Let’s dive into the week with some fresh listener questions we have lined up for you! And don't just stand on the sidelines- if you have a question you’d like us to answer, toss your voice memo our way. It only takes about 90 seconds to record and you can find a step by step guide over at HowToMoney.com/ask . Regardless of how random or bizarre you might think it is, we want to hear it!
1 - How can I plan a move back in with my parents that is financially a winner without things getting awkward?
2 - Should I keep my condo as an investment property and rent it out, or should I sell it?
3 - Is it a good idea for my daughter to contribute to her Roth IRA if she’s wanting to buy a house soon?
4 - What should I do if my MBA is getting paid for but my salary isn’t all that great?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Hod of Money. I'm Joel and I am Matt,
and today we're gonna answer some mere listener questions.
Speaker 2 (00:24):
That's right, buddy, It's Monday, which means we've got to
hear for some listeners. We're gonna hear from a specific
listener and she is moving back in with her parents,
and it may not be for the reason that you're thinking.
Another listener has her employer paying for an MBA. Some
different considerations there as to maybe how long she should
work for that company.
Speaker 3 (00:42):
Sounds like a nice perk.
Speaker 2 (00:43):
It is, it is. And we're also gonna hear from
somebody else who is interested in getting into investing in
real estate, but specifically with his condo. So we've got
some thoughts there. Plus we got more to get to today, Bud,
condos can be trickier.
Speaker 1 (00:56):
Too than a single family home. Just uh, and we'll
get to why some different considerations exactly. All right, Matt,
I just want to call you out real quick on
the carpet. Tell all of our listeners when you say
on the carpet, you're a liar?
Speaker 2 (01:09):
Wait what? Okay? So first I was fixated on the
on the carpet part. Is that basically like calling out
like a dog that uh oh maybe it has like
gone to the bathroom. I don't know where that where
that comes from? Sorry, immediately lashed onto that.
Speaker 3 (01:21):
Wow, how did I lie?
Speaker 1 (01:22):
Okay, so you told listeners that you were not investing
this year because you are doing a home renovation and
you're saving allocating more money than I don't think for that,
don't take on any debt. Yeah, there's a chance we're
not going to invest next year as well, because I
don't know if you've heard, but home redos cost a
lot of money. I've heard this, I've heard this. But
the place where you lied is that you are still investing.
(01:43):
I know this because our business contributes a portion of
our and because of the way solo form one k's work,
we have to contribute the same amount. So our business
is contributing to your retirement. That's true, even though you
as you're not contributing the individual portion though.
Speaker 2 (01:58):
So what's so great is that we've got a sort
of like a baseline, like our standard is so high
as to what it is that we're investing that I
honestly don't even kind of count.
Speaker 1 (02:08):
That we just do that without thinking, which, yeah.
Speaker 2 (02:11):
I'm just gonna point out there is something amazing that
comes with accountability and the facts in Granted, we could
just change things up, so a part of the reason
I'm continuing to do that is it would be a
pain in the butt. But b it's at the beginning.
We basically agreed to this. We you know, we're setting
up our four one K with Fidelity. Interesting trivia side note,
we named it the how to Money invest a Palooza
(02:34):
because you have to come up with retirement plan names.
And I think most corporations and businesses it's they take
they take it a little more seriously. But that's one
of the fun things about owning your own business. You
can do what you want.
Speaker 3 (02:46):
That's right.
Speaker 2 (02:46):
But yeah, we're investing. We basically agreed to the fact
that we're going to invest the max amount that we
can as employers. So because of that, yeah, I guess
I am investing. I didn't think about that. I was
thinking more from a so I am holding off on
personal contributions. I am whole holding off when it comes
to my wrath Ira, the Kate's espousal wrath Ira just
some of the different ways that you can invest. But
(03:08):
silver lining focus on the accountability aspect of it. Talk
about money, talk about investing with your friends, because let's
envision a world, Joel, where we didn't co own a
business together. Let's say you were self employed, you ran
your own business. Let's say I was self employed. I
ran my own business, and we would still talk about money,
right like we would talk about different deals that we
would get. I think it's more likely, though, that we
(03:29):
would not talk about the exact dollar amount. Perhaps that
each of us is soaking away towards retirement.
Speaker 1 (03:35):
We're forced to with this because the employer contribution has
to be the same for both you and I essentially,
and if you were like, hey, dude, I don't want
to do this anymore, you know, we'd.
Speaker 3 (03:43):
Have a talk about it.
Speaker 1 (03:44):
Yeah, yeah, exactly, I'd throw a pissy fit and we'd
have to come to terms. And so I'm glad that
we at least see that as like a baseline. We're
not getting rid of that, and it's nice to know, Hey,
guess what, maybe that's a silver lining for you. You're still
investing something, right, even though you're prioritizing some other methods
from other avenues. With some of those dollars and So
what I would recommend is for a lot of folks
out there to talk about money, talk about what you're
(04:06):
investing in order to hold yourself accountable, because when you
put some of those different goals out there, you're gonna
be less.
Speaker 2 (04:11):
Likely to walk that back.
Speaker 4 (04:12):
You know.
Speaker 2 (04:12):
It's just like your running challenges are going to the gym,
seeing certain folks there who are like, hey, been missing you,
you know, like what's been going on.
Speaker 1 (04:19):
It might seem like it's weak accountability sometimes, but that matters.
Even the weak accountability matters. Say something out loud from
somebody else, then you're like, don't want to look foolish
if they asked, if they follow up and ask me.
Speaker 3 (04:28):
About it later on. So totally agree.
Speaker 2 (04:30):
All right, Well, I guess getting called out for lying
in that way that's such a bad that's the worst lie,
I guess. But let's introduce the beer that you and
I are sharing this episode is called the Garden of
Earthly Delights. This is a beer by Burial. It is
a barrel aged golden sour with Carrot's coconut curry and
vanilla bean looking forward to I combo. It's a crazy
(04:53):
combination which has never had a beer part of why
I picked it up that.
Speaker 3 (04:56):
Have curry spices in it before.
Speaker 2 (04:57):
Yeah, so we're gonna enjoy and share our thoughts at
the end of.
Speaker 1 (05:00):
The episode, no doubt, And if you have a money question,
well just go to honmoney dot com slash ask for
the simple directions for how to submit it, or just
literally record your question on the voice memo app of
your phone, email it over to us and hopefully we'll
take it on the next ask htm episode. Matt, this
first question comes from a listener who's moving back in
with other folks.
Speaker 5 (05:19):
Hi, Joel, and Matt, this is Madison from New York City.
I'm a longtime fan of the show and I'm hoping
to get your take on a new situation i'm facing.
For context, I'm twenty five years old and have been
living on my own for the past two years. I
will soon be moving back in with my parents at
the end of the month to help out with things
as my dad lost his job a while ago and
hasn't landed on his feet yet. Do you have any
advice for how I can approach establishing clear financial expectations
(05:42):
and responsibilities with my parents? Also, how can I navigate
contributing to living expenses at home, while also balancing that
with working towards my own financial goals. Thanks in advance,
love the show, Matt.
Speaker 1 (05:55):
First things first, I got to say to Madison, so
sorry to hear about your dad's job loss. I mean, yeah,
that's a bummer. That's a really hard thing to go
through as a family. It can be tough emotionally, and
I think for the kid, Matt, it can put pressure
on you to participate financially. And I know that every
family and cultures has like kind of different ways of
(06:16):
going about that, right of what sort of involvement the
child should have in a family's finances, and some and
some cultures kids start working early and actually contributed that
Money's not theirs, it's the families. And so I totally,
I totally understand that different their different strokes for different
folks on that on that level, but I think it's
also potentially an opportunity here for Madison to be able
to pay her folks back for all the years of
(06:37):
support that they gave to her. And I don't even
necessarily mean that oh tens of thousands of dollars of
debt that she owes them and it's time to pay
the piper. I guess I'm saying that this. I think
this could be an opportunity to yes, juice her savings
rates since she's not going to be paying rent traditionally anymore,
but also be able to help her folks out at
the same time in a tough spot in their lives.
And so it makes me think, Matt, I moved back
(06:59):
in to my parents' house for like five months or
so right about Madison's age, which felt weird, by the way,
what we're going to talk about here in just a second.
But it was right as I was looking to buy
a house, and it helped a ton Like it helped me,
you know, save so much more because I was able
to skip out on rent payments for five months. So
big thanks to my mom and dad for it was
a limited time thing, but it really was massively helpful
(07:22):
in allowing me to garner that saving so that I
could come with the twenty percent down that I wanted
to buy that house.
Speaker 2 (07:27):
Yeah, So was it proactively a limited time thing or
did it just end up that way? And you're like,
you can look back and retrospect and say, oh, yeah,
see it was just a short period of time, because
I guess what I'm pointing to here is that it
is worth having these conversations.
Speaker 1 (07:39):
Yeah, I didn't have like a drop dead deadline, right,
but I had like a time that we had both
discussed as like this, this is how long I'm hoping
and thinking it's going to be nice.
Speaker 2 (07:46):
So I think Madison, for you, it sounds like you've
got a great relationship with your family and a part
of why you're moving back is to help out financially,
and so because of that, I think offering to pay something,
especially given the financial circumstances your folks are in. Joel,
you said, Uh, it could be mutually beneficial, whether she's
trying to save up for a big financial goal like
buying a home, or just the ability to sock more
(08:07):
money away than otherwise she would be then she would
otherwise be able to Did she say she was actually yeah?
Was she actually in New York City? I know she
said New York, New York. I don't know if it was, so,
I don't know. My mind immediately goes to New York
City and I'm like, oh, yeah, you're definitely going to
be saving other parts of New York A ton of money.
Speaker 3 (08:23):
Yeah, there's like Rochester, I like your buddy jesty.
Speaker 2 (08:27):
But when it comes to what it is that you're contributing,
and you know what you're paying for rent, like it
doesn't need to be like market rate rent for renting
a room in your area. You are your parents' daughter
after all. But I would just be proactive with this conversation.
Don't wait for them to start it, like, make it
clear that hey, this is this is what I'm planning
to do. I think it's going to be less awkward
if you have an idea of what this looks like
(08:49):
versus them having to bring it up. Oh yeah, and yeah,
so if are you, I just would want to suggest
a fair monthly amount to pay. Maybe so just a
few chores that you can reabsorb, take you back to
some of your I don't know, high school years, maybe
you're having some flashbacks feed the cat Madison. Talk through
other expenses as well, like maybe paying a portion of
the utilities, maybe groceries. But I think just a proactive
(09:12):
financial commitment like this can create a lot of trust
and honestly like strengthen y'alls relationship, as opposed to this
being something that taxes or strains your relationship.
Speaker 1 (09:20):
And this is why, like, honesty is the best policy, Matt,
I called you off for lying earlier, just I'm really
just trying to rub that in even though it wasn't
really that big of a deal. But yeah, honesty is
the best policy. And having the conversation is so much
better than not having it. Even though it might seem
like it's awkward in the moment, it's way less awkward
than the hurt feelings that can come from not having
(09:42):
had those discussions and not having kind of mutually agreed
upon rules for this move back in. And I don't know,
I would think of that as like a great starting point, Madison,
which you're able to suggest to your parents, but I
would get there and put too. I'm sure there's like
a lot of love and trust in your family, but
even still, expectations and relationships have changed. You're twenty five now,
you're not sixteen, and there is I think zero shame
(10:05):
in moving back home, especially if your intention is to help.
But it is crucial to ask for their input because
once you've made some of those suggestions, ask them what
they think is this fair? What are their expectations for
this living situation? Because you are I think understandably and
rightly concerned about boundaries here. Right you want to be
able to help them without hurting yourself, And I think
(10:25):
this is doable. It is possible to create a sweet, loving,
mutually beneficial move here. But it's also important to write
this stuff down, I think, so everyone can see the
terms laid out and agree to. It doesn't have to
be some sort of like twenty page lease or document
that's signed in blood or anything like that. You don't
have to go overboard, but that way, if there's like
a misunderstanding two months in, you can go back to
(10:47):
the document for clarity matter. I think of it as
like an investor statement. It can help you keep you
accountable to do the right thing, the thing you said
you were going to do, and you can go back
to it and look and say, am I doing what
I said I was going to do from the outset?
