October 7, 2024 • 51 mins
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 - What are the tax implications as I start to invest funds for my newborn nephew?
2 - Is it too risky to use a HELOC for an investment property down payment?
3 - How can I rebalance my portfolio away from stocks in the most tax-efficient way possible?
4 - Who should I follow for the best stock tips?
5 - Does it make sense to use a credit card for some expensive home repairs I have coming up?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to How to Money. I'm Joel, I'm Matt, and
today we're answering your listener questions.
Speaker 2 (00:24):
It's Ray Joel, it's Monday.
Speaker 3 (00:25):
Let's step away from the craziness in the world, and
are you ready to answer some listener questions today?
Speaker 2 (00:30):
Never been readier.
Speaker 3 (00:31):
Yeah, wellt's do it, man. Let's get to listener questions
where we get to hear directly from you. A listener
is wanting to know who he should take stock investing
tips from. He wants to know what ticker symbols should
I be buying in order to maximize my return.
Speaker 1 (00:45):
Who's the smartest person in the room, who's going to
point me to the right stocks for the future.
Speaker 2 (00:48):
Exactly, So we'll get to that one.
Speaker 3 (00:50):
Another listener is asking about utilizing a heelock in order
to fund a down payment, whether or not we are
in agreement there, and then a credit card rewards optimization question.
We've got a listener who's looking to make the most
of some expenses that she has coming up, so we'll
get to that plus more. During today's ask how to Money,
they buddy.
Speaker 1 (01:09):
You and I we've talked about helocks and how people
are sitting on record amounts of home equity.
Speaker 2 (01:13):
It's really tempting.
Speaker 1 (01:14):
And we've also said, like, oh, you probably most of
the time to want to tap it this question there
might be an exception and this might be a good
use of it.
Speaker 2 (01:21):
I don't know.
Speaker 1 (01:21):
We'll talk about that in just a second. Before we
get to that, mat, I wanted to just quickly mention like,
Halloween's obviously right around the corner. Even though Halloween stuff
has been out in the aisles for months, I still
remember like the first time I showed up to Costco
and I was like, Halloween outfits, like costumes are out?
Speaker 2 (01:35):
Was it already was? Back in July that it was?
It was?
Speaker 1 (01:38):
And my son was like, I want a ninja outfit,
and I'm like, you already have a ninja outfit, but
he's obsessed with being a ninja. And so my question
to you, though, is one, how do you feel about
reusing Halloween costumes before it going it's the same thing
every year?
Speaker 2 (01:49):
You gear right with that?
Speaker 1 (01:51):
And then two, man, this is I think buying a
Halloween costume used on Facebook. Like let's say you don't
want to make your own. You're not the homespun type,
Like I'm not gonna sit down with some thread and
a needle and sit down to the sewing machine. Probably
not the singer you have. You've created actually some really
good homemade outfits over the years, Thank you. Uh well,
you were like tinker Bell's husband or something, mess in
the day.
Speaker 3 (02:11):
That's not a joke. She's not married. Fairies aren't married.
They're all friends, are they all? They're all hippies. They
live in this Okay, it's like a commune. Okay, no,
it was. It was uh it Terrence or Clarence or
something or something like that. It was like the I don't know,
like the one boy fairy back when Vue was wanting to.
Speaker 2 (02:30):
Be should post pictures to our on Instagram?
Speaker 3 (02:32):
I made my own little acorn hat. I have my
boots on. That was a good one.
Speaker 1 (02:35):
So I guess to the people, who, how do you
feel about just going on there and buying someone else's goods?
And by the way, it thinks great if you want
to update your costume, don't want to wear the same thing,
what about listing the costume you're not going to re wear?
Now is the perfect time to put that on Facebook?
Speaker 2 (02:47):
Yeah?
Speaker 3 (02:47):
Well then that kind of raises another question. I feel
like you've asked me three questions here. So to your
most immediate question listing your old costume, I feel like
that's a frugal or cheap because really, well is it
worth as a lot of I mean, what's the how
much are you getting for that thing?
Speaker 1 (03:01):
Probably it depends on how nice a costume is, I guess,
but let's say ten twelve bucks exactly, and maybe twenty
five if you've got like one of the really.
Speaker 3 (03:09):
Nice And maybe you're not doing as well as I
am these days, Joel, but like and there are who
is there are other ways where I'm going to pick
up every sort of loose piece of change I see
on the sidewalk, like not literally right, like I refuse
to pick up pinies now, But there are other ways
where folks are like, dude, I can't believe you do
that in order to save a buck. I guess for me,
the costume things, that's not something we have done on Facebook.
Speaker 2 (03:33):
I'm not a fan of.
Speaker 3 (03:34):
Just the haggling, the going back and forth, showing up
and maybe it's not what you thought it was going
to be. And like you said, I guess historically we've Yeah,
we don't normally buy costumes. We always end up kind
of like scraping them together with clothes that we have
at home and being a little more creative in that way.
Speaker 2 (03:50):
Except this year.
Speaker 3 (03:51):
It's funny that you mentioned buying the Ninja outfit at Costco,
because this year is the first year we've ever purchased a.
Speaker 2 (03:56):
Full on costume. Huh.
Speaker 3 (03:58):
Because Westy, I think it was he saw a costume
at Costco and he, I think that's a nice one.
Was a police officer uniform, and he'd been for weeks.
He was just like, oh, I want to be a policeman.
I'm like, all right, buddy, except for the fact that
the costume never came back, and so every time we
would go in there, I would check the rack and
they never carried it again. And so I got lucky though.
(04:19):
I swung into a TJ Max randomly a few weeks
ago picked up a policeman outfit costume or whatever for
like eight ninety nine or something like that.
Speaker 2 (04:29):
Are the TG Maxes across the country, I.
Speaker 3 (04:31):
Think, so, yeah, it's a pretty big retailer, discount home goods,
clothing retailer or whatever. So maybe for that costume I
could see some slight residual value when it comes to
that costume.
Speaker 1 (04:43):
I guess the thing we want people to avoid is
walking into a Spirit Halloween store on like October twenty
ninth or thirtieth and getting completely swindled.
Speaker 3 (04:51):
Amazing, they raised the razor prices significant Alloween.
Speaker 2 (04:55):
There are probably raising prices, yeah, or no, I would
think so.
Speaker 1 (04:57):
Or I just gotta imagine it's really expensive to buy
that last mink A costume. You're picking over whatever is
left and and so. Yeah, either be creative like you Matt,
make your own fairy costume, uh, or or buy something
used on Facebook marketplace.
Speaker 2 (05:11):
If you're so inclined.
Speaker 1 (05:12):
What about the Maybe you end up paying nothing if
you sell your old costume too.
Speaker 2 (05:15):
I guess we have made our own costumes a whole lot.
I haven't thought about it.
Speaker 3 (05:18):
You remember the year when our family did Beauty and
the Beast and I was the candle Oberry. Oh that's right, yes,
And I created candlesticks for my arms that were just
rolled up poster board, and I painted my fingers red
and there were the flames that I could do.
Speaker 2 (05:30):
The do the flame.
Speaker 1 (05:32):
You've warned some ostentatious outfits through the years.
Speaker 2 (05:35):
Yeah, we always get together for Halloween.
Speaker 3 (05:37):
I'll post some of some of the old Guard family
Halloween costume photos of the good years, adorable years and
good memories.
Speaker 1 (05:44):
I might I've got my old Michelangelo Ninja turtle costume.
That's a good that's a good go to it like
never goes out of style. So maybe you got that one.
And then don't you have a banana?
Speaker 2 (05:53):
Weren't you?
Speaker 1 (05:53):
I don't think I've ever been a banana. I was
inflatable Ballerina one year, but I think that the motive
broke on that.
Speaker 2 (05:59):
Oh no, you were the yellow man what's it called
serious George, which I'm freakishally tall, So it works out.
It works so well.
Speaker 3 (06:06):
That's why I was thinking banana.
Speaker 2 (06:09):
They're very similar.
Speaker 1 (06:11):
All right, let's mention the beer real pick math that
we're gonna have. Yeah, on this episode. This one is
called Upstream. It's a hazy ipa by combo between Fremont
Brewing and Society, uh and one ones out of Seattle,
ones out of California. We'll give our thoughts on this one.
Speaker 2 (06:25):
Maybe it's Society.
Speaker 3 (06:26):
It's got an E now I could no it would
have the little French symbol if.
Speaker 2 (06:30):
It's supposed to be pronounce that way, right, Yeah, I don't.
Speaker 1 (06:32):
I don't have pronunciation skills like you, but I'll say
society or we'll give our thoughts on this one at
the end of the episode, but we will. Let's get
your listener questions, and if you have a money question,
please do send it our way, whether it's a specific
money scenario you and your family faces, like right now,
or whether it's just kind of one of those things
that's been lingering in your back, in the back of
your head and you're like, yeah, I wonder what man
Joel think about that.
Speaker 3 (06:52):
Maybe it's something a friend of yours is going through, right, like,
this is something that I'm not This isn't something I'm
dealing with. Guys, this is quite to quote somebody else. Yeah,
that's totally fine as well.
Speaker 1 (07:02):
Howard, Matt and Joel talked to my idiot friend over here.
We'd love to hear that question. You can just literally
record a voice memo, send it over to us via email,
or go to hoamoney dot com slash ask.
Speaker 2 (07:11):
The weirder the better. We love weird stuff.
Speaker 1 (07:14):
If it's a very straight laced, roth higher a question,
that's okay, But we like the funky stuff too. Allight,
Let's get to a question now. This is specifically about
helping someone else invest.
Speaker 4 (07:26):
I'm Matt and Joel. This is Katie. I have a
question about creating a brokerage account for my nephew. He
was born last year and I opened a brokerage account
in Fidelity in my name and I'm putting fifty dollars
a month into VLL for him. I am not planning
on telling his parents, and I didn't want it to
be in his name to impact anything down the road
with financial aid. I also wanted to keep it in
(07:48):
my name just in case I needed the money in
the future, or if I can't keep up with this,
both things that I don't expect to happen, but just
wanted to make it possible. Still, my goal is to
do this until he is eighteen and give it to
him when he was twenty five or so. Is this
okay to keep in my name and give to him
in the future with the only tax implication beyond him
(08:11):
if and when he sells the position. Any help would
be greatly appreciated. Love the podcast.
Speaker 2 (08:17):
Thank you, Katie.
Speaker 3 (08:18):
First off, I am going to nominate you for Best
Aunts of the year.
Speaker 2 (08:23):
Is there an award for that, Joel? I don't know,
but I think you just created one and I stand
behind this.
Speaker 3 (08:28):
You are incredibly generous. I think it's awesome what you're
doing there for your nephew. And I'll go ahead and
say that you are correct on almost every point there
when it comes to investing for your nephew, keeping it
in your name, that's going to allow you to remain
in control. It's not going to impact his ability to
score any financial aid for college. But honestly, who knows
in eighteen years what the rules will and won't be.
Speaker 1 (08:50):
But I can't imagine they're going to be like broker's
account in your ant exactly. Sorry, you just think your
financiallead package you got reduced significant exactly.
Speaker 3 (08:58):
But as of now, at the least, at the very
least prospective schools, they don't have any clue that you
are intending for money that you have invested in your
own brokerage account to go to him. And then on
top of that, if you do this for you said
you're gonna do this for eighteen years, and then it
sounds like I guess then you're gonna sit on it
maybe for seven and then give it to him at
age twenty five. If that's the case, you could easily
(09:19):
have over fifty thousand dollars saved up for him, which
is incredible. And what's super cool here is that only
ten thousand dollars of that would be contributions made by you.
The rest of it would all be earning. Yeah, growth man, phenomenal.
Speaker 2 (09:31):
Yeah.
Speaker 1 (09:32):
Well, And the other thing I like about this too
is waiting till age twenty five, till that prefrontal cortex
is fully formatt you don't want to give the money.
Speaker 2 (09:39):
One hundred percent.
Speaker 1 (09:40):
Can you imagine getting fifty grand or forty grand or
something at the age of eighteen. I wouldn't know what
to do with it. I would have screwed up majorly
even at twenty five, Like probably some choices I would
have made it wouldn't have been the best. And so, yeah,
I think that's the cool thing. If it remains in
your name, you then have the ability to decide when
and how you gifted to your nephew. You could do
it in one fell swoop, one lump summer. You can
(10:01):
kind of do it irregularly over time and kind of
let him in on the reality of what you're trying
to help him accomplish and Matt, Yeah, you mentioned that
he'd have fifty thousand bucks at the age of twenty five. Well,
if you handed that money over to him though at
that point in time, Katie, and then he kept that
money invested, given the many decades that he would be
able to continue the investing journey, he could grow that
(10:23):
sum significantly beyond fifty thousand bucks. So this could turn into.
Speaker 2 (10:27):
Some amazing seed money. Yes.
Speaker 1 (10:29):
For Yeah, whether it's like starting a small business, I
mean think about that, that's a large chunk of change
to kind of get the ball rolling. It gives you
an option earlier on or if it's like, no, I'm
going to go a traditional workout and this money's actually
I'm going to save it for future retirement, that could
be a massive chunk of change even further down the road.
I think the one thing you might be avoiding though
(10:49):
by keeping this really secretive. I don't know that you're
trying to keep it secretive, but part of the benefit
that you can instill with your knowledge is teaching your
nephew how to invest and talking to him about money
kind of regularly over the years growing up. And I
don't think it has to be one or the other necessarily,
but I do think it's important. Because this is important
(11:11):
to you, I would try to find ways to talk
with him about the concepts of growing wealth in an
age appropriate way.
Speaker 2 (11:17):
So you're just.
Speaker 1 (11:19):
Gonna, I think you're gonna be surprised at the cool
conversations that you can look forward to when he gets
into let's say, middle school, right man. I think once
kids hit that, in particular sixth grade seventh grade, the
things that they're able to understand and converse about they
just grow exponentially. So Plus, I think this prepares him
for the reality that's coming down the pike, ensuring that
(11:39):
he's not caught off guard and that he's well prepared
to make smart moves when this vast sum of money is.
