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1 - Who actually owns the house if you buy a place with your friend?
2 - Should I dollar cost average back into the market after I roll over my 401k?
3 - Does it make sense to use some equity from the sale of my house to pay off some debts?
4 - How should I invest the money I’m saving up for a new car purchase in a few years?
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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 and I am Matt,
and today we're going to answer some of your listener questions.
Speaker 2 (00:25):
That's right, buddy, it is Monday, so we are hearing
directly from listeners. We're going to talk through a savings
strategy for buying a new car. We got a listener
who's wondering how it is that he should time his four.
Speaker 1 (00:37):
To one k rollover.
Speaker 2 (00:38):
That'll be I think an interesting one, as well as
another who is buying a house with her friends. We're
going to talk through. I guess maybe some of the
pros and cons there, and then.
Speaker 1 (00:47):
Like a Three's Company situation, like some pitfalls to watch
out for. Our younger listeners won't remember that, but I
guess they were renters in that situation too. I don't
remember that. Did you watch Three's Companies Scandal a show
back in the day, But I did. I did. I
don't know if my parents allowed it. I come on
right after The Love Boat or before. It's a good question.
I don't remember. I don't think I should have watched
the Love Boat, but I did like Three's Company. Okay,
(01:08):
but before we get to the listener questions, Matt, there
was something I read about this week and it fascinating
me because I'm about to go on this like really
fun hiking trip. I'm excited about it and uh with
some friends, and I saw that Arctarix, which is this
cool outdoors company, just released some new hiking pants, and
I was like, oh, do I need some new hiking
(01:29):
pants for this trip? Well, not at this price point?
Have you seen this? Said, so Joell, send me the
article just to give me a.
Speaker 2 (01:36):
Little heads up right before we hit record. But yes,
the price point on these things.
Speaker 1 (01:40):
These are five thousand dollars pants. But why why?
Speaker 3 (01:43):
Unreal?
Speaker 1 (01:43):
They're not lined with cold They're not like the US
women's gymnastics uniforms with all sorts of like you know,
diamond encrusted studs or whatever else. Leotards had like how
many crystals, ten thousand crystals something, Yeah, four thousand more
than last Olympics. Yeah exactly. So okay did this one.
It was all about the exoskeleton that's going to make
you a better hiker. They're cyborg pants, yes, that's what
(02:05):
I call them. Yeah, basically like you're a transformer on
the bottom half.
Speaker 2 (02:09):
So I will say Arctics is a good company. Actually
they breaks up, Yeah, my first pack took.
Speaker 1 (02:13):
It abroad when literally we're.
Speaker 2 (02:16):
Like hiking and seeing stuff in Italy, Arctics. Awesome company.
I don't understand this product at all though, specifically because
of how they're marketing it. Yes, is that Okay, that's
exactly what I was thinking here, you're thinking.
Speaker 1 (02:27):
So what they're saying basically is like, hey, this is
for hikers who want to just be a little bit better,
who want to up their game, up their game. Because
what I immediately thought of when I read this article was, oh, man,
this is great for like older folks, for people who
have like hurt knees, because it's going to take a
lot of pressure off. But they're saying, no, no, no, this
isn't for that crowd. This is for the person who's
already like a solid hiker and just wants to be
(02:47):
bionic exactly.
Speaker 2 (02:49):
Which makes zero sense though, because so there's one stat
that they shared, Uh, do you know what the battery
life is on the three hours?
Speaker 1 (02:57):
Right?
Speaker 2 (02:57):
That's the part that doesn't make any sense to me,
because if you are you solid hiker and you're looking.
Speaker 1 (03:01):
To up your performance, I'm going to want you're already
hiking at least.
Speaker 2 (03:05):
Three hours, and then would you have you've got like
this heavy, clumsy like you're totally screwed.
Speaker 1 (03:11):
You got to like sit down for an hour and
charge it real quick.
Speaker 4 (03:13):
It doesn't.
Speaker 2 (03:13):
Yeah, it makes zero sense at all, But I totally
agree if they if it was marketed more towards those
with mobility issues or somebody who's older, and hey, you
know what, this is.
Speaker 1 (03:23):
Going to get you back on the trail.
Speaker 2 (03:24):
This is going to allow you to enjoy your favorite
mountain again, which you haven't been able to do in
ten years.
Speaker 1 (03:29):
I think that makes a ton of sense, a ton
of sense. Plus the fact that folks who are in
that situation I think are more might be more willing
to spend that kind of money to kind of regain
this aspect of their life that they lost ondred percent.
Speaker 2 (03:40):
So taking that perspective, So the original perspective that I
had on this, my original take was that they are ridiculous.
But if you think about it from those with mobility issues,
I think I'm one hundred percent for it. It makes
me like an e bike dude, You're like reading my mind.
It parallels e bikes completely, Because initially I was just like, dude,
if you are using an e bike, that means you're cheating,
(04:02):
like you should be one hundred percent muscle. But then
as prices came down and you start to realize that, man,
this is going to allow a lot of folks to
get out there and they're gonna get moving. They're gonna
consider biking to work, They're gonna be able to take
their kids on longer rides if it was like an
e cargo.
Speaker 1 (04:17):
Bike and actually be able to have their kids in
tow versus what the traditional bike.
Speaker 2 (04:21):
It takes a lot of quad power, not to mention
the fact that it might something like an e bike
might allow somebody who ordinarily wouldn't be able to bike
to work do that on their rag and then all
of a sudden they're able to lose completely ditch a
car from their life. I think that's huge, And again
especially given where prices with e bikes were, because like,
what's a pair of hiking pans cost, I don't know,
(04:41):
like fifty bucks, right, but.
Speaker 1 (04:42):
Is this five thousand? Yeah, so exponentially higher, much more expensive.
Speaker 2 (04:46):
And so if e bikes were like one hundred times
more expensive than like a regular bike, well I.
Speaker 1 (04:52):
Would still say that e bikes are pretty dumb. Yeah,
not because I don't like the idea of them, but
because they're just so expensive. But because what are you
they're like twice as expensive me as like a like
it's traditional bike counterpart, especially these days. If that was
the case, then I'd be like, you know, that seems
to make a little bit more sense. I'm curious to
see in five, six, seven years what these pants like,
how much they're going to go down on price, how
(05:13):
much better they're going to get, how much battery power
is going to get better, they're going to be more
market to more available for people with like physical issues,
and so maybe we'll change our tune years from now,
but for the time being, I'm not going to be
the initial adaptor of these pants, that's for sure. Yeah.
Speaker 2 (05:27):
Absolutely, it's funny as my own legs to hike. It's
funny you mentioned hiking. You're going to hiking with some
buddies and you're you're doing like a I mean, it's
a camping trip essentially, you're going to be like out
in the wilderness.
Speaker 1 (05:38):
We've got here in Nevadas.
Speaker 2 (05:39):
Yeah, we've got a trip planned out there in Colorado,
and we just decided that we're going to go for
the Rocky Mountain National Park, which would ever make Yeah,
there's like a ton of high elevation alpine lakes.
Speaker 1 (05:51):
Yeah, and I'm super stoked about that. That sounds amazing.
Speaker 2 (05:53):
Talking about this makes me think, think about that and
super pumped. It's one of those stories to share from
our getting out there on the mountains.
Speaker 1 (06:01):
One of the best free things you can do, or
very cheap things you can do, is get out there
in nature. So hundred percent. All right, let's get to
our listener questions. But first, Matt, let's mention the beer
we're having. This one's called Garden Salad. It's by Variant.
I actually picked this can up at the brewery. Was there.
It's like in Roswell, not too far from where we live,
and I'd never been there before. Really great brewery, So
give our thoughts on this one.
Speaker 2 (06:21):
At the end of the episode, one of a friend,
kind of a distant friend. Technically him and his wife
were clients of ours, but he is he was one
of the.
Speaker 1 (06:29):
Owners or founderies. Okay brewery, Well, they.
Speaker 2 (06:31):
Make good stuff, So I feel like because of that,
I probably should have given it more love over the
past I don't know six years we've been recording this podcast.
Speaker 1 (06:39):
But have we had any variants? I don't think we
have variant beers. This might be the first one on
the show. Looking forward to sharing. No thoughts at the end,
mostf all right, But and if you have a money question,
by the way, we'd love to hear from you. Just
go to how to money dot com slash ask for
the simple directions. How to record your question really just
on the voicemano wap on your phone emailing it over
to us. We'd love to take it on the next
Ask Kind of Money episode. Matt, let's get to the
(07:01):
first question of the day. This question is all about
buying a house, but it's got a twist to it.
Speaker 4 (07:07):
Hey, Matt and Joel, this is Michelle from Saint Paul.
I actually have a question for a family member. My
aunt is a widow and just retired, and for the
last several years her and her best friend had planned
to live together in their retirement and girl together. This
friend was set to move in with my aunt, who
owns her house outright, but for several reasons, they decide
against this and my aunt's house is now up for sale. Instead,
(07:28):
they plan to purchase a house or condo together. My
family is a little concerned. We've known the friend for
many years and believe she's a trustworthy person. However, this
is a platonic friendship where they each have their own children,
their own finances, and so on. My mom came to
me because I tend to be the more financially savvy
in the family. But I'm a little stumped. My main
(07:49):
concern is what happens when one person dies, assuming they're
both invested equally. Normally, I would expect the house to
be inherited by the other owner, but in this case,
they both have kids that they would want their half
the house to go to. And then how would that work?
If my aunt dies first, then my cousins both own
half a house with the friend. Then I'm assuming they
(08:12):
would be expected to pay insurance and praipery taxes and
maintenance and so forth. But then if it goes the
other way and the house then goes to the surviving friend,
then what happens when the second person dies? Would the
entire house only go to their own kids and not
(08:34):
all of them like the original plan. So this is
a little over my head, and any advice you can
give would be helpful.
Speaker 2 (08:40):
Thank you well, thank you Michelle for sending us your question.
This is honestly a really interesting question, and it's becoming
a more I bet it's on more people's radars. Oh,
then it used to be given the housing prices.
Speaker 1 (08:52):
Yeah, well, people are delaying marriage so much more delaying
having kids, and so I think, but the home ownership
maybe still remains something that people to desire, and so
they are saying, well, in this unaffordable market, it's becoming
a little more elusive on your own. Hey friend, oh
what if you and I going together?
Speaker 2 (09:07):
And by this exactly, and it's becoming a lot more
common for younger folks. There are some stats from open door.
Here are some numbers. Eleven percent of first time home
buyers bought a home with a friend in twenty twenty three,
and specifically, unmarried millennials are ten times more likely to
buy a home with a friend than boomers were. This
trend it's just not going away anytime soon. The basic
(09:29):
demographic changes are a part of the reason why. But
there are risks that your aunt Michelle, as well as
her family, I guess her immediate family, even though you're
technically family as well. There are specific risks that they're
assuming though, if your aunt attempts to go this route,
but at the same time, you don't want that to,
I don't know, dissuade you from at least considering it,
because there's there's risk involved in essentially everything that we do.
(09:50):
Walking out the front door, there's a risks that we're
just exactly like driving around into cars, like that's how
a lot of people die. But it's basically something that
we've this is totally worth doing. So you just got
to make sure you kind of weigh the known risks
against the potential rewards.
Speaker 1 (10:06):
That's the real question. So we'll try to lay out
as much as we can to kind of help you. Michelle.
And it's interesting because your aunt is older. We're talking
about first time home buyers, we're talking about millennials. This
is a younger thing for the most part of your
aunt is bucking that trend as someone who isn't in
her thirties and attempting to do this. But still talking
from a forest perspective here, we talked not too long
about cohabitating with a friend or a significant other too
(10:27):
early on in a relationship and We mentioned that as
like whether it's a friendship style relationship or whether there's
something extra there. And what seems like it's saving you
money could actually potentially come back to bite you and
cost you more in the long run if you have
to break a lease, for instance, Right, that presents a
real financial problem for you in many many states. There's
the flip side of that too, Right, we as individuals
(10:49):
are lonelier than ever. We feel cut off from our
friends in our community. Walking and biking are rare in
this country, sadly in much of the country, And so
I get the appeal of living with people that you
care about that can provide real emotional and relational benefits.
So I guess don't discount the benefits your aunt is
going to receive here from this platonic cohabitation. I do
(11:11):
think that there's like a beautiful thing to be able
to hang out. I don't know, Matt, you and I
we work together every day. We're best buds, and so
there's something really nice about getting to see your best
bud every day. Normally you see your best bud on
Friday and Saturdays or something like that, And so I
think we get to have fun conversations all throughout the
week exactly, even when we're not talking about right before
we hit record, we're talking for like ten minutes. Finally
we start talking about the subject that we need to
(11:32):
and that's just what you don't want to hear, is
the conversation we had before we were Yeah, so it's
different for another podcast sometimes.
Speaker 2 (11:40):
Yeah, but yeah, so I don't be a paywall there
for all the premium subscribers.
Speaker 1 (11:43):
That's the Patreon, I guess or whatever.
Speaker 2 (11:46):
Okay, let's imagine our wives leave us or die whatever.
That dying is sadder though our kids. They both be said, Yeah,
our kids grow up and exit the house. Do you
think you and I you think we could buy a
house together and live in the same house.