And you guys can use a similar document. It's honestly
can be like a one pager but I think that
would be really helpful.
Speaker 3 (11:04):
Yeah, helpful reference.
Speaker 2 (11:05):
Point, not like an Actually you don't need to drop
an actual lease and like have both of you all
sign up. But I say hire a lawyer or anything. Yeah,
but just actually kind of writing some things out. I
think that can be helpful. And you know, I think
there could, like traditionally, there could be some shame associated
with moving back home. But I think what's important to
recognize here is that it seems like Madison is kicking
butt like she is. She's the one that sent the
(11:26):
voice memo to the Personal Finance podcast and is having
an answered on the show, and so I think the
roles might be a little bit reversed here, Madison. I'm
mentioning this because I think it's worth being careful with
your folks just to make sure that they're not embarrassed.
I guess by the fact that you're having to move
back in with them a lot of times. Again, like
there's like a negative connotation and moving back in with
(11:47):
your folks, but they've launched you out into the world
and they know it sounds like that you might be
moving back home in order to help them out, and
so I would just be really careful. Again, all families
are different, different families that have different dynamics and expectations.
But I don't know, just keep that in mind as well,
that there might be some of that going on as well,
and that can dictate how it is that you approach
(12:08):
some of these conversations with just with some tenderness and sensitivity.
Speaker 1 (12:12):
Yeah, Matt, I think one of the things maybe you're
getting at with that is that you might say, hey, parents,
here's how much I want to contribute, here's what I
want to take on when it comes to family roles
and financial obligations, and her parents might say, whoa, whoa, Woa, Madison,
you're our baby, right, like, no, no, no, you want to
pay four hundred bucks in rents? Know this is your home,
come back in, but because of what's happening with your dad,
(12:34):
I think the right thing to do is to insist,
essentially right to not let your parents kind of say no, no, no,
please don't because obviously they are in a financial situation.
Speaker 3 (12:45):
Who knows how long it'll last.
Speaker 1 (12:46):
Or you can be helpful, and this is I think
the right thing to do is to contribute extra towards groceries,
offer to do some of the cooking, and make sure
that you are paying a certain stipend or monthly rent
amount every single month and explain why you want to
pay something. Again, I think if there were no financial
struggles on their end, it might be different, but I
think that insistence on contributing is going to mean a
ton to them. They're they're gonna feel seen and supported.
Speaker 2 (13:09):
So yeah, yeah, it's funny. I think you and I
see certain things very differently. It's funny because like we
have a lot in common, but like when it comes
to like if I was a parent and I had
a kid who had went off and even if I
was in a great financial position, I would I personally
would still be one hundred percent charging my kid rent,
not because I want their money, but just because, like selfishly,
I would. I think I would love for them to
(13:30):
move back in because I keep hearing from more and
more folks who have kids that are going off to
college and they're like really missing them. I think I
would love that, But I also know that it may
not be in the best interest of the kid, right,
Like you want them to get out there and to
launch a career, to have goals and ambitions to do something,
because they might be.
Speaker 1 (13:48):
They might be more likely if they're living rent free
in your house to play whatever the latest game system
is all day, every day.
Speaker 2 (13:52):
You don't want to necessarily incentivize that, so it's just
Madison's in dangers. No, No, it's just interesting because we're kind
of like in between Madison and her folks, right, Like
we're the generation in between, Like we're kind of the
sandwichship generation. And so I can very easily connect with
Madison as a child, but I can also start to
connect with the parents' point of view as well, having
kids and trying to look off into the future. But
(14:12):
either way, it does sound like you're going to come
out ahead financially. And so what I want to highlight
here is that it makes sense to know what it
is that you want to do with all this money
that you're saving, have some goals laid out, get after it,
because your monthly expenses could be declining meaningfully a significant amount,
especially if you are currently living in a high rent area.
(14:33):
I just don't want you to friar of those dollars away.
Think of it like you're mentioning like playing video games,
You'll think of this as like a game genie, like
this is almost like a hack in a way that
you're able to get playing with that was just like
a way to cheat on video back, And this is
kind of what this is. It is some sort of.
Speaker 1 (14:49):
Like a cheat code essentially, right exactly, giving you some
special powers to be able to accelerate whatever financial goals
you have. Kind Of like Matt, when student loan payments
were paused, I guess they still kind of are for
years on end, and for people with massive student loan payments,
it was this like fresh start at least for a
bunch of years to be able to do a bunch
of things that they otherwise couldn't do with their money.
And so we were saying, game, Genie, that thing, use
(15:10):
use this to your financial advantage. And I think Madison
can do the same thing with reduced expenses by going
back to live at home. And Matt, there's also like
just so many other things that are worth discussing to
what are the rules of the house these days, and
what do you expect from me as a grown twenty
five year old woman, like having friends over or how
late I'm out right, that was one of the weirdest
things about when I moved back home at that age.
(15:31):
I remember it was, you know, I would I was
still under the assumption that I could go do whatever
I wanted whenever I wanted late night beers with friends
or whatever. And I remember my parents being like, what
time did you get home last night? And I was like,
I don't want to answer that your business mode. Yeah right,
And so it's worth having I don't know if there's
like a separate entrance or how that works in your house,
(15:52):
or if they're like staying up late waiting for you
on the couch. I mean, probably not at this point
in time, but it's worth having those discussions too. It's
not just hey, how long on my planning to live
here with you and to kind of hopefully help in
a financial way and enjoy this reconnection essentially with my
adult parents, but what are the actual ground rules? What
does it look like for me to actually live here
(16:14):
without us stepping on.
Speaker 3 (16:14):
Each other's toes?
Speaker 2 (16:15):
Totally Yeah, and you kind of touched on something there too,
like see this as a like I not kind of
hinted at this earlier too, but as a way for
you to strengthen your relationship with your parents. It's something
like ninety percent of the time that kids spend with
their parents happens by the time that they're eighteen years old.
This is sort of like a not a redo, but
you get to squeeze in some additional time with them,
and that stat really resonates with me even more as
(16:38):
a parent in thinking about the time you have with
your kids before they do hopefully launch and get out
into the world.
Speaker 3 (16:44):
It's like, I appreciate it, enjoy it.
Speaker 2 (16:46):
Yeah, kind of. Well, I know twenty five year old
Matt would not have appreciated. I mean, I don't think
I would have really appreciated that if I ended up
moving back home. It's like those narrow coffees or breakfast
or something like those are going to be so meaningful, Yes,
if you can see them for what they are and
realize that it's limited. Yeah, speaking of the parent child relationship,
we're gonna hear from a father who I think he's
(17:06):
got some proud dad vibes going on. We'll get to
that and more right after this.
Speaker 3 (17:18):
Matt, we'll back.
Speaker 1 (17:18):
We'll get to some more parent child relationship stuff after this.
I feel like you're a relationship guru blossoming. Yeah, why
in part of my very eyes. But let's get to
our next question, Matt. This one comes from a listener
who's thinking about becoming a landlord.
Speaker 6 (17:31):
Hey, guys, Bob from New York here, how you guys,
doing in my current state of my financial journey. I
own a condo and I'm looking to buy a second
home in the near future. With that being said, I
would love to keep the condo and rent it out
as a second form of income. After doing some research
into the renting market in my area, I found that
(17:53):
I would only make a few hundred dollars a month
from a potential renter. Simply put, my mortgage in Texas
would account for approximately ninety percent of what a potential
renter would be paying, only leaving me about ten percent
profit margins each month. So my question is this, what
do you think the minimum required profit margins are when
(18:15):
taking on the risk of renting out of property?
Speaker 2 (18:19):
Thanks?
Speaker 6 (18:19):
Guys, love the show, all right?
Speaker 2 (18:21):
So Joel, Bob asked how we're doing? And do you
think he was Do you think it was like a
passing a coworker at work, kind of like, hey, what's up?
Or do you think he actually wants to hear how
you are doing right now?
Speaker 1 (18:31):
I've felt the deep heartfelt ask in that, and nobody
asked that in the questions.
Speaker 2 (18:35):
I agree Bob. I appreciate that Bob has an intentionality
about about himself. I'm doing great, and I've only got
to know him over the past ninety seconds.
Speaker 1 (18:43):
I'm not gonna say there's not hard things in my
life Matt right now, but overall I'm doing great.
Speaker 2 (18:47):
I'm yeah, I feeling great. Fortunate worked out. We both
worked out this morning. You went on like a six
plus mile run. I got to work out in ate
some delicious leftovers for lunch, went on a walk around
the block like I like to do after lunch, sitting down,
drinking a delicious beer, talking about money with you.
Speaker 3 (19:01):
What's not the love?
Speaker 1 (19:01):
And I ran on the local trails, which I'm doing
less and less of. I'm doing more pavement running, and
I make you appreciate the woods.
Speaker 3 (19:06):
Love it.
Speaker 1 (19:06):
Yeah, it's my favorite. It's my favorite. I need to
make that more of a priority. So it's yeah, I
was a joy to.
Speaker 3 (19:10):
Do that this morning. Yeah, all right.
Speaker 2 (19:11):
Bob's got a great question here, though. I like the
way that he is thinking because renting out that condo,
this certainly could be a money making endeavor. But not
every property is created equal. Well specifically too, not all
financing terms are created equal, which is an important factor
to consider. And so what we don't know about Bob
here that would be helpful. Is the length of your mortgage?
Speaker 3 (19:33):
Is this a.
Speaker 2 (19:34):
Fifteen year or is this a thirty year?
Speaker 3 (19:36):
Yeah?
Speaker 2 (19:37):
Is this a fixed mortgage? Hopefully it definitely is. But
that would shed a lot of light. Yes, the rental
would be less profitable on an ongoing monthly basis, let's say,
with like a fifteen year note. But if you've got
an incredibly great rate and you know you're looking to
pay off the mortgage a decade and a half sooner
than a thirty year mortgage and still be cash flowing,
then I think that there is a really great reason
(19:58):
to hang over this thing.
Speaker 1 (19:58):
Yeah, that's why the payment amount when we're talking about
owning a home, what that mortgage is, Well, it's yeah,
you're right, Matt. We need to know all these other
underlying details because they're gonna help inform Well, okay, are Yeah,
you're making money above and beyond the mortgage. But if
you've got a fifteen year mortgage, that makes this gap
even more insanely good. And I think it's also important
(20:19):
to note that the ten percent gap between the mortgage
and the rent amount doesn't tell the whole story either.
You're not necessarily gonna be pocketing that gap, and in fact, Bob,
you're probably gonna pocket a fraction of it. And that's
because you've got a factor in vacancy, repairs, right, and maintenance.
Those are the landlord's worst nightmares, but they're also the
true realities of being a landlord too, Matt. I've got
(20:41):
one side of my duplex. I've had two people like
basically say we're ready to sign a lease, and then
they ghost us. And so the vacancy is just part
of the deal and you have to bake that into
the cake. And if you don't, you're gonna find yourself
in a tough financial spot. And so you might experience
little or no vacancy, which would be great, but make
sure you plan for potential lulls. You might also find
(21:03):
that when all of a sudden done at the end
of the year, they actually lost a little bit of money.
Speaker 3 (21:06):
Matter.
Speaker 1 (21:07):
I'm gonna lose money on a couple of properties this year.
And that's not the end of the world, though, because
the key here is whether or not you want to
be a landlord, if you've got a long term mindset,
if you think that this property overall in the coming
years is going to be a solid money making endeavor
despite the cost and setbacks that you're of course going
to incur.