Speaker 2 (11:45):
If he doesn't immediately blow it.
Speaker 1 (11:47):
Yeah, it's like we've been having these conversations for years.
He's getting prepared not only to inherit a decent chunk
of money, but then also he's prepared to understand pretty
well how money works and what he can do with it.
Speaker 3 (11:59):
Yeah, said, I will say, I like I do understand
her hesitancy to let not only her nephew know, but
also the nephew's parents, So I guess her sister or
brother because and what she said was that she's not
sure if she's gonna be able to keep it up.
And so that's like, that's the part of it that
I think if I were in her shoes, I would
I think there was a chance I wouldn't tell them either.
(12:19):
I think I would just kind of sit on it
or if you found yourself in a hard position, or
maybe it's like, oh, I really need to use this
money to be able to do X, y Z with it.
Speaker 2 (12:27):
Whatever I changed. Yeah, yeah, exactly.
Speaker 3 (12:29):
And so that being said, I understand at least waiting until, like,
like she said, maybe once he's eighteen, because by then,
you'll I think she would have a very good idea
as to how much money she would have on hand
as opposed to this sort of iou because if her
parents know about it starting now, and they can quickly
easily do the math and be like all right, like
(12:50):
that's that's a lot of money, and then if eighteen
yearlls around and you have like half of that, there
might be a little a little bit of disappointment where
they're just like, ohh so yeah, keeping it secret, keeping
it safe, the ability to keep that disappointment at bay.
Speaker 2 (13:03):
I certainly appreciate that.
Speaker 3 (13:04):
And you can still sort of have some of these
personal finance conversations and talk about investing without fully disclosing
how much money you're setting aside. And especially as I think,
with kids, so many of the early money lessons are
about them understanding the value of a dollar, right, the
ability to earn money based on the work that you're doing,
and then slowly saving, and you can get to some
(13:25):
of those investing lessons maybe yeah, once he does go
off to college, for instance.
Speaker 1 (13:28):
Yeah, I guess what I'm hinting at is lots of
times of parents in particular think that, oh, I'm just
going to save money in a five twenty nine plan
for my kid. They'll have seventy five thousand dollars, let's say,
to help reduce the cost of college. But the bigger
investment that you can make is often through what you
teach him about money. And if those lessons don't get taught, well,
it's amazing and wonderful that you saved up a big
(13:50):
nest egg for them, but being able to kind of
help them understand money concepts from an early age and
help them grow in developing some money wisdom and be
worth a whole lot more than seventy five grand over
the decades.
Speaker 2 (14:03):
Totally.
Speaker 1 (14:04):
And let's talk about taxes though here, Matt, like, that's
kind of the heart of Katie's question. Your nephew would
not necessarily be on the hook for the taxes, but
it's all in how you go about it. So you
could sell positions which would generate a tax bill for you,
but then you know, obviously ideally you don't want to
do that because you probably want to minimize your tax burden.
But because of the way gift tax laws work, you
(14:25):
can give your nephew up to eighteen thousand dollars tax
free every single year. Matt, you talked about changing tax laws, Well,
that number is going to change by the time Katie's
ready to give these gifts, so that number goes up
typically adjusted for inflation, every year. But the cool thing
is you can give stock up to that amount too,
so it's not just literally cash from your savings account.
(14:45):
So at that point in time, your nephew is going
to be able to be in control of these assets.
He would then be responsible for paying capital gains tax
upon selling once you've kind of gifted him those funds.
So in my mind that you'd be pulling off exactly
what you're trying to do, not creating a tax burden
for yourself, but also investing in a way in which
(15:07):
you hold the keys to win. And if he has
access to those funds, to those assets, that's right.
Speaker 3 (15:12):
Yeah, it would not be difficult to do that over
a few years. But we wanted to toast a couple
of other account options out there as well, because if
your nephew is likely to go to college, a five
twenty nine account could be a better choice than a
taxable brokerage account. And that's because if he doesn't go
to college, that account is now more flexible given recent
changes to the law, and it could be a killer
(15:33):
start to funding a roth ira as he enters early adulthood.
Speaking of the rath actually you didn't mention whether or
not you are maxing out a wroth for yourself or not,
but a roth ira could actually be the best overall option.
We kind of immediately jumped into brokerage accounts, but a
roth man the ability to allow yourself to build wealth
for the two of you at the same time, while
(15:55):
you still maintain the flexibility of being able to withdraw
some of his option those contributions.
Speaker 2 (16:00):
I mean that would be huge. Yeah, agreed, Yeah, it
should have started there maybe.
Speaker 1 (16:04):
Yeah, I think if Katie isn't already doing a roth ira,
that that's where we want to kind of point you.
First scrap the taxbile brokerage account for the time being,
go all in on the wroth That's because you can
contribute up to seven thousand dollars a year.
Speaker 2 (16:16):
Right.
Speaker 1 (16:16):
If you decide you want to ramp things up and
invest more over time, you can do that. But especially
with your current fifty dollars a month contribution amount, you're
well within the contribution limits of a roth IRA. And
then the cool thing is you can take out the
contributions in the future to straight up give him cash.
And that's generating no tax for you, no tax for
(16:38):
your nephew either, And this is probably the best of
both worlds from a tax and from a gifting perspective,
and then from your own future retirement needs perspective too.
It gives you the ability to build up a solid
nest egg of contributions, but then the earnings you can
keep for yourself to use for your retirement future. And
so again we love what you're doing here, love that
(17:01):
you're wanting to help the next generation of people in
your family succeed. When it comes to money, Katie, we
would say, keep up the good work, keep putting money
in regularly, and do it in the most tax advantaged
way that you possibly can. I think the roth Ira,
if that's a stone you haven't turned up yet, is
kind of, like Matt said, probably the best way to go.
Speaker 3 (17:19):
And don't forget this personal finance lessons that Joel mentioned earlier.
And you don't necessarily have to be socking away money
for him in order to share those lessons with him
over time.
Speaker 1 (17:28):
Yeah, and I think you could, you could like share
the lessons without even letting him in on the fact
that you're saving future.
Speaker 2 (17:34):
All Right, we've got more to get to.
Speaker 3 (17:35):
We're gonna hear from a listener who might be over
invested in securities and is looking to rebalance his portfolio.
Speaker 2 (17:41):
We'll get to that more right after this.
Speaker 1 (17:51):
All right, Matt, we're back time for another question. Let's
get to this one on using home equity to invest more.
Speaker 5 (17:58):
Hi, Jolan, Matt, my name is Daniela, and I'm from Massachusetts.
I have been listening to your podcast since my husband
and I decided to purchase our first home in twenty twenty.
We bought a duplex and I have been living in
one unit while renting the other. Since then, our house
has appreciated in value a lot. We would like to
purchase another multi family home soon, and we would like
(18:19):
to use our equity. Since we bought in twenty twenty
with less than three percent interest rate, we want to
avoid a cash out REFI the only other option we
have thought of would be a helock to access to equity.
I have listened to your episodes on helocks and using
it to invest, but I would love to hear if
your opinions have changed given the current market and rates.
(18:40):
What should we take into consideration when using a helock
as a down payment.
Speaker 3 (18:44):
Thank you all right, Danielle. Hopefully we will give you
some things to think about. But I want to highlight
the fact that you are house hacking, which is phenomenal.
You are doing the living in one half of the
duplex and renting out the other half, which is a
classic recipe for loowing housing costs significantly. By doing that,
you're gonna be able to build wealth more quickly there
(19:04):
as a landlord, and it is clearly worth out for
you so far, given what's happened with home prices over
the past four years specifically, and now you want to
double down on that good decision, We are all for
you thinking in this direction.
Speaker 1 (19:16):
Yeah, no, I agree. I house hacking is one of
those things that's underutilized because housing costs are typically what Matt,
one of the biggest parts of any normal person's budget.
It exceeds food, it exceeds gas. Those are things that
were like viscerally complain about. But if you're like, can
I say a thousand bucks on rent or on my mortgage,
(19:38):
that is something people would jump at instinctively. And house
hacking allows you to do that. And that's exactly what
Danielle is doing. It's something that I've done over the years,
whether it was renting out a room or owning a
duplex and running out the back half. And it's amazing
how it can help jumpstart your ability to build a
successful financial future. And the cool thing about this too,
is you're gonna be able to get another primary home loan.
(20:00):
You got that the first time around, that's what.
Speaker 3 (20:02):
It sounds like at Lias because she says did she
use the word home because she didn't say specifically, Well,
she didn't say specifically that she was looking at getting
another duplex as an investment property, So I guess we're
assuming that she's looking at.
Speaker 2 (20:13):
Perhaps a slight duplex upgrade.
Speaker 1 (20:15):
Which which would be Honestly, the ideal way to go
is to like, yes, hey, rent out the place that
you're in, Now buy the next duplex, live in half
of that again. Now you've got four units, one of
which you live in, but you're able to get if
you buy it as a primary home again, better rates,
better terms than you get with an investment loan, whereas
if you stayed put, you're buying that next duplex as
an investor versus a primary homeowner. Right, so your rate's
(20:38):
not going to be nearly as amazing as your current duplex.
That's just because rates aren't as good as they were
when you bought that house. And that's okay. That doesn't
necessarily make this a bad decision at all. And the
truth is, if you pull this off, which I think
you're going to, you're gonna have three income producing units
and you might find that those three tenants put together
are reducing your cost of living substantially. You might essentially
(20:59):
be living rent free. And Matt, think about that, living
rent free, How much you can do, how much progress
you can make if that's the position you're.
Speaker 3 (21:06):
In twenty five percent of most people's budgets. Yeah, but
let's talk about how you can grab some helock funds
for that next down payment. Actually, before we get to that,
I think the first piece of advice that we should
give would be to save up more cash if that
is something that you're that you're able to do, or
something that you can be patient with, because the best
part about someone else paying the majority of your mortgage
(21:27):
is that you can accelerate your cash hoarding abilities. That
cash can just be shoved directly into your next real
estate opportunity, helping you to avoid helocks completely, and of
course other forms of debt down the road as well.
And we get the desire to keep your current mortgage
as is in your desire to keep building and buying,
given the success that that you've already had and how
(21:48):
game changing it has been for you. But I will
say to I would exercise some caution because I mean,
there are several reasons why it feels me I would
be more cautious. We already talked about rates, and so
it's going to be more difficult to make the numbers work.
You're gonna have to work, You're gonna have to work
the spreadshet you're gonna have to tease the numbers out
a little bit more in order to find a deal
(22:09):
that's going to be as good as what you were able.
Speaker 2 (22:11):
To score its rates and home prices by the.
Speaker 3 (22:13):
Way, I hope you exactly Well, that's I mean appreciation.
That's another part of it too, because she mentioned she's
like the way she said it, she's like, man, we've
seen the equity and our property increase significantly. I would
not necessarily count on that because of prices are basically
twenty five percent higher than they were back in twenty
nineteen pre pandemic, and housing is definitely not an exception
(22:34):
to that rule as well. And so were you to
buy another property now realize that, like, I'm sure you're
going to see an increase in the value of that property,
but it's probably not going to be nearly at the
pace or the clip that you've seen currently.
Speaker 2 (22:46):
Yeah, you can't.
Speaker 1 (22:47):
Expect essentially like twenty twenty three stock market returns, you're
gonna have yours like twenty twenty two. And the same
thing that's true in the housing market, right exactly that
you can't expect like, hey, I'm going to washprints and
repeat and get the exact same results were in a
different climate.
Speaker 3 (23:00):
Think the results might be a little bit different. And
one other point of caution I guess I wanted to
throw out there as well is the fact that, and
maybe this is me really ringing between the lines, but
being a landlord of a duplex that you're living in
the other half is pretty nice, right.
Speaker 2 (23:13):
If there's something wrong with.
Speaker 3 (23:14):
The garbage disposal, you take like five steps, you go
around the corner and you're right there, as opposed to
driving to a different neighborhood or driving across town. Up
until now, managing that duplex has probably felt like, certainly
a part time job, but like a super light part
time job, as opposed to having to load some tools
in the vehicle, driving over to see it, scheduling a
(23:35):
time to see it. Like it starts to feel a
bit more like a part time job. It's going to
be more work than I think. Maybe what you've experienced
so far, So just something to keep in mind that
it's not going to necessarily be quite as easy as
it has been so far.
Speaker 1 (23:49):
So what you're getting at you got to ask the question,
is the juice is going to be worth the squeeze
if I continue to kind of ramp up my investments
and expand my real estate empire. And the answer is
maybe right, depends on the specific numbers where you live
and the specific properties you're looking at. And I think
also what you're saying, Matt too, is that a wisely
used helock can help you make more progress in less
time when it comes to ramping up the speed of
(24:10):
your ability to invest, But that's also not without additional risk, sure,
so you have to take that into consideration, Like I
use this this. I did something very similar to myself
after about my first property and it had increased in
value substantially, and I did take some helock money out
to buy the next house and it worked out well,
but I was very cautious about how much dat I
was willing to take on, and I wanted to keep
(24:32):
a significant equity buffer, like I didn't don't call hogwild.
I guess this is what I'm trying to say. And
so I think too, if your question a bit about
using a helock to help you buy something frivolous, we'd
say no way. I mean, that's typically when people are
talking about pulling helock funds, Matt. Most of the time
it is for consumption, even if it's for renovating a house.
(24:52):
That typically I consider that to be consumption unless you're
adding value in such a way that you can also
consider that an investment, like if you're putting an EIGHTYU
on to the back of your house or something like that.
And I think if you'd asked even about using the
helock money to buy a nicer single family home, we
would tell you to save up longer. But I think
the difference in your question here, Danielle, is that you'd
(25:13):
be cashing out a portion of the value of your
current successful investment to make another strategic real estate investment.