Speaker 1 (11:58):
It depends how big the house is. Yeah, maybe a duplex. Yeah,
a duplex would be great. I don't know. Yeah, we
travel together, but living together is a completely different thing.
It really is.
Speaker 2 (12:07):
And it depends on how like how old we are
at that point, because if we're like old and I
don't know, which is another thing. If we're younger, I
would think that like there's more change, there's more of
a dynamic sort of reality that you would expect as
you're younger, but obviously Michelle's aunt, she's she's a little
bit older.
Speaker 1 (12:23):
Well, you're less sett in your ways then, and there's
more ability to mold to each other. I guess, yeah,
but that's just I guess. One other question worth asking
is like, Okay, even though we're great friends, this is
gonna be good for our friendship or bad for our friendship,
because as you know, there are friends who are like,
they're dear to me, they're not great travel companions. Yeah,
and you realize that about friends too. You're like, Okay,
they're great for this, this and this, not so great
for this in this.
Speaker 2 (12:44):
And even if Michelle your aunt has traveled with his friend,
I still think that because like we can, I mean,
we travel together all the time. But it's still very different,
like I'm imagining, because there's like little sacrifices you make
and different ways you modify your your behavior when you're
on vacation. But if that was like your day in
and day out, that's a lot different. Right now, I
think I'm only content to live with my wife and
(13:05):
my kids. But we were talking about how Michelle your
aunt is older. I do think it's less likely that
this comes back to bite her because I don't know.
When you are older, I think you understand yourself better.
I bet you understand your friends a little bit better
as well. But we'd also say that it is important
to consider what it would look like to sell the
home even before they end up buying it, making sure
(13:26):
to outline an exit strategy if this platonic purchase isn't
all that they thought it would be. I would make
sure that each party just has a plan for what
that could or what it might look like. But also
I would encourage them to decide why purchasing a home
together makes the most sense, because what about renting your aunt.
She could end up keeping the proceeds from her home
(13:47):
sale in that scenario, and then the fallout from this
not working well, I think is going to be far
less financially consequential. It's at least worth discussing, And it
sounds like her friend was already maybe planning to do
some sort of arrangement like that when she was planning
to move into your aunt's house, So maybe she's already
on board with the renting idea. Honestly, I'm assuming that
(14:07):
the reason they're choosing at different house is because maybe
I think Michelle said her aim was a widow, so
maybe the house worked well for her before. But as
they're thinking through, like who's gonna take the primary bedroom,
for instance, that poses a whole lot of additional questions,
and maybe they're thinking, oh, well, maybe we should just
end up getting just a fresh new place without without
all the history. Which also makes me think, why doesn't
(14:28):
your aunt just buy the home on her own, because
if she owns her current home outright, I think that
makes a ton of sense because then you are avoiding
a lot of the messiness.
Speaker 1 (14:38):
Of having to your friend.
Speaker 2 (14:40):
Yeah, exactly, that way, her friend doesn't take on any risk,
but she also isn't necessarily realizing any additional reward. But
if your aunt's friends' kids, right, if they're concerned about well,
what about the inheritance or any equity that we'd be
missing out on if she's not buying a home, Well,
that money's in the bank. Yeah, that is not money
that she's utilizing to purchase a home, which in my
(15:02):
mind is almost even better, right, like it's even more
available as opposed to trying to figure out, Okay, how
do we sell this home or do we end up
wanting to hang on to it. There's a lot more
questions and a lot more messiness when you're talking about
owning it together.
Speaker 1 (15:15):
And yeah, not to put too much emphasis on what's
going on in the macrosphere right now, but as it's
been widely documented, renting is cheaper than buying these days,
and so it also gives you a chance, just like
we talked about Matt, when somebody moves to a new city,
we'll give renting a shot first. So you figure out
what part of town you like and what you know,
is it close enough to work, how's that going to
impact your commute time? What else do you like to
do in that city? And you just don't know a
(15:36):
city well enough, typically upon just one or two visits,
to decide this is where I want to live for
the next decade. Well, the same thing can be true
with living with somebody else. Dip your toes in the water,
and dipping your toes in the water could be a
one year lease because the stakes are lower totally, and
it's just a better financial decision in the current climate.
This might not be the case, by the way, if
your aunt was house hacking, if she was renting out
(15:57):
a room in the home that she already owns, But
buying a new home in today's housing environment is a
totally different conundrum. So, you know, opting for the cheaper
monthly costs of rent, avoiding home ownership altogether while investing
the difference could ultimately be the best financial choice for
both of these both of these ladies and totally renting
if it's a single family home or an apartment, whatever,
(16:18):
a condo like, whatever floats their boat, whatever suits their
needs the best. I just I see that making a
whole lot of sense. I don't know totally. If they
want to live together, great, why does buying have to
be at the center? I think there are a lot
of other additional avenues that could go down where they
could achieve all the benefits of cohabitation and reducing some
costs and providing companionship without the additional messiness and risk
that comes with purchasing linking finances in a major way.
Speaker 2 (16:41):
But let's assume though, that she does want you know,
they're I don't know, maybe they're dead set on actually
purchasing this home together. Let's talk about the ownership side
of things. It's worth mentioning we're not lawyers. And so
our suggestion here is going to be to hire a
real estate attorney if she does opt to continue down
this path, because basically she's gonna want the real estate version.
Speaker 1 (17:00):
Of a pre nup.
Speaker 2 (17:01):
Like all of these details need to be hammered out
and they need to be agreed upon. And this is
you know, you said that I think her friend is
quite trustworthy, you know her yourself. It doesn't really matter
because things, you know, things can go sideways.
Speaker 1 (17:14):
Yeah, you never know, Like someone leaves throw underwear on
the on the dining room table one time, bright, it
can mess us up a good thing at Linda. But
if they choose to purchase.
Speaker 2 (17:23):
This home together, they could do this as a joint tendency,
which gives your aunt and her friend equal ownership as
well as right of survivorship. Though, and so that's kind
of a downside because that means if one of them
does pass away, it's not the family that inherits the
ownership stake there and the property, it's the other co owner.
So in this case, if let's say your aunt were
(17:44):
to die first, in this scenario, her friend would be
the sole beneficiary of the ownership stake, which means her
kids they're not going to be happy with this arrangement
because it sounds like they want to make sure that
they're able to get.
Speaker 1 (17:56):
Some of what she might leave behind. Yeah, so probably
in all likelihood, what the approach you're gonna want to
take is something called tendency in common. This allows each
individual to decide how they want their ownership stake divvied
up if they were to pass away, and they can
also choose to go in seventy five twenty five, Let's
say your aunt has more cash than her friend. Instead
of like the fifty to fifty arrangement, you can divvy
(18:17):
up the ownership amount to your own satisfaction and then
this allows for more flexibility and the ability then to
leave an inheritance as well to your loved ones. But
that flexibility also means one or the other might be
able to sell their share to a stranger, which could
be a deal breaker. So that's the downside of that one.
So there's downsides really to both of these arrangements. It
would be tough if things got difficult that where one
(18:40):
or the other said, you know what, I'm gonna sell
mistake in this property there, I'm gonna list it on
Craigslist and just see who wants it. That could create
a really difficult problem for both people.
Speaker 2 (18:50):
And hopefully, like you would assume that you would offer
for the other partner to kind of buy them out,
because that's pretty common, but like they don't have to
do that, and so that's where that's where a real.
Speaker 1 (18:58):
Estate attorney can come in. Yeah, yeah, you know.
Speaker 2 (19:00):
Or again even still like if they want to get
a new place, either renting Joel, like you were kind
of talking about, or just your aunt Michelle her buying
it like completely on her own, and then you just
drop a lease and you have a simple arrangement from
year to year. The stakes are just much much lower
as opposed to going all in on a new purchase together.
Speaker 1 (19:16):
And you think about it, Matt, when you're buying too,
not only is it like, oh, let's slit the mortgage,
it's okay. Do we have some sort of big savings
account set aside for repairs we're going to need to
make to this What if we decided to make some
renovations too. There's a lot of outlines or joint decisions
if you're going to do this together exactly, and those
joint decisions are basically off the table. When we're talking
(19:36):
about renting, it's like, well, maybe our landlord will let
us paint this room, so then you just like find
the place that works for you, guys and makes you happy,
but it doesn't come with all those other side questions
that as well could.
Speaker 2 (19:47):
Be a little thorny and sticky as well as expenses.
And you can take that extra money that you're saving
and go travel instead, right, which is a great way
to maintain your friendship.
Speaker 1 (19:55):
Yeah, so, Michelle, I hope that's helpful. There's a really
a lot to think about, a lot to work through,
and a lot to really discuss with your aunt. I'm
not sure you know how much influence you have over
what she does or what sort of information you're looking
to provide her, but hopefully this conversation gives you the
ability to have a good discussion with her about this choice,
because it's a big one. All right, Matt, We've got
(20:15):
more to get to. We've got an interesting question about
rolling over a retirement account, and then what about buying
a home when you just had twins. We'll get to
those questions right after thisybody, we.
Speaker 2 (20:33):
Are back from the break and now let's hear from
a listener who has essentially come upon a fork in
the road when it comes to his retirement funds.
Speaker 3 (20:40):
Hello, Matt and Joel. My name is Sam and I
live in Cleveland, Ohio. Big fan of the show and
I've been listening for some time.
Speaker 1 (20:48):
Now.
Speaker 3 (20:49):
What do I do with a previous employer plan of
approximately sixty thousand dollars that I want to roll into
my current rollover IRA? In particular? Do I invest the
full proceeds in one allocated however my money is currently allocated,
or do I dollar cost average it over a specified
time period in order to dollar cost average it? Again,
the issue I see with one lump sum is the
(21:11):
same issue with any big lump sum of money. You
run the risk of buying too high. But if you
dollar cost average the rollover to slightly eliminate that risk,
you then have a big chunk of money sitting on
the sidelines for a while. My previous employer sends a
check as opposed to an inkind transfer. I would really
appreciate your thoughts.
Speaker 1 (21:29):
Thanks for all that you do, Sam, This's a great question.
I totally see why you're hesitant to do a lump
sum investment here. But Matt, I don't know if you
had the same thought. My thought was kind of like, uh,
you're also not doing a lump sum investment because the
money you're rolling over was already invested. So because of that,
I think what you're trying to do is you're trying
(21:51):
to decipher whether or not to keep all your money
invested or not, which just reframes the conversation a little
bit differently and the reality of the choice that Sam
has to make. And I do think that makes this
a different predicament than someone who inherits, let's say, twenty
thousand bucks that they want to invest or someone who
gets a big bonus and wants to invest at all,
and they're like, do I do it in one fell
swoop or do I wait and do it over time,
over weeks or months. The psychology and the reality are different.
(22:15):
But in your case, Sam, I mean, I think the
answer here, Matt, at least the TLDR is to say, well,
stay invested, don't do a slow role here, keep those
funds where they were. Yeah, So psychologically it feels different,
but the reality is that it's exactly the same, you know,
Like the fact that he so he said that his
previous employer that they won't do an in kind transfer basically,
(22:37):
and so they're forcing him to face this issue by
cutting him a check, yeah, or by cutting the new
brokerage check. Like that's the fork in the road where
he's just like, well, okay, what do I do now?
When before, had it been in kind transfer, he would
never like, this would not be something that was on
his radar at all.
Speaker 2 (22:53):
And so because that it seems like on the surface
that things are completely different, but they don't need to be, essentially.
Speaker 1 (23:00):
Because in a lot of other situations, You're right, the
money would have got onto a like fund and at
the new place, and then he wouldn't have had to
make any decision. But now he has to actually make
the decision because of the way his employers shoul.
Speaker 2 (23:11):
It's forced his hand, It's forced him to look at
this when otherwise he would just be happy doing whatever
it is that Sam and Ohio does.
Speaker 1 (23:17):
Yeah with his free time.
Speaker 2 (23:19):
And I think a good question for you, Sam is
whether or not you were planning to sell any of
your current holdings, whether that was the consideration at all
before you started this conversion process. Previously, were you worried
that the market was maybe going to see a little
bit of a pullback. Well, if that was the case, like,
maybe you're right on that front. But if he is,
how would you then figure out how to invest those dollars? Again,
(23:42):
Let's say in that instance, you do decide to hold
off a little bit and you want to ease back
into the market. Well, the biggest upside here is that
you dollar cost average into a market pullback, which means
you are paying slightly less for the index funds that
you that you previously owned.
Speaker 1 (23:56):
Which makes you feel smart, makes you feel like he
got a little win there. Yeah, like a little boost,
little win at your back. But then the risk here, though,
is that you are slow to dollar.
Speaker 2 (24:04):
Cost average and your money just sits idly by while
the market continues to chug long reaches all time highs.
And then the longer that happens, I think, the more
reticent you're likely to become, where you're not wanting to
invest at what you perceive as the basically like the
top of the market. And like I will say this
from personal experience, because I've never had automated investing, Like
(24:25):
even Joel, like you and I, we've got a self
employed four one K or a solo four one K
plan that we have set up here for some personal company.
Mainly write the check every year, yes literally a check
like in every quarter is when I send that into Fidelity.
But like for a lot of folks, it's set it
and forget it, and so it's not something that's on
your mind, just like it was never really on Sam's
mind before. But when you have to think about it,
(24:46):
you start doubting yourself and you start thinking. You start
paying attention a little bit to the gyrations and fluctuations
of the market and.