Speaker 2 (21:26):
Yeah, so you're not saying that profitability doesn't matter. You're
not saying that cashlow isn't important. You're just stating that
you might not be predictably making money every single year
with this particular property. Although at ten percent gap that's
actually pretty solid. Just make sure you're including some of
those other expenses as well. But this is why it
is so crucial to think about the potential for appreciation.
(21:47):
There are two main ways that you can grow your
wealth by owning real estate, and that's either cash flow
or appreciation. And so a question you might want to
ask yourself is your condo in an up and coming
neighborhood do you think that you're gonna see outside returns
because of its location? And if so, you know, you
might just make penis like every year for the next decade,
but you might end up reaping a windfall at the
(22:10):
point when you actually sell the property. I think, as
long as your finances can handle waiting for that reward,
it could still be a really smart move. We don't
want you to overly focus on the cash flow side
of the equation. Were you to do that, then you'd
be looking at like a lot of commercial properties like
self storage or mobile home parks. Like trailer parks are
(22:30):
the classes of properties that typically have the highest amounts
of cash flow. But guess what, you're also not seeing
hardly any appreciation with those types of properties. Either, that's right,
that's right, So you have to take that in consideration
for sure, Matt. Cash Flow is one thing, appreciation is another,
And especially in high cost cities, high cost places to live,
that is something landlords have to focus more on because
(22:50):
typically the cash flow is harder to come by, but
appreciation can be even greater. And so especially if you
have good terms on that mortgage, extrapol it out, what
could that appreciation look like in the coming five, eight,
ten years and is it worth and can you handle
not having a ton of income from that property for
the greater upside down the road. I would also ask
yourself the question, Bob, do you want to be a landlord?
(23:11):
Wrestle with that for a second, because Matt and I
we always say this, it's more light part time job
than it is passive income.
Speaker 1 (23:18):
And if you follow too many real estate influencers on
Instagram or TikTok or whatever. You're going to hear a
lot of high praises for real estate investing and just
how simple and easy it is, and we don't want
to overly complicate it either, but it's often not nearly
as passive as they make it sound. And so I
would also say, since this is a condo, it'll likely
be a little bit easier from a management perspective. Actually, Matt,
(23:39):
I manage my mother in law's condo for her. The
HOA is typically responsible for exterior repairs. It's a piece
of cake lawn maintenance. Are you going to say right no,
because then there's still intra unit disputes. There was a
water leak from our unit down to the unit below.
It was a massive hassle. And so I will say
I do think it is easier owning a condo and
(24:00):
renting it out if your condo association allows you to
do that, which is something you also need to look into.
But it's also maybe not completely fool proof or anything
like that. And one of the other things I think
Bob needs to consider is his potential ownership timeline, because
the cool thing about rental real estate is that the
numbers tend to get better over time as rents go up,
although that's not what's happening lots of the country right now.
(24:21):
But your mortgage amount stays the same, and so basically
ten years from now you might find, hey, the cash
flow is a heck of a lot better than it
was when I started.
Speaker 2 (24:27):
And then on top of.
Speaker 1 (24:28):
That, if you want to hold forever and let someone
else inherit the condo when you die, you're gonna get
tax breaks over the years, and they're gonna inherit that
property with a stepped up basis that this, of course,
could could be decades and decades and decades down the
road for Bob. It's a really interesting tax maneuver, but
it's a long time from now.
Speaker 2 (24:45):
I just figured I should put it in there anyway, now, sure, sure, sure, yeah.
I would also think through, what Bob, would you be
doing with this money if you ended up selling the condo,
Because on one hand, if you just hurled it into
your roth IRA and anything above that you put in
a taxable b good account. Okay, you know, that'll certainly
be the easy route, although it might not be as
lucrative in the coming years. It is impossible to know.
(25:06):
But on the other hand, were you to be tempted
into spending all of that money, well long term tomorrow, Bob,
for your sake, I would say to hang onto that property.
And especially if you like the idea of becoming a landlord,
which which it does sound like you are interested in,
and you believe in the neighborhood where your condo is located,
I think holding onto it can deliver outsize returns in
(25:27):
the years to come. So you know, we've got no
slam dunk recommendation here, but I do lean towards holding
onto it in your case, and especially considering that I'm
assuming your mortgage interest rate on that thing is pretty low.
Speaker 3 (25:40):
Let's say you about it five or six years ago.
Speaker 2 (25:42):
Oh my gosh. Yeah, yeah, you're looking at i don't know,
in the threes for a thirty year, maybe even in
the twos if he's got that fifteen year, which on
a condo is certainly much more doable. Yeah. So with
that in mind, if it was me, I think I
would personally be hanging onto that condo.
Speaker 3 (25:56):
Yeah.
Speaker 1 (25:56):
Our goal in this response is to essentially lay out
a checklist of things for you to consider, because yeah,
there isn't any slam dun. One hundred percent you should
keep it or one hundred percent you should sell it.
There are a lot of personal factors and then you
factors about your specific property that you should take into
consideration before you make a final decision. But Bob, best
of luck in that decision, and Matt, let's get to
our next question. This one is about excess savings. Should
(26:17):
it stay a savings or should it become investment dollars?
Speaker 4 (26:20):
Today? Man Joel, this is Jack from toll Sokolholma. I'm
calling for advice for my twenty nine year old daughter.
She is currently saving twenty three percent in a raw
War one K. She is saving the max on on hsay.
She has a roth Ira which she opened as a
(26:41):
team and has a total retirement savings of two hundred
and forty thousand dollars. She has no debt and owns
her own car. Needless to say, she is very good
about managing her money. Her career is very stable with
fi plus years of service. She has one hundred and
ten thousand dollars in cash say and plans to buy
(27:01):
a Midwest home within twelve months. She has recently divorced
My question is this, should she contribute to her wroth
IRA this year or use the funds for a home purchase.
Thanks for all you do, really appreciate it.
Speaker 2 (27:19):
All right, Well, first of all, Jack, it sounds like
your daughter doesn't need much of our advice because she's
doing incredibly well, especially for still being in her twenties.
And I will say, and I kind of hinted at
this earlier, I think that Jack had a lot to
do with this, some of these proud dad vibes. Specifically,
he should.
Speaker 1 (27:36):
Feel super I mean, if I have a kid that's
that financially responsible, Oh my gosh. Yeah, it's unlikely, but
if it happens, I'll be thrilled.
Speaker 2 (27:41):
I was going to highlight the fact that she opened
a wroth as a teenager, which is a totally clutch move,
and I'm guessing may not have happened unless maybe Jack
mentioned something. All that being said, I don't know, maybe
this is totally his daughter and he didn't have any input,
which would be honestly even more impressive, and especially too,
he just casually mentioned slipped in there that she was
recently divorced. It's even I think it's even. I mean,
(28:02):
I can take a massive bite out of your financial like,
not just not emotionally, but also financially, in the fact
that she's still in an incredible position, like this is
a testament to how well she's handled her money. Yeah,
and she's already gained so much optionality in choice, which
is what a significant savings and investing rate can do
for people. But she's going to crew significantly more if
she keeps us up, Like every single month and year
(28:25):
that she keeps these money habits up, she's just got more.
I mean, think about where she's going to be mid thirties,
late thirties, the option she's going to be able to choose,
whether it's working for herself, whether it's working part time,
like I don't know, the world kind of becomes your
oyster when you're handling money this well. And the truth
is too if she never contributed another dollar to retirement,
which is not our suggestion, by the way, but it's
(28:46):
a fun experiment to think through. So Jack mentioned she
had two hundred and forty thousand dollars in her investment
accounts already, and I just ran the numbers. Basically that
nest egg would turn into two point five million dollars
over the next thirty years with an average return of
eight percent. That's called coast fire right there, That's where
she's at.
Speaker 1 (29:06):
Yeah, she would not have to do any more investing
if she didn't want to. That would still in all
likelihood be plenty.
Speaker 3 (29:12):
Of money for her in retirement.
Speaker 1 (29:14):
So and she still wouldn't be sixty, she'd be fifty nine.
It's amazing close enough. It's just it just really goes
to show the power of front loading the sacrifice. And
so actually the timing is kind of perfect because you
start pulling some.
Speaker 2 (29:26):
Of that money out of play the wroth without any penalties. Yeah, right,
it's so amazing. She's really such a great, great position.
Speaker 1 (29:32):
She show it. So what should she do with this cash? Well,
you know, we're talking about a minimal amount, something like
six percent of the substantial down payment that she's been
able to save. She'll still have over one hundred thousand
dollars matt to put down on this house even if
she makes this wroth contribution. And I'm we don't know,
you know, how expensive the home that she's ideally looking
to purchase is going to be. I would say I
(29:53):
hope that she's staying under the five hundred thousand dollars
price point. Oh, I've got to think so that allows
her then the twenty percent to put down avoiding p AM.
I keeping hopefully that mortgage reasonable and guess what, you
can still contribute to the Wroth. Right, you can basically
have your cake and eat it too. Yeah, that would
be the sweet spot.
Speaker 2 (30:09):
We talked about this with ed Slot because those Wroth
dollars they're just far superior in retirement because you've already
paid the tax on that when you're likely going to
see higher tax rates and you can never go back
in time and contribute towards a year that you missed.
And Jack, the way your daughter is headed, like her
income it might soar the near future. She just sounds
like such a go get her and yeah, she's gonna
(30:31):
be together on every level. Yeah.
Speaker 1 (30:33):
Really, she could be seeing like big time six figures,
which high tax rates.
Speaker 2 (30:36):
If that were to happen, that would also make her
ineligible to contribute to her wrath in the future. And
so I think that that is the combination of this
not really impacting how much she can she would have
to set aside towards the down payment for a house
and the fact that you can't go back in time.
I think that makes this a top money priority for her,
And I think you're spot on, Matt. It's the it's
(30:56):
used or lose it. It's like FSA dollars, right, if
they don't get spent, they vanish. Well, if you don't,
you know, max out your ROTH contribution for twenty twenty four,
you can't go back and do it again later. I mean,
I guess you can do it, say through the first
quarter of twenty twenty five essentially, but after that point,
let's the moments past. And when you say use it,
you don't mean actually using those dollars. It's think of
it like a window of time. You can use that
period of time to contribute. Of course not We're not
(31:19):
telling you to actually spend them money.
Speaker 1 (31:20):
Time travel portal or something. But it's going to disappear.
There's gotta be some movie where that happens. Oh yeah,
where they're.
Speaker 2 (31:25):
Like the portals open for only so long? Yeah, what
ifore it closes? There's like all the sci fi. One
that immediately comes to mind is tron Okay, tron Legacy
with Jeff Bridges, and there's the portals open for a
period of time and they have to take the thing
up into the I don't know what they called it, Okay,
the portal.
Speaker 1 (31:42):
It's been a long time, and I think, Matt, what
we shall also mention that part of the wroth appeal
is the flexibility that it offers. Right, sure, your daughter
can take wroth contributions out if she needs to in
the future. And then on top of that, there are
ways to tap ten thousand dollars of even earnings in
your wroth without penalty for a down payment. So obviously
what we would say too is just because you can
(32:02):
doesn't mean you should. We'd love to see her not
only keep that account fully intact, but also be contributing more. Yeah,
these are retirement dollars after all, not like a home
down payment, rath Ira, that's not necessarily what it's for.
But she's also this section of her life where she's
trying to accomplish a lot of financial goals, like a
lot of our listeners are, Matt, and it feels like
I can't do it all. You know, I'm trying, but
I can't do it all. And we get that too,
(32:23):
But she also seems like one of those rare folks
who is able to successfully choose the option d Matt
all the above right consistently, so I think she can
buy the house make the ROTH contribution in twenty twenty four.
So that's our advice. Keep doing what you're doing and yeah,
try to me both at the same time, and I
think she can. It's not a binary decision like walking
(32:43):
and chewing gum, right, Yeah, like in this.