And to me, that's different. This is likely the best
way to get those funds, aside from, like Matt said,
saving up a bigger cash cushion, This is the best
way to go about it. And so I would shop
around with a few local credit units to try and
get the best rates and then I would say the
(25:35):
goal should be to pay off this helock with the
additional income that you're going to generate, the rental income
you're going to be able to see with that next duplex,
hopefully eradicating the helock in something like thirty six months
at the most twenty four months ideally, because if you have,
if you're saying, oh cool, I'll pay off the helock
in eleven twelve years, to me, that timeline's too long
and you're biding off more than you can chew. But
(25:56):
if you have, if you run the numbers and you're like,
I can pay off this helock in short order once
this new investment starts to generate a profit, then I
think it can make sense and it's within the realm
of reason to consider using a helock to buy the
next place.
Speaker 3 (26:10):
Yeah, and you're also likely going to need to season
those funds for anywhere between sixty and ninety days first,
which means you'll need to tap the helock and then
just have those funds sitting in the account that you
plan to disperse from for that down payment. And so
having that money sitting there for a while will likely
be helpful, and it also just what banks want to see, right,
It depends on the lender as well. It depends on
(26:32):
the bank or the credit union, because either way they'll
be accounting for the the money payment that you're making
exactly towards that helock and your debt to income ratio.
Speaker 2 (26:41):
But just keep in.
Speaker 3 (26:42):
Mind the leverage. It can be a helpful tool for
wealth building, but it can cut both ways. And that
is why you want to take on debt with just
great caution. And I don't want to be the guy
that's just like raining on your parade here, because it
does sound like that you are being cautious. It sounds
like you're being smart about it, but just don't take
out more than you need in order to buy this
new income producing set. And if you do go the
(27:02):
path of taken the helock, we want you to have
that plan in place in order to eradicate that because
even though it's not the absolute worst kind of debt
that we like to see people have, well, fact is
you're still paying some interest on that because of the
fact that you didn't go full cash for that downpayment.
Speaker 2 (27:16):
Yeah.
Speaker 1 (27:17):
Yeah, And another thing that Matt's some real estate investors do,
they'll take helock money out to buy a place in
cash and they rehabit and then they do cash out refinance.
I mean, there are all sorts of like funky ways
that you can do this, that you can buy that
next investment property. It's just a lot of the ways
that hardcore real estate investors talk about financing some of
these deals. I get scared, I get nervous, and to me,
(27:40):
I wouldn't be willing to take that much risk. So
I think what we're attempting to say is, like, listen,
if the numbers are solid and you know what you're doing,
then this is something I think you can proceed with
as long as you keep your debt reasonable. But if
you get way too cozy with debt and you're overleveraging yourself,
you could find yourself in a really poor position. Especially
(28:00):
let's say you're to experience a few extra mounts of
vacancy and some additional repairs and you're like, wait a
second now, Mike, Like, I can't pay it off anytime soon.
I actually need to tap it for more money. That's
what we want you to avoid.
Speaker 3 (28:10):
Yeah, basically, we don't want you to count on the
absolute best case scenario unfolding in order for this to work, Joel,
let's get to our next question. And this is a
listener who is beginning to look ahead. He's starting to
feel a little uncomfortable with his portfolio allocation.
Speaker 6 (28:24):
Hi Matton, Joel, Raphael from Hillsboro, Oregon. Here. First, I
would like to thank you for the show, always providing
great and valuable advice. Now for my question. My broker's
account is fully invested in stocks, but I wanted to
gradually convert it to bonds over the coming decade or so,
and I was wondering if you have any recommendations for
(28:44):
doing it in a text efficient way. My income is
not expected to drop during this time and I have
no losses to harvest. I was talking to an advisor
and he recommended moving my money into an SMA separately
managed account, which is supposedly text optimized. But doing them
out myself, I honestly couldn't see how that provides any benefits.
Please help me understand if I'm missing something. Thanks again, Raphael.
Speaker 2 (29:08):
Raphael, thank you, thank you for your question. Love where
your head is at? Here?
Speaker 1 (29:11):
Because now we talk about this all the time, there's, like,
I think, distinct periods of time when it comes to
your money. And when you're in your twenties and thirties,
you're in the wealth building phase of your life. Typically,
let's say you get into your mid forties, which we're
rapidly approaching, like, you start to get into maybe more
of a wealth preservation mindset as you're approaching drawing down
(29:33):
those sons. It's not like Rafaela doesn't sound like it's
going to tap this money tomorrow or anytime in the
super near future.
Speaker 2 (29:39):
It's like a decade out. Yeah, he's in no rush.
Speaker 1 (29:42):
He has chosen to be incredibly stock heavy for the
wealth building years, which I think makes a lot of sense.
And then I think he's planning ahead at least for
the wealth preservation stage, and I think that's wise. The
closer you get to tapping the accounts, that the money
that you've been saying, I think some people listening Matt,
the I've been saving and investing, and all they can
think about is like continuing to ramp up their investments.
(30:04):
They're like, I don't even know what it's gonna be
like to flip that switch where I'm actually drawing down
on those funds. And it doesn't mean that rafael is
going to get to the point where he needs no
stock exposure, because even like a target date fund is
going to have, at its most conservative something like a
fifty percent allocation of stocks, you're still gonna want that too,
because you're gonna want to be able to compound that
money for decades to come to help to support you
(30:26):
and your retirement needs. But it also doesn't mean that
taking some of your chips off of the stock only
side of the table doesn't make sense. So I think
I like where Rafael's head's at here.
Speaker 3 (30:35):
Yeah, I was gonna mention that he's from Hillsboro, Oregon,
which anytime someone mentions like this not only the state
but also the town, you always.
Speaker 2 (30:42):
Look up where they live. D al You're a stocker
like that Rafael's specific address. I looked at al No.
It's a cute little town.
Speaker 3 (30:48):
It's like a suburb of Portland, a little expensive, expensive
to live there, given the fact that it's also known
as the Silicon Forest, not like Slicon Valley, but Silicon Forest,
and that's because Intel is actually headquartered there.
Speaker 4 (31:01):
Oh.
Speaker 2 (31:01):
Interesting, Did you know that? No, didn't know that. It
seems like a lot I should have known that, being
from Morgan myself. But oh yeah, well.
Speaker 3 (31:06):
You're only there until you're like six months old or
something two, But bet you have just as many memories
of Well you remember things when you're two years old,
don't you.
Speaker 1 (31:14):
Yeah, I don't really remember anything, Crent, but I when
I go back and visit, I still love it.
Speaker 2 (31:18):
You feel a kindred spirit. The Pacific Northwest is that
the folks who live there.
Speaker 3 (31:22):
But Rafael was asking about the separately managed account. We
don't see that as a great solution. It's no surprise though,
that your financial advisor would suggest it, telling you that hey,
I'm going to do all the hard work for you,
well for a substantial fee. Of course they stand to benefit,
and there's nothing wrong with hiring an advisor or paying
for advice. But with an SMA, you are typically paying
(31:45):
someone to pick stocks. You're paying someone to help you
with your allocation. But my guess is that you already
know what it is that you want to do. You're
just looking for the most tax advantage way to achieve
greater levels of balance there within that brokerage account. And
so unless I think you feel the knee need for
expert help on that front, and if you're willing to
pay up in order to get it. We think that
this is most definitely something that you can di y. Yeah, yeah,
(32:07):
you've done the hard part.
Speaker 1 (32:09):
And so do you want to start paying someone one
percent of assets under management in order to put you
in this specialized account to try and offer you more
specific investment options. I don't think it makes a whole
lot of sense. I think you're right, man, and I
think the average person listening to this podcast one has
never heard of a separately managed account and also doesn't
(32:31):
need one to achieve their goals. One of the things
that typically gets talked about when we're talking about SMAs,
when an advisor will attempt to sell you one, is
you'll hear the word customization in the sales pitch. It's
it's a lot about flexibility and customization.
Speaker 3 (32:44):
It's going to be all about Raphael. Yeah, let's talk
about your needs. We're the exact thing they're going to say,
your name by bunch that works for you.
Speaker 2 (32:51):
Look you directly in the eyes. That's right. We know you,
we know what you need. But do you really you
live in the You live in Silicon forest, don't you?
We know you, Rafael, so clearly.
Speaker 1 (32:59):
You, sir, are you going to need a portfolio allocation
more along the lines of this, and it's going to
be highly specified, tailored to you.
Speaker 2 (33:07):
But do you need that?
Speaker 1 (33:08):
We doubt it. It's highly unlikely. Index funds still make
a lot of sense for the average person or even
for the unaveraged person who has been able to amass
the amount you've been able to do, Raphael. So it's
important to note we're talking about brokerage accounts here too
when you're talking about rebalancing the investments that you currently have.
I'm sure you have some money in tax advantaged accounts too,
(33:30):
But inside of those tax advantage accounts, you can buy
and sell funds, updating your holdings without any tax consequences whatsoever,
which is cool, But you have to be more intentional
with holdings inside of a brokerage account because rebalancing can
come with tax consequences, Like depending on how long you've
held a particular position, you can be taxed at the
more favorable capital gains tax rate, or you might find
(33:53):
yourself owing tax that mirrors your top income racket, which
should be double or more the capital gains tax rate.
So while rebalancing it can be wise, and it can
be something smart to plan for, do it over time,
and with the tax consequences as a key consideration of
win and how you do it.
Speaker 2 (34:10):
Yeah.
Speaker 3 (34:10):
Yeah, So one of the routes you can take in
order to not generate a big old tax bill would
be to actually not sell any positions at all, not
sell any securities, and to just contribute new investment dollars
directly into something, let's say like a total bond index
fund as a way of rebalancing. And so by doing that,
with every single month or whatever you're purchasing cycle that
(34:31):
you happen to be investing in, you're going to slowly
but surely you're going to tone down the relative percentage
of stocks that you own relative to the bonds that
you now own in that brokerage account. And that's ultimately
what you're after, right, And so if you opt to
take this route, we're achieving what you want, slowly but
surely without creating any sort of tax burden. Yeah, you're
doing it the most tax within the most tax efficient manner.
Speaker 1 (34:54):
Yeah, And it sounds like this is not something that
needs to happen overnight.
Speaker 2 (34:58):
So why immediate?
Speaker 1 (34:59):
Why sell stuff and buy stuff and create a big
tax burden for yourself when, like you said, you can
just essentially funnel those new purchases into something that's more conservative,
and then you're just buying that and building up your
positions slowly, especially.
Speaker 3 (35:12):
Because he said too that he's not expecting his income
to go down, so I'm assuming that he's going to
be able to continue investing at the same clip that
he was doing before. And so that's again with him
having a decade. You know, he's got ten years of
runway ahead of them. That's a lot of bonds that
you can buy to where he would feel much more comfortable.
Speaker 1 (35:26):
I think probably in like three years, he's going to
be like, wait a second, Okay, now I'm relegated there.
I need to actually start buying some more stocks again.
And maybe then you're you're splitting your purchases fifty to
fifty at that point, But yeah, I think that's probably
the best way to do it. You're building up even
more significant positions, You're you're continuing to keep the stocks
that you have around, and you're punting any tax bill
until even further down the line in retirement. You can
(35:49):
do the same thing with distributions, right that you're reinvesting. Yeah,
just reinvest those into bonds instead of total how the
market fund that you're using.
Speaker 3 (35:57):
Yeah, I don't have those automatically reinvest and whatever they're
coming from.
Speaker 1 (36:01):
Yeah, and then it might take it. Like I said,
I think a few years of these steady contributions to
get to that comfortable place where you're like, cool, I
did the wealth building thing. Now I feel comfortable in
the wealth preservation piece. I've been able to achieve this
kind of balance that I'm looking for. But because you're
not in a hurry, you have so much time to
get to that balance point. It's amazing how planning ahead,
(36:21):
giving yourself time can help you from a tax perspective
to avoid some of the worst possible investing mistakes. And
we're always trying to but you know, grow our money
and minimize taxes, like those are two of the biggest
things that you need to think about as an investor,
and Raphael is thinking about both of those things. He's
also thinking about minimizing downside risk, and so I think
(36:42):
he's got the whole picture in mind. Don't necessarily listen
to that financial advisor and hire them on the spot
to do something we think you can do for yourself
pretty easily.
Speaker 3 (36:49):
Totally, and if it's something that you're wanting to achieve
more quickly too, don't forget you. You can donate securities
that you have as well through something like a donor
advised fund, which is where we've got an article up
on the website talking about how we're big fans of Daffy.
But what's so great there is that even like there's
a lot of smaller five oh one c threes that
aren't set up to receive securities, and so by contributing
(37:10):
stocks to your donor advised fund, they take care of
it for you, and then you can choose what charities
that you want to give to further, you know, further
on down the line.
Speaker 1 (37:17):
Yeah, So instead of giving me a huge cash from
your savings for checking account, give from your appreciated securities.
You're minimizing your tax bill.
Speaker 3 (37:24):
To get more bang for your buck, yeah, because, yeah,
you're avoiding tax completely while at the same time rebalancing.
Speaker 2 (37:29):
Your portfolio as well. So that could be a great
solution for you.
Speaker 1 (37:32):
And it's a stone that often goes unturned, like most
people don't think about that, but you're right and giving
it to the donor bus fund and then giving your
charities that can be a big tax one.
Speaker 2 (37:39):
Absolutely, all right, Joel, We've got more to get to.
Speaker 3 (37:41):
We're gonna hear from a listener who's looking for the
next hot stock tip. We'll get to that more right
after this, all right, Matt, Tim gonna get more listener questions.
This next question is, of course the Facebook question of
the week.
Speaker 2 (38:00):
This is a long one.
Speaker 1 (38:01):
Yeah, it's quite short, quite to the point. This comes
from Chad and he says, who do you follow for
stock tips? This was posted in our Facebook group, of course. Yeah,
and so he's asking all the how to money listeners,
who do you follow for stock tips? Talking people like
Jim Kramer here meant that's the question.
Speaker 2 (38:16):
Yeah.
Speaker 1 (38:17):
So Jim Kramer is like probably one of the most
famous people because he's on CNBC and Mad Money.
Speaker 2 (38:22):
Is this still on? I think he is.
Speaker 1 (38:24):
Yeah, he's still on TV. Got the buzzers and the
bells and the whistles, and so you know why.
Speaker 2 (38:27):
I guess he needs all that in order to maintain
everyone's attention. You've got to keep the ratings up right.