Speaker 1 (24:51):
Taking heads on CNBC, Yes exactly, and I will say
I have found myself being like, well, it feels like
we're at all time highs and then so so then
you start to delay a little bit, and then the
market goes up for another three months and you're like,
I should have invested three months ago. Which is why
I think it's incredibly for folks like Ustil or you know,
for folks who have to manually invest, making sure you've
(25:13):
got an investment plan, which is why I love the
fact that typically I save up for my next year's
investments in the like the previous year or like in
the current year right now, twenty twenty four, I'm saving
up for investments that I would make in twenty twenty five.
That way, when the calendar year rolls over, boom, no
matter what right you deploy it.
Speaker 2 (25:30):
So basically, I'm pointing to the fact that there's a
plan that you're sticking to and you're not paying it
as much attention to what the market is doing, because
there's always a chance of second guessing yourself.
Speaker 1 (25:40):
No, I think that's spot on, and I think you're
right because when you look at history, better to be
invested on January first, January second, whatever, than it is
even to dollar cost average throughout the year. So if
you have the money at the top of the year,
which not everybody does, but that's a better time to
invest because time in the market is more important than
trying to time the market. And I I just do
(26:00):
think this could turn into a behavioral nightmare for Sam.
Right the money sitting on the sidelines, missing out on
gains potentially for quite a long time. That is the
far bigger risk if you're asking us to play odds maker, Sam,
And it's true, money on the sidelines is doing better
than any other time in recent history, because in Matt,
I think that's what's giving people a sense of false security, right.
I get why young folks are pumped about seeing something
(26:22):
like five percent returns in a money market account or
in a savings account. It feels great, and it is
great in so many ways. It's for what I'm thankful
that savers are not being penalized anymore, because for a
lot of years it was like half a percent that
was the only thing you could get excited about in savings. However,
the market clearly performs better than cash over the long
run and has over the short term too, So when
(26:43):
the market goes up, you know three quarters of the time,
I would just let that be my guiding light and
I wouldn't overthink this. Absolutely. Yeah.
Speaker 2 (26:50):
So on that note, I actually don't know how old
Sam is, but he I don't know, if this is
over generalizing, he kind of sounds like he's fairly young,
and so I think of this as a decision that
is going to have minimal impact on returns over the decades,
because maybe he's been investing for a few years, but
we're talking about investing over the long haul here, and
so that's just another reason to not try and over
(27:11):
optimize this because the SMP is going to be Let's,
it's gonna be at like forty five thousand in a
few decades if the historical trends continue, And it's not
going to matter at all if you bought in at
fifty five hundred or fifty six hundred. Right, Like, I
know you want to be smart, but I think taking
like a higher level view of your investment horizon is
(27:32):
a healthier way of thinking about it.
Speaker 1 (27:34):
In here and now that seems like, oh my gosh,
holy smoke. So the difference of that big in the
index fund that I want to invest in, I'm buying
in a discount, And yes you are to a certain degree.
But the other potential downside is that you're buying when
prices go up, and you're keeping that money uninvested for
too long. And what you're getting at here, Matt is
they're really in the grand scheme of things. It's a
(27:55):
small potatoes decision. So just stet invested.
Speaker 2 (27:57):
Yeah, yeah, Like you kind of quite literally are making
in out of molehills, right because like you see like
the movements of like last week or this month, and
you're thinking, oh man, that's a that's that's quite the mountain.
Speaker 1 (28:08):
But like when you zoom out, let me get my exoskeletons,
so I can climate when you look at twenty thirty
years of time like that's it's not even going to
register at all. And so we're essentially we're pointing at here,
is that being invested, that that is the main key
and the driver of returns, and so time in the
market that means a lot more than trying to time
(28:28):
the market. And that's assuming too that you can even
get the timing of the market correct. And so there's
a high likelihood that you aren't able to actually time
the market properly. And I mean that in a way
that optimizes returns in the in the short term, especially
over the past couple of years. As we've just hit
all time high after all time high after all time high,
so many people are like, it's too hot, it's too
hot in the kitchen. This can't continue. And you know,
(28:51):
we don't know how long it can continue. We don't
know when the pullback happens. Well, we've had to pull
back recently, when the bear market happens, right, or when
a recession happens. It's hard to predict those things. But
because of that, the only thing we can do in
an attempt to remain sane and to remain invested is
to keep doing the thing right, is to keep pushing
money in, and especially in this case, when the money
(29:12):
is already invested, to not take it out and try
to do something different with it. And so to go
a step further here, dollar cost averaging is typically what
we talk about because you know, most folks are investing
with every paycheck. That's how the vast majority of dollars
get into tax advantaged accounts right there. It's in the
four O on K the four or three be the
TSP with every single paycheck. But you know we mentioned
(29:33):
the twenty thousand dollars inheritance or a bonus or something
at the beginning of this question. Even in that scenario
right where we're talking about fresh dollars being diverted toward investing,
investing it all in one fell swoop is still the
best move, you know. Can we guarantee that it's gonna
work out to the greatest eventual net worth. No, of
course we can't. But that is what history shows us.
That is what makes the most sense. I'm gonna let
(29:55):
history be my guide here and not my feelings about
what's happening in the current moment, especially when you take
that zoom out approach, the forest approach, and you're like, Eh,
it's all going to be good either way. But let
me air on the side of just keeping my money
in the market. That's right.
Speaker 2 (30:07):
Yeah, So Sam, if it was me personally, I would
immediately get those dollars invested back into the market. And
we hope that provides you with some good direction. Joel,
let's now hear from a listener who has a housing question.
It's like a housing slash debt payoff question. But he's
actually he's not an American, and so I want to
preface this listener question with like a little warning. I
guess I don't want folks to get bogged down with
(30:28):
the details that are specific to being a Canadian, because
I think there are some awesome principles that will be
able to pull from his question.
Speaker 5 (30:37):
Hey, Matt and Joel, this is Clinton from Alberta, Canada.
I am twenty nine years old and have been listening
to the show for about two years now. I really
enjoy the show. Is that has helped me and my
wife organize our finances and stimulated conversations around our money goals.
My question is about using home equity to pay off
loans as we sell our current home and buy another.
(30:58):
We recently had twins, so our current home feels a
bit small for our needs.
Speaker 4 (31:02):
Now.
Speaker 5 (31:03):
We are currently between money gears four and five and
are anticipating to buy a new home for two hundred
and seventy thousand while selling ours for two hundred and
fifty five thousand. Our current mortgage is at one hundred
and sixty three thousand at one point nine nine percent interest,
leaving us around ninety thousand dollars in equity for the move,
minus re liter and other moving fees. Our mortgage broker
(31:26):
suggested that we use some of that equity to pay
off provincial student loans nineteen thousand dollars at six point
nine five percent and a car loan thirty two thousand
at six point eighty five percent leasing it, leaving us
a little shy of forty thousand as a down payment.
This is under twenty percent down, so we would need
to pay CMHC insert insurance on the new mortgage. We've
(31:49):
paid seven thousand and CMHC on our current home and
that would transfer oh over, so we would only owe
CMHC on the balance above what our current home costs.
New mortgage would be around five percent, so we would
save just shy of two percent on those loans that
we pay off. Our only other loans are zero percent
(32:09):
interest federal student loans. It seems to me that this
would save us money long term, along with simplifying our budget,
essentially just consolidating debts. We expect to stay in the
home for a few decades while the boys grow up.
I'm curious to hear your thoughts and thank you for
taking the time to answer my question.
Speaker 2 (32:28):
J also back at the beginning of Clinton's question, he
said that you are a conversation stimulator.
Speaker 1 (32:35):
I appreciate. How do you like that title.
Speaker 2 (32:37):
I'm down with it. I'm down with it. If I
have anything to do with it, that's going to be
on your grip.
Speaker 1 (32:42):
Honestly, I think that's probably true, but probably because, like
conversation is one of my favorite things. Yeah, whether it's
with you, my friend, or honestly, no matter what you do,
you're gonna be a conversation stimulator. I was just talking
with a couple of friends last night about what kind
of person are you. Are you the person who puts
in their earbuds in the uber or are you the
kind of person who talks to the uber driver? You
can guess what kind of person I am. Yeah, you
(33:02):
start talking, Yeah, immediately you know their life story by
the end of them on the audiobook that you're listening to.
I love I don't know. I love hearing people's lives.
I mean, it's it's to me, it's the most fascinating
thing ever. Clinton, Thank you for your question. Always nice
to have a question from a listener north of the border.
Congratulations on the twins. Oh yeah, that's life changing, but
I'm sorry I didn't start with that. Well and having twins,
(33:23):
I mean just it's gonna be one of those things
that punches you in the face and also brings to
doword to your heart. It's both at the same time, totally.
And by the way, it's just really interesting to hear
all the different terms. So instead of p M, I
what did he call it? Was the term for it
in Canada m HMC. So there's different terms, but really
there's a lot of similarities that I think a lot
of our you know, us listeners can learn from two totally.
(33:45):
I think the main thrust here is about whether you
should consolidate debts as you're swapping home. Yeah.
Speaker 2 (33:50):
I think most folks might think that the no brainer
answer here is yes, because in Clinton even outlined it,
He's like, we're gonna be saving two percent here. Well,
the answer might actually be yes. But it's just not
that easy because when you consolidate debt, you essentially minimize
or you are eradicating the pain of paying it off,
which sounds great, but that could potentially lead to pour
(34:12):
borrowing habits, and it could ultimately ultimately lead to more
debt in the future. And so what we're pointing out
here is that, like, we know, it's going to be
awesome to be done with your student loans in what
she called provinci loans that they have there in Canada,
as well as that car debt. But but if getting
rid of the car loan the easy way I just
(34:33):
hitting the easy button, if that's going to attempt you
to upgrade your car, let's say a year from now
or even a couple of years from now, if it's
going to cause you to take on other forms of
debt that you might find yourself slipping into as opposed
to feeling the pain and the I don't know, the
self flagellation that comes with making payments. Asues are slowly
trying to eliminate debt from your life. I'm not trying
(34:56):
to like glorify that, but there is a resolve I
think that can come from that that where you say
to yourself, we are never going to ever do this again.
Speaker 1 (35:03):
That's exactly right. Yeah, that's why you know, when we
talk about buy not pay later, or when we talk
about balance transfer credit cards, this is like something that
has to be addressed every single time. Is are you
just looking for the easy way out or are you
seriously dedicated to paying off this debt completely but you
just want better terms? Right? And like we literally literally
just published a new article on how to money dot
(35:24):
com at about balance transfer credit cards. We try to
be honest with people, like, yeah, they might be able
to help you out in your financial situation, but there
are cons to going that route too, Whereas it seems
like I think from the novice, it's like, oh, it's
only a good thing to be able to go from
twenty two percent interest right down to zero percent for
fifteen months. Well, but is it if that tends to
get at a little more loosey goosey with your spending, realizing, Hey,
(35:46):
now I've got two credit cards at my disposal, and
I'm going to run the debt up on the other
credit card, and I'm not going to be as disciplined
as I would like or as I thought I was
going to be, because really this all comes down to, in
my opinion, self discipline. Basically, you're in the worst of
both worlds scenario. If you use this debt in a
haphazard manner, you find yourself in a much bigger financial
hole if you lack restraint. So self discipline is at
(36:08):
the root of the answer. I think we would say totally.
Speaker 2 (36:11):
And I'll want to highlight to the fact that I
think he said his mortgage broker is who pointed him
in the direction of like, hey, you're pulling some maquity
out of this house. Maybe there's something smarter you can do.
And obviously your mortgage broker knows all of your what
your debts are, and they've got a pretty good picture
of your finances. Yeah, I think that's cool. I would
like to think if I was a mortgage broker, I
would also try to I. Would you know that you
and I both Joel that we'd be pointing folks to
(36:32):
be like, hey, have you thought about doing this instead?
Speaker 1 (36:34):
Yeah?
Speaker 2 (36:35):
But what I want to point out here is that
just because something makes sense from a financial, like a
purely numbers standpoint, that doesn't necessarily mean though, that it's
going to make sense for Clinton and his family. It
doesn't mean it's necessarily going to make sense for him
like his personality. For how it is that you find
motivation for the things that you want to eliminate from
your life. It's like the math versus the behavior one
(36:55):
hundred percent. Honestly, that's why we're able to have a
podcast that we publish three times a week because, like
the rules are pretty solid, Like do we prescribe is
there a recommended way that we think that folks should
achieve financial independence? Higher levels of financial freedom? Absolutely, that's
what the money gears.
Speaker 1 (37:11):
Maybe.
Speaker 2 (37:12):
But that being said, everyone's personal circumstances and situation they're
all going to be a little bit different, and.
Speaker 1 (37:17):
That's what we just always want to highlight at least
these potential pitfalls of making this decision. So, yes, it
doesn't mean that this might not be the best decision.
But it's like, only if you have at least resolved
that you're not going to go down these other pathways
that could lead to greater destruction.
Speaker 2 (37:32):
Yeah, and plus we don't know what your investments look like. Clinton,
there's a chance you might be over prioritizing this debt
payoff and that you're not investing enough. But that just
depends on a few factors, including the retirement accounts and
the matches at your disposal. It depends on how long
you've been investing, It depends on how big your nest
egg has become. So what is it that you should
do specifically, And that's going to ultimately depend on your
(37:55):
money habits, because it could truly be a great choice
to get rid of these other debts. And to simplify,
I see a lot in the Yes, let's do this
column right as you're going down and making the check marks,
But only if you don't use it as a license
to take on additional debts that you don't need.