Speaker 2 (32:45):
Case, she can definitely do that. But Joey got more
to get to, including that MBA question. We'll get to
that right after the break. That as always a time
for the Facebook question of the week.
Speaker 3 (33:02):
Indeed, this one comes from Emily.
Speaker 1 (33:05):
She starts it out by saying TLDR, which means too
long don't read for all you all the old. She says,
when is it appropriate to leave a job that's paying
for my MBA but isn't giving me a good salary.
I need advice on when to leave my job so
I can make more money and advance my personal and
professional goals. I'm currently getting my MBA and my company
is paying for it. I'll be done in two semesters,
(33:26):
only four semesters total, and it's going to cost approximately
thirty three thousand dollars. The payback period is two years
of work for every one year in school, so I'll
ow my job about two and a half years after
I graduate in May twenty twenty five. Additionally, the payback
period has a scale. If I leave after one year,
I would only have to pay back fifty percent. But
I don't think I can stick around that long because
(33:47):
some benefits are being taken away. My raise this year
was below four percent, and the work environment is declining.
So when I started the program, I was told by
someone higher up in the company that the degree doesn't
equal an automatic pay increase. They're encouraging or enticing for
me to stay. I don't want to jump ship immediately
and seem ungrateful, but I also don't want to stay
too long. Any advice would be appreciated. I'm a first
(34:08):
gen college student, so no one I know has been
in this position before. Well, I'll say right out of
the gate, the first thing I've noticed is that it
seems like she that there is a pressure for her
to stay with this company when she doesn't necessarily have to.
And I think there are a whole lot of other
additional factors that you need to keep in mind. Emily specifically.
You know, you kind of mentioned the environment there at work.
There are also relationships that are at stake, but also
(34:30):
other perks like a paid for college, and these things
all influence whether we decide to start looking for something
else or if you're going to stay put. You're kind
of hinting at the total comp right, and she's saying, Oh,
they haven't been able to keep up salaryise, but total compwise,
where does that stand? I think it's a good thing
to consider exactly.
Speaker 2 (34:45):
Like, for instance, what is the four to one k match,
Like they're at the company and the fact that they're
paying for you in your MBA, this could tip the
scales in favor of your current employer and for you
to stay put. Who knows, maybe you've got a whole
lot of flexibility here with your current company. The fact
that this is something that they have offered you, I
don't know, it makes me think that that might be
more of the case. So I mentioned all of these
(35:07):
different factors because I think it could make sense for
you to at least write these down in just way,
some of those benefits as you are considering whether or
not to jump ship or not.
Speaker 1 (35:16):
Yeah, I think like a pros and cons checklist, Matt
can really help because I think sometimes the vibes it's like, ah, man,
I feel disappointed because I thought the raise was going
to be bigger, and man, the vibes that work have
not been so hot lately. It feels like there's like
a pessimistic tone or something like that. And it's not
that those things don't matter, but I would just create
a checklist so that I could put things in their
(35:37):
proper category and kind of realize, what is my total
conversation in this job and actually, could I get something
much more lucrative elsewhere, because you wouldn't want to necessarily
leave and then find that the pastors aren't actually greener
on the other side. And I would say this too, Matt,
that you might hear of a peer or something like
that who's making more money in a similar job than you,
(35:57):
and it's worth having those discussions to find out what
are you making, what are the perks down at this
particular employer, Like those are good ways to shed some
light on what you might be able to get on
the open market.
Speaker 2 (36:07):
Well, and specifically somebody that also has the NBA right
because even within her company, the fact that She said
that somebody higher up was like, hey, this, you know,
you're not going to get automatically get paid, Like I
kind of I don't have a love hate relationship with
that because I kind of like it because it's like, hey,
you got to prove that you are worth it, like
it's not just being credentialed. But at the same time,
(36:28):
some of that can be hard to measure. I think
some of the additional benefit that you bring to your company, yeah,
it's tough to quantify sometimes well. And the other thing
is they might say, we're not going to pay extra
because we paid for the NBA, which I kind of
sort of also understand a little bit, right, But I
don't know. I guess it's tough also to think about
staying somewhere for three years longer, given some of the
details that Emily mentioned, especially if future advancement looks paltry,
(36:52):
like if, like I don't know, an awesome employer typically
isn't isn't acting in a demoralizing fashion, And this sounds
pretty demoralizing. Specifically, she's talking about how the work environment
is declining, so that speaks to other stuff that might
be going on there at the company as well. And
obviously you want to make sure that you are in
a healthy environment. But then of course the fact that
she was talking about how there's a scale, how you
(37:14):
know you leave after one year and you've only you
only got to pay back half, that's another consideration, Like
you have to take that into account as like that
is a part of the total compensation, right, not just
the fact that you receive this benefit, but also the
fact that you have to pay it back or you
need to leave early. And so just keep that in mind.
Speaker 3 (37:31):
Is the NBA worth it if you have to pay
for it?
Speaker 2 (37:33):
I mean it sounds like she's kind of plot committed
of yeah at that point at this point, and so
I mean, if it was me, I would stay. But
as you are looking, let's say the work environment has
really gone downhill at this particular company and you are
going to jump ship. You are starting to have conversations
with other folks in the industry. Maybe flow your resume
out there, talk with that employer and see if they
(37:53):
might be able to come on board and help to
pay some of that NBA, some of those costs that
you have to pay. Just like, Hey, I'm interested in
coming to work for you.
Speaker 3 (38:02):
But it's one halfway through this NBA.
Speaker 2 (38:04):
It's sort of like when you're selling a home, like
you don't get all that money, like first you have
to satisfy the original lean on the home, which is
held by the first mortgage holder. So in a way,
that's almost like what's going on here. It's like I
owe this money to my former employer because they're making
me pay for the NBA. Will you pay for that?
And then there's a chance that they don't consider that
as total as part of the overall compensation at the
(38:26):
new company. But for you, obviously it is a huge
perk were they to pay that off for you something
to consider.
Speaker 1 (38:32):
I would also suggest this to Matt, consider having an
honest conversation with your current employer about your future, about
your career trajectory. I would you tell them that you're hey,
you're loving the education you're getting, thank you. But also
I would want to talk about what responsibility you hope
to take on, like where you see things going, what proactively,
how you intend to use this degree to increase your
(38:55):
role at the company. And then I would ask them
where do they see you going over the next couple
of years, Like from there vantage point where do they
envision you just before piecing out or upsetting the apple cart,
especially considering how much money is on the line for
this education, I'd want to probe in those ways first,
and I think having an idea of where you want
to go with that company, where you could see yourself,
and then asking them if they see the same thing,
(39:16):
That could be an enlightening conversation, Matt, and it could
potentially put her on a path staying where she is
currently with some of those with some of those benefits,
including the education benefit, to a pretty prosperous financial future
down the road.
Speaker 2 (39:27):
Yeah, and not to mention, just the fact that you're
even having that conversation just shows the initiative that you're
putting forth and speaks to what it is that you
could bring that company were they to start compensating you
fairly well, what it is.
Speaker 1 (39:38):
That you agree to Yes, especially again, if you have
the ability kind of to highlight this is the progress,
the route I see myself taking, and the ways I
see myself benefiting the company. They might say, oh, yes,
it's not just the degree, but like the kind of
initiative she's taking shows that, Hey, guess what, Emily, we
should be paying her a lot more like and she
she really can take on this assume these positions. We
hope she would, but it takes those conversations to really
(40:00):
I think shed light on that sometimes.
Speaker 3 (40:01):
Plus it costs more to hire.
Speaker 2 (40:03):
And you know, to bring on a new hire. So
the fact that they're like, all right, well we already
know it's going to cost us this much and not
having that role filled you highlight that upside potential. Like
these are all the different things that are going through
an HR manager's mind when you take the initiative and
start having these kind of conversations. But Emily, we hope
that gets you pointed in the right direction. Joel, let's
get to our beer. The you want to read it
(40:23):
this time because it's such a wacky name.
Speaker 3 (40:25):
Y' I'll do it.
Speaker 1 (40:25):
This one is called the Garden of Earthly Delights. It's
it's gotten eden esque or a picture on the front,
I would say, eating esk. But also, what's a guitar
world Pangaea? I don't know what's what's it called Pandora?
Speaker 2 (40:38):
Pandora?
Speaker 3 (40:38):
That's it? Yeah? Yeah, that's right?
Speaker 2 (40:41):
Is that like that's like the contents before that? Whatever?
Speaker 3 (40:44):
Yep.
Speaker 2 (40:45):
So this one was gonna I thought you were gonna
throw out. It's got an East of Eden like feel
to it because it's it's kind of got all the
beauties of a garden but exceptercity thrown in there at
a prehistoric time. But it's also a little off kilter.
Speaker 1 (40:56):
Yeah, yes, true. Well, this one is really interesting in
the ingredients. It's a barrel aged golden sour with carrots,
coconut curry spices, and vanilla bean. Who are your thoughts
on this one, Budd.
Speaker 2 (41:07):
Yeah, this one might be at the top of the
heap as far as the most interesting, kind of out
there beers I've ever had, but also pretty dang good. Yeah,
because I feel like I've had some other wacky beers
out there that were just bad. Right, Like what was
the I'm thinking of the pickle beer that we've had before.
It was just like I can't drink this. I'm sorry,
Like it's just it's kind of weird, it's out there.
This something about the flavors, it kind of comes together.
(41:29):
There's a whole I'll say. The first thing that I
noticed was the acidity. Man, this is a really acidic,
really bright golden sour. That's the first thing that I
noticed before it sort of evolved into what I perceived
is like a briny, like almost saltiness that was coming through.
Speaker 3 (41:45):
Yeah. No, I think that's spot on.
Speaker 1 (41:47):
I don't know if I would have been able to
characterize it like that, because I'm not a super taster
like you are, but I think.
Speaker 2 (41:52):
That's I just taste weird things. I think if some
of these.
Speaker 1 (41:54):
Ingredients had been done, had been dialed up a little
bit further and actually would have taken away from the beer.
Speaker 2 (41:59):
Okay, yeah, I thought you're about to say, if they
would have just cranked it up even more, I would
have enjoyed it.
Speaker 1 (42:03):
I was like, no, way, I'm really glad that the
golden sour was the barrel age. Golden sour was the
main thing I tasted, and those ingredients were like they
played a smaller role, right they they were they were highlights.
They were more complimentary the golden sour. So I think
if like the curry spice had been downed up five,
I would have liked it.
Speaker 2 (42:19):
Yeah, Like do you like do you like curry?
Speaker 3 (42:22):
I do?
Speaker 4 (42:22):
Like?
Speaker 2 (42:22):
Okay, Like there's acid and then there was brininess, but
then the curry flavors are what kind of came through next,
But the curry mixed with the coconut, this is like
a chicken curry bowl right right right here beer, which
is like totally crazy, but I kind of actually liked it,
and the fact that it was aged on oak as well,
and so it all kind of some of those tasting
notes can be like harsh if on their own, but
(42:43):
you kind of age it and it helps it to
just mellow mellow outland for the flares to meld together.
I don't know what they're thinking when they made this beer,
but actually I kind of dig it. I'm into it.
Speaker 3 (42:54):
I agree.
Speaker 1 (42:54):
Yeah, interesting beer from the folks over at Burial. Definitely
we're checking this out. If you're able to pick it up,
that's going to do it.
Speaker 2 (43:00):
For this episode.
Speaker 1 (43:01):
We'll have links to some of the stuff we mentioned
up on the show notes at howtomoney dot com. Of course,
there's all sorts of resources up there to help you
in your personal finance journey.
Speaker 2 (43:10):
Yes, right, if you find those resources helpful, we would
love it if you left us a solid review.
Speaker 3 (43:14):
We actually it's.
