Let’s kick off 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 find a financial coach to help me to quit living paycheck to paycheck?
2 - Should I put my savings in a money market account if I’m saving up for a home down payment?
3 - Which student loans are actually going to be cancelled after a period of time?
4 - I have thousands in medical bills that are coming due - should I put those charges on a credit card if I have the cash?
5 - Does it make sense to sell the old truck in order to pay off our house a few months earlier this year?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Out of Money. I'm Joel, I am Matt.
Today we're answering your listener questions.
Speaker 2 (00:24):
You know, a buddy, and we hope everyone had a
fantastic weekend.
Speaker 1 (00:27):
We're glad to see you back here, back in the
podcast here, back into the groove. It's Monday morning. You
got stuff to do, you got podcasts to listen to,
so we're glad to see you. They don't know this.
We're monitoring all their movements. Yeah, it's like her, she
I forget. I never actually watched the movie with the
phone I go, and I was like, that'll never happen.
The AI girlfriends, it's happening. Little did you know, Joel?
(00:48):
If that's the dystopian reality we now live in. Not
in my life, but it's some people's life.
Speaker 2 (00:51):
So we are going to take listener questions. The listeners
asking about breaking the paycheck to paycheck cycle. She's specifically
wondering if professional help is in order. Another listener is
asking about our take on money market accounts. He's looking
to park some down payment money, and we'll discuss student loans.
The best way to proceed, whether or not forgiveness is
(01:12):
actually something that this listener can count on. We'll get
to that more on today's Ask how many episodes, buddy.
Speaker 1 (01:19):
This ain't that blanket forgiveness?
Speaker 3 (01:20):
Oh?
Speaker 1 (01:20):
Is that going to come to pass? I think everybody
knows that's not going to happen. Happening, Yeah, that's yeah.
But this is kind of more specified forgiveness that has
been around for a long time. Is that going to remain?
And other questions? Matt, real quick, before we get to
all of these great questions, just one idea for people.
It's interesting, Actually, Americans used to move in a whole
lot more numbers. We should just be more willing to
(01:40):
uproot go somewhere for opportunity. And I guess that's actually
maybe a little bit less necessary because of work from home. Right,
So it has it declined? It has declined. Yeah, just
people are ready to take a look at the latest
BLS statistics and charts. But my sister, my sister, my
little sister, is an exception to this rule. She and
her husband are moving to a new city for a
job offer, and one of the first things that came
(02:03):
out of their mouth that they were excited about the job,
They're excited about the town. But after that, one of
the first things they mentioned was, oh my gosh, you
know how much money we're gonna save by moving there.
And because it's a smaller town they live in kind
of the heart of a big city right now, very
expensive to live there from a tax perspective, from a
rent perspective, even just from an activity perspective, like everything
(02:24):
costs more where they live than where they're moving too.
Nice and so I just think secondary cities in particular
can offer a lot of those job opportunities, but then
the living expenses go down considerably. He was able to
negotiate essentially to get the same exact pay for the
job he's moving too. She's able to keep her job
sort of, so he didn't. So they didn't get a
(02:45):
pay increase. They're able to maintain it, but effectively they
got to It feels a raise, like a massive pay
bomp because the cost of everything else is going down.
I mean, I'm assuming they're moving because they're looking to
switch things up a little bit. Yeah, sometimes you just
want to check out a new place. Sure, he knows
it's a very different town than where they currently are,
so yeah, but they were some more natural outdoor sort
(03:06):
of attraction as well. For sure, and they I think
they were estimating they'd be able to save six hundred
dollars a month in rent to rent something similar where
they're moving to, which is kind of crazy when you
think about it. That's like over seven thousand dollars a
year back in their pocket. So think of it like that,
it's like an untaxed rays of that amount. That's pretty significant.
(03:26):
A move in the frugal direction for sure. I like it,
and I also like the beer that we're going to
enjoy today. Well, there goes my review from the end
of the episode. Now we are going to enjoy a Spring,
which is a beer by Creature Comforts and uh not
the Spring that is my favorite local restaurant, but Spring
the beer and I will share our thoughts at the end. Yeah,
Michelin Award winning local restaurant. Correct, we've been once since
(03:50):
they won that Stark and prices go up pafterwards. Yeah
you better believe, really and rightly. So it's an amazing place. Yeah,
I'm gonna guess supplying a man Baby, prices went up
around twenty to thirty percent for the exact same dishes,
and they weren't pompous or show voting, but you could
kind of look off down the side towards the kitchen.