Speaker 1 (38:10):
And some people might say, oh, great, now I've literally
got one loan I'm paying off every month and I
can't wait to be done with that and be debt free,
and other people say, I'm only got one loan going
on every month, why don't I upgrade the car a
year from now? Like, come on, I don't have a
car debt, I don't have a car note. But literally,
because you've played a game mentally and you've rolled the
car note into another loan, and now you're giving yourself
(38:32):
the permission to do something you probably shouldn't have done, because,
let's be honest, the car is not really paid off exactly.
Speaker 2 (38:37):
There's a lot that goes into the situation. I want
to highly to the fact that the two debts that
he talks about eliminating, they're not terrible. They're like not
the worst, but they're also not the best. And so
that's a part of what makes this a fun question
to tackle because essentially they're at seven percent.
Speaker 1 (38:51):
There was like in the upper sixes. If it was
much less, I would actually probably say just keep those
debts around. You don't need to roll that into your mortgage.
Let's keep this, let's pay them off as agreed.
Speaker 2 (39:01):
Yeah, if they were much higher than seven percent, then
it's like, oh no, let's go ahead and get rid.
Speaker 1 (39:07):
Of these things.
Speaker 2 (39:07):
Because from a financial standpoint, it also makes a ton
of sense. But because of the fact that it's kind
of like right there and like that that Goldilocks zone
that in this case makes it more difficult to make
a decision. Yeah, that's part of why this makes this
a fun decision too.
Speaker 4 (39:20):
Well.
Speaker 1 (39:20):
And on the plus side for Clinton too, I love
hearing that he said they're planning to be in this
home for decades. Yeah, that doesn't mean that you're going
to stand out there no matter what, Matt, I think
you and I would both agree with, Like, you know,
you make plans and then there, that doesn't necessarily mean
that those come to fruition.
Speaker 2 (39:35):
Coming from two dudes who renovated their homes and basically moved.
Speaker 1 (39:39):
For us, it was like two years, I guess. After
us it was like six months, Like six months. Yeah,
we were like, oh, this is going to be the
home for forever and it turned out not to be. Yeah,
but moving regularly is one of the biggest detractors of
building home equity and watching your net worth increase from
smart housing moves. So buying and holding truly is Matt
when it comes to investing in the market. When it
comes to owning a home, it's the secret sauce of
(40:02):
wealth builders. It seems like this insignificant thing, but it's
amazing how much money is lost by people who are
frequent traders, and whether again, whether that's in your retirement
accounts or whether that's in the housing that you're buying.
The longer you can own those things, the more you
can feel comfortable in that place that you've purchased, The
longer you can make that work, the more wealth you're
going to accrue to yourself.
Speaker 2 (40:22):
And of course, while the transaction costs have come down
it comes to stock trading, they're still up there when
it comes to buying and selling homes, which is one
of the things that's slowing down I think the housing
market today. But uh, kudos to you and your fame, Clinton,
and we wish you the best. But Joel, we got
more to get to.
Speaker 1 (40:37):
We're gonna hear from a listener who's looking to save
up for a medium term savings goal, how to go
about that in the most optimized way. We'll get to
that right after this. All right, Matt, we're back on
the break. We've got another question to get to. Of course,
we got to get to our Facebook question of the week.
(41:00):
This one comes from listener Alex By the way, if
you're not a member of the how to Money Facebook group,
please do go sign up if you're on Facebook, because
it's one of the only good things about Facebook these days.
Marketplace is solid, but the how to Money Facebook group
is where it's at. But this one comes from Alex
who says, I want to start saving for a car
purchase I'll make in the next three to four years.
With that timeframe, I was considering a brokerage account, but
(41:23):
what to invest in? S P five hundred or bonds?
If bonds, which one? What do I do on this one?
Speaker 2 (41:29):
He was looking for a specifics Yeah, yeah, no. So
this remains I think one of the trickiest things in
personal finance, which is how do you think about money
that you intend to spend in the medium term, Because again,
short term is sort of like when we talk about
interest rates on debt. If it is low, okay, it's
not the worst, keep it around.
Speaker 1 (41:46):
Yea, you got a three percent interest that's one thing.
Twenty five percent and easy answers to both of.
Speaker 2 (41:49):
Us slam dunk. So short term savings goals are easy.
That hial savings account that's going to be the answer,
and so is long term, because if you're saving for decades,
if you're saving for retirement, stock heavy, low cost investing
in tax advantage accounts, that's always going to be the answer.
Speaker 1 (42:05):
Something that long term listeners have heard us say many times.
Speaker 2 (42:07):
Yeah, but that three to five year window, it's always
the most fraut. You don't want to lose chunks of
capital right before the big purchase, let's say, four years
from now. But you also can't lock that money away
in an account that you don't have access to within
that period of time as well. And so while there
is no slam dunk answer, let's try to thread this needle, Joel,
(42:27):
in this case, the Goldilocks zone is actually what we're
striving for.
Speaker 1 (42:31):
Yeah, exactly. Yeah, And so you mentioned locking it away.
That means don't put it in a four one K right,
like this is not a retirement again, right exactly, Like
you definitely don't want it in there. He mentioned brokerage
account at least Alex mentioned, So, yeah, brokerage at least
Alex is thinking the right way in regards to the
type of account. But I I'm gonna go out on
a limb here, Matt. I'm gonna say I think the
best option, the goldilocks option here is probably just cash, right,
(42:55):
especially since saving money isn't losing you money anymore. We're
finally and the savers aren't getting bludgeoned pace of life.
So you can make money above and beyond the rate
of inflation in a simple high heeled saviors account. No
exotic moves needed, and that makes it even more difficult,
I think to justify taking additional risk in an attempt
(43:16):
to juice returns for that car purchase just a few
years from now, I think I would agree with you.
I think cash makes a lot of sense. But Alex,
if you do decide to go ahead and invest, just
make sure that you do it with your eyes wide open,
because let's just look to recent history, right.
Speaker 2 (43:31):
There were a lot of folks calling the top of
the market just a couple of years ago. They avoided investing,
and just look at what they missed out on, right,
So we don't want you to shy away from investing
because you think that the market can't go up anymore.
Speaker 1 (43:43):
Which is a very human reaction. Just avoid tapping into
those emotional tendencies.
Speaker 2 (43:47):
And especially given with when you look at stock charts, right,
like the way just inherently that the information is displayed
to us there is an end, Like you've got that
what is it that X the right is the end?
What is like the vertical access and like the line
stops there, And so I feel like it almost conditions
us to a certain extent to think that.
Speaker 1 (44:07):
Oh, well, this is it, this is the top.
Speaker 2 (44:09):
But the way we don't view the stock market is
like zoomed out with like thirty more years of time
added on to the right of that chart, that's just blank.
I think if honestly, I think that would be incredibly
helpful for long term investors. I don't know if somebody
out there needs to do that. Schwab or Fidelity or
Vanguard hit us up, we got some good ideas for you.
But I think that can help folks to take a
(44:31):
longer term view of what it is that the market
is doing, as opposed to just staring and fixating at
the immediate term. But I mean, ultimately, I don't think
it's like the end.
Speaker 1 (44:39):
Of the world.
Speaker 2 (44:40):
If you do want to invest this money, if you
are keen to take on some additional risk and you
want to you know, if you want to invest a
portion of your car buying fund. That's fine, Just don't
go all in on stocks, because that's going to be
certainly a great move for the money that you again
that you need decades from now, but it's not going
to be so great for the money that you need
reallyatively soon. If that's the case, you're looking for wealth
(45:03):
conservation essentially as opposed to looking to maximize every single dollar.
Speaker 1 (45:07):
Again, we're not talking about some massive sum of money
here either. We're talking about the car fund. So I
guess if we want to keep going down the potential
investing rabbit hole, Matt, we could say, oh, a target
day fund inside of that broker's account could be a
good pick. Pick what the one closest not to the
date of your retirement, but to when you're going to
need it. Right, So a target date fund twenty twenty
five or even a twenty thirty maybe right. Still, even
(45:28):
that might be needlessly over complicating something in an attempt
to eke out a bit more return, though in a
situation that just doesn't need this much complexity. So if
you're worried about rates going down, your high yeld savings
rate not being great in the coming year, you're worried
about FED rate cuts and what that's going to do
to what you're able to earn in your high old
savings account. Consider a CD I guess where you can
lock in a rate for for longer. I think that
(45:50):
could make sense. It might be the happy medium best solution.
But while investing could end up netting you a few
hundred extra dollars or something like that in your car
buying account, I just think the risk outweighs the reward here,
and you could find yourself with less money than you
started with. That's going to be the worst case scenario
when you're trying to buy that car a few years.
Speaker 2 (46:08):
Down the road exactly, especially given his timeframe when he's
looking to buy in three to four years, and you
know what, the market does go up three out of
four years, But what if it's that one year when
you end up seeing it go down? And I think
what you say is so key too. Hopefully Alex is
looking to save up cash to buy a used car,
and you can find a solid used vehicle for fifteen
thousand dollars even ten thousand dollars, which and he said
(46:31):
he's looking to start saving, which means I don't know
right now, he probably has maybe he's got zero in
that bucket. Well, you're looking at maybe socking the side
two three thousand dollars over the next year. If you're
looking at, let's say, cross for your fingers and hope
for ten percent on like three thousand dollars, you're looking at.
Speaker 1 (46:46):
Three hundred bucks.
Speaker 2 (46:47):
And that's obviously an assumption that the market is going
to go up another ten percent over the next year.
Speaker 1 (46:52):
There's no savings are guaranteed right now in the four
to five percent.
Speaker 2 (46:54):
Why not get the guarantee one fifty as opposed to
rolling the dice for three hundred in this case. And
I think there's just a lot more risk here for
not a whole lot of reward. And yeah, I think
that just saving up that cash, having that flexibility, because
who knows, maybe in four years, I don't know, maybe
you inherit a car from somebody, or maybe you end
up moving cities and you know what, Oh, I live
(47:15):
in New York City now I don't need a car.
There's a whole lot of other options that you have
when you have that cash in hand there in your
savings account, that you could use it for.
Speaker 1 (47:21):
If you want to take a page out of my book,
to Alex, I am saving money for the Ribbon R
two two years from now when it comes out again.
I don't know if I'm gonna buy it. I don't
know if I'm gonna be able to pull the trigger.
I might be a little weak in the knees and
find myself saying I'm gonna stick with the old Beater
two thousand and five SUV that I've got, just because
I can't stomach forking more money over for a car,
(47:43):
because I hate doing that. But we'll see, we'll see.
But at least I am saving for the potential for
that purpose. We'll see what happens, though. No I love it.
Speaker 2 (47:52):
Man, all right, Let's get back to our beer, which
was Garden Salad by Variant Brewing Company not here in Atlanta,
but they're actually up in Roswell, Georgia. Got a nice
little picture of veggies there on the front, which, obviously,
what does that evoke to you.
Speaker 1 (48:07):
It's like they're pulling off another half naming convention exactly,
which I mean, if you're mimicking somebody, mimic the best
and the other half's the best.
Speaker 2 (48:14):
So how do you think this compared to a lot
of the other half hazy IPAs to look like they're
closing in on the heels of other.
Speaker 1 (48:21):
Heads are really good. Yeah, it was really good. I'm
surprised because I haven't had that many Varian beers and
I had this and I was like, oh wow, some
of their original top like cash there's like Cashmere ipa.
They're solid.
Speaker 2 (48:31):
But I don't know if they've gotten a new head
brewer in or something, but they're totally stepping up their game.
This is next level for sure, and so got everything.
Speaker 1 (48:37):
I'm looking for. One of the best hazy for sure.
Georgia ip as I've had so great job.
Speaker 2 (48:41):
It's quite opaque as well, like as we poured it,
you couldn't see through it at all, so it almost
lent us kind of creaminess to it. And I will say,
I don't know about maybe your glasses dirty or something.
I've got like beautiful lacing all day.
Speaker 1 (48:54):
I just don't watch my cup. Maybe your cup is
like oily or something that that's why we can't live together.
Maybe you hit the nail on the head. I don't know,
but it's just beautiful.
Speaker 2 (49:02):
And there's something about seeing uh, really pretty lacing on
a beer as you get to enjoy it over the
course of forty five minutes. I'm glad you and I
got to enjoy this one. You can find a picture
of this beer if you want, up in our show
notes that how to money dot com, along with other
resources that we have mentioned Joel, like you mentioned the
balance transfer card, money gears.
Speaker 1 (49:20):
There's new stuff up there all the time.
Speaker 3 (49:22):
Now.
Speaker 1 (49:22):
Yeah, we're publishing great articles for you when it comes
to your financial questions. Sure go ask chat GPT or
instead just go to our website, or you can go
straight to the source better answers Chat GPT. They're getting
all their information from US's right, That's right. So, and
guess what, we have real humans writing this stuff who
know what they're talking about and relate it in a
friendly and informative way. That's right. Are you saying chat
(49:44):
GPD is not friendly? I mean, robot, it's only going
to get friendlier, all right, the moundy. That's gonna be
it for this episode. And so next time, best friends
out and best friends out.