Speaker 2 (43:15):
Been a minute since we've asked for war reviews, but
they really do help us so much in getting the
word out and helping others to find the show. So
head to wherever it is that you listen to your podcast,
Spotify or Apple in particular cast. Those two would help
a lot. They're the heavy hitters. We appreciate it, of course.
Speaker 1 (43:32):
All right, buddy, that's going to be it until next time.
Best Friends Out, Best Friends Out,
Welcome to Hod of Money. I'm Joel and I am Matt,
and today we're gonna answer some mere listener questions.
Speaker 2 (00:24):
That's right, buddy, It's Monday, which means we've got to
hear for some listeners. We're gonna hear from a specific
listener and she is moving back in with her parents,
and it may not be for the reason that you're thinking.
Another listener has her employer paying for an MBA. Some
different considerations there as to maybe how long she should
work for that company.
Speaker 3 (00:42):
Sounds like a nice perk.
Speaker 2 (00:43):
It is, it is. And we're also gonna hear from
somebody else who is interested in getting into investing in
real estate, but specifically with his condo. So we've got
some thoughts there. Plus we got more to get to today, Bud,
condos can be trickier.
Speaker 1 (00:56):
Too than a single family home. Just uh, and we'll
get to why some different considerations exactly. All right, Matt,
I just want to call you out real quick on
the carpet. Tell all of our listeners when you say
on the carpet, you're a liar?
Speaker 2 (01:09):
Wait what? Okay? So first I was fixated on the
on the carpet part. Is that basically like calling out
like a dog that uh oh maybe it has like
gone to the bathroom. I don't know where that where
that comes from? Sorry, immediately lashed onto that.
Speaker 3 (01:21):
Wow, how did I lie?
Speaker 1 (01:22):
Okay, so you told listeners that you were not investing
this year because you are doing a home renovation and
you're saving allocating more money than I don't think for that,
don't take on any debt. Yeah, there's a chance we're
not going to invest next year as well, because I
don't know if you've heard, but home redos cost a
lot of money. I've heard this, I've heard this. But
the place where you lied is that you are still investing.
(01:43):
I know this because our business contributes a portion of
our and because of the way solo form one k's work,
we have to contribute the same amount. So our business
is contributing to your retirement. That's true, even though you
as you're not contributing the individual portion though.
Speaker 2 (01:58):
So what's so great is that we've got a sort
of like a baseline, like our standard is so high
as to what it is that we're investing that I
honestly don't even kind of count.
Speaker 1 (02:08):
That we just do that without thinking, which, yeah.
Speaker 2 (02:11):
I'm just gonna point out there is something amazing that
comes with accountability and the facts in Granted, we could
just change things up, so a part of the reason
I'm continuing to do that is it would be a
pain in the butt. But b it's at the beginning.
We basically agreed to this. We you know, we're setting
up our four one K with Fidelity. Interesting trivia side note,
we named it the how to Money invest a Palooza
(02:34):
because you have to come up with retirement plan names.
And I think most corporations and businesses it's they take
they take it a little more seriously. But that's one
of the fun things about owning your own business. You
can do what you want.
Speaker 3 (02:46):
That's right.
Speaker 2 (02:46):
But yeah, we're investing. We basically agreed to the fact
that we're going to invest the max amount that we
can as employers. So because of that, yeah, I guess
I am investing. I didn't think about that. I was
thinking more from a so I am holding off on
personal contributions. I am whole holding off when it comes
to my wrath Ira, the Kate's espousal wrath Ira just
some of the different ways that you can invest. But
(03:08):
silver lining focus on the accountability aspect of it. Talk
about money, talk about investing with your friends, because let's
envision a world, Joel, where we didn't co own a
business together. Let's say you were self employed, you ran
your own business. Let's say I was self employed. I
ran my own business, and we would still talk about money,
right like we would talk about different deals that we
would get. I think it's more likely, though, that we
(03:29):
would not talk about the exact dollar amount. Perhaps that
each of us is soaking away towards retirement.
Speaker 1 (03:35):
We're forced to with this because the employer contribution has
to be the same for both you and I essentially,
and if you were like, hey, dude, I don't want
to do this anymore, you know, we'd.
Speaker 3 (03:43):
Have a talk about it.
Speaker 1 (03:44):
Yeah, yeah, exactly, I'd throw a pissy fit and we'd
have to come to terms. And so I'm glad that
we at least see that as like a baseline. We're
not getting rid of that, and it's nice to know, Hey,
guess what, maybe that's a silver lining for you. You're still
investing something, right, even though you're prioritizing some other methods
from other avenues. With some of those dollars and So
what I would recommend is for a lot of folks
out there to talk about money, talk about what you're
(04:06):
investing in order to hold yourself accountable, because when you
put some of those different goals out there, you're gonna
be less.
Speaker 2 (04:11):
Likely to walk that back.
Speaker 4 (04:12):
You know.
Speaker 2 (04:12):
It's just like your running challenges are going to the gym,
seeing certain folks there who are like, hey, been missing you,
you know, like what's been going on.
Speaker 1 (04:19):
It might seem like it's weak accountability sometimes, but that matters.
Even the weak accountability matters. Say something out loud from
somebody else, then you're like, don't want to look foolish
if they asked, if they follow up and ask me.
Speaker 3 (04:28):
About it later on. So totally agree.
Speaker 2 (04:30):
All right, Well, I guess getting called out for lying
in that way that's such a bad that's the worst lie,
I guess. But let's introduce the beer that you and
I are sharing this episode is called the Garden of
Earthly Delights. This is a beer by Burial. It is
a barrel aged golden sour with Carrot's coconut curry and
vanilla bean looking forward to I combo. It's a crazy
(04:53):
combination which has never had a beer part of why
I picked it up that.
Speaker 3 (04:56):
Have curry spices in it before.
Speaker 2 (04:57):
Yeah, so we're gonna enjoy and share our thoughts at
the end of.
Speaker 1 (05:00):
The episode, no doubt, And if you have a money question,
well just go to honmoney dot com slash ask for
the simple directions for how to submit it, or just
literally record your question on the voice memo app of
your phone, email it over to us and hopefully we'll
take it on the next ask htm episode. Matt, this
first question comes from a listener who's moving back in
with other folks.
Speaker 5 (05:19):
Hi, Joel, and Matt, this is Madison from New York City.
I'm a longtime fan of the show and I'm hoping
to get your take on a new situation i'm facing.
For context, I'm twenty five years old and have been
living on my own for the past two years. I
will soon be moving back in with my parents at
the end of the month to help out with things
as my dad lost his job a while ago and
hasn't landed on his feet yet. Do you have any
advice for how I can approach establishing clear financial expectations
(05:42):
and responsibilities with my parents? Also, how can I navigate
contributing to living expenses at home, while also balancing that
with working towards my own financial goals. Thanks in advance,
love the show, Matt.
Speaker 1 (05:55):
First things first, I got to say to Madison, so
sorry to hear about your dad's job loss. I mean, yeah,
that's a bummer. That's a really hard thing to go
through as a family. It can be tough emotionally, and
I think for the kid, Matt, it can put pressure
on you to participate financially. And I know that every
family and cultures has like kind of different ways of
(06:16):
going about that, right of what sort of involvement the
child should have in a family's finances, and some and
some cultures kids start working early and actually contributed that
Money's not theirs, it's the families. And so I totally,
I totally understand that different their different strokes for different
folks on that on that level, but I think it's
also potentially an opportunity here for Madison to be able
to pay her folks back for all the years of
(06:37):
support that they gave to her. And I don't even
necessarily mean that oh tens of thousands of dollars of
debt that she owes them and it's time to pay
the piper. I guess I'm saying that this. I think
this could be an opportunity to yes, juice her savings
rates since she's not going to be paying rent traditionally anymore,
but also be able to help her folks out at
the same time in a tough spot in their lives.
And so it makes me think, Matt, I moved back
(06:59):
in to my parents' house for like five months or
so right about Madison's age, which felt weird, by the way,
what we're going to talk about here in just a second.
But it was right as I was looking to buy
a house, and it helped a ton Like it helped me,
you know, save so much more because I was able
to skip out on rent payments for five months. So
big thanks to my mom and dad for it was
a limited time thing, but it really was massively helpful
(07:22):
in allowing me to garner that saving so that I
could come with the twenty percent down that I wanted
to buy that house.
Speaker 2 (07:27):
Yeah, So was it proactively a limited time thing or
did it just end up that way? And you're like,
you can look back and retrospect and say, oh, yeah,
see it was just a short period of time, because
I guess what I'm pointing to here is that it
is worth having these conversations.
Speaker 1 (07:39):
Yeah, I didn't have like a drop dead deadline, right,
but I had like a time that we had both
discussed as like this, this is how long I'm hoping
and thinking it's going to be nice.
Speaker 2 (07:46):
So I think Madison, for you, it sounds like you've
got a great relationship with your family and a part
of why you're moving back is to help out financially,
and so because of that, I think offering to pay something,
especially given the financial circumstances your folks are in. Joel,
you said, Uh, it could be mutually beneficial, whether she's
trying to save up for a big financial goal like
buying a home, or just the ability to sock more
(08:07):
money away than otherwise she would be then she would
otherwise be able to Did she say she was actually yeah?
Was she actually in New York City? I know she
said New York, New York. I don't know if it was, so,
I don't know. My mind immediately goes to New York
City and I'm like, oh, yeah, you're definitely going to
be saving other parts of New York A ton of money.
Speaker 3 (08:23):
Yeah, there's like Rochester, I like your buddy jesty.
Speaker 2 (08:27):
But when it comes to what it is that you're contributing,
and you know what you're paying for rent, like it
doesn't need to be like market rate rent for renting
a room in your area. You are your parents' daughter
after all. But I would just be proactive with this conversation.
Don't wait for them to start it, like, make it
clear that hey, this is this is what I'm planning
to do. I think it's going to be less awkward
if you have an idea of what this looks like
(08:49):
versus them having to bring it up. Oh yeah, and yeah,
so if are you, I just would want to suggest
a fair monthly amount to pay. Maybe so just a
few chores that you can reabsorb, take you back to
some of your I don't know, high school years, maybe
you're having some flashbacks feed the cat Madison. Talk through
other expenses as well, like maybe paying a portion of
the utilities, maybe groceries. But I think just a proactive
(09:12):
financial commitment like this can create a lot of trust
and honestly like strengthen y'alls relationship, as opposed to this
being something that taxes or strains your relationship.
Speaker 1 (09:20):
And this is why, like, honesty is the best policy, Matt,
I called you off for lying earlier, just I'm really
just trying to rub that in even though it wasn't
really that big of a deal. But yeah, honesty is
the best policy. And having the conversation is so much
better than not having it. Even though it might seem
like it's awkward in the moment, it's way less awkward
than the hurt feelings that can come from not having
(09:42):
had those discussions and not having kind of mutually agreed
upon rules for this move back in. And I don't know,
I would think of that as like a great starting point, Madison,
which you're able to suggest to your parents, but I
would get there and put too. I'm sure there's like
a lot of love and trust in your family, but
even still, expectations and relationships have changed. You're twenty five now,
you're not sixteen, and there is I think zero shame
(10:05):
in moving back home, especially if your intention is to help.
But it is crucial to ask for their input because
once you've made some of those suggestions, ask them what
they think is this fair? What are their expectations for
this living situation? Because you are I think understandably and
rightly concerned about boundaries here. Right you want to be
able to help them without hurting yourself, And I think
(10:25):
this is doable. It is possible to create a sweet, loving,
mutually beneficial move here. But it's also important to write
this stuff down, I think, so everyone can see the
terms laid out and agree to. It doesn't have to
be some sort of like twenty page lease or document
that's signed in blood or anything like that. You don't
have to go overboard, but that way, if there's like
a misunderstanding two months in, you can go back to
(10:47):
the document for clarity matter. I think of it as
like an investor statement. It can help you keep you
accountable to do the right thing, the thing you said
you were going to do, and you can go back
to it and look and say, am I doing what
I said I was going to do from the outset?