Speaker 3 (38:32):
And so, Joe, why don't we have buzzers and sirens
going off and I've only seen him.
Speaker 1 (38:38):
We should like memes or clips of his show. Yeah,
I've never literally never actually watched it, but yeah he is.
He's the kind of guy. And there's especially in the
age of fragmented media, there are more and more Jim
Kramer's out there or want to be Jim Kramer's out
there who are giving specific stock buying tips. But I
love the how to Money Facebook group for so many reasons,
and if you're listening and you're not a member, you
should go join it. But the group responses were so
(38:59):
good that no names were mentioned in the comments, so
the main thrust was essentially right. Yeah, nobody was saying, actually,
this is the guy I follow. They were just saying,
we don't do that here, like, that's not what we
do as hod of money listeners. And they're right, you know,
we're not fans you and me of stock picking and
the people who are the stockpicking types who are throwing
out ticker symbols or hey, guess what I'm forecasting in
(39:21):
Nvidia to smash returns over the next five years. They're
going to be four times the size of Apple. Like, no,
that's just not the kind of stuff we pay attention
to I guess if you're so inclined, I would go
back and listen to our conversation with Brian Ferraldi. He's
not the kind of guy either who's really throwing out
names and ticker symbols, although he is a fan of
buying individual stocks in addition to index one. So he
(39:42):
does both. But he's also honest about what it takes
to do well. He's honest about his long term view
and about the successes and the failures that he's had.
He discusses the fact that there's a lot of research
that if you're going to invest in individual stocks, you
have to be able to withstand higher level of volatility
and you have to have that long term mindset in
(40:03):
order to be successful. So if you're kind of saying,
what's the hot stock of the minute, that's not what
he's into either. He's about investing in companies that he
trusts and thinks have a long term potential future in
this right, Yeah, and so he has done well. But
I think but even sometimes when people ask this question,
mat they're talking about day trading.
Speaker 3 (40:20):
Sure, sure, and even still he's done well, but he
also only invests his own money, So like you might
be thinking, well, why don't why don't you guys let
Brian invest your money.
Speaker 2 (40:28):
He refuses, Yeah, he won't do it.
Speaker 3 (40:30):
He's willing to take those kind of risks because he
knows that he can handle the ups and downs. And
like you said, that volatility, you have to you have
to have the right mindset in order to handle some
of the extreme volatility that you're going to get when
you do invest in single individual companies.
Speaker 1 (40:43):
I mean, there's so many examples we could point out.
Do you remember when like Meta Facebook basically when the
stock just like dropped off a cliff and it's been
crushing actually kind of since that day. That was maybe
a couple years ago, and it's been crushing kind of
in the aftermath. And it's one of those things where
like we'll continue to do that. I don't know, like,
are the it is the virtual reality where that the
Mark Zuckerberger is creating and it's Facebook as an entity
(41:05):
going to stick around in this I don't know, like
it's but if you have that conviction right that Meta
is going to be a company that stands to test
the time. And you essentially want your money to follow
your mouth or your heart in that I'm okay with
that as long as you do it reasonably and you
have that conviction to hold on to it for the
long term.
Speaker 5 (41:22):
Yeah.
Speaker 3 (41:23):
And what's reasonable for the vast majority of investors and
certainly for the vast majority of folks who are listening
to this podcast is keeping that limited to just five
percent of your overall portfolio. And Joel, like, you just
said something about putting your money where your mouth is.
This is like the best example I think of this phrase,
like put your money where your mouth is, because we'll
literally this what we do. We talk about money all day,
(41:44):
so it seems quite literal. But I checked because I
own some individual companies. Now I was curious.
Speaker 2 (41:50):
I was like, oh, man, I wonder what.
Speaker 3 (41:51):
The overall percentage of my portfolio is that invested in
single stocks. And I also lump single companies in with
crypto as well, because any of those basically non indexed
investments that I have, I don't want any of that
to exceed five percent.
Speaker 2 (42:06):
Yeah. And do you want to.
Speaker 3 (42:07):
Guess as to what percentage I have invested in single
companies in single stocks plus crypto.
Speaker 2 (42:12):
I'm gonna say one and a half percent. I would have.
Speaker 3 (42:14):
Guessed something in that line as well. Point three percent. Okay,
point three percent, dude, it's almost non existent. And I,
you know, got some Netflix they've been doing pretty well
over the past couple years. Would have expected it to
be a little bit higher, maybe some of my let
those winners run, but it was not the case. I
was actually pretty shocked at the fact that I have
less than one percent invested. This is an example. This
(42:35):
is an instance where we can say, or at least
where I can say, do as I say, and as
I do. Yeah, no, same here. I don't know the
actual percentage, but my guess is, if I'm like adding
it up in my head real.
Speaker 2 (42:44):
Quick, you're like, no, I got a cool fifteen to
twenty percent in.
Speaker 1 (42:48):
Meta, right, it probably it's probably one percent maybe less
of my overah holdings. And I just put you're right,
it's for me. It's a blowing off steam thing. It's
kind of like a fun It is fun, and we
don't think most of investing should be fun. We think
life should be fun, but investing should be boring. And
the more you stick to boring investing, the more fun
your life can be.
Speaker 2 (43:06):
Because you're not as.
Speaker 1 (43:07):
Worried or anxious about how a particular stock is performing
in a given day, week, or season. So it can
not only be fun but scary. Right things aren't doing.
Speaker 2 (43:17):
So exactly right.
Speaker 1 (43:18):
When it's like up into the right, you're like, yeah, whooo.
It's like when your team is winning in playoff baseball,
but if you just lost the first three games in
a seven game series, you're freaking out right, and so
you don't want to be in that position. By the way,
there was like a literally an inverse etf of Jim
Kramer picks that was available that was publicly traded, which
is just hilarious, man, that people can invest in the
(43:39):
opposite of whatever Jim Kramer says. And there's a reason
I think funds like that came into being, and it's
because people saw the bells and the whistles and the
silliness of it all, and they said, hey, actually, maybe
if you do exactly the opposite of what this guy says,
you might perform better. And the truth is, buying the
index fund is probably the best way to go, not
listening to any individual stock advice giver.
Speaker 3 (43:59):
That's right, We've got time for one more here. Let's
take an email from Janine and she wrote, I have
very good credit, no debt, and I'm getting new windows
from my home.
Speaker 2 (44:08):
I want to use my card with.
Speaker 3 (44:09):
The best benefits, but all of them seem to have
one percent only for this type of use. Your info
seems to show a City card that will give me
two percent City double cash card. But is there a
charge to apply for it or an annual fee? I
can't find that info as of right now. I'll put
the deposit on one of my cards and the first
half of the remainder on another one, intending to use
(44:30):
their float and pay it off when the bill comes.
The last part will be due when they install, so
I have time to figure something out before then.
Speaker 2 (44:37):
So that's one part of it.
Speaker 3 (44:38):
She's asking about a specific card, and then she wrote,
the other thing that confuses me is my friends apply
for home equity loans for this type of thing. Why
how does that make sense? So, Joe, are you want
to start with question A or question B?
Speaker 2 (44:49):
Okay? Can I start with actually question ce the one
that didn't get asked?
Speaker 1 (44:52):
Well, we're reading between the lines. That's my favorite thing
to do. First thing starts. I just wanted to mention
that if you're getting new windows at your house. There
are energy efficient tax credits. Oh yeah, don't forget about those.
Don't forget to claim those, because you might be eligible
for a significant chunk. And let's say you do some
of those windows this year, you do some of those
windows next year, you you might be able to then
(45:12):
kind of get the because there's like limits on annual
limits on what you can claim. That's right, you might
be able to double the amount.
Speaker 2 (45:18):
Of tax credit you receive. That's true. Do some in December,
some of January.
Speaker 3 (45:22):
So get that quote and see if they're going to
charge you more for coming out, right, because they might.
Speaker 2 (45:26):
They might, they might. If they don't, why not chop
that thing up.
Speaker 1 (45:29):
It's worth considering. All right, let's get to whether it
was A or B or whatever one of the tool
We'll start talking about credit cards here the UH and
Janine mentioned the City Double Cash card.
Speaker 2 (45:38):
That's a great card.
Speaker 1 (45:39):
It's one of the rare cards that offers two percent
cash back on all purchases. I think there's like literally
three of them maybe in existence. And so we're totally
good with you putting the window purchases on that credit card.
And we love that you're planning to pay the pay
the bill on time and in full when it comes.
That is obviously key when we're talking about using credit
cards doing it wisely. And by the way, this is
(46:00):
likely a bigger purchase, so you might even want to
consider I'm just going to make a suggestion here a
credit card with a bigger welcome bonus. And so the
City Double Cash is a great, fantastic everyday card when
you're just doing your normal spending, when you're able to,
let's say, meet a sign up bonus in one fell swoop.
Now we could be talking about, like in the case
of the Southwest card, eighty five thousand miles that you're
(46:23):
able to get just by putting the purchase on that.
So I would at least kind of consider opting for
a different card, but then getting the City Double Cash
to go along with it for the future. I don't know,
maybe both and is the right solution here.
Speaker 3 (46:34):
Yeah, that could totally work for Janine. And let's talk
about the helock part of your question then, because we
actually talked about this on a recent Friday flight. It
doesn't make sense for you to use a helock for this.
Your friends who do that, they're taking on debt for
those home repairs, and yes, this is the intended purpose
of a helock, but we'd still rather see folks save
(46:55):
up them pay for those repairs in cash, because using
home equity to pay for fixes, well, that makes even
lessons today, given where interest.
Speaker 2 (47:01):
Rates are, the environment that we're in.
Speaker 3 (47:04):
It's not that it never makes sense, but you want
to insure into those transactions cautiously. But the ideal is
to just hold off making those repairs or any of
those updates and to pay for them with cash, with
money that you've been soalking away, just like you're doing,
even though you can deduct the interest that you make
interest payments that you are making on that heelock, because
you are using it to improve your property. That's great,
(47:26):
But that's like that would be an instance of the
tail wagon the dogs, right. So it's just it's a
very very small silver lining. And the fact is the
fact the friends who are tapping home equity, unfortunately, they're
probably in a position to where.
Speaker 2 (47:37):
They have to do that.
Speaker 3 (47:38):
You know, they don't have that cash on hand. It's
not that it makes sense, it's just that they're in
a position to where that's what they have to do.
Speaker 1 (47:44):
Yeah, I mean, it'd almost be like if Janine had
written and said, hey, here there's a tax credit on
getting new windows. My windows are pretty solid thinking about
going in this struction anyway, get some new windows, because hey,
who doesn't love a tax.
Speaker 2 (47:54):
Break, love a deal, right, that would also be.
Speaker 1 (47:56):
Tail wagging the dog. And so don't let those potential
tax break push you in a direction that doesn't make
sense because you're still spending money. And the same is
true with like, let's say helock. It's like, oh, well,
I have access to this money. I've got the home
equity built up, so maybe I should just tap it
in order to do stuff that I would have otherwise
waited to do. And the truth is, the better financial move,
(48:17):
the one that's going to leave you with more financial security,
is to instead save up the cash and pay for
it instead of using a helock, even though it's something
you can do, Jenny, we hope that that helps you out.
Best of luck to you with that window replacement. You
hope you're able to max out the benefits and optimize
this nicely. All right, Matt, let's get back to the
beer that we had on this episode. This one is
(48:37):
called Upstream. It's a hazy ipa it's a collab by
two awesome breweries and actually on the license plate on
the front of the vehicle on this can says best friends.
So is that why you picked it out?
Speaker 3 (48:50):
Nope, you literally didn't see that when you picked up
the spear, because this isn't one that was sent into
us by a listener. You picked this one up and
when we were listening to one of the listener questions,
you held up the cannon point out about it. Yeah,
I just noticed it. I was like, oh, which is
totally cool, but yeah, I dug it. What'd you think
I dug it too. I thought it was kind of
grassy and earthy for an ipa. It was a little different,
a little a little out of the normal hazy ipa sphere.
(49:12):
It had a different, yeah, different flavor profile before I
even tasted it, Like on the nose, what I smelled
was grapefruit like. It smelled like like someone had sliced
a fresh grapefruit and they're holding it under my nose.
And the flavor once I sipped it, I completely backed
that up.
Speaker 2 (49:26):
In my opinion. It tasted it almost had like a
grapey muscadine like flavor going on.
Speaker 3 (49:32):
I don't know it was, but simultaneously, it wasn't overly
sweet and kind of I don't know, musky or anything
like that.
Speaker 2 (49:38):
It was still super fresh. Was it last week?
Speaker 3 (49:40):
Was that beer that you liked in our interview with
thrown by Prestin?
Speaker 2 (49:44):
Yeah, the Pure Project.
Speaker 3 (49:46):
I felt like that one to me. I don't know
that it tasted old and kind of flat. This one
was very prickly and.
Speaker 2 (49:51):
Alive and I could feel it all my tongue. Yeah. Yeah, yeah,
I liked this one too. Maybe I had a cold
last week. I don't know.
Speaker 1 (49:56):
Maybe I like that one better actually last week, But
I liked this one too, so this is quite yeah,
good one. Always fun to have stuff like pick stuff
up when I'm out on the West Coast because it's
beer that we don't normally normally have access to. It's
like when I just went to Washington, DC and I
was able to get some beers from some breweries that
are harder to come by down here, and it's like
there are a diamond dozen up there.
Speaker 3 (50:13):
But you also see some of our local Atlanta breweries
on the tap list as well, which is super cool,
especially when it's like the small ones who don't get
around very much.
Speaker 2 (50:21):
I'm always like, oh, you got the insider knowledge. Yeah yeah,
but they're still crushing it.
Speaker 1 (50:25):
That's right, all right, that's going to do it for
this episode. For links to some of the stuff we mentioned,
you can find those up on our website at how
toomoney dot com.
Speaker 3 (50:32):
That's right, and leave us a review please if you
have not yet already. It's a great way to let
other folks know that how to Money brings the value
that it's helping you in your own personal finance journey.
You can do that at Apple Podcasts or wherever it.