Speaker 3 (50:00):
The
Welcome to How to Money. I'm Joel and I am Matt,
and today we're going to answer some of your listener questions.
Speaker 2 (00:25):
That's right, buddy, it is Monday, so we are hearing
directly from listeners. We're going to talk through a savings
strategy for buying a new car. We got a listener
who's wondering how it is that he should time his four.
Speaker 1 (00:37):
To one k rollover.
Speaker 2 (00:38):
That'll be I think an interesting one, as well as
another who is buying a house with her friends. We're
going to talk through. I guess maybe some of the
pros and cons there, and then.
Speaker 1 (00:47):
Like a Three's Company situation, like some pitfalls to watch
out for. Our younger listeners won't remember that, but I
guess they were renters in that situation too. I don't
remember that. Did you watch Three's Companies Scandal a show
back in the day, But I did. I did. I
don't know if my parents allowed it. I come on
right after The Love Boat or before. It's a good question.
I don't remember. I don't think I should have watched
the Love Boat, but I did like Three's Company. Okay,
(01:08):
but before we get to the listener questions, Matt, there
was something I read about this week and it fascinating
me because I'm about to go on this like really
fun hiking trip. I'm excited about it and uh with
some friends, and I saw that Arctarix, which is this
cool outdoors company, just released some new hiking pants, and
I was like, oh, do I need some new hiking
(01:29):
pants for this trip? Well, not at this price point?
Have you seen this? Said, so Joell, send me the
article just to give me a.
Speaker 2 (01:36):
Little heads up right before we hit record. But yes,
the price point on these things.
Speaker 1 (01:40):
These are five thousand dollars pants. But why why?
Speaker 3 (01:43):
Unreal?
Speaker 1 (01:43):
They're not lined with cold They're not like the US
women's gymnastics uniforms with all sorts of like you know,
diamond encrusted studs or whatever else. Leotards had like how
many crystals, ten thousand crystals something, Yeah, four thousand more
than last Olympics. Yeah exactly. So okay did this one.
It was all about the exoskeleton that's going to make
you a better hiker. They're cyborg pants, yes, that's what
(02:05):
I call them. Yeah, basically like you're a transformer on
the bottom half.
Speaker 2 (02:09):
So I will say Arctics is a good company. Actually
they breaks up, Yeah, my first pack took.
Speaker 1 (02:13):
It abroad when literally we're.
Speaker 2 (02:16):
Like hiking and seeing stuff in Italy, Arctics. Awesome company.
I don't understand this product at all though, specifically because
of how they're marketing it. Yes, is that Okay, that's
exactly what I was thinking here, you're thinking.
Speaker 1 (02:27):
So what they're saying basically is like, hey, this is
for hikers who want to just be a little bit better,
who want to up their game, up their game. Because
what I immediately thought of when I read this article was, oh, man,
this is great for like older folks, for people who
have like hurt knees, because it's going to take a
lot of pressure off. But they're saying, no, no, no, this
isn't for that crowd. This is for the person who's
already like a solid hiker and just wants to be
(02:47):
bionic exactly.
Speaker 2 (02:49):
Which makes zero sense though, because so there's one stat
that they shared, Uh, do you know what the battery
life is on the three hours?
Speaker 1 (02:57):
Right?
Speaker 2 (02:57):
That's the part that doesn't make any sense to me,
because if you are you solid hiker and you're looking.
Speaker 1 (03:01):
To up your performance, I'm going to want you're already
hiking at least.
Speaker 2 (03:05):
Three hours, and then would you have you've got like
this heavy, clumsy like you're totally screwed.
Speaker 1 (03:11):
You got to like sit down for an hour and
charge it real quick.
Speaker 4 (03:13):
It doesn't.
Speaker 2 (03:13):
Yeah, it makes zero sense at all, But I totally
agree if they if it was marketed more towards those
with mobility issues or somebody who's older, and hey, you
know what, this is.
Speaker 1 (03:23):
Going to get you back on the trail.
Speaker 2 (03:24):
This is going to allow you to enjoy your favorite
mountain again, which you haven't been able to do in
ten years.
Speaker 1 (03:29):
I think that makes a ton of sense, a ton
of sense. Plus the fact that folks who are in
that situation I think are more might be more willing
to spend that kind of money to kind of regain
this aspect of their life that they lost ondred percent.
Speaker 2 (03:40):
So taking that perspective, So the original perspective that I
had on this, my original take was that they are ridiculous.
But if you think about it from those with mobility issues,
I think I'm one hundred percent for it. It makes
me like an e bike dude, You're like reading my mind.
It parallels e bikes completely, Because initially I was just like, dude,
if you are using an e bike, that means you're cheating,
(04:02):
like you should be one hundred percent muscle. But then
as prices came down and you start to realize that, man,
this is going to allow a lot of folks to
get out there and they're gonna get moving. They're gonna
consider biking to work, They're gonna be able to take
their kids on longer rides if it was like an
e cargo.
Speaker 1 (04:17):
Bike and actually be able to have their kids in
tow versus what the traditional bike.
Speaker 2 (04:21):
It takes a lot of quad power, not to mention
the fact that it might something like an e bike
might allow somebody who ordinarily wouldn't be able to bike
to work do that on their rag and then all
of a sudden they're able to lose completely ditch a
car from their life. I think that's huge, And again
especially given where prices with e bikes were, because like,
what's a pair of hiking pans cost, I don't know,
(04:41):
like fifty bucks, right, but.
Speaker 1 (04:42):
Is this five thousand? Yeah, so exponentially higher, much more expensive.
Speaker 2 (04:46):
And so if e bikes were like one hundred times
more expensive than like a regular bike, well I.
Speaker 1 (04:52):
Would still say that e bikes are pretty dumb. Yeah,
not because I don't like the idea of them, but
because they're just so expensive. But because what are you
they're like twice as expensive me as like a like
it's traditional bike counterpart, especially these days. If that was
the case, then I'd be like, you know, that seems
to make a little bit more sense. I'm curious to
see in five, six, seven years what these pants like,
how much they're going to go down on price, how
(05:13):
much better they're going to get, how much battery power
is going to get better, they're going to be more
market to more available for people with like physical issues,
and so maybe we'll change our tune years from now,
but for the time being, I'm not going to be
the initial adaptor of these pants, that's for sure. Yeah.
Speaker 2 (05:27):
Absolutely, it's funny as my own legs to hike. It's
funny you mentioned hiking. You're going to hiking with some
buddies and you're you're doing like a I mean, it's
a camping trip essentially, you're going to be like out
in the wilderness.
Speaker 1 (05:38):
We've got here in Nevadas.
Speaker 2 (05:39):
Yeah, we've got a trip planned out there in Colorado,
and we just decided that we're going to go for
the Rocky Mountain National Park, which would ever make Yeah,
there's like a ton of high elevation alpine lakes.
Speaker 1 (05:51):
Yeah, and I'm super stoked about that. That sounds amazing.
Speaker 2 (05:53):
Talking about this makes me think, think about that and
super pumped. It's one of those stories to share from
our getting out there on the mountains.
Speaker 1 (06:01):
One of the best free things you can do, or
very cheap things you can do, is get out there
in nature. So hundred percent. All right, let's get to
our listener questions. But first, Matt, let's mention the beer
we're having. This one's called Garden Salad. It's by Variant.
I actually picked this can up at the brewery. Was there.
It's like in Roswell, not too far from where we live,
and I'd never been there before. Really great brewery, So
give our thoughts on this one.
Speaker 2 (06:21):
At the end of the episode, one of a friend,
kind of a distant friend. Technically him and his wife
were clients of ours, but he is he was one
of the.
Speaker 1 (06:29):
Owners or founderies. Okay brewery, Well, they.
Speaker 2 (06:31):
Make good stuff, So I feel like because of that,
I probably should have given it more love over the
past I don't know six years we've been recording this podcast.
Speaker 1 (06:39):
But have we had any variants? I don't think we
have variant beers. This might be the first one on
the show. Looking forward to sharing. No thoughts at the end,
mostf all right, But and if you have a money question,
by the way, we'd love to hear from you. Just
go to how to money dot com slash ask for
the simple directions. How to record your question really just
on the voicemano wap on your phone emailing it over
to us. We'd love to take it on the next
Ask Kind of Money episode. Matt, let's get to the
(07:01):
first question of the day. This question is all about
buying a house, but it's got a twist to it.
Speaker 4 (07:07):
Hey, Matt and Joel, this is Michelle from Saint Paul.
I actually have a question for a family member. My
aunt is a widow and just retired, and for the
last several years her and her best friend had planned
to live together in their retirement and girl together. This
friend was set to move in with my aunt, who
owns her house outright, but for several reasons, they decide
against this and my aunt's house is now up for sale. Instead,
(07:28):
they plan to purchase a house or condo together. My
family is a little concerned. We've known the friend for
many years and believe she's a trustworthy person. However, this
is a platonic friendship where they each have their own children,
their own finances, and so on. My mom came to
me because I tend to be the more financially savvy
in the family. But I'm a little stumped. My main
(07:49):
concern is what happens when one person dies, assuming they're
both invested equally. Normally, I would expect the house to
be inherited by the other owner, but in this case,
they both have kids that they would want their half
the house to go to. And then how would that work?
If my aunt dies first, then my cousins both own
half a house with the friend. Then I'm assuming they
(08:12):
would be expected to pay insurance and praipery taxes and
maintenance and so forth. But then if it goes the
other way and the house then goes to the surviving friend,
then what happens when the second person dies? Would the
entire house only go to their own kids and not
(08:34):
all of them like the original plan. So this is
a little over my head, and any advice you can
give would be helpful.
Speaker 2 (08:40):
Thank you well, thank you Michelle for sending us your question.
This is honestly a really interesting question, and it's becoming
a more I bet it's on more people's radars. Oh,
then it used to be given the housing prices.
Speaker 1 (08:52):
Yeah, well, people are delaying marriage so much more delaying
having kids, and so I think, but the home ownership
maybe still remains something that people to desire, and so
they are saying, well, in this unaffordable market, it's becoming
a little more elusive on your own. Hey friend, oh
what if you and I going together?
Speaker 2 (09:07):
And by this exactly, and it's becoming a lot more
common for younger folks. There are some stats from open door.
Here are some numbers. Eleven percent of first time home
buyers bought a home with a friend in twenty twenty three,
and specifically, unmarried millennials are ten times more likely to
buy a home with a friend than boomers were. This
trend it's just not going away anytime soon. The basic
(09:29):
demographic changes are a part of the reason why. But
there are risks that your aunt Michelle, as well as
her family, I guess her immediate family, even though you're
technically family as well. There are specific risks that they're
assuming though, if your aunt attempts to go this route,
but at the same time, you don't want that to,
I don't know, dissuade you from at least considering it,
because there's there's risk involved in essentially everything that we do.
(09:50):
Walking out the front door, there's a risks that we're
just exactly like driving around into cars, like that's how
a lot of people die. But it's basically something that
we've this is totally worth doing. So you just got
to make sure you kind of weigh the known risks
against the potential rewards.
Speaker 1 (10:06):
That's the real question. So we'll try to lay out
as much as we can to kind of help you. Michelle.
And it's interesting because your aunt is older. We're talking
about first time home buyers, we're talking about millennials. This
is a younger thing for the most part of your
aunt is bucking that trend as someone who isn't in
her thirties and attempting to do this. But still talking
from a forest perspective here, we talked not too long
about cohabitating with a friend or a significant other too
(10:27):
early on in a relationship and We mentioned that as
like whether it's a friendship style relationship or whether there's
something extra there. And what seems like it's saving you
money could actually potentially come back to bite you and
cost you more in the long run if you have
to break a lease, for instance, Right, that presents a
real financial problem for you in many many states. There's
the flip side of that too, Right, we as individuals
(10:49):
are lonelier than ever. We feel cut off from our
friends in our community. Walking and biking are rare in
this country, sadly in much of the country, And so
I get the appeal of living with people that you
care about that can provide real emotional and relational benefits.
So I guess don't discount the benefits your aunt is
going to receive here from this platonic cohabitation. I do
(11:11):
think that there's like a beautiful thing to be able
to hang out. I don't know, Matt, you and I
we work together every day. We're best buds, and so
there's something really nice about getting to see your best
bud every day. Normally you see your best bud on
Friday and Saturdays or something like that, And so I
think we get to have fun conversations all throughout the
week exactly, even when we're not talking about right before
we hit record, we're talking for like ten minutes. Finally
we start talking about the subject that we need to
(11:32):
and that's just what you don't want to hear, is
the conversation we had before we were Yeah, so it's
different for another podcast sometimes.
Speaker 2 (11:40):
Yeah, but yeah, so I don't be a paywall there
for all the premium subscribers.
Speaker 1 (11:43):
That's the Patreon, I guess or whatever.
Speaker 2 (11:46):
Okay, let's imagine our wives leave us or die whatever.
That dying is sadder though our kids. They both be said, Yeah,
our kids grow up and exit the house. Do you
think you and I you think we could buy a
house together and live in the same house.
Speaker 1 (11:58):
It depends how big the house is. Yeah, maybe a duplex. Yeah,
a duplex would be great. I don't know. Yeah, we
travel together, but living together is a completely different thing.