And you guys can use a similar document. It's honestly
can be like a one pager but I think that
would be really helpful.
Speaker 3 (11:04):
Yeah, helpful reference.
Speaker 2 (11:05):
Point, not like an Actually you don't need to drop
an actual lease and like have both of you all
sign up. But I say hire a lawyer or anything. Yeah,
but just actually kind of writing some things out. I
think that can be helpful. And you know, I think
there could, like traditionally, there could be some shame associated
with moving back home. But I think what's important to
recognize here is that it seems like Madison is kicking
butt like she is. She's the one that sent the
(11:26):
voice memo to the Personal Finance podcast and is having
an answered on the show, and so I think the
roles might be a little bit reversed here, Madison. I'm
mentioning this because I think it's worth being careful with
your folks just to make sure that they're not embarrassed.
I guess by the fact that you're having to move
back in with them a lot of times. Again, like
there's like a negative connotation and moving back in with
(11:47):
your folks, but they've launched you out into the world
and they know it sounds like that you might be
moving back home in order to help them out, and
so I would just be really careful. Again, all families
are different, different families that have different dynamics and expectations.
But I don't know, just keep that in mind as well,
that there might be some of that going on as well,
and that can dictate how it is that you approach
(12:08):
some of these conversations with just with some tenderness and sensitivity.
Speaker 1 (12:12):
Yeah, Matt, I think one of the things maybe you're
getting at with that is that you might say, hey, parents,
here's how much I want to contribute, here's what I
want to take on when it comes to family roles
and financial obligations, and her parents might say, whoa, whoa, Woa, Madison,
you're our baby, right, like, no, no, no, you want to
pay four hundred bucks in rents? Know this is your home,
come back in, but because of what's happening with your dad,
(12:34):
I think the right thing to do is to insist,
essentially right to not let your parents kind of say no, no, no,
please don't because obviously they are in a financial situation.
Speaker 3 (12:45):
Who knows how long it'll last.
Speaker 1 (12:46):
Or you can be helpful, and this is I think
the right thing to do is to contribute extra towards groceries,
offer to do some of the cooking, and make sure
that you are paying a certain stipend or monthly rent
amount every single month and explain why you want to
pay something. Again, I think if there were no financial
struggles on their end, it might be different, but I
think that insistence on contributing is going to mean a
ton to them. They're they're gonna feel seen and supported.
Speaker 2 (13:09):
So yeah, yeah, it's funny. I think you and I
see certain things very differently. It's funny because like we
have a lot in common, but like when it comes
to like if I was a parent and I had
a kid who had went off and even if I
was in a great financial position, I would I personally
would still be one hundred percent charging my kid rent,
not because I want their money, but just because, like selfishly,
I would. I think I would love for them to
(13:30):
move back in because I keep hearing from more and
more folks who have kids that are going off to
college and they're like really missing them. I think I
would love that, But I also know that it may
not be in the best interest of the kid, right,
Like you want them to get out there and to
launch a career, to have goals and ambitions to do something,
because they might be.
Speaker 1 (13:48):
They might be more likely if they're living rent free
in your house to play whatever the latest game system
is all day, every day.
Speaker 2 (13:52):
You don't want to necessarily incentivize that, so it's just
Madison's in dangers. No, No, it's just interesting because we're kind
of like in between Madison and her folks, right, Like
we're the generation in between, Like we're kind of the
sandwichship generation. And so I can very easily connect with
Madison as a child, but I can also start to
connect with the parents' point of view as well, having
kids and trying to look off into the future. But
(14:12):
either way, it does sound like you're going to come
out ahead financially. And so what I want to highlight
here is that it makes sense to know what it
is that you want to do with all this money
that you're saving, have some goals laid out, get after it,
because your monthly expenses could be declining meaningfully a significant amount,
especially if you are currently living in a high rent area.
(14:33):
I just don't want you to friar of those dollars away.
Think of it like you're mentioning like playing video games,
You'll think of this as like a game genie, like
this is almost like a hack in a way that
you're able to get playing with that was just like
a way to cheat on video back, And this is
kind of what this is. It is some sort of.
Speaker 1 (14:49):
Like a cheat code essentially, right exactly, giving you some
special powers to be able to accelerate whatever financial goals
you have. Kind Of like Matt, when student loan payments
were paused, I guess they still kind of are for
years on end, and for people with massive student loan payments,
it was this like fresh start at least for a
bunch of years to be able to do a bunch
of things that they otherwise couldn't do with their money.
And so we were saying, game, Genie, that thing, use
(15:10):
use this to your financial advantage. And I think Madison
can do the same thing with reduced expenses by going
back to live at home. And Matt, there's also like
just so many other things that are worth discussing to
what are the rules of the house these days, and
what do you expect from me as a grown twenty
five year old woman, like having friends over or how
late I'm out right, that was one of the weirdest
things about when I moved back home at that age.
(15:31):
I remember it was, you know, I would I was
still under the assumption that I could go do whatever
I wanted whenever I wanted late night beers with friends
or whatever. And I remember my parents being like, what
time did you get home last night? And I was like,
I don't want to answer that your business mode. Yeah right,
And so it's worth having I don't know if there's
like a separate entrance or how that works in your house,
(15:52):
or if they're like staying up late waiting for you
on the couch. I mean, probably not at this point
in time, but it's worth having those discussions too. It's
not just hey, how long on my planning to live
here with you and to kind of hopefully help in
a financial way and enjoy this reconnection essentially with my
adult parents, but what are the actual ground rules? What
does it look like for me to actually live here
(16:14):
without us stepping on.
Speaker 3 (16:14):
Each other's toes?
Speaker 2 (16:15):
Totally Yeah, and you kind of touched on something there too,
like see this as a like I not kind of
hinted at this earlier too, but as a way for
you to strengthen your relationship with your parents. It's something
like ninety percent of the time that kids spend with
their parents happens by the time that they're eighteen years old.
This is sort of like a not a redo, but
you get to squeeze in some additional time with them,
and that stat really resonates with me even more as
(16:38):
a parent in thinking about the time you have with
your kids before they do hopefully launch and get out
into the world.
Speaker 3 (16:44):
It's like, I appreciate it, enjoy it.
Speaker 2 (16:46):
Yeah, kind of. Well, I know twenty five year old
Matt would not have appreciated. I mean, I don't think
I would have really appreciated that if I ended up
moving back home. It's like those narrow coffees or breakfast
or something like those are going to be so meaningful, Yes,
if you can see them for what they are and
realize that it's limited. Yeah, speaking of the parent child relationship,
we're gonna hear from a father who I think he's
(17:06):
got some proud dad vibes going on. We'll get to
that and more right after this.
Speaker 3 (17:18):
Matt, we'll back.
Speaker 1 (17:18):
We'll get to some more parent child relationship stuff after this.
I feel like you're a relationship guru blossoming. Yeah, why
in part of my very eyes. But let's get to
our next question, Matt. This one comes from a listener
who's thinking about becoming a landlord.
Speaker 6 (17:31):
Hey, guys, Bob from New York here, how you guys,
doing in my current state of my financial journey. I
own a condo and I'm looking to buy a second
home in the near future. With that being said, I
would love to keep the condo and rent it out
as a second form of income. After doing some research
into the renting market in my area, I found that
(17:53):
I would only make a few hundred dollars a month
from a potential renter. Simply put, my mortgage in Texas
would account for approximately ninety percent of what a potential
renter would be paying, only leaving me about ten percent
profit margins each month. So my question is this, what
do you think the minimum required profit margins are when
(18:15):
taking on the risk of renting out of property?
Speaker 2 (18:19):
Thanks?
Speaker 6 (18:19):
Guys, love the show, all right?
Speaker 2 (18:21):
So Joel, Bob asked how we're doing? And do you
think he was Do you think it was like a
passing a coworker at work, kind of like, hey, what's up?
Or do you think he actually wants to hear how
you are doing right now?
Speaker 1 (18:31):
I've felt the deep heartfelt ask in that, and nobody
asked that in the questions.
Speaker 2 (18:35):
I agree Bob. I appreciate that Bob has an intentionality
about about himself. I'm doing great, and I've only got
to know him over the past ninety seconds.
Speaker 1 (18:43):
I'm not gonna say there's not hard things in my
life Matt right now, but overall I'm doing great.
Speaker 2 (18:47):
I'm yeah, I feeling great. Fortunate worked out. We both
worked out this morning. You went on like a six
plus mile run. I got to work out in ate
some delicious leftovers for lunch, went on a walk around
the block like I like to do after lunch, sitting down,
drinking a delicious beer, talking about money with you.
Speaker 3 (19:01):
What's not the love?
Speaker 1 (19:01):
And I ran on the local trails, which I'm doing
less and less of. I'm doing more pavement running, and
I make you appreciate the woods.
Speaker 3 (19:06):
Love it.
Speaker 1 (19:06):
Yeah, it's my favorite. It's my favorite. I need to
make that more of a priority. So it's yeah, I
was a joy to.
Speaker 3 (19:10):
Do that this morning. Yeah, all right.
Speaker 2 (19:11):
Bob's got a great question here, though. I like the
way that he is thinking because renting out that condo,
this certainly could be a money making endeavor. But not
every property is created equal. Well specifically too, not all
financing terms are created equal, which is an important factor
to consider. And so what we don't know about Bob
here that would be helpful. Is the length of your mortgage?
Speaker 3 (19:33):
Is this a.
Speaker 2 (19:34):
Fifteen year or is this a thirty year?
Speaker 3 (19:36):
Yeah?
Speaker 2 (19:37):
Is this a fixed mortgage? Hopefully it definitely is. But
that would shed a lot of light. Yes, the rental
would be less profitable on an ongoing monthly basis, let's say,
with like a fifteen year note. But if you've got
an incredibly great rate and you know you're looking to
pay off the mortgage a decade and a half sooner
than a thirty year mortgage and still be cash flowing,
then I think that there is a really great reason
(19:58):
to hang over this thing.
Speaker 1 (19:58):
Yeah, that's why the payment amount when we're talking about
owning a home, what that mortgage is, Well, it's yeah,
you're right, Matt. We need to know all these other
underlying details because they're gonna help inform Well, okay, are Yeah,
you're making money above and beyond the mortgage. But if
you've got a fifteen year mortgage, that makes this gap
even more insanely good. And I think it's also important
(20:19):
to note that the ten percent gap between the mortgage
and the rent amount doesn't tell the whole story either.
You're not necessarily gonna be pocketing that gap, and in fact, Bob,
you're probably gonna pocket a fraction of it. And that's
because you've got a factor in vacancy, repairs, right, and maintenance.
Those are the landlord's worst nightmares, but they're also the
true realities of being a landlord too, Matt. I've got
(20:41):
one side of my duplex. I've had two people like
basically say we're ready to sign a lease, and then
they ghost us. And so the vacancy is just part
of the deal and you have to bake that into
the cake. And if you don't, you're gonna find yourself
in a tough financial spot. And so you might experience
little or no vacancy, which would be great, but make
sure you plan for potential lulls. You might also find
(21:03):
that when all of a sudden done at the end
of the year, they actually lost a little bit of money.
Speaker 3 (21:06):
Matter.
Speaker 1 (21:07):
I'm gonna lose money on a couple of properties this year.
And that's not the end of the world, though, because
the key here is whether or not you want to
be a landlord, if you've got a long term mindset,
if you think that this property overall in the coming
years is going to be a solid money making endeavor
despite the cost and setbacks that you're of course going
to incur.
Speaker 2 (21:26):
Yeah, so you're not saying that profitability doesn't matter. You're
not saying that cashlow isn't important. You're just stating that
you might not be predictably making money every single year
with this particular property. Although at ten percent gap that's
actually pretty solid. Just make sure you're including some of
those other expenses as well. But this is why it
is so crucial to think about the potential for appreciation.