Speaker 2 (50:46):
Is that you listen. But buddy, that's going to be
it for this episode. So until next time
Speaker 3 (50:49):
Best Friends Out, Best Friends Out.
Welcome to How to Money. I'm Joel, I'm Matt, and
today we're answering your listener questions.
Speaker 2 (00:24):
It's Ray Joel, it's Monday.
Speaker 3 (00:25):
Let's step away from the craziness in the world, and
are you ready to answer some listener questions today?
Speaker 2 (00:30):
Never been readier.
Speaker 3 (00:31):
Yeah, wellt's do it, man. Let's get to listener questions
where we get to hear directly from you. A listener
is wanting to know who he should take stock investing
tips from. He wants to know what ticker symbols should
I be buying in order to maximize my return.
Speaker 1 (00:45):
Who's the smartest person in the room, who's going to
point me to the right stocks for the future.
Speaker 2 (00:48):
Exactly, So we'll get to that one.
Speaker 3 (00:50):
Another listener is asking about utilizing a heelock in order
to fund a down payment, whether or not we are
in agreement there, and then a credit card rewards optimization question.
We've got a listener who's looking to make the most
of some expenses that she has coming up, so we'll
get to that plus more. During today's ask how to Money,
they buddy.
Speaker 1 (01:09):
You and I we've talked about helocks and how people
are sitting on record amounts of home equity.
Speaker 2 (01:13):
It's really tempting.
Speaker 1 (01:14):
And we've also said, like, oh, you probably most of
the time to want to tap it this question there
might be an exception and this might be a good
use of it.
Speaker 2 (01:21):
I don't know.
Speaker 1 (01:21):
We'll talk about that in just a second. Before we
get to that, mat, I wanted to just quickly mention like,
Halloween's obviously right around the corner. Even though Halloween stuff
has been out in the aisles for months, I still
remember like the first time I showed up to Costco
and I was like, Halloween outfits, like costumes are out?
Speaker 2 (01:35):
Was it already was? Back in July that it was?
It was?
Speaker 1 (01:38):
And my son was like, I want a ninja outfit,
and I'm like, you already have a ninja outfit, but
he's obsessed with being a ninja. And so my question
to you, though, is one, how do you feel about
reusing Halloween costumes before it going it's the same thing
every year?
Speaker 2 (01:49):
You gear right with that?
Speaker 1 (01:51):
And then two, man, this is I think buying a
Halloween costume used on Facebook. Like let's say you don't
want to make your own. You're not the homespun type,
Like I'm not gonna sit down with some thread and
a needle and sit down to the sewing machine. Probably
not the singer you have. You've created actually some really
good homemade outfits over the years, Thank you. Uh well,
you were like tinker Bell's husband or something, mess in
the day.
Speaker 3 (02:11):
That's not a joke. She's not married. Fairies aren't married.
They're all friends, are they all? They're all hippies. They
live in this Okay, it's like a commune. Okay, no,
it was. It was uh it Terrence or Clarence or
something or something like that. It was like the I don't know,
like the one boy fairy back when Vue was wanting to.
Speaker 2 (02:30):
Be should post pictures to our on Instagram?
Speaker 3 (02:32):
I made my own little acorn hat. I have my
boots on. That was a good one.
Speaker 1 (02:35):
So I guess to the people, who, how do you
feel about just going on there and buying someone else's goods?
And by the way, it thinks great if you want
to update your costume, don't want to wear the same thing,
what about listing the costume you're not going to re wear?
Now is the perfect time to put that on Facebook?
Speaker 2 (02:47):
Yeah?
Speaker 3 (02:47):
Well then that kind of raises another question. I feel
like you've asked me three questions here. So to your
most immediate question listing your old costume, I feel like
that's a frugal or cheap because really, well is it
worth as a lot of I mean, what's the how
much are you getting for that thing?
Speaker 1 (03:01):
Probably it depends on how nice a costume is, I guess,
but let's say ten twelve bucks exactly, and maybe twenty
five if you've got like one of the really.
Speaker 3 (03:09):
Nice And maybe you're not doing as well as I
am these days, Joel, but like and there are who
is there are other ways where I'm going to pick
up every sort of loose piece of change I see
on the sidewalk, like not literally right, like I refuse
to pick up pinies now, But there are other ways
where folks are like, dude, I can't believe you do
that in order to save a buck. I guess for me,
the costume things, that's not something we have done on Facebook.
Speaker 2 (03:33):
I'm not a fan of.
Speaker 3 (03:34):
Just the haggling, the going back and forth, showing up
and maybe it's not what you thought it was going
to be. And like you said, I guess historically we've Yeah,
we don't normally buy costumes. We always end up kind
of like scraping them together with clothes that we have
at home and being a little more creative in that way.
Speaker 2 (03:50):
Except this year.
Speaker 3 (03:51):
It's funny that you mentioned buying the Ninja outfit at Costco,
because this year is the first year we've ever purchased a.
Speaker 2 (03:56):
Full on costume. Huh.
Speaker 3 (03:58):
Because Westy, I think it was he saw a costume
at Costco and he, I think that's a nice one.
Was a police officer uniform, and he'd been for weeks.
He was just like, oh, I want to be a policeman.
I'm like, all right, buddy, except for the fact that
the costume never came back, and so every time we
would go in there, I would check the rack and
they never carried it again. And so I got lucky though.
(04:19):
I swung into a TJ Max randomly a few weeks
ago picked up a policeman outfit costume or whatever for
like eight ninety nine or something like that.
Speaker 2 (04:29):
Are the TG Maxes across the country, I.
Speaker 3 (04:31):
Think, so, yeah, it's a pretty big retailer, discount home goods,
clothing retailer or whatever. So maybe for that costume I
could see some slight residual value when it comes to
that costume.
Speaker 1 (04:43):
I guess the thing we want people to avoid is
walking into a Spirit Halloween store on like October twenty
ninth or thirtieth and getting completely swindled.
Speaker 3 (04:51):
Amazing, they raised the razor prices significant Alloween.
Speaker 2 (04:55):
There are probably raising prices, yeah, or no, I would
think so.
Speaker 1 (04:57):
Or I just gotta imagine it's really expensive to buy
that last mink A costume. You're picking over whatever is
left and and so. Yeah, either be creative like you Matt,
make your own fairy costume, uh, or or buy something
used on Facebook marketplace.
Speaker 2 (05:11):
If you're so inclined.
Speaker 1 (05:12):
What about the Maybe you end up paying nothing if
you sell your old costume too.
Speaker 2 (05:15):
I guess we have made our own costumes a whole lot.
I haven't thought about it.
Speaker 3 (05:18):
You remember the year when our family did Beauty and
the Beast and I was the candle Oberry. Oh that's right, yes,
And I created candlesticks for my arms that were just
rolled up poster board, and I painted my fingers red
and there were the flames that I could do.
Speaker 2 (05:30):
The do the flame.
Speaker 1 (05:32):
You've warned some ostentatious outfits through the years.
Speaker 2 (05:35):
Yeah, we always get together for Halloween.
Speaker 3 (05:37):
I'll post some of some of the old Guard family
Halloween costume photos of the good years, adorable years and
good memories.
Speaker 1 (05:44):
I might I've got my old Michelangelo Ninja turtle costume.
That's a good that's a good go to it like
never goes out of style. So maybe you got that one.
And then don't you have a banana?
Speaker 2 (05:53):
Weren't you?
Speaker 1 (05:53):
I don't think I've ever been a banana. I was
inflatable Ballerina one year, but I think that the motive
broke on that.
Speaker 2 (05:59):
Oh no, you were the yellow man what's it called
serious George, which I'm freakishally tall, So it works out.
It works so well.
Speaker 3 (06:06):
That's why I was thinking banana.
Speaker 2 (06:09):
They're very similar.
Speaker 1 (06:11):
All right, let's mention the beer real pick math that
we're gonna have. Yeah, on this episode. This one is
called Upstream. It's a hazy ipa by combo between Fremont
Brewing and Society, uh and one ones out of Seattle,
ones out of California. We'll give our thoughts on this one.
Speaker 2 (06:25):
Maybe it's Society.
Speaker 3 (06:26):
It's got an E now I could no it would
have the little French symbol if.
Speaker 2 (06:30):
It's supposed to be pronounce that way, right, Yeah, I don't.
Speaker 1 (06:32):
I don't have pronunciation skills like you, but I'll say
society or we'll give our thoughts on this one at
the end of the episode, but we will. Let's get
your listener questions, and if you have a money question,
please do send it our way, whether it's a specific
money scenario you and your family faces, like right now,
or whether it's just kind of one of those things
that's been lingering in your back, in the back of
your head and you're like, yeah, I wonder what man
Joel think about that.
Speaker 3 (06:52):
Maybe it's something a friend of yours is going through, right, like,
this is something that I'm not This isn't something I'm
dealing with. Guys, this is quite to quote somebody else. Yeah,
that's totally fine as well.
Speaker 1 (07:02):
Howard, Matt and Joel talked to my idiot friend over here.
We'd love to hear that question. You can just literally
record a voice memo, send it over to us via email,
or go to hoamoney dot com slash ask.
Speaker 2 (07:11):
The weirder the better. We love weird stuff.
Speaker 1 (07:14):
If it's a very straight laced, roth higher a question,
that's okay, But we like the funky stuff too. Allight,
Let's get to a question now. This is specifically about
helping someone else invest.
Speaker 4 (07:26):
I'm Matt and Joel. This is Katie. I have a
question about creating a brokerage account for my nephew. He
was born last year and I opened a brokerage account
in Fidelity in my name and I'm putting fifty dollars
a month into VLL for him. I am not planning
on telling his parents, and I didn't want it to
be in his name to impact anything down the road
with financial aid. I also wanted to keep it in
(07:48):
my name just in case I needed the money in
the future, or if I can't keep up with this,
both things that I don't expect to happen, but just
wanted to make it possible. Still, my goal is to
do this until he is eighteen and give it to
him when he was twenty five or so. Is this
okay to keep in my name and give to him
in the future with the only tax implication beyond him
(08:11):
if and when he sells the position. Any help would
be greatly appreciated. Love the podcast.
Speaker 2 (08:17):
Thank you, Katie.
Speaker 3 (08:18):
First off, I am going to nominate you for Best
Aunts of the year.
Speaker 2 (08:23):
Is there an award for that, Joel? I don't know,
but I think you just created one and I stand
behind this.
Speaker 3 (08:28):
You are incredibly generous. I think it's awesome what you're
doing there for your nephew. And I'll go ahead and
say that you are correct on almost every point there
when it comes to investing for your nephew, keeping it
in your name, that's going to allow you to remain
in control. It's not going to impact his ability to
score any financial aid for college. But honestly, who knows
in eighteen years what the rules will and won't be.
Speaker 1 (08:50):
But I can't imagine they're going to be like broker's
account in your ant exactly. Sorry, you just think your
financiallead package you got reduced significant exactly.
Speaker 3 (08:58):
But as of now, at the least, at the very
least prospective schools, they don't have any clue that you
are intending for money that you have invested in your
own brokerage account to go to him. And then on
top of that, if you do this for you said
you're gonna do this for eighteen years, and then it
sounds like I guess then you're gonna sit on it
maybe for seven and then give it to him at
age twenty five. If that's the case, you could easily
(09:19):
have over fifty thousand dollars saved up for him, which
is incredible. And what's super cool here is that only
ten thousand dollars of that would be contributions made by you.
The rest of it would all be earning. Yeah, growth man, phenomenal.
Speaker 2 (09:31):
Yeah.
Speaker 1 (09:32):
Well, And the other thing I like about this too
is waiting till age twenty five, till that prefrontal cortex
is fully formatt you don't want to give the money.
Speaker 2 (09:39):
One hundred percent.
Speaker 1 (09:40):
Can you imagine getting fifty grand or forty grand or
something at the age of eighteen. I wouldn't know what
to do with it. I would have screwed up majorly
even at twenty five, Like probably some choices I would
have made it wouldn't have been the best. And so, yeah,
I think that's the cool thing. If it remains in
your name, you then have the ability to decide when
and how you gifted to your nephew. You could do
it in one fell swoop, one lump summer. You can
(10:01):
kind of do it irregularly over time and kind of
let him in on the reality of what you're trying
to help him accomplish and Matt, Yeah, you mentioned that
he'd have fifty thousand bucks at the age of twenty five. Well,
if you handed that money over to him though at
that point in time, Katie, and then he kept that
money invested, given the many decades that he would be
able to continue the investing journey, he could grow that
(10:23):
sum significantly beyond fifty thousand bucks. So this could turn into.
Speaker 2 (10:27):
Some amazing seed money. Yes.
Speaker 1 (10:29):
For Yeah, whether it's like starting a small business, I
mean think about that, that's a large chunk of change
to kind of get the ball rolling. It gives you
an option earlier on or if it's like, no, I'm
going to go a traditional workout and this money's actually
I'm going to save it for future retirement, that could
be a massive chunk of change even further down the road.
I think the one thing you might be avoiding though
(10:49):
by keeping this really secretive. I don't know that you're
trying to keep it secretive, but part of the benefit
that you can instill with your knowledge is teaching your
nephew how to invest and talking to him about money
kind of regularly over the years growing up. And I
don't think it has to be one or the other necessarily,
but I do think it's important. Because this is important
(11:11):
to you, I would try to find ways to talk
with him about the concepts of growing wealth in an
age appropriate way.
Speaker 2 (11:17):
So you're just.
Speaker 1 (11:19):
Gonna, I think you're gonna be surprised at the cool
conversations that you can look forward to when he gets
into let's say, middle school, right man. I think once
kids hit that, in particular sixth grade seventh grade, the
things that they're able to understand and converse about they
just grow exponentially. So Plus, I think this prepares him
for the reality that's coming down the pike, ensuring that
(11:39):
he's not caught off guard and that he's well prepared
to make smart moves when this vast sum of money is.
Speaker 2 (11:45):
If he doesn't immediately blow it.
Speaker 1 (11:47):
Yeah, it's like we've been having these conversations for years.