It really is.
Speaker 2 (12:07):
And it depends on how like how old we are
at that point, because if we're like old and I
don't know, which is another thing. If we're younger, I
would think that like there's more change, there's more of
a dynamic sort of reality that you would expect as
you're younger, but obviously Michelle's aunt, she's she's a little
bit older.
Speaker 1 (12:23):
Well, you're less sett in your ways then, and there's
more ability to mold to each other. I guess, yeah,
but that's just I guess. One other question worth asking
is like, Okay, even though we're great friends, this is
gonna be good for our friendship or bad for our friendship,
because as you know, there are friends who are like,
they're dear to me, they're not great travel companions. Yeah,
and you realize that about friends too. You're like, Okay,
they're great for this, this and this, not so great
for this in this.
Speaker 2 (12:44):
And even if Michelle your aunt has traveled with his friend,
I still think that because like we can, I mean,
we travel together all the time. But it's still very different,
like I'm imagining, because there's like little sacrifices you make
and different ways you modify your your behavior when you're
on vacation. But if that was like your day in
and day out, that's a lot different. Right now, I
think I'm only content to live with my wife and
(13:05):
my kids. But we were talking about how Michelle your
aunt is older. I do think it's less likely that
this comes back to bite her because I don't know.
When you are older, I think you understand yourself better.
I bet you understand your friends a little bit better
as well. But we'd also say that it is important
to consider what it would look like to sell the
home even before they end up buying it, making sure
(13:26):
to outline an exit strategy if this platonic purchase isn't
all that they thought it would be. I would make
sure that each party just has a plan for what
that could or what it might look like. But also
I would encourage them to decide why purchasing a home
together makes the most sense, because what about renting your aunt.
She could end up keeping the proceeds from her home
(13:47):
sale in that scenario, and then the fallout from this
not working well, I think is going to be far
less financially consequential. It's at least worth discussing, And it
sounds like her friend was already maybe planning to do
some sort of arrangement like that when she was planning
to move into your aunt's house, So maybe she's already
on board with the renting idea. Honestly, I'm assuming that
(14:07):
the reason they're choosing at different house is because maybe
I think Michelle said her aim was a widow, so
maybe the house worked well for her before. But as
they're thinking through, like who's gonna take the primary bedroom,
for instance, that poses a whole lot of additional questions,
and maybe they're thinking, oh, well, maybe we should just
end up getting just a fresh new place without without
all the history. Which also makes me think, why doesn't
(14:28):
your aunt just buy the home on her own, because
if she owns her current home outright, I think that
makes a ton of sense because then you are avoiding
a lot of the messiness.
Speaker 1 (14:38):
Of having to your friend.
Speaker 2 (14:40):
Yeah, exactly, that way, her friend doesn't take on any risk,
but she also isn't necessarily realizing any additional reward. But
if your aunt's friends' kids, right, if they're concerned about well,
what about the inheritance or any equity that we'd be
missing out on if she's not buying a home, Well,
that money's in the bank. Yeah, that is not money
that she's utilizing to purchase a home, which in my
(15:02):
mind is almost even better, right, like it's even more
available as opposed to trying to figure out, Okay, how
do we sell this home or do we end up
wanting to hang on to it. There's a lot more
questions and a lot more messiness when you're talking about
owning it together.
Speaker 1 (15:15):
And yeah, not to put too much emphasis on what's
going on in the macrosphere right now, but as it's
been widely documented, renting is cheaper than buying these days,
and so it also gives you a chance, just like
we talked about Matt, when somebody moves to a new city,
we'll give renting a shot first. So you figure out
what part of town you like and what you know,
is it close enough to work, how's that going to
impact your commute time? What else do you like to
do in that city? And you just don't know a
(15:36):
city well enough, typically upon just one or two visits,
to decide this is where I want to live for
the next decade. Well, the same thing can be true
with living with somebody else. Dip your toes in the water,
and dipping your toes in the water could be a
one year lease because the stakes are lower totally, and
it's just a better financial decision in the current climate.
This might not be the case, by the way, if
your aunt was house hacking, if she was renting out
(15:57):
a room in the home that she already owns, But
buying a new home in today's housing environment is a
totally different conundrum. So, you know, opting for the cheaper
monthly costs of rent, avoiding home ownership altogether while investing
the difference could ultimately be the best financial choice for
both of these both of these ladies and totally renting
if it's a single family home or an apartment, whatever,
(16:18):
a condo like, whatever floats their boat, whatever suits their
needs the best. I just I see that making a
whole lot of sense. I don't know totally. If they
want to live together, great, why does buying have to
be at the center? I think there are a lot
of other additional avenues that could go down where they
could achieve all the benefits of cohabitation and reducing some
costs and providing companionship without the additional messiness and risk
that comes with purchasing linking finances in a major way.
Speaker 2 (16:41):
But let's assume though, that she does want you know,
they're I don't know, maybe they're dead set on actually
purchasing this home together. Let's talk about the ownership side
of things. It's worth mentioning we're not lawyers. And so
our suggestion here is going to be to hire a
real estate attorney if she does opt to continue down
this path, because basically she's gonna want the real estate version.
Speaker 1 (17:00):
Of a pre nup.
Speaker 2 (17:01):
Like all of these details need to be hammered out
and they need to be agreed upon. And this is
you know, you said that I think her friend is
quite trustworthy, you know her yourself. It doesn't really matter
because things, you know, things can go sideways.
Speaker 1 (17:14):
Yeah, you never know, Like someone leaves throw underwear on
the on the dining room table one time, bright, it
can mess us up a good thing at Linda. But
if they choose to purchase.
Speaker 2 (17:23):
This home together, they could do this as a joint tendency,
which gives your aunt and her friend equal ownership as
well as right of survivorship. Though, and so that's kind
of a downside because that means if one of them
does pass away, it's not the family that inherits the
ownership stake there and the property, it's the other co owner.
So in this case, if let's say your aunt were
(17:44):
to die first, in this scenario, her friend would be
the sole beneficiary of the ownership stake, which means her
kids they're not going to be happy with this arrangement
because it sounds like they want to make sure that
they're able to get.
Speaker 1 (17:56):
Some of what she might leave behind. Yeah, so probably
in all likelihood, what the approach you're gonna want to
take is something called tendency in common. This allows each
individual to decide how they want their ownership stake divvied
up if they were to pass away, and they can
also choose to go in seventy five twenty five, Let's
say your aunt has more cash than her friend. Instead
of like the fifty to fifty arrangement, you can divvy
(18:17):
up the ownership amount to your own satisfaction and then
this allows for more flexibility and the ability then to
leave an inheritance as well to your loved ones. But
that flexibility also means one or the other might be
able to sell their share to a stranger, which could
be a deal breaker. So that's the downside of that one.
So there's downsides really to both of these arrangements. It
would be tough if things got difficult that where one
(18:40):
or the other said, you know what, I'm gonna sell
mistake in this property there, I'm gonna list it on
Craigslist and just see who wants it. That could create
a really difficult problem for both people.
Speaker 2 (18:50):
And hopefully, like you would assume that you would offer
for the other partner to kind of buy them out,
because that's pretty common, but like they don't have to
do that, and so that's where that's where a real.
Speaker 1 (18:58):
Estate attorney can come in. Yeah, yeah, you know.
Speaker 2 (19:00):
Or again even still like if they want to get
a new place, either renting Joel, like you were kind
of talking about, or just your aunt Michelle her buying
it like completely on her own, and then you just
drop a lease and you have a simple arrangement from
year to year. The stakes are just much much lower
as opposed to going all in on a new purchase together.
Speaker 1 (19:16):
And you think about it, Matt, when you're buying too,
not only is it like, oh, let's slit the mortgage,
it's okay. Do we have some sort of big savings
account set aside for repairs we're going to need to
make to this What if we decided to make some
renovations too. There's a lot of outlines or joint decisions
if you're going to do this together exactly, and those
joint decisions are basically off the table. When we're talking
(19:36):
about renting, it's like, well, maybe our landlord will let
us paint this room, so then you just like find
the place that works for you, guys and makes you happy,
but it doesn't come with all those other side questions
that as well could.
Speaker 2 (19:47):
Be a little thorny and sticky as well as expenses.
And you can take that extra money that you're saving
and go travel instead, right, which is a great way
to maintain your friendship.
Speaker 1 (19:55):
Yeah, so, Michelle, I hope that's helpful. There's a really
a lot to think about, a lot to work through,
and a lot to really discuss with your aunt. I'm
not sure you know how much influence you have over
what she does or what sort of information you're looking
to provide her, but hopefully this conversation gives you the
ability to have a good discussion with her about this choice,
because it's a big one. All right, Matt, We've got
(20:15):
more to get to. We've got an interesting question about
rolling over a retirement account, and then what about buying
a home when you just had twins. We'll get to
those questions right after thisybody, we.
Speaker 2 (20:33):
Are back from the break and now let's hear from
a listener who has essentially come upon a fork in
the road when it comes to his retirement funds.
Speaker 3 (20:40):
Hello, Matt and Joel. My name is Sam and I
live in Cleveland, Ohio. Big fan of the show and
I've been listening for some time.
Speaker 1 (20:48):
Now.
Speaker 3 (20:49):
What do I do with a previous employer plan of
approximately sixty thousand dollars that I want to roll into
my current rollover IRA? In particular? Do I invest the
full proceeds in one allocated however my money is currently allocated,
or do I dollar cost average it over a specified
time period in order to dollar cost average it? Again,
the issue I see with one lump sum is the
(21:11):
same issue with any big lump sum of money. You
run the risk of buying too high. But if you
dollar cost average the rollover to slightly eliminate that risk,
you then have a big chunk of money sitting on
the sidelines for a while. My previous employer sends a
check as opposed to an inkind transfer. I would really
appreciate your thoughts.
Speaker 1 (21:29):
Thanks for all that you do, Sam, This's a great question.
I totally see why you're hesitant to do a lump
sum investment here. But Matt, I don't know if you
had the same thought. My thought was kind of like, uh,
you're also not doing a lump sum investment because the
money you're rolling over was already invested. So because of that,
I think what you're trying to do is you're trying
(21:51):
to decipher whether or not to keep all your money
invested or not, which just reframes the conversation a little
bit differently and the reality of the choice that Sam
has to make. And I do think that makes this
a different predicament than someone who inherits, let's say, twenty
thousand bucks that they want to invest or someone who
gets a big bonus and wants to invest at all,
and they're like, do I do it in one fell
swoop or do I wait and do it over time,
over weeks or months. The psychology and the reality are different.
(22:15):
But in your case, Sam, I mean, I think the
answer here, Matt, at least the TLDR is to say, well,
stay invested, don't do a slow role here, keep those
funds where they were. Yeah, So psychologically it feels different,
but the reality is that it's exactly the same, you know,
Like the fact that he so he said that his
previous employer that they won't do an in kind transfer basically,
(22:37):
and so they're forcing him to face this issue by
cutting him a check, yeah, or by cutting the new
brokerage check. Like that's the fork in the road where
he's just like, well, okay, what do I do now?
When before, had it been in kind transfer, he would
never like, this would not be something that was on
his radar at all.
Speaker 2 (22:53):
And so because that it seems like on the surface
that things are completely different, but they don't need to be, essentially.
Speaker 1 (23:00):
Because in a lot of other situations, You're right, the
money would have got onto a like fund and at
the new place, and then he wouldn't have had to
make any decision. But now he has to actually make
the decision because of the way his employers shoul.
Speaker 2 (23:11):
It's forced his hand, It's forced him to look at
this when otherwise he would just be happy doing whatever
it is that Sam and Ohio does.
Speaker 1 (23:17):
Yeah with his free time.
Speaker 2 (23:19):
And I think a good question for you, Sam is
whether or not you were planning to sell any of
your current holdings, whether that was the consideration at all
before you started this conversion process. Previously, were you worried
that the market was maybe going to see a little
bit of a pullback. Well, if that was the case, like,
maybe you're right on that front. But if he is,
how would you then figure out how to invest those dollars? Again,
(23:42):
Let's say in that instance, you do decide to hold
off a little bit and you want to ease back
into the market. Well, the biggest upside here is that
you dollar cost average into a market pullback, which means
you are paying slightly less for the index funds that
you that you previously owned.
Speaker 1 (23:56):
Which makes you feel smart, makes you feel like he
got a little win there. Yeah, like a little boost,
little win at your back. But then the risk here, though,
is that you are slow to dollar.
Speaker 2 (24:04):
Cost average and your money just sits idly by while
the market continues to chug long reaches all time highs.
And then the longer that happens, I think, the more
reticent you're likely to become, where you're not wanting to
invest at what you perceive as the basically like the
top of the market. And like I will say this
from personal experience, because I've never had automated investing, Like
(24:25):
even Joel, like you and I, we've got a self
employed four one K or a solo four one K
plan that we have set up here for some personal company.
Mainly write the check every year, yes literally a check
like in every quarter is when I send that into Fidelity.
But like for a lot of folks, it's set it
and forget it, and so it's not something that's on
your mind, just like it was never really on Sam's
mind before. But when you have to think about it,
(24:46):
you start doubting yourself and you start thinking. You start
paying attention a little bit to the gyrations and fluctuations
of the market and.