(21:47):
There are two main ways that you can grow your
wealth by owning real estate, and that's either cash flow
or appreciation. And so a question you might want to
ask yourself is your condo in an up and coming
neighborhood do you think that you're gonna see outside returns
because of its location? And if so, you know, you
might just make penis like every year for the next decade,
but you might end up reaping a windfall at the
(22:10):
point when you actually sell the property. I think, as
long as your finances can handle waiting for that reward,
it could still be a really smart move. We don't
want you to overly focus on the cash flow side
of the equation. Were you to do that, then you'd
be looking at like a lot of commercial properties like
self storage or mobile home parks. Like trailer parks are
(22:30):
the classes of properties that typically have the highest amounts
of cash flow. But guess what, you're also not seeing
hardly any appreciation with those types of properties. Either, that's right,
that's right, So you have to take that in consideration
for sure, Matt. Cash Flow is one thing, appreciation is another,
And especially in high cost cities, high cost places to live,
that is something landlords have to focus more on because
(22:50):
typically the cash flow is harder to come by, but
appreciation can be even greater. And so especially if you
have good terms on that mortgage, extrapol it out, what
could that appreciation look like in the coming five, eight,
ten years and is it worth and can you handle
not having a ton of income from that property for
the greater upside down the road. I would also ask
yourself the question, Bob, do you want to be a landlord?
(23:11):
Wrestle with that for a second, because Matt and I
we always say this, it's more light part time job
than it is passive income.
Speaker 1 (23:18):
And if you follow too many real estate influencers on
Instagram or TikTok or whatever. You're going to hear a
lot of high praises for real estate investing and just
how simple and easy it is, and we don't want
to overly complicate it either, but it's often not nearly
as passive as they make it sound. And so I
would also say, since this is a condo, it'll likely
be a little bit easier from a management perspective. Actually, Matt,
(23:39):
I manage my mother in law's condo for her. The
HOA is typically responsible for exterior repairs. It's a piece
of cake lawn maintenance. Are you going to say right no,
because then there's still intra unit disputes. There was a
water leak from our unit down to the unit below.
It was a massive hassle. And so I will say
I do think it is easier owning a condo and
(24:00):
renting it out if your condo association allows you to
do that, which is something you also need to look into.
But it's also maybe not completely fool proof or anything
like that. And one of the other things I think
Bob needs to consider is his potential ownership timeline, because
the cool thing about rental real estate is that the
numbers tend to get better over time as rents go up,
although that's not what's happening lots of the country right now.
(24:21):
But your mortgage amount stays the same, and so basically
ten years from now you might find, hey, the cash
flow is a heck of a lot better than it
was when I started.
Speaker 2 (24:27):
And then on top of.
Speaker 1 (24:28):
That, if you want to hold forever and let someone
else inherit the condo when you die, you're gonna get
tax breaks over the years, and they're gonna inherit that
property with a stepped up basis that this, of course,
could could be decades and decades and decades down the
road for Bob. It's a really interesting tax maneuver, but
it's a long time from now.
Speaker 2 (24:45):
I just figured I should put it in there anyway, now, sure, sure, sure, yeah.
I would also think through, what Bob, would you be
doing with this money if you ended up selling the condo,
Because on one hand, if you just hurled it into
your roth IRA and anything above that you put in
a taxable b good account. Okay, you know, that'll certainly
be the easy route, although it might not be as
lucrative in the coming years. It is impossible to know.
(25:06):
But on the other hand, were you to be tempted
into spending all of that money, well long term tomorrow, Bob,
for your sake, I would say to hang onto that property.
And especially if you like the idea of becoming a landlord,
which which it does sound like you are interested in,
and you believe in the neighborhood where your condo is located,
I think holding onto it can deliver outsize returns in
(25:27):
the years to come. So you know, we've got no
slam dunk recommendation here, but I do lean towards holding
onto it in your case, and especially considering that I'm
assuming your mortgage interest rate on that thing is pretty low.
Speaker 3 (25:40):
Let's say you about it five or six years ago.
Speaker 2 (25:42):
Oh my gosh. Yeah, yeah, you're looking at i don't know,
in the threes for a thirty year, maybe even in
the twos if he's got that fifteen year, which on
a condo is certainly much more doable. Yeah. So with
that in mind, if it was me, I think I
would personally be hanging onto that condo.
Speaker 3 (25:56):
Yeah.
Speaker 1 (25:56):
Our goal in this response is to essentially lay out
a checklist of things for you to consider, because yeah,
there isn't any slam dun. One hundred percent you should
keep it or one hundred percent you should sell it.
There are a lot of personal factors and then you
factors about your specific property that you should take into
consideration before you make a final decision. But Bob, best
of luck in that decision, and Matt, let's get to
our next question. This one is about excess savings. Should
(26:17):
it stay a savings or should it become investment dollars?
Speaker 4 (26:20):
Today? Man Joel, this is Jack from toll Sokolholma. I'm
calling for advice for my twenty nine year old daughter.
She is currently saving twenty three percent in a raw
War one K. She is saving the max on on hsay.
She has a roth Ira which she opened as a
(26:41):
team and has a total retirement savings of two hundred
and forty thousand dollars. She has no debt and owns
her own car. Needless to say, she is very good
about managing her money. Her career is very stable with
fi plus years of service. She has one hundred and
ten thousand dollars in cash say and plans to buy
(27:01):
a Midwest home within twelve months. She has recently divorced
My question is this, should she contribute to her wroth
IRA this year or use the funds for a home purchase.
Thanks for all you do, really appreciate it.
Speaker 2 (27:19):
All right, Well, first of all, Jack, it sounds like
your daughter doesn't need much of our advice because she's
doing incredibly well, especially for still being in her twenties.
And I will say, and I kind of hinted at
this earlier, I think that Jack had a lot to
do with this, some of these proud dad vibes. Specifically,
he should.
Speaker 1 (27:36):
Feel super I mean, if I have a kid that's
that financially responsible, Oh my gosh. Yeah, it's unlikely, but
if it happens, I'll be thrilled.
Speaker 2 (27:41):
I was going to highlight the fact that she opened
a wroth as a teenager, which is a totally clutch move,
and I'm guessing may not have happened unless maybe Jack
mentioned something. All that being said, I don't know, maybe
this is totally his daughter and he didn't have any input,
which would be honestly even more impressive, and especially too,
he just casually mentioned slipped in there that she was
recently divorced. It's even I think it's even. I mean,
(28:02):
I can take a massive bite out of your financial like,
not just not emotionally, but also financially, in the fact
that she's still in an incredible position, like this is
a testament to how well she's handled her money. Yeah,
and she's already gained so much optionality in choice, which
is what a significant savings and investing rate can do
for people. But she's going to crew significantly more if
she keeps us up, Like every single month and year
(28:25):
that she keeps these money habits up, she's just got more.
I mean, think about where she's going to be mid thirties,
late thirties, the option she's going to be able to choose,
whether it's working for herself, whether it's working part time,
like I don't know, the world kind of becomes your
oyster when you're handling money this well. And the truth
is too if she never contributed another dollar to retirement,
which is not our suggestion, by the way, but it's
(28:46):
a fun experiment to think through. So Jack mentioned she
had two hundred and forty thousand dollars in her investment
accounts already, and I just ran the numbers. Basically that
nest egg would turn into two point five million dollars
over the next thirty years with an average return of
eight percent. That's called coast fire right there, That's where
she's at.
Speaker 1 (29:06):
Yeah, she would not have to do any more investing
if she didn't want to. That would still in all
likelihood be plenty.
Speaker 3 (29:12):
Of money for her in retirement.
Speaker 1 (29:14):
So and she still wouldn't be sixty, she'd be fifty nine.
It's amazing close enough. It's just it just really goes
to show the power of front loading the sacrifice. And
so actually the timing is kind of perfect because you
start pulling some.
Speaker 2 (29:26):
Of that money out of play the wroth without any penalties. Yeah, right,
it's so amazing. She's really such a great, great position.
Speaker 1 (29:32):
She show it. So what should she do with this cash? Well,
you know, we're talking about a minimal amount, something like
six percent of the substantial down payment that she's been
able to save. She'll still have over one hundred thousand
dollars matt to put down on this house even if
she makes this wroth contribution. And I'm we don't know,
you know, how expensive the home that she's ideally looking
to purchase is going to be. I would say I
(29:53):
hope that she's staying under the five hundred thousand dollars
price point. Oh, I've got to think so that allows
her then the twenty percent to put down avoiding p AM.
I keeping hopefully that mortgage reasonable and guess what, you
can still contribute to the Wroth. Right, you can basically
have your cake and eat it too. Yeah, that would
be the sweet spot.
Speaker 2 (30:09):
We talked about this with ed Slot because those Wroth
dollars they're just far superior in retirement because you've already
paid the tax on that when you're likely going to
see higher tax rates and you can never go back
in time and contribute towards a year that you missed.
And Jack, the way your daughter is headed, like her
income it might soar the near future. She just sounds
like such a go get her and yeah, she's gonna
(30:31):
be together on every level. Yeah.
Speaker 1 (30:33):
Really, she could be seeing like big time six figures,
which high tax rates.
Speaker 2 (30:36):
If that were to happen, that would also make her
ineligible to contribute to her wrath in the future. And
so I think that that is the combination of this
not really impacting how much she can she would have
to set aside towards the down payment for a house
and the fact that you can't go back in time.
I think that makes this a top money priority for her,
And I think you're spot on, Matt. It's the it's
(30:56):
used or lose it. It's like FSA dollars, right, if
they don't get spent, they vanish. Well, if you don't,
you know, max out your ROTH contribution for twenty twenty four,
you can't go back and do it again later. I mean,
I guess you can do it, say through the first
quarter of twenty twenty five essentially, but after that point,
let's the moments past. And when you say use it,
you don't mean actually using those dollars. It's think of
it like a window of time. You can use that
period of time to contribute. Of course not We're not
(31:19):
telling you to actually spend them money.
Speaker 1 (31:20):
Time travel portal or something. But it's going to disappear.
There's gotta be some movie where that happens. Oh yeah,
where they're.
Speaker 2 (31:25):
Like the portals open for only so long? Yeah, what
ifore it closes? There's like all the sci fi. One
that immediately comes to mind is tron Okay, tron Legacy
with Jeff Bridges, and there's the portals open for a
period of time and they have to take the thing
up into the I don't know what they called it, Okay,
the portal.
Speaker 1 (31:42):
It's been a long time, and I think, Matt, what
we shall also mention that part of the wroth appeal
is the flexibility that it offers. Right, sure, your daughter
can take wroth contributions out if she needs to in
the future. And then on top of that, there are
ways to tap ten thousand dollars of even earnings in
your wroth without penalty for a down payment. So obviously
what we would say too is just because you can
(32:02):
doesn't mean you should. We'd love to see her not
only keep that account fully intact, but also be contributing more. Yeah,
these are retirement dollars after all, not like a home
down payment, rath Ira, that's not necessarily what it's for.
But she's also this section of her life where she's
trying to accomplish a lot of financial goals, like a
lot of our listeners are, Matt, and it feels like
I can't do it all. You know, I'm trying, but
I can't do it all. And we get that too,
(32:23):
But she also seems like one of those rare folks
who is able to successfully choose the option d Matt
all the above right consistently, so I think she can
buy the house make the ROTH contribution in twenty twenty four.
So that's our advice. Keep doing what you're doing and yeah,
try to me both at the same time, and I
think she can. It's not a binary decision like walking
(32:43):
and chewing gum, right, Yeah, like in this.
Speaker 2 (32:45):
Case, she can definitely do that. But Joey got more
to get to, including that MBA question. We'll get to
that right after the break. That as always a time
for the Facebook question of the week.
Speaker 3 (33:02):
Indeed, this one comes from Emily.