He's getting prepared not only to inherit a decent chunk
of money, but then also he's prepared to understand pretty
well how money works and what he can do with it.
Speaker 3 (11:59):
Yeah, said, I will say, I like I do understand
her hesitancy to let not only her nephew know, but
also the nephew's parents, So I guess her sister or
brother because and what she said was that she's not
sure if she's gonna be able to keep it up.
And so that's like, that's the part of it that
I think if I were in her shoes, I would
I think there was a chance I wouldn't tell them either.
(12:19):
I think I would just kind of sit on it
or if you found yourself in a hard position, or
maybe it's like, oh, I really need to use this
money to be able to do X, y Z with it.
Speaker 2 (12:27):
Whatever I changed. Yeah, yeah, exactly.
Speaker 3 (12:29):
And so that being said, I understand at least waiting until, like,
like she said, maybe once he's eighteen, because by then,
you'll I think she would have a very good idea
as to how much money she would have on hand
as opposed to this sort of iou because if her
parents know about it starting now, and they can quickly
easily do the math and be like all right, like
(12:50):
that's that's a lot of money, and then if eighteen
yearlls around and you have like half of that, there
might be a little a little bit of disappointment where
they're just like, ohh so yeah, keeping it secret, keeping
it safe, the ability to keep that disappointment at bay.
Speaker 2 (13:03):
I certainly appreciate that.
Speaker 3 (13:04):
And you can still sort of have some of these
personal finance conversations and talk about investing without fully disclosing
how much money you're setting aside. And especially as I think,
with kids, so many of the early money lessons are
about them understanding the value of a dollar, right, the
ability to earn money based on the work that you're doing,
and then slowly saving, and you can get to some
(13:25):
of those investing lessons maybe yeah, once he does go
off to college, for instance.
Speaker 1 (13:28):
Yeah, I guess what I'm hinting at is lots of
times of parents in particular think that, oh, I'm just
going to save money in a five twenty nine plan
for my kid. They'll have seventy five thousand dollars, let's say,
to help reduce the cost of college. But the bigger
investment that you can make is often through what you
teach him about money. And if those lessons don't get taught, well,
it's amazing and wonderful that you saved up a big
(13:50):
nest egg for them, but being able to kind of
help them understand money concepts from an early age and
help them grow in developing some money wisdom and be
worth a whole lot more than seventy five grand over
the decades.
Speaker 2 (14:03):
Totally.
Speaker 1 (14:04):
And let's talk about taxes though here, Matt, like, that's
kind of the heart of Katie's question. Your nephew would
not necessarily be on the hook for the taxes, but
it's all in how you go about it. So you
could sell positions which would generate a tax bill for you,
but then you know, obviously ideally you don't want to
do that because you probably want to minimize your tax burden.
But because of the way gift tax laws work, you
(14:25):
can give your nephew up to eighteen thousand dollars tax
free every single year. Matt, you talked about changing tax laws, Well,
that number is going to change by the time Katie's
ready to give these gifts, so that number goes up
typically adjusted for inflation, every year. But the cool thing
is you can give stock up to that amount too,
so it's not just literally cash from your savings account.
(14:45):
So at that point in time, your nephew is going
to be able to be in control of these assets.
He would then be responsible for paying capital gains tax
upon selling once you've kind of gifted him those funds.
So in my mind that you'd be pulling off exactly
what you're trying to do, not creating a tax burden
for yourself, but also investing in a way in which
(15:07):
you hold the keys to win. And if he has
access to those funds, to those assets, that's right.
Speaker 3 (15:12):
Yeah, it would not be difficult to do that over
a few years. But we wanted to toast a couple
of other account options out there as well, because if
your nephew is likely to go to college, a five
twenty nine account could be a better choice than a
taxable brokerage account. And that's because if he doesn't go
to college, that account is now more flexible given recent
changes to the law, and it could be a killer
(15:33):
start to funding a roth ira as he enters early adulthood.
Speaking of the rath actually you didn't mention whether or
not you are maxing out a wroth for yourself or not,
but a roth ira could actually be the best overall option.
We kind of immediately jumped into brokerage accounts, but a
roth man the ability to allow yourself to build wealth
for the two of you at the same time, while
(15:55):
you still maintain the flexibility of being able to withdraw
some of his option those contributions.
Speaker 2 (16:00):
I mean that would be huge. Yeah, agreed, Yeah, it
should have started there maybe.
Speaker 1 (16:04):
Yeah, I think if Katie isn't already doing a roth ira,
that that's where we want to kind of point you.
First scrap the taxbile brokerage account for the time being,
go all in on the wroth That's because you can
contribute up to seven thousand dollars a year.
Speaker 2 (16:16):
Right.
Speaker 1 (16:16):
If you decide you want to ramp things up and
invest more over time, you can do that. But especially
with your current fifty dollars a month contribution amount, you're
well within the contribution limits of a roth IRA. And
then the cool thing is you can take out the
contributions in the future to straight up give him cash.
And that's generating no tax for you, no tax for
(16:38):
your nephew either, And this is probably the best of
both worlds from a tax and from a gifting perspective,
and then from your own future retirement needs perspective too.
It gives you the ability to build up a solid
nest egg of contributions, but then the earnings you can
keep for yourself to use for your retirement future. And
so again we love what you're doing here, love that
(17:01):
you're wanting to help the next generation of people in
your family succeed. When it comes to money, Katie, we
would say, keep up the good work, keep putting money
in regularly, and do it in the most tax advantaged
way that you possibly can. I think the roth Ira,
if that's a stone you haven't turned up yet, is
kind of, like Matt said, probably the best way to go.
Speaker 3 (17:19):
And don't forget this personal finance lessons that Joel mentioned earlier.
And you don't necessarily have to be socking away money
for him in order to share those lessons with him
over time.
Speaker 1 (17:28):
Yeah, and I think you could, you could like share
the lessons without even letting him in on the fact
that you're saving future.
Speaker 2 (17:34):
All Right, we've got more to get to.
Speaker 3 (17:35):
We're gonna hear from a listener who might be over
invested in securities and is looking to rebalance his portfolio.
Speaker 2 (17:41):
We'll get to that more right after this.
Speaker 1 (17:51):
All right, Matt, we're back time for another question. Let's
get to this one on using home equity to invest more.
Speaker 5 (17:58):
Hi, Jolan, Matt, my name is Daniela, and I'm from Massachusetts.
I have been listening to your podcast since my husband
and I decided to purchase our first home in twenty twenty.
We bought a duplex and I have been living in
one unit while renting the other. Since then, our house
has appreciated in value a lot. We would like to
purchase another multi family home soon, and we would like
(18:19):
to use our equity. Since we bought in twenty twenty
with less than three percent interest rate, we want to
avoid a cash out REFI the only other option we
have thought of would be a helock to access to equity.
I have listened to your episodes on helocks and using
it to invest, but I would love to hear if
your opinions have changed given the current market and rates.
(18:40):
What should we take into consideration when using a helock
as a down payment.
Speaker 3 (18:44):
Thank you all right, Danielle. Hopefully we will give you
some things to think about. But I want to highlight
the fact that you are house hacking, which is phenomenal.
You are doing the living in one half of the
duplex and renting out the other half, which is a
classic recipe for loowing housing costs significantly. By doing that,
you're gonna be able to build wealth more quickly there
(19:04):
as a landlord, and it is clearly worth out for
you so far, given what's happened with home prices over
the past four years specifically, and now you want to
double down on that good decision, We are all for
you thinking in this direction.
Speaker 1 (19:16):
Yeah, no, I agree. I house hacking is one of
those things that's underutilized because housing costs are typically what Matt,
one of the biggest parts of any normal person's budget.
It exceeds food, it exceeds gas. Those are things that
were like viscerally complain about. But if you're like, can
I say a thousand bucks on rent or on my mortgage,
(19:38):
that is something people would jump at instinctively. And house
hacking allows you to do that. And that's exactly what
Danielle is doing. It's something that I've done over the years,
whether it was renting out a room or owning a
duplex and running out the back half. And it's amazing
how it can help jumpstart your ability to build a
successful financial future. And the cool thing about this too,
is you're gonna be able to get another primary home loan.
(20:00):
You got that the first time around, that's what.
Speaker 3 (20:02):
It sounds like at Lias because she says did she
use the word home because she didn't say specifically, Well,
she didn't say specifically that she was looking at getting
another duplex as an investment property, So I guess we're
assuming that she's looking at.
Speaker 2 (20:13):
Perhaps a slight duplex upgrade.
Speaker 1 (20:15):
Which which would be Honestly, the ideal way to go
is to like, yes, hey, rent out the place that
you're in, Now buy the next duplex, live in half
of that again. Now you've got four units, one of
which you live in, but you're able to get if
you buy it as a primary home again, better rates,
better terms than you get with an investment loan, whereas
if you stayed put, you're buying that next duplex as
an investor versus a primary homeowner. Right, so your rate's
(20:38):
not going to be nearly as amazing as your current duplex.
That's just because rates aren't as good as they were
when you bought that house. And that's okay. That doesn't
necessarily make this a bad decision at all. And the
truth is, if you pull this off, which I think
you're going to, you're gonna have three income producing units
and you might find that those three tenants put together
are reducing your cost of living substantially. You might essentially
(20:59):
be living rent free. And Matt, think about that, living
rent free, How much you can do, how much progress
you can make if that's the position you're.
Speaker 3 (21:06):
In twenty five percent of most people's budgets. Yeah, but
let's talk about how you can grab some helock funds
for that next down payment. Actually, before we get to that,
I think the first piece of advice that we should
give would be to save up more cash if that
is something that you're that you're able to do, or
something that you can be patient with, because the best
part about someone else paying the majority of your mortgage
(21:27):
is that you can accelerate your cash hoarding abilities. That
cash can just be shoved directly into your next real
estate opportunity, helping you to avoid helocks completely, and of
course other forms of debt down the road as well.
And we get the desire to keep your current mortgage
as is in your desire to keep building and buying,
given the success that that you've already had and how
(21:48):
game changing it has been for you. But I will
say to I would exercise some caution because I mean,
there are several reasons why it feels me I would
be more cautious. We already talked about rates, and so
it's going to be more difficult to make the numbers work.
You're gonna have to work, You're gonna have to work
the spreadshet you're gonna have to tease the numbers out
a little bit more in order to find a deal
(22:09):
that's going to be as good as what you were able.
Speaker 2 (22:11):
To score its rates and home prices by the.
Speaker 3 (22:13):
Way, I hope you exactly Well, that's I mean appreciation.
That's another part of it too, because she mentioned she's
like the way she said it, she's like, man, we've
seen the equity and our property increase significantly. I would
not necessarily count on that because of prices are basically
twenty five percent higher than they were back in twenty
nineteen pre pandemic, and housing is definitely not an exception
(22:34):
to that rule as well. And so were you to
buy another property now realize that, like, I'm sure you're
going to see an increase in the value of that property,
but it's probably not going to be nearly at the
pace or the clip that you've seen currently.
Speaker 2 (22:46):
Yeah, you can't.
Speaker 1 (22:47):
Expect essentially like twenty twenty three stock market returns, you're
gonna have yours like twenty twenty two. And the same
thing that's true in the housing market, right exactly that
you can't expect like, hey, I'm going to washprints and
repeat and get the exact same results were in a
different climate.
Speaker 3 (23:00):
Think the results might be a little bit different. And
one other point of caution I guess I wanted to
throw out there as well is the fact that, and
maybe this is me really ringing between the lines, but
being a landlord of a duplex that you're living in
the other half is pretty nice, right.
Speaker 2 (23:13):
If there's something wrong with.
Speaker 3 (23:14):
The garbage disposal, you take like five steps, you go
around the corner and you're right there, as opposed to
driving to a different neighborhood or driving across town. Up
until now, managing that duplex has probably felt like, certainly
a part time job, but like a super light part
time job, as opposed to having to load some tools
in the vehicle, driving over to see it, scheduling a
(23:35):
time to see it. Like it starts to feel a
bit more like a part time job. It's going to
be more work than I think. Maybe what you've experienced
so far, So just something to keep in mind that
it's not going to necessarily be quite as easy as
it has been so far.
Speaker 1 (23:49):
So what you're getting at you got to ask the question,
is the juice is going to be worth the squeeze
if I continue to kind of ramp up my investments
and expand my real estate empire. And the answer is
maybe right, depends on the specific numbers where you live
and the specific properties you're looking at. And I think
also what you're saying, Matt too, is that a wisely
used helock can help you make more progress in less
time when it comes to ramping up the speed of
(24:10):
your ability to invest, But that's also not without additional risk, sure,
so you have to take that into consideration, Like I
use this this. I did something very similar to myself
after about my first property and it had increased in
value substantially, and I did take some helock money out
to buy the next house and it worked out well,
but I was very cautious about how much dat I
was willing to take on, and I wanted to keep
(24:32):
a significant equity buffer, like I didn't don't call hogwild.
I guess this is what I'm trying to say. And
so I think too, if your question a bit about
using a helock to help you buy something frivolous, we'd
say no way. I mean, that's typically when people are
talking about pulling helock funds, Matt. Most of the time
it is for consumption, even if it's for renovating a house.
(24:52):
That typically I consider that to be consumption unless you're
adding value in such a way that you can also
consider that an investment, like if you're putting an EIGHTYU
on to the back of your house or something like that.
And I think if you'd asked even about using the
helock money to buy a nicer single family home, we
would tell you to save up longer. But I think
the difference in your question here, Danielle, is that you'd
(25:13):
be cashing out a portion of the value of your
current successful investment to make another strategic real estate investment.
And to me, that's different. This is likely the best
way to get those funds, aside from, like Matt said,
saving up a bigger cash cushion, This is the best
way to go about it. And so I would shop
around with a few local credit units to try and
get the best rates and then I would say the
(25:35):
goal should be to pay off this helock with the
additional income that you're going to generate, the rental income
you're going to be able to see with that next duplex,
hopefully eradicating the helock in something like thirty six months
at the most twenty four months ideally, because if you have,
if you're saying, oh cool, I'll pay off the helock
in eleven twelve years, to me, that timeline's too long
and you're biding off more than you can chew. But
(25:56):
if you have, if you run the numbers and you're like,
I can pay off this helock in short order once
this new investment starts to generate a profit, then I
think it can make sense and it's within the realm
of reason to consider using a helock to buy the
next place.