Speaker 1 (24:51):
Taking heads on CNBC, Yes exactly, and I will say
I have found myself being like, well, it feels like
we're at all time highs and then so so then
you start to delay a little bit, and then the
market goes up for another three months and you're like,
I should have invested three months ago. Which is why
I think it's incredibly for folks like Ustil or you know,
for folks who have to manually invest, making sure you've
(25:13):
got an investment plan, which is why I love the
fact that typically I save up for my next year's
investments in the like the previous year or like in
the current year right now, twenty twenty four, I'm saving
up for investments that I would make in twenty twenty five.
That way, when the calendar year rolls over, boom, no
matter what right you deploy it.
Speaker 2 (25:30):
So basically, I'm pointing to the fact that there's a
plan that you're sticking to and you're not paying it
as much attention to what the market is doing, because
there's always a chance of second guessing yourself.
Speaker 1 (25:40):
No, I think that's spot on, and I think you're
right because when you look at history, better to be
invested on January first, January second, whatever, than it is
even to dollar cost average throughout the year. So if
you have the money at the top of the year,
which not everybody does, but that's a better time to
invest because time in the market is more important than
trying to time the market. And I I just do
(26:00):
think this could turn into a behavioral nightmare for Sam.
Right the money sitting on the sidelines, missing out on
gains potentially for quite a long time. That is the
far bigger risk if you're asking us to play odds maker, Sam,
And it's true, money on the sidelines is doing better
than any other time in recent history, because in Matt,
I think that's what's giving people a sense of false security, right.
I get why young folks are pumped about seeing something
(26:22):
like five percent returns in a money market account or
in a savings account. It feels great, and it is
great in so many ways. It's for what I'm thankful
that savers are not being penalized anymore, because for a
lot of years it was like half a percent that
was the only thing you could get excited about in savings. However,
the market clearly performs better than cash over the long
run and has over the short term too, So when
(26:43):
the market goes up, you know three quarters of the time,
I would just let that be my guiding light and
I wouldn't overthink this. Absolutely. Yeah.
Speaker 2 (26:50):
So on that note, I actually don't know how old
Sam is, but he I don't know, if this is
over generalizing, he kind of sounds like he's fairly young,
and so I think of this as a decision that
is going to have minimal impact on returns over the decades,
because maybe he's been investing for a few years, but
we're talking about investing over the long haul here, and
so that's just another reason to not try and over
(27:11):
optimize this because the SMP is going to be Let's,
it's gonna be at like forty five thousand in a
few decades if the historical trends continue, And it's not
going to matter at all if you bought in at
fifty five hundred or fifty six hundred. Right, Like, I
know you want to be smart, but I think taking
like a higher level view of your investment horizon is
(27:32):
a healthier way of thinking about it.
Speaker 1 (27:34):
In here and now that seems like, oh my gosh,
holy smoke. So the difference of that big in the
index fund that I want to invest in, I'm buying
in a discount, And yes you are to a certain degree.
But the other potential downside is that you're buying when
prices go up, and you're keeping that money uninvested for
too long. And what you're getting at here, Matt is
they're really in the grand scheme of things. It's a
(27:55):
small potatoes decision. So just stet invested.
Speaker 2 (27:57):
Yeah, yeah, Like you kind of quite literally are making
in out of molehills, right because like you see like
the movements of like last week or this month, and
you're thinking, oh man, that's a that's that's quite the mountain.
Speaker 1 (28:08):
But like when you zoom out, let me get my exoskeletons,
so I can climate when you look at twenty thirty
years of time like that's it's not even going to
register at all. And so we're essentially we're pointing at here,
is that being invested, that that is the main key
and the driver of returns, and so time in the
market that means a lot more than trying to time
(28:28):
the market. And that's assuming too that you can even
get the timing of the market correct. And so there's
a high likelihood that you aren't able to actually time
the market properly. And I mean that in a way
that optimizes returns in the in the short term, especially
over the past couple of years. As we've just hit
all time high after all time high after all time high,
so many people are like, it's too hot, it's too
hot in the kitchen. This can't continue. And you know,
(28:51):
we don't know how long it can continue. We don't
know when the pullback happens. Well, we've had to pull
back recently, when the bear market happens, right, or when
a recession happens. It's hard to predict those things. But
because of that, the only thing we can do in
an attempt to remain sane and to remain invested is
to keep doing the thing right, is to keep pushing
money in, and especially in this case, when the money
(29:12):
is already invested, to not take it out and try
to do something different with it. And so to go
a step further here, dollar cost averaging is typically what
we talk about because you know, most folks are investing
with every paycheck. That's how the vast majority of dollars
get into tax advantaged accounts right there. It's in the
four O on K the four or three be the
TSP with every single paycheck. But you know we mentioned
(29:33):
the twenty thousand dollars inheritance or a bonus or something
at the beginning of this question. Even in that scenario
right where we're talking about fresh dollars being diverted toward investing,
investing it all in one fell swoop is still the
best move, you know. Can we guarantee that it's gonna
work out to the greatest eventual net worth. No, of
course we can't. But that is what history shows us.
That is what makes the most sense. I'm gonna let
(29:55):
history be my guide here and not my feelings about
what's happening in the current moment, especially when you take
that zoom out approach, the forest approach, and you're like, Eh,
it's all going to be good either way. But let
me air on the side of just keeping my money
in the market. That's right.
Speaker 2 (30:07):
Yeah, So Sam, if it was me personally, I would
immediately get those dollars invested back into the market. And
we hope that provides you with some good direction. Joel,
let's now hear from a listener who has a housing question.
It's like a housing slash debt payoff question. But he's
actually he's not an American, and so I want to
preface this listener question with like a little warning. I
guess I don't want folks to get bogged down with
(30:28):
the details that are specific to being a Canadian, because
I think there are some awesome principles that will be
able to pull from his question.
Speaker 5 (30:37):
Hey, Matt and Joel, this is Clinton from Alberta, Canada.
I am twenty nine years old and have been listening
to the show for about two years now. I really
enjoy the show. Is that has helped me and my
wife organize our finances and stimulated conversations around our money goals.
My question is about using home equity to pay off
loans as we sell our current home and buy another.
(30:58):
We recently had twins, so our current home feels a
bit small for our needs.
Speaker 4 (31:02):
Now.
Speaker 5 (31:03):
We are currently between money gears four and five and
are anticipating to buy a new home for two hundred
and seventy thousand while selling ours for two hundred and
fifty five thousand. Our current mortgage is at one hundred
and sixty three thousand at one point nine nine percent interest,
leaving us around ninety thousand dollars in equity for the move,
minus re liter and other moving fees. Our mortgage broker
(31:26):
suggested that we use some of that equity to pay
off provincial student loans nineteen thousand dollars at six point
nine five percent and a car loan thirty two thousand
at six point eighty five percent leasing it, leaving us
a little shy of forty thousand as a down payment.
This is under twenty percent down, so we would need
to pay CMHC insert insurance on the new mortgage. We've
(31:49):
paid seven thousand and CMHC on our current home and
that would transfer oh over, so we would only owe
CMHC on the balance above what our current home costs.
New mortgage would be around five percent, so we would
save just shy of two percent on those loans that
we pay off. Our only other loans are zero percent
(32:09):
interest federal student loans. It seems to me that this
would save us money long term, along with simplifying our budget,
essentially just consolidating debts. We expect to stay in the
home for a few decades while the boys grow up.
I'm curious to hear your thoughts and thank you for
taking the time to answer my question.
Speaker 2 (32:28):
J also back at the beginning of Clinton's question, he
said that you are a conversation stimulator.
Speaker 1 (32:35):
I appreciate. How do you like that title.
Speaker 2 (32:37):
I'm down with it. I'm down with it. If I
have anything to do with it, that's going to be
on your grip.
Speaker 1 (32:42):
Honestly, I think that's probably true, but probably because, like
conversation is one of my favorite things. Yeah, whether it's
with you, my friend, or honestly, no matter what you do,
you're gonna be a conversation stimulator. I was just talking
with a couple of friends last night about what kind
of person are you. Are you the person who puts
in their earbuds in the uber or are you the
kind of person who talks to the uber driver? You
can guess what kind of person I am. Yeah, you
(33:02):
start talking, Yeah, immediately you know their life story by
the end of them on the audiobook that you're listening to.
I love I don't know. I love hearing people's lives.
I mean, it's it's to me, it's the most fascinating
thing ever. Clinton, Thank you for your question. Always nice
to have a question from a listener north of the border.
Congratulations on the twins. Oh yeah, that's life changing, but
I'm sorry I didn't start with that. Well and having twins,
(33:23):
I mean just it's gonna be one of those things
that punches you in the face and also brings to
doword to your heart. It's both at the same time, totally.
And by the way, it's just really interesting to hear
all the different terms. So instead of p M, I
what did he call it? Was the term for it
in Canada m HMC. So there's different terms, but really
there's a lot of similarities that I think a lot
of our you know, us listeners can learn from two totally.
(33:45):
I think the main thrust here is about whether you
should consolidate debts as you're swapping home. Yeah.
Speaker 2 (33:50):
I think most folks might think that the no brainer
answer here is yes, because in Clinton even outlined it,
He's like, we're gonna be saving two percent here. Well,
the answer might actually be yes. But it's just not
that easy because when you consolidate debt, you essentially minimize
or you are eradicating the pain of paying it off,
which sounds great, but that could potentially lead to pour
(34:12):
borrowing habits, and it could ultimately ultimately lead to more
debt in the future. And so what we're pointing out
here is that, like, we know, it's going to be
awesome to be done with your student loans in what
she called provinci loans that they have there in Canada,
as well as that car debt. But but if getting
rid of the car loan the easy way I just
(34:33):
hitting the easy button, if that's going to attempt you
to upgrade your car, let's say a year from now
or even a couple of years from now, if it's
going to cause you to take on other forms of
debt that you might find yourself slipping into as opposed
to feeling the pain and the I don't know, the
self flagellation that comes with making payments. Asues are slowly
trying to eliminate debt from your life. I'm not trying
(34:56):
to like glorify that, but there is a resolve I
think that can come from that that where you say
to yourself, we are never going to ever do this again.
Speaker 1 (35:03):
That's exactly right. Yeah, that's why you know, when we
talk about buy not pay later, or when we talk
about balance transfer credit cards, this is like something that
has to be addressed every single time. Is are you
just looking for the easy way out or are you
seriously dedicated to paying off this debt completely but you
just want better terms? Right? And like we literally literally
just published a new article on how to money dot
(35:24):
com at about balance transfer credit cards. We try to
be honest with people, like, yeah, they might be able
to help you out in your financial situation, but there
are cons to going that route too, Whereas it seems
like I think from the novice, it's like, oh, it's
only a good thing to be able to go from
twenty two percent interest right down to zero percent for
fifteen months. Well, but is it if that tends to
get at a little more loosey goosey with your spending, realizing, Hey,
(35:46):
now I've got two credit cards at my disposal, and
I'm going to run the debt up on the other
credit card, and I'm not going to be as disciplined
as I would like or as I thought I was
going to be, because really this all comes down to, in
my opinion, self discipline. Basically, you're in the worst of
both worlds scenario. If you use this debt in a
haphazard manner, you find yourself in a much bigger financial
hole if you lack restraint. So self discipline is at
(36:08):
the root of the answer. I think we would say totally.
Speaker 2 (36:11):
And I'll want to highlight to the fact that I
think he said his mortgage broker is who pointed him
in the direction of like, hey, you're pulling some maquity
out of this house. Maybe there's something smarter you can do.
And obviously your mortgage broker knows all of your what
your debts are, and they've got a pretty good picture
of your finances. Yeah, I think that's cool. I would
like to think if I was a mortgage broker, I
would also try to I. Would you know that you
and I both Joel that we'd be pointing folks to
(36:32):
be like, hey, have you thought about doing this instead?
Speaker 1 (36:34):
Yeah?
Speaker 2 (36:35):
But what I want to point out here is that
just because something makes sense from a financial, like a
purely numbers standpoint, that doesn't necessarily mean though, that it's
going to make sense for Clinton and his family. It
doesn't mean it's necessarily going to make sense for him
like his personality. For how it is that you find
motivation for the things that you want to eliminate from
your life. It's like the math versus the behavior one
(36:55):
hundred percent. Honestly, that's why we're able to have a
podcast that we publish three times a week because, like
the rules are pretty solid, Like do we prescribe is
there a recommended way that we think that folks should
achieve financial independence? Higher levels of financial freedom? Absolutely, that's
what the money gears.
Speaker 1 (37:11):
Maybe.
Speaker 2 (37:12):
But that being said, everyone's personal circumstances and situation they're
all going to be a little bit different, and.
Speaker 1 (37:17):
That's what we just always want to highlight at least
these potential pitfalls of making this decision. So, yes, it
doesn't mean that this might not be the best decision.
But it's like, only if you have at least resolved
that you're not going to go down these other pathways
that could lead to greater destruction.
Speaker 2 (37:32):
Yeah, and plus we don't know what your investments look like. Clinton,
there's a chance you might be over prioritizing this debt
payoff and that you're not investing enough. But that just
depends on a few factors, including the retirement accounts and
the matches at your disposal. It depends on how long
you've been investing, It depends on how big your nest
egg has become. So what is it that you should
do specifically, And that's going to ultimately depend on your
(37:55):
money habits, because it could truly be a great choice
to get rid of these other debts. And to simplify,
I see a lot in the Yes, let's do this
column right as you're going down and making the check marks,
But only if you don't use it as a license
to take on additional debts that you don't need.