Speaker 1 (33:05):
She starts it out by saying TLDR, which means too
long don't read for all you all the old. She says,
when is it appropriate to leave a job that's paying
for my MBA but isn't giving me a good salary.
I need advice on when to leave my job so
I can make more money and advance my personal and
professional goals. I'm currently getting my MBA and my company
is paying for it. I'll be done in two semesters,
(33:26):
only four semesters total, and it's going to cost approximately
thirty three thousand dollars. The payback period is two years
of work for every one year in school, so I'll
ow my job about two and a half years after
I graduate in May twenty twenty five. Additionally, the payback
period has a scale. If I leave after one year,
I would only have to pay back fifty percent. But
I don't think I can stick around that long because
(33:47):
some benefits are being taken away. My raise this year
was below four percent, and the work environment is declining.
So when I started the program, I was told by
someone higher up in the company that the degree doesn't
equal an automatic pay increase. They're encouraging or enticing for
me to stay. I don't want to jump ship immediately
and seem ungrateful, but I also don't want to stay
too long. Any advice would be appreciated. I'm a first
(34:08):
gen college student, so no one I know has been
in this position before. Well, I'll say right out of
the gate, the first thing I've noticed is that it
seems like she that there is a pressure for her
to stay with this company when she doesn't necessarily have to.
And I think there are a whole lot of other
additional factors that you need to keep in mind. Emily specifically.
You know, you kind of mentioned the environment there at work.
There are also relationships that are at stake, but also
(34:30):
other perks like a paid for college, and these things
all influence whether we decide to start looking for something
else or if you're going to stay put. You're kind
of hinting at the total comp right, and she's saying, Oh,
they haven't been able to keep up salaryise, but total compwise,
where does that stand? I think it's a good thing
to consider exactly.
Speaker 2 (34:45):
Like, for instance, what is the four to one k match,
Like they're at the company and the fact that they're
paying for you in your MBA, this could tip the
scales in favor of your current employer and for you
to stay put. Who knows, maybe you've got a whole
lot of flexibility here with your current company. The fact
that this is something that they have offered you, I
don't know, it makes me think that that might be
more of the case. So I mentioned all of these
(35:07):
different factors because I think it could make sense for
you to at least write these down in just way,
some of those benefits as you are considering whether or
not to jump ship or not.
Speaker 1 (35:16):
Yeah, I think like a pros and cons checklist, Matt
can really help because I think sometimes the vibes it's like, ah, man,
I feel disappointed because I thought the raise was going
to be bigger, and man, the vibes that work have
not been so hot lately. It feels like there's like
a pessimistic tone or something like that. And it's not
that those things don't matter, but I would just create
a checklist so that I could put things in their
(35:37):
proper category and kind of realize, what is my total
conversation in this job and actually, could I get something
much more lucrative elsewhere, because you wouldn't want to necessarily
leave and then find that the pastors aren't actually greener
on the other side. And I would say this too, Matt,
that you might hear of a peer or something like
that who's making more money in a similar job than you,
(35:57):
and it's worth having those discussions to find out what
are you making, what are the perks down at this
particular employer, Like those are good ways to shed some
light on what you might be able to get on
the open market.
Speaker 2 (36:07):
Well, and specifically somebody that also has the NBA right
because even within her company, the fact that She said
that somebody higher up was like, hey, this, you know,
you're not going to get automatically get paid, Like I
kind of I don't have a love hate relationship with
that because I kind of like it because it's like, hey,
you got to prove that you are worth it, like
it's not just being credentialed. But at the same time,
(36:28):
some of that can be hard to measure. I think
some of the additional benefit that you bring to your company, yeah,
it's tough to quantify sometimes well. And the other thing
is they might say, we're not going to pay extra
because we paid for the NBA, which I kind of
sort of also understand a little bit, right, But I
don't know. I guess it's tough also to think about
staying somewhere for three years longer, given some of the
details that Emily mentioned, especially if future advancement looks paltry,
(36:52):
like if, like I don't know, an awesome employer typically
isn't isn't acting in a demoralizing fashion, And this sounds
pretty demoralizing. Specifically, she's talking about how the work environment
is declining, so that speaks to other stuff that might
be going on there at the company as well. And
obviously you want to make sure that you are in
a healthy environment. But then of course the fact that
she was talking about how there's a scale, how you
(37:14):
know you leave after one year and you've only you
only got to pay back half, that's another consideration, Like
you have to take that into account as like that
is a part of the total compensation, right, not just
the fact that you receive this benefit, but also the
fact that you have to pay it back or you
need to leave early. And so just keep that in mind.
Speaker 3 (37:31):
Is the NBA worth it if you have to pay
for it?
Speaker 2 (37:33):
I mean it sounds like she's kind of plot committed
of yeah at that point at this point, and so
I mean, if it was me, I would stay. But
as you are looking, let's say the work environment has
really gone downhill at this particular company and you are
going to jump ship. You are starting to have conversations
with other folks in the industry. Maybe flow your resume
out there, talk with that employer and see if they
(37:53):
might be able to come on board and help to
pay some of that NBA, some of those costs that
you have to pay. Just like, Hey, I'm interested in
coming to work for you.
Speaker 3 (38:02):
But it's one halfway through this NBA.
Speaker 2 (38:04):
It's sort of like when you're selling a home, like
you don't get all that money, like first you have
to satisfy the original lean on the home, which is
held by the first mortgage holder. So in a way,
that's almost like what's going on here. It's like I
owe this money to my former employer because they're making
me pay for the NBA. Will you pay for that?
And then there's a chance that they don't consider that
as total as part of the overall compensation at the
(38:26):
new company. But for you, obviously it is a huge
perk were they to pay that off for you something
to consider.
Speaker 1 (38:32):
I would also suggest this to Matt, consider having an
honest conversation with your current employer about your future, about
your career trajectory. I would you tell them that you're hey,
you're loving the education you're getting, thank you. But also
I would want to talk about what responsibility you hope
to take on, like where you see things going, what proactively,
how you intend to use this degree to increase your
(38:55):
role at the company. And then I would ask them
where do they see you going over the next couple
of years, Like from there vantage point where do they
envision you just before piecing out or upsetting the apple cart,
especially considering how much money is on the line for
this education, I'd want to probe in those ways first,
and I think having an idea of where you want
to go with that company, where you could see yourself,
and then asking them if they see the same thing,
(39:16):
That could be an enlightening conversation, Matt, and it could
potentially put her on a path staying where she is
currently with some of those with some of those benefits,
including the education benefit, to a pretty prosperous financial future
down the road.
Speaker 2 (39:27):
Yeah, and not to mention, just the fact that you're
even having that conversation just shows the initiative that you're
putting forth and speaks to what it is that you
could bring that company were they to start compensating you
fairly well, what it is.
Speaker 1 (39:38):
That you agree to Yes, especially again, if you have
the ability kind of to highlight this is the progress,
the route I see myself taking, and the ways I
see myself benefiting the company. They might say, oh, yes,
it's not just the degree, but like the kind of
initiative she's taking shows that, Hey, guess what, Emily, we
should be paying her a lot more like and she
she really can take on this assume these positions. We
hope she would, but it takes those conversations to really
(40:00):
I think shed light on that sometimes.
Speaker 3 (40:01):
Plus it costs more to hire.
Speaker 2 (40:03):
And you know, to bring on a new hire. So
the fact that they're like, all right, well we already
know it's going to cost us this much and not
having that role filled you highlight that upside potential. Like
these are all the different things that are going through
an HR manager's mind when you take the initiative and
start having these kind of conversations. But Emily, we hope
that gets you pointed in the right direction. Joel, let's
get to our beer. The you want to read it
(40:23):
this time because it's such a wacky name.
Speaker 3 (40:25):
Y' I'll do it.
Speaker 1 (40:25):
This one is called the Garden of Earthly Delights. It's
it's gotten eden esque or a picture on the front,
I would say, eating esk. But also, what's a guitar
world Pangaea? I don't know what's what's it called Pandora?
Speaker 2 (40:38):
Pandora?
Speaker 3 (40:38):
That's it? Yeah? Yeah, that's right?
Speaker 2 (40:41):
Is that like that's like the contents before that? Whatever?
Speaker 3 (40:44):
Yep.
Speaker 2 (40:45):
So this one was gonna I thought you were gonna
throw out. It's got an East of Eden like feel
to it because it's it's kind of got all the
beauties of a garden but exceptercity thrown in there at
a prehistoric time. But it's also a little off kilter.
Speaker 1 (40:56):
Yeah, yes, true. Well, this one is really interesting in
the ingredients. It's a barrel aged golden sour with carrots,
coconut curry spices, and vanilla bean. Who are your thoughts
on this one, Budd.
Speaker 2 (41:07):
Yeah, this one might be at the top of the
heap as far as the most interesting, kind of out
there beers I've ever had, but also pretty dang good. Yeah,
because I feel like I've had some other wacky beers
out there that were just bad. Right, Like what was
the I'm thinking of the pickle beer that we've had before.
It was just like I can't drink this. I'm sorry,
Like it's just it's kind of weird, it's out there.
This something about the flavors, it kind of comes together.
(41:29):
There's a whole I'll say. The first thing that I
noticed was the acidity. Man, this is a really acidic,
really bright golden sour. That's the first thing that I
noticed before it sort of evolved into what I perceived
is like a briny, like almost saltiness that was coming through.
Speaker 3 (41:45):
Yeah. No, I think that's spot on.
Speaker 1 (41:47):
I don't know if I would have been able to
characterize it like that, because I'm not a super taster
like you are, but I think.
Speaker 2 (41:52):
That's I just taste weird things. I think if some
of these.
Speaker 1 (41:54):
Ingredients had been done, had been dialed up a little
bit further and actually would have taken away from the beer.
Speaker 2 (41:59):
Okay, yeah, I thought you're about to say, if they
would have just cranked it up even more, I would
have enjoyed it.
Speaker 1 (42:03):
I was like, no, way, I'm really glad that the
golden sour was the barrel age. Golden sour was the
main thing I tasted, and those ingredients were like they
played a smaller role, right they they were they were highlights.
They were more complimentary the golden sour. So I think
if like the curry spice had been downed up five,
I would have liked it.
Speaker 2 (42:19):
Yeah, Like do you like do you like curry?
Speaker 3 (42:22):
I do?
Speaker 4 (42:22):
Like?
Speaker 2 (42:22):
Okay, Like there's acid and then there was brininess, but
then the curry flavors are what kind of came through next,
But the curry mixed with the coconut, this is like
a chicken curry bowl right right right here beer, which
is like totally crazy, but I kind of actually liked it,
and the fact that it was aged on oak as well,
and so it all kind of some of those tasting
notes can be like harsh if on their own, but
(42:43):
you kind of age it and it helps it to
just mellow mellow outland for the flares to meld together.
I don't know what they're thinking when they made this beer,
but actually I kind of dig it. I'm into it.
Speaker 3 (42:54):
I agree.
Speaker 1 (42:54):
Yeah, interesting beer from the folks over at Burial. Definitely
we're checking this out. If you're able to pick it up,
that's going to do it.
Speaker 2 (43:00):
For this episode.
Speaker 1 (43:01):
We'll have links to some of the stuff we mentioned
up on the show notes at howtomoney dot com. Of course,
there's all sorts of resources up there to help you
in your personal finance journey.
Speaker 2 (43:10):
Yes, right, if you find those resources helpful, we would
love it if you left us a solid review.
Speaker 3 (43:14):
We actually it's.
Speaker 2 (43:15):
Been a minute since we've asked for war reviews, but
they really do help us so much in getting the
word out and helping others to find the show. So
head to wherever it is that you listen to your podcast,
Spotify or Apple in particular cast. Those two would help
a lot. They're the heavy hitters. We appreciate it, of course.
Speaker 1 (43:32):
All right, buddy, that's going to be it until next time.
Best Friends Out, Best Friends Out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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