Speaker 3 (26:10):
Yeah, and you're also likely going to need to season
those funds for anywhere between sixty and ninety days first,
which means you'll need to tap the helock and then
just have those funds sitting in the account that you
plan to disperse from for that down payment. And so
having that money sitting there for a while will likely
be helpful, and it also just what banks want to see, right,
It depends on the lender as well. It depends on
(26:32):
the bank or the credit union, because either way they'll
be accounting for the the money payment that you're making
exactly towards that helock and your debt to income ratio.
Speaker 2 (26:41):
But just keep in.
Speaker 3 (26:42):
Mind the leverage. It can be a helpful tool for
wealth building, but it can cut both ways. And that
is why you want to take on debt with just
great caution. And I don't want to be the guy
that's just like raining on your parade here, because it
does sound like that you are being cautious. It sounds
like you're being smart about it, but just don't take
out more than you need in order to buy this
new income producing set. And if you do go the
(27:02):
path of taken the helock, we want you to have
that plan in place in order to eradicate that because
even though it's not the absolute worst kind of debt
that we like to see people have, well, fact is
you're still paying some interest on that because of the
fact that you didn't go full cash for that downpayment.
Speaker 2 (27:16):
Yeah.
Speaker 1 (27:17):
Yeah, And another thing that Matt's some real estate investors do,
they'll take helock money out to buy a place in
cash and they rehabit and then they do cash out refinance.
I mean, there are all sorts of like funky ways
that you can do this, that you can buy that
next investment property. It's just a lot of the ways
that hardcore real estate investors talk about financing some of
these deals. I get scared, I get nervous, and to me,
(27:40):
I wouldn't be willing to take that much risk. So
I think what we're attempting to say is, like, listen,
if the numbers are solid and you know what you're doing,
then this is something I think you can proceed with
as long as you keep your debt reasonable. But if
you get way too cozy with debt and you're overleveraging yourself,
you could find yourself in a really poor position. Especially
(28:00):
let's say you're to experience a few extra mounts of
vacancy and some additional repairs and you're like, wait a
second now, Mike, Like, I can't pay it off anytime soon.
I actually need to tap it for more money. That's
what we want you to avoid.
Speaker 3 (28:10):
Yeah, basically, we don't want you to count on the
absolute best case scenario unfolding in order for this to work, Joel,
let's get to our next question. And this is a
listener who is beginning to look ahead. He's starting to
feel a little uncomfortable with his portfolio allocation.
Speaker 6 (28:24):
Hi Matton, Joel, Raphael from Hillsboro, Oregon. Here. First, I
would like to thank you for the show, always providing
great and valuable advice. Now for my question. My broker's
account is fully invested in stocks, but I wanted to
gradually convert it to bonds over the coming decade or so,
and I was wondering if you have any recommendations for
(28:44):
doing it in a text efficient way. My income is
not expected to drop during this time and I have
no losses to harvest. I was talking to an advisor
and he recommended moving my money into an SMA separately
managed account, which is supposedly text optimized. But doing them
out myself, I honestly couldn't see how that provides any benefits.
Please help me understand if I'm missing something. Thanks again, Raphael.
Speaker 2 (29:08):
Raphael, thank you, thank you for your question. Love where
your head is at? Here?
Speaker 1 (29:11):
Because now we talk about this all the time, there's, like,
I think, distinct periods of time when it comes to
your money. And when you're in your twenties and thirties,
you're in the wealth building phase of your life. Typically,
let's say you get into your mid forties, which we're
rapidly approaching, like, you start to get into maybe more
of a wealth preservation mindset as you're approaching drawing down
(29:33):
those sons. It's not like Rafaela doesn't sound like it's
going to tap this money tomorrow or anytime in the
super near future.
Speaker 2 (29:39):
It's like a decade out. Yeah, he's in no rush.
Speaker 1 (29:42):
He has chosen to be incredibly stock heavy for the
wealth building years, which I think makes a lot of sense.
And then I think he's planning ahead at least for
the wealth preservation stage, and I think that's wise. The
closer you get to tapping the accounts, that the money
that you've been saying, I think some people listening Matt,
the I've been saving and investing, and all they can
think about is like continuing to ramp up their investments.
(30:04):
They're like, I don't even know what it's gonna be
like to flip that switch where I'm actually drawing down
on those funds. And it doesn't mean that rafael is
going to get to the point where he needs no
stock exposure, because even like a target date fund is
going to have, at its most conservative something like a
fifty percent allocation of stocks, you're still gonna want that too,
because you're gonna want to be able to compound that
money for decades to come to help to support you
(30:26):
and your retirement needs. But it also doesn't mean that
taking some of your chips off of the stock only
side of the table doesn't make sense. So I think
I like where Rafael's head's at here.
Speaker 3 (30:35):
Yeah, I was gonna mention that he's from Hillsboro, Oregon,
which anytime someone mentions like this not only the state
but also the town, you always.
Speaker 2 (30:42):
Look up where they live. D al You're a stocker
like that Rafael's specific address. I looked at al No.
It's a cute little town.
Speaker 3 (30:48):
It's like a suburb of Portland, a little expensive, expensive
to live there, given the fact that it's also known
as the Silicon Forest, not like Slicon Valley, but Silicon Forest,
and that's because Intel is actually headquartered there.
Speaker 4 (31:01):
Oh.
Speaker 2 (31:01):
Interesting, Did you know that? No, didn't know that. It
seems like a lot I should have known that, being
from Morgan myself. But oh yeah, well.
Speaker 3 (31:06):
You're only there until you're like six months old or
something two, But bet you have just as many memories
of Well you remember things when you're two years old,
don't you.
Speaker 1 (31:14):
Yeah, I don't really remember anything, Crent, but I when
I go back and visit, I still love it.
Speaker 2 (31:18):
You feel a kindred spirit. The Pacific Northwest is that
the folks who live there.
Speaker 3 (31:22):
But Rafael was asking about the separately managed account. We
don't see that as a great solution. It's no surprise though,
that your financial advisor would suggest it, telling you that hey,
I'm going to do all the hard work for you,
well for a substantial fee. Of course they stand to benefit,
and there's nothing wrong with hiring an advisor or paying
for advice. But with an SMA, you are typically paying
(31:45):
someone to pick stocks. You're paying someone to help you
with your allocation. But my guess is that you already
know what it is that you want to do. You're
just looking for the most tax advantage way to achieve
greater levels of balance there within that brokerage account. And
so unless I think you feel the knee need for
expert help on that front, and if you're willing to
pay up in order to get it. We think that
this is most definitely something that you can di y. Yeah, yeah,
(32:07):
you've done the hard part.
Speaker 1 (32:09):
And so do you want to start paying someone one
percent of assets under management in order to put you
in this specialized account to try and offer you more
specific investment options. I don't think it makes a whole
lot of sense. I think you're right, man, and I
think the average person listening to this podcast one has
never heard of a separately managed account and also doesn't
(32:31):
need one to achieve their goals. One of the things
that typically gets talked about when we're talking about SMAs,
when an advisor will attempt to sell you one, is
you'll hear the word customization in the sales pitch. It's
it's a lot about flexibility and customization.
Speaker 3 (32:44):
It's going to be all about Raphael. Yeah, let's talk
about your needs. We're the exact thing they're going to say,
your name by bunch that works for you.
Speaker 2 (32:51):
Look you directly in the eyes. That's right. We know you,
we know what you need. But do you really you
live in the You live in Silicon forest, don't you?
We know you, Rafael, so clearly.
Speaker 1 (32:59):
You, sir, are you going to need a portfolio allocation
more along the lines of this, and it's going to
be highly specified, tailored to you.
Speaker 2 (33:07):
But do you need that?
Speaker 1 (33:08):
We doubt it. It's highly unlikely. Index funds still make
a lot of sense for the average person or even
for the unaveraged person who has been able to amass
the amount you've been able to do, Raphael. So it's
important to note we're talking about brokerage accounts here too
when you're talking about rebalancing the investments that you currently have.
I'm sure you have some money in tax advantaged accounts too,
(33:30):
But inside of those tax advantage accounts, you can buy
and sell funds, updating your holdings without any tax consequences whatsoever,
which is cool, But you have to be more intentional
with holdings inside of a brokerage account because rebalancing can
come with tax consequences, Like depending on how long you've
held a particular position, you can be taxed at the
more favorable capital gains tax rate, or you might find
(33:53):
yourself owing tax that mirrors your top income racket, which
should be double or more the capital gains tax rate.
So while rebalancing it can be wise, and it can
be something smart to plan for, do it over time,
and with the tax consequences as a key consideration of
win and how you do it.
Speaker 2 (34:10):
Yeah.
Speaker 3 (34:10):
Yeah, So one of the routes you can take in
order to not generate a big old tax bill would
be to actually not sell any positions at all, not
sell any securities, and to just contribute new investment dollars
directly into something, let's say like a total bond index
fund as a way of rebalancing. And so by doing that,
with every single month or whatever you're purchasing cycle that
(34:31):
you happen to be investing in, you're going to slowly
but surely you're going to tone down the relative percentage
of stocks that you own relative to the bonds that
you now own in that brokerage account. And that's ultimately
what you're after, right, And so if you opt to
take this route, we're achieving what you want, slowly but
surely without creating any sort of tax burden. Yeah, you're
doing it the most tax within the most tax efficient manner.
Speaker 1 (34:54):
Yeah, And it sounds like this is not something that
needs to happen overnight.
Speaker 2 (34:58):
So why immediate?
Speaker 1 (34:59):
Why sell stuff and buy stuff and create a big
tax burden for yourself when, like you said, you can
just essentially funnel those new purchases into something that's more conservative,
and then you're just buying that and building up your
positions slowly, especially.
Speaker 3 (35:12):
Because he said too that he's not expecting his income
to go down, so I'm assuming that he's going to
be able to continue investing at the same clip that
he was doing before. And so that's again with him
having a decade. You know, he's got ten years of
runway ahead of them. That's a lot of bonds that
you can buy to where he would feel much more comfortable.
Speaker 1 (35:26):
I think probably in like three years, he's going to
be like, wait a second, Okay, now I'm relegated there.
I need to actually start buying some more stocks again.
And maybe then you're you're splitting your purchases fifty to
fifty at that point, But yeah, I think that's probably
the best way to do it. You're building up even
more significant positions, You're you're continuing to keep the stocks
that you have around, and you're punting any tax bill
until even further down the line in retirement. You can
(35:49):
do the same thing with distributions, right that you're reinvesting. Yeah,
just reinvest those into bonds instead of total how the
market fund that you're using.
Speaker 3 (35:57):
Yeah, I don't have those automatically reinvest and whatever they're
coming from.
Speaker 1 (36:01):
Yeah, and then it might take it. Like I said,
I think a few years of these steady contributions to
get to that comfortable place where you're like, cool, I
did the wealth building thing. Now I feel comfortable in
the wealth preservation piece. I've been able to achieve this
kind of balance that I'm looking for. But because you're
not in a hurry, you have so much time to
get to that balance point. It's amazing how planning ahead,
(36:21):
giving yourself time can help you from a tax perspective
to avoid some of the worst possible investing mistakes. And
we're always trying to but you know, grow our money
and minimize taxes, like those are two of the biggest
things that you need to think about as an investor,
and Raphael is thinking about both of those things. He's
also thinking about minimizing downside risk, and so I think
(36:42):
he's got the whole picture in mind. Don't necessarily listen
to that financial advisor and hire them on the spot
to do something we think you can do for yourself
pretty easily.
Speaker 3 (36:49):
Totally, and if it's something that you're wanting to achieve
more quickly too, don't forget you. You can donate securities
that you have as well through something like a donor
advised fund, which is where we've got an article up
on the website talking about how we're big fans of Daffy.
But what's so great there is that even like there's
a lot of smaller five oh one c threes that
aren't set up to receive securities, and so by contributing
(37:10):
stocks to your donor advised fund, they take care of
it for you, and then you can choose what charities
that you want to give to further, you know, further
on down the line.
Speaker 1 (37:17):
Yeah, So instead of giving me a huge cash from
your savings for checking account, give from your appreciated securities.
You're minimizing your tax bill.
Speaker 3 (37:24):
To get more bang for your buck, yeah, because, yeah,
you're avoiding tax completely while at the same time rebalancing.
Speaker 2 (37:29):
Your portfolio as well. So that could be a great
solution for you.
Speaker 1 (37:32):
And it's a stone that often goes unturned, like most
people don't think about that, but you're right and giving
it to the donor bus fund and then giving your
charities that can be a big tax one.
Speaker 2 (37:39):
Absolutely, all right, Joel, We've got more to get to.
Speaker 3 (37:41):
We're gonna hear from a listener who's looking for the
next hot stock tip. We'll get to that more right
after this, all right, Matt, Tim gonna get more listener questions.
This next question is, of course the Facebook question of
the week.
Speaker 2 (38:00):
This is a long one.
Speaker 1 (38:01):
Yeah, it's quite short, quite to the point. This comes
from Chad and he says, who do you follow for
stock tips? This was posted in our Facebook group, of course. Yeah,
and so he's asking all the how to money listeners,
who do you follow for stock tips? Talking people like
Jim Kramer here meant that's the question.
Speaker 2 (38:16):
Yeah.
Speaker 1 (38:17):
So Jim Kramer is like probably one of the most
famous people because he's on CNBC and Mad Money.
Speaker 2 (38:22):
Is this still on? I think he is.
Speaker 1 (38:24):
Yeah, he's still on TV. Got the buzzers and the
bells and the whistles, and so you know why.
Speaker 2 (38:27):
I guess he needs all that in order to maintain
everyone's attention. You've got to keep the ratings up right.
Speaker 3 (38:32):
And so, Joe, why don't we have buzzers and sirens
going off and I've only seen him.