Speaker 1 (38:10):
And some people might say, oh, great, now I've literally
got one loan I'm paying off every month and I
can't wait to be done with that and be debt free,
and other people say, I'm only got one loan going
on every month, why don't I upgrade the car a
year from now? Like, come on, I don't have a
car debt, I don't have a car note. But literally,
because you've played a game mentally and you've rolled the
car note into another loan, and now you're giving yourself
(38:32):
the permission to do something you probably shouldn't have done, because,
let's be honest, the car is not really paid off exactly.
Speaker 2 (38:37):
There's a lot that goes into the situation. I want
to highly to the fact that the two debts that
he talks about eliminating, they're not terrible. They're like not
the worst, but they're also not the best. And so
that's a part of what makes this a fun question
to tackle because essentially they're at seven percent.
Speaker 1 (38:51):
There was like in the upper sixes. If it was
much less, I would actually probably say just keep those
debts around. You don't need to roll that into your mortgage.
Let's keep this, let's pay them off as agreed.
Speaker 2 (39:01):
Yeah, if they were much higher than seven percent, then
it's like, oh no, let's go ahead and get rid.
Speaker 1 (39:07):
Of these things.
Speaker 2 (39:07):
Because from a financial standpoint, it also makes a ton
of sense. But because of the fact that it's kind
of like right there and like that that Goldilocks zone
that in this case makes it more difficult to make
a decision. Yeah, that's part of why this makes this
a fun decision too.
Speaker 4 (39:20):
Well.
Speaker 1 (39:20):
And on the plus side for Clinton too, I love
hearing that he said they're planning to be in this
home for decades. Yeah, that doesn't mean that you're going
to stand out there no matter what, Matt, I think
you and I would both agree with, Like, you know,
you make plans and then there, that doesn't necessarily mean
that those come to fruition.
Speaker 2 (39:35):
Coming from two dudes who renovated their homes and basically moved.
Speaker 1 (39:39):
For us, it was like two years, I guess. After
us it was like six months, Like six months. Yeah,
we were like, oh, this is going to be the
home for forever and it turned out not to be. Yeah,
but moving regularly is one of the biggest detractors of
building home equity and watching your net worth increase from
smart housing moves. So buying and holding truly is Matt
when it comes to investing in the market. When it
comes to owning a home, it's the secret sauce of
(40:02):
wealth builders. It seems like this insignificant thing, but it's
amazing how much money is lost by people who are
frequent traders, and whether again, whether that's in your retirement
accounts or whether that's in the housing that you're buying.
The longer you can own those things, the more you
can feel comfortable in that place that you've purchased, The
longer you can make that work, the more wealth you're
going to accrue to yourself.
Speaker 2 (40:22):
And of course, while the transaction costs have come down
it comes to stock trading, they're still up there when
it comes to buying and selling homes, which is one
of the things that's slowing down I think the housing
market today. But uh, kudos to you and your fame, Clinton,
and we wish you the best. But Joel, we got
more to get to.
Speaker 1 (40:37):
We're gonna hear from a listener who's looking to save
up for a medium term savings goal, how to go
about that in the most optimized way. We'll get to
that right after this. All right, Matt, we're back on
the break. We've got another question to get to. Of course,
we got to get to our Facebook question of the week.
(41:00):
This one comes from listener Alex By the way, if
you're not a member of the how to Money Facebook group,
please do go sign up if you're on Facebook, because
it's one of the only good things about Facebook these days.
Marketplace is solid, but the how to Money Facebook group
is where it's at. But this one comes from Alex
who says, I want to start saving for a car
purchase I'll make in the next three to four years.
With that timeframe, I was considering a brokerage account, but
(41:23):
what to invest in? S P five hundred or bonds?
If bonds, which one? What do I do on this one?
Speaker 2 (41:29):
He was looking for a specifics Yeah, yeah, no. So
this remains I think one of the trickiest things in
personal finance, which is how do you think about money
that you intend to spend in the medium term, Because again,
short term is sort of like when we talk about
interest rates on debt. If it is low, okay, it's
not the worst, keep it around.
Speaker 1 (41:46):
Yea, you got a three percent interest that's one thing.
Twenty five percent and easy answers to both of.
Speaker 2 (41:49):
Us slam dunk. So short term savings goals are easy.
That hial savings account that's going to be the answer,
and so is long term, because if you're saving for decades,
if you're saving for retirement, stock heavy, low cost investing
in tax advantage accounts, that's always going to be the answer.
Speaker 1 (42:05):
Something that long term listeners have heard us say many times.
Speaker 2 (42:07):
Yeah, but that three to five year window, it's always
the most fraut. You don't want to lose chunks of
capital right before the big purchase, let's say, four years
from now. But you also can't lock that money away
in an account that you don't have access to within
that period of time as well. And so while there
is no slam dunk answer, let's try to thread this needle, Joel,
(42:27):
in this case, the Goldilocks zone is actually what we're
striving for.
Speaker 1 (42:31):
Yeah, exactly. Yeah, And so you mentioned locking it away.
That means don't put it in a four one K right,
like this is not a retirement again, right exactly, Like
you definitely don't want it in there. He mentioned brokerage
account at least Alex mentioned, So, yeah, brokerage at least
Alex is thinking the right way in regards to the
type of account. But I I'm gonna go out on
a limb here, Matt. I'm gonna say I think the
best option, the goldilocks option here is probably just cash, right,
(42:55):
especially since saving money isn't losing you money anymore. We're
finally and the savers aren't getting bludgeoned pace of life.
So you can make money above and beyond the rate
of inflation in a simple high heeled saviors account. No
exotic moves needed, and that makes it even more difficult,
I think to justify taking additional risk in an attempt
(43:16):
to juice returns for that car purchase just a few
years from now, I think I would agree with you.
I think cash makes a lot of sense. But Alex,
if you do decide to go ahead and invest, just
make sure that you do it with your eyes wide open,
because let's just look to recent history, right.
Speaker 2 (43:31):
There were a lot of folks calling the top of
the market just a couple of years ago. They avoided investing,
and just look at what they missed out on, right,
So we don't want you to shy away from investing
because you think that the market can't go up anymore.
Speaker 1 (43:43):
Which is a very human reaction. Just avoid tapping into
those emotional tendencies.
Speaker 2 (43:47):
And especially given with when you look at stock charts, right,
like the way just inherently that the information is displayed
to us there is an end, Like you've got that
what is it that X the right is the end?
What is like the vertical access and like the line
stops there, And so I feel like it almost conditions
us to a certain extent to think that.
Speaker 1 (44:07):
Oh, well, this is it, this is the top.
Speaker 2 (44:09):
But the way we don't view the stock market is
like zoomed out with like thirty more years of time
added on to the right of that chart, that's just blank.
I think if honestly, I think that would be incredibly
helpful for long term investors. I don't know if somebody
out there needs to do that. Schwab or Fidelity or
Vanguard hit us up, we got some good ideas for you.
But I think that can help folks to take a
(44:31):
longer term view of what it is that the market
is doing, as opposed to just staring and fixating at
the immediate term. But I mean, ultimately, I don't think
it's like the end.
Speaker 1 (44:39):
Of the world.
Speaker 2 (44:40):
If you do want to invest this money, if you
are keen to take on some additional risk and you
want to you know, if you want to invest a
portion of your car buying fund. That's fine, Just don't
go all in on stocks, because that's going to be
certainly a great move for the money that you again
that you need decades from now, but it's not going
to be so great for the money that you need
reallyatively soon. If that's the case, you're looking for wealth
(45:03):
conservation essentially as opposed to looking to maximize every single dollar.
Speaker 1 (45:07):
Again, we're not talking about some massive sum of money
here either. We're talking about the car fund. So I
guess if we want to keep going down the potential
investing rabbit hole, Matt, we could say, oh, a target
day fund inside of that broker's account could be a
good pick. Pick what the one closest not to the
date of your retirement, but to when you're going to
need it. Right, So a target date fund twenty twenty
five or even a twenty thirty maybe right. Still, even
(45:28):
that might be needlessly over complicating something in an attempt
to eke out a bit more return, though in a
situation that just doesn't need this much complexity. So if
you're worried about rates going down, your high yeld savings
rate not being great in the coming year, you're worried
about FED rate cuts and what that's going to do
to what you're able to earn in your high old
savings account. Consider a CD I guess where you can
lock in a rate for for longer. I think that
(45:50):
could make sense. It might be the happy medium best solution.
But while investing could end up netting you a few
hundred extra dollars or something like that in your car
buying account, I just think the risk outweighs the reward here,
and you could find yourself with less money than you
started with. That's going to be the worst case scenario
when you're trying to buy that car a few years.
Speaker 2 (46:08):
Down the road exactly, especially given his timeframe when he's
looking to buy in three to four years, and you
know what, the market does go up three out of
four years, But what if it's that one year when
you end up seeing it go down? And I think
what you say is so key too. Hopefully Alex is
looking to save up cash to buy a used car,
and you can find a solid used vehicle for fifteen
thousand dollars even ten thousand dollars, which and he said
(46:31):
he's looking to start saving, which means I don't know
right now, he probably has maybe he's got zero in
that bucket. Well, you're looking at maybe socking the side
two three thousand dollars over the next year. If you're
looking at, let's say, cross for your fingers and hope
for ten percent on like three thousand dollars, you're looking at.
Speaker 1 (46:46):
Three hundred bucks.
Speaker 2 (46:47):
And that's obviously an assumption that the market is going
to go up another ten percent over the next year.
Speaker 1 (46:52):
There's no savings are guaranteed right now in the four
to five percent.
Speaker 2 (46:54):
Why not get the guarantee one fifty as opposed to
rolling the dice for three hundred in this case. And
I think there's just a lot more risk here for
not a whole lot of reward. And yeah, I think
that just saving up that cash, having that flexibility, because
who knows, maybe in four years, I don't know, maybe
you inherit a car from somebody, or maybe you end
up moving cities and you know what, Oh, I live
(47:15):
in New York City now I don't need a car.
There's a whole lot of other options that you have
when you have that cash in hand there in your
savings account, that you could use it for.
Speaker 1 (47:21):
If you want to take a page out of my book,
to Alex, I am saving money for the Ribbon R
two two years from now when it comes out again.
I don't know if I'm gonna buy it. I don't
know if I'm gonna be able to pull the trigger.
I might be a little weak in the knees and
find myself saying I'm gonna stick with the old Beater
two thousand and five SUV that I've got, just because
I can't stomach forking more money over for a car,
(47:43):
because I hate doing that. But we'll see, we'll see.
But at least I am saving for the potential for
that purpose. We'll see what happens, though. No I love it.
Speaker 2 (47:52):
Man, all right, Let's get back to our beer, which
was Garden Salad by Variant Brewing Company not here in Atlanta,
but they're actually up in Roswell, Georgia. Got a nice
little picture of veggies there on the front, which, obviously,
what does that evoke to you.
Speaker 1 (48:07):
It's like they're pulling off another half naming convention exactly,
which I mean, if you're mimicking somebody, mimic the best
and the other half's the best.
Speaker 2 (48:14):
So how do you think this compared to a lot
of the other half hazy IPAs to look like they're
closing in on the heels of other.
Speaker 1 (48:21):
Heads are really good. Yeah, it was really good. I'm
surprised because I haven't had that many Varian beers and
I had this and I was like, oh wow, some
of their original top like cash there's like Cashmere ipa.
They're solid.
Speaker 2 (48:31):
But I don't know if they've gotten a new head
brewer in or something, but they're totally stepping up their game.
This is next level for sure, and so got everything.
Speaker 1 (48:37):
I'm looking for. One of the best hazy for sure.
Georgia ip as I've had so great job.
Speaker 2 (48:41):
It's quite opaque as well, like as we poured it,
you couldn't see through it at all, so it almost
lent us kind of creaminess to it. And I will say,
I don't know about maybe your glasses dirty or something.
I've got like beautiful lacing all day.
Speaker 1 (48:54):
I just don't watch my cup. Maybe your cup is
like oily or something that that's why we can't live together.
Maybe you hit the nail on the head. I don't know,
but it's just beautiful.
Speaker 2 (49:02):
And there's something about seeing uh, really pretty lacing on
a beer as you get to enjoy it over the
course of forty five minutes. I'm glad you and I
got to enjoy this one. You can find a picture
of this beer if you want, up in our show
notes that how to money dot com, along with other
resources that we have mentioned Joel, like you mentioned the
balance transfer card, money gears.
Speaker 1 (49:20):
There's new stuff up there all the time.
Speaker 3 (49:22):
Now.
Speaker 1 (49:22):
Yeah, we're publishing great articles for you when it comes
to your financial questions. Sure go ask chat GPT or
instead just go to our website, or you can go
straight to the source better answers Chat GPT. They're getting
all their information from US's right, That's right. So, and
guess what, we have real humans writing this stuff who
know what they're talking about and relate it in a
friendly and informative way. That's right. Are you saying chat
(49:44):
GPD is not friendly? I mean, robot, it's only going
to get friendlier, all right, the moundy. That's gonna be
it for this episode. And so next time, best friends
out and best friends out.
Speaker 3 (50:00):
The
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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