Speaker 1 (38:38):
We should like memes or clips of his show. Yeah,
I've never literally never actually watched it, but yeah he is.
He's the kind of guy. And there's especially in the
age of fragmented media, there are more and more Jim
Kramer's out there or want to be Jim Kramer's out
there who are giving specific stock buying tips. But I
love the how to Money Facebook group for so many reasons,
and if you're listening and you're not a member, you
should go join it. But the group responses were so
(38:59):
good that no names were mentioned in the comments, so
the main thrust was essentially right. Yeah, nobody was saying, actually,
this is the guy I follow. They were just saying,
we don't do that here, like, that's not what we
do as hod of money listeners. And they're right, you know,
we're not fans you and me of stock picking and
the people who are the stockpicking types who are throwing
out ticker symbols or hey, guess what I'm forecasting in
(39:21):
Nvidia to smash returns over the next five years. They're
going to be four times the size of Apple. Like, no,
that's just not the kind of stuff we pay attention
to I guess if you're so inclined, I would go
back and listen to our conversation with Brian Ferraldi. He's
not the kind of guy either who's really throwing out
names and ticker symbols, although he is a fan of
buying individual stocks in addition to index one. So he
(39:42):
does both. But he's also honest about what it takes
to do well. He's honest about his long term view
and about the successes and the failures that he's had.
He discusses the fact that there's a lot of research
that if you're going to invest in individual stocks, you
have to be able to withstand higher level of volatility
and you have to have that long term mindset in
(40:03):
order to be successful. So if you're kind of saying,
what's the hot stock of the minute, that's not what
he's into either. He's about investing in companies that he
trusts and thinks have a long term potential future in
this right, Yeah, and so he has done well. But
I think but even sometimes when people ask this question,
mat they're talking about day trading.
Speaker 3 (40:20):
Sure, sure, and even still he's done well, but he
also only invests his own money, So like you might
be thinking, well, why don't why don't you guys let
Brian invest your money.
Speaker 2 (40:28):
He refuses, Yeah, he won't do it.
Speaker 3 (40:30):
He's willing to take those kind of risks because he
knows that he can handle the ups and downs. And
like you said, that volatility, you have to you have
to have the right mindset in order to handle some
of the extreme volatility that you're going to get when
you do invest in single individual companies.
Speaker 1 (40:43):
I mean, there's so many examples we could point out.
Do you remember when like Meta Facebook basically when the
stock just like dropped off a cliff and it's been
crushing actually kind of since that day. That was maybe
a couple years ago, and it's been crushing kind of
in the aftermath. And it's one of those things where
like we'll continue to do that. I don't know, like,
are the it is the virtual reality where that the
Mark Zuckerberger is creating and it's Facebook as an entity
(41:05):
going to stick around in this I don't know, like
it's but if you have that conviction right that Meta
is going to be a company that stands to test
the time. And you essentially want your money to follow
your mouth or your heart in that I'm okay with
that as long as you do it reasonably and you
have that conviction to hold on to it for the
long term.
Speaker 5 (41:22):
Yeah.
Speaker 3 (41:23):
And what's reasonable for the vast majority of investors and
certainly for the vast majority of folks who are listening
to this podcast is keeping that limited to just five
percent of your overall portfolio. And Joel, like, you just
said something about putting your money where your mouth is.
This is like the best example I think of this phrase,
like put your money where your mouth is, because we'll
literally this what we do. We talk about money all day,
(41:44):
so it seems quite literal. But I checked because I
own some individual companies. Now I was curious.
Speaker 2 (41:50):
I was like, oh, man, I wonder what.
Speaker 3 (41:51):
The overall percentage of my portfolio is that invested in
single stocks. And I also lump single companies in with
crypto as well, because any of those basically non indexed
investments that I have, I don't want any of that
to exceed five percent.
Speaker 2 (42:06):
Yeah. And do you want to.
Speaker 3 (42:07):
Guess as to what percentage I have invested in single
companies in single stocks plus crypto.
Speaker 2 (42:12):
I'm gonna say one and a half percent. I would have.
Speaker 3 (42:14):
Guessed something in that line as well. Point three percent. Okay,
point three percent, dude, it's almost non existent. And I,
you know, got some Netflix they've been doing pretty well
over the past couple years. Would have expected it to
be a little bit higher, maybe some of my let
those winners run, but it was not the case. I
was actually pretty shocked at the fact that I have
less than one percent invested. This is an example. This
(42:35):
is an instance where we can say, or at least
where I can say, do as I say, and as
I do. Yeah, no, same here. I don't know the
actual percentage, but my guess is, if I'm like adding
it up in my head real.
Speaker 2 (42:44):
Quick, you're like, no, I got a cool fifteen to
twenty percent in.
Speaker 1 (42:48):
Meta, right, it probably it's probably one percent maybe less
of my overah holdings. And I just put you're right,
it's for me. It's a blowing off steam thing. It's
kind of like a fun It is fun, and we
don't think most of investing should be fun. We think
life should be fun, but investing should be boring. And
the more you stick to boring investing, the more fun
your life can be.
Speaker 2 (43:06):
Because you're not as.
Speaker 1 (43:07):
Worried or anxious about how a particular stock is performing
in a given day, week, or season. So it can
not only be fun but scary. Right things aren't doing.
Speaker 2 (43:17):
So exactly right.
Speaker 1 (43:18):
When it's like up into the right, you're like, yeah, whooo.
It's like when your team is winning in playoff baseball,
but if you just lost the first three games in
a seven game series, you're freaking out right, and so
you don't want to be in that position. By the way,
there was like a literally an inverse etf of Jim
Kramer picks that was available that was publicly traded, which
is just hilarious, man, that people can invest in the
(43:39):
opposite of whatever Jim Kramer says. And there's a reason
I think funds like that came into being, and it's
because people saw the bells and the whistles and the
silliness of it all, and they said, hey, actually, maybe
if you do exactly the opposite of what this guy says,
you might perform better. And the truth is, buying the
index fund is probably the best way to go, not
listening to any individual stock advice giver.
Speaker 3 (43:59):
That's right, We've got time for one more here. Let's
take an email from Janine and she wrote, I have
very good credit, no debt, and I'm getting new windows
from my home.
Speaker 2 (44:08):
I want to use my card with.
Speaker 3 (44:09):
The best benefits, but all of them seem to have
one percent only for this type of use. Your info
seems to show a City card that will give me
two percent City double cash card. But is there a
charge to apply for it or an annual fee? I
can't find that info as of right now. I'll put
the deposit on one of my cards and the first
half of the remainder on another one, intending to use
(44:30):
their float and pay it off when the bill comes.
The last part will be due when they install, so
I have time to figure something out before then.
Speaker 2 (44:37):
So that's one part of it.
Speaker 3 (44:38):
She's asking about a specific card, and then she wrote,
the other thing that confuses me is my friends apply
for home equity loans for this type of thing. Why
how does that make sense? So, Joe, are you want
to start with question A or question B?
Speaker 2 (44:49):
Okay? Can I start with actually question ce the one
that didn't get asked?
Speaker 1 (44:52):
Well, we're reading between the lines. That's my favorite thing
to do. First thing starts. I just wanted to mention
that if you're getting new windows at your house. There
are energy efficient tax credits. Oh yeah, don't forget about those.
Don't forget to claim those, because you might be eligible
for a significant chunk. And let's say you do some
of those windows this year, you do some of those
windows next year, you you might be able to then
(45:12):
kind of get the because there's like limits on annual
limits on what you can claim. That's right, you might
be able to double the amount.
Speaker 2 (45:18):
Of tax credit you receive. That's true. Do some in December,
some of January.
Speaker 3 (45:22):
So get that quote and see if they're going to
charge you more for coming out, right, because they might.
Speaker 2 (45:26):
They might, they might. If they don't, why not chop
that thing up.
Speaker 1 (45:29):
It's worth considering. All right, let's get to whether it
was A or B or whatever one of the tool
We'll start talking about credit cards here the UH and
Janine mentioned the City Double Cash card.
Speaker 2 (45:38):
That's a great card.
Speaker 1 (45:39):
It's one of the rare cards that offers two percent
cash back on all purchases. I think there's like literally
three of them maybe in existence. And so we're totally
good with you putting the window purchases on that credit card.
And we love that you're planning to pay the pay
the bill on time and in full when it comes.
That is obviously key when we're talking about using credit
cards doing it wisely. And by the way, this is
(46:00):
likely a bigger purchase, so you might even want to
consider I'm just going to make a suggestion here a
credit card with a bigger welcome bonus. And so the
City Double Cash is a great, fantastic everyday card when
you're just doing your normal spending, when you're able to,
let's say, meet a sign up bonus in one fell swoop.
Now we could be talking about, like in the case
of the Southwest card, eighty five thousand miles that you're
(46:23):
able to get just by putting the purchase on that.
So I would at least kind of consider opting for
a different card, but then getting the City Double Cash
to go along with it for the future. I don't know,
maybe both and is the right solution here.
Speaker 3 (46:34):
Yeah, that could totally work for Janine. And let's talk
about the helock part of your question then, because we
actually talked about this on a recent Friday flight. It
doesn't make sense for you to use a helock for this.
Your friends who do that, they're taking on debt for
those home repairs, and yes, this is the intended purpose
of a helock, but we'd still rather see folks save
(46:55):
up them pay for those repairs in cash, because using
home equity to pay for fixes, well, that makes even
lessons today, given where interest.
Speaker 2 (47:01):
Rates are, the environment that we're in.
Speaker 3 (47:04):
It's not that it never makes sense, but you want
to insure into those transactions cautiously. But the ideal is
to just hold off making those repairs or any of
those updates and to pay for them with cash, with
money that you've been soalking away, just like you're doing,
even though you can deduct the interest that you make
interest payments that you are making on that heelock, because
you are using it to improve your property. That's great,
(47:26):
But that's like that would be an instance of the
tail wagon the dogs, right. So it's just it's a
very very small silver lining. And the fact is the
fact the friends who are tapping home equity, unfortunately, they're
probably in a position to where.
Speaker 2 (47:37):
They have to do that.
Speaker 3 (47:38):
You know, they don't have that cash on hand. It's
not that it makes sense, it's just that they're in
a position to where that's what they have to do.
Speaker 1 (47:44):
Yeah, I mean, it'd almost be like if Janine had
written and said, hey, here there's a tax credit on
getting new windows. My windows are pretty solid thinking about
going in this struction anyway, get some new windows, because hey,
who doesn't love a tax.
Speaker 2 (47:54):
Break, love a deal, right, that would also be.
Speaker 1 (47:56):
Tail wagging the dog. And so don't let those potential
tax break push you in a direction that doesn't make
sense because you're still spending money. And the same is
true with like, let's say helock. It's like, oh, well,
I have access to this money. I've got the home
equity built up, so maybe I should just tap it
in order to do stuff that I would have otherwise
waited to do. And the truth is, the better financial move,
(48:17):
the one that's going to leave you with more financial security,
is to instead save up the cash and pay for
it instead of using a helock, even though it's something
you can do, Jenny, we hope that that helps you out.
Best of luck to you with that window replacement. You
hope you're able to max out the benefits and optimize
this nicely. All right, Matt, let's get back to the
beer that we had on this episode. This one is
(48:37):
called Upstream. It's a hazy ipa it's a collab by
two awesome breweries and actually on the license plate on
the front of the vehicle on this can says best friends.
So is that why you picked it out?
Speaker 3 (48:50):
Nope, you literally didn't see that when you picked up
the spear, because this isn't one that was sent into
us by a listener. You picked this one up and
when we were listening to one of the listener questions,
you held up the cannon point out about it. Yeah,
I just noticed it. I was like, oh, which is
totally cool, but yeah, I dug it. What'd you think
I dug it too. I thought it was kind of
grassy and earthy for an ipa. It was a little different,
a little a little out of the normal hazy ipa sphere.
(49:12):
It had a different, yeah, different flavor profile before I
even tasted it, Like on the nose, what I smelled
was grapefruit like. It smelled like like someone had sliced
a fresh grapefruit and they're holding it under my nose.
And the flavor once I sipped it, I completely backed
that up.
Speaker 2 (49:26):
In my opinion. It tasted it almost had like a
grapey muscadine like flavor going on.
Speaker 3 (49:32):
I don't know it was, but simultaneously, it wasn't overly
sweet and kind of I don't know, musky or anything
like that.
Speaker 2 (49:38):
It was still super fresh. Was it last week?
Speaker 3 (49:40):
Was that beer that you liked in our interview with
thrown by Prestin?
Speaker 2 (49:44):
Yeah, the Pure Project.
Speaker 3 (49:46):
I felt like that one to me. I don't know
that it tasted old and kind of flat. This one
was very prickly and.
Speaker 2 (49:51):
Alive and I could feel it all my tongue. Yeah. Yeah, yeah,
I liked this one too. Maybe I had a cold
last week. I don't know.
Speaker 1 (49:56):
Maybe I like that one better actually last week, But
I liked this one too, so this is quite yeah,
good one. Always fun to have stuff like pick stuff
up when I'm out on the West Coast because it's
beer that we don't normally normally have access to. It's
like when I just went to Washington, DC and I
was able to get some beers from some breweries that
are harder to come by down here, and it's like
there are a diamond dozen up there.
Speaker 3 (50:13):
But you also see some of our local Atlanta breweries
on the tap list as well, which is super cool,
especially when it's like the small ones who don't get
around very much.
Speaker 2 (50:21):
I'm always like, oh, you got the insider knowledge. Yeah yeah,
but they're still crushing it.
Speaker 1 (50:25):
That's right, all right, that's going to do it for
this episode. For links to some of the stuff we mentioned,
you can find those up on our website at how
toomoney dot com.
Speaker 3 (50:32):
That's right, and leave us a review please if you
have not yet already. It's a great way to let
other folks know that how to Money brings the value
that it's helping you in your own personal finance journey.
You can do that at Apple Podcasts or wherever it.
Speaker 2 (50:46):
Is that you listen. But buddy, that's going to be
it for this episode. So until next time
Speaker 3 (50:49):
Best Friends Out, Best Friends Out.
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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