You kind of see the Michelin Star plaque kind of
(04:12):
like subtly placed with in view of the diners, but
not like it would have been I would say, lacking
taste if they stuck at like on its own little
pedestal in the middle. I would be interested to know,
random before we get the list of questions. I'd be
interested to know for restaurants who win a Michelin Star
if that's the norm. I gotta imagine is, Yeah, there's
enough foodies who follow Michelin Star awards and they say, oh,
(04:33):
now I want to go to that restaurant, and it
just increases bookings. More demand means hey, we're gonna have
to raise rates to just kind of create equilibrium here.
Speaker 2 (04:41):
Yeah, there's been articles written about how winning these awards
just completely ruins the restaurant because of the different expectations
and essentially you have to you do have to cater
to a different crowd, a different kind of folks who
are looking for maybe a heightened experience, and then all
the regulars who.
Speaker 1 (04:56):
Were there the whole time that made it. The help.
I don't know, if you help them make it, but
you help them keep the doors open. You aren't back
to the amount of money, No, Chef, I will say
the amount of money that we spent there. I felt
like we single handedly did it. Joel, Okay, no, not quite.
All right, let's get to listener questions, and if you
have a money question, we want to hear from you.
The funkier the better. You can just yeah, literally record
(05:16):
a voice memo on the voicemo app of your phone.
Say hey, I'm Denise from San Diego, and then your question.
And if you really are Denise from San Diego, we
definitely want to hear from you. But whatever your money
keeps looking at her phone and like they really are
watching it. How did they actually know they I thought
they were joking. So if you want the directions, got
to how to money dot com slash ask but it's
super simple. We look forward to hearing yours and taking it.
(05:38):
Next week on the show, Matt, let's get to a
question about living paycheck to paycheck and how to escape
that cycle.
Speaker 4 (05:45):
I'm ann and I'm in California. I'm a single woman,
sixty one years old. I believe that I'm in the
lower end of middle class lately, I find that I'm.
Speaker 5 (05:55):
Living paycheck to paycheck. I looked into using.
Speaker 4 (05:59):
A financial planner, however, I found that they really only
work with investments, and I don't have any investments. What
I'd like is a financial coach, someone who can help
me with budgeting and looking at my situation and then
making suggestions. I'd like to meet with a person for
a low cost. I'm not interested in an online worksheet
(06:23):
type program.
Speaker 5 (06:24):
My question is, is there such a person who can
do this? Thank you, bye bye.
Speaker 1 (06:30):
Oh Joe. What do you think about ann hating on
all the worksheets and the different programs out there that
folks are well, folks are selling or sometimes giving away.
We've got worksheets on our website can give away. I
think those can be really helpful. But I also get
I get what she's saying, the desire to have a
one on one relationship with a human who can help
you out through this. Like that makes sense to me.
(06:51):
I think totally that's how I work best.
Speaker 2 (06:53):
But a real life person, Yeah, I don't want to
talk to no AI Chat Bob, give me a real
person with issues.
Speaker 1 (06:59):
I was literally talking to friend the other day and
he was like, you guys should totally have an AI chatbot.
You have all the podcasts, all the content on your website.
You could feed it in there and it could spit
out Matt and Joel answers right and left to people.
And I don't know, man, I'm just kind of trying
to avoid that AI game as much as possible. That
was one of the first questions. So, man, we're really
going off the rails here. But back when we were
talking to somebody we had that we had hired to
(07:19):
do some work on the site, and one of our
questions was about AI. We're talking about these large language models.
Can we create our own chatbot, train it on our
episodes and essentially have answers in our voice the way
that we would talk about it. It's a unique proposition
is but he's just like, we're not quite there yet.
Maybe we are now because that wasn't again the rate
(07:39):
at which things go. Yeah, it might actually be a reality.
But and I've got to say, your desire here to
avoid a financial advisor and instead to work with a
money coach specifically is brilliant. Most folks, they tend to
think of advisors as the only game in town when
it comes to help with their money. But the average
advisor they don't do a whole lot with how budgets
(08:00):
and holding people accountable, So your desire to find like
a coach is totally.
Speaker 2 (08:06):
It makes a ton of sense. Advisors are going to
be more interested in helping you to invest, and then
the vast majority like they're not even gonna want to
work with you unless you've got like six figures of
investable assets to your name either. This is also why
rebo advisors they found a nice niche as well for
them to people who don't have a ton of money,
but they are looking for some of that additional help,
(08:26):
not unlike an AI chat bogie.
Speaker 1 (08:28):
Kind of in between step there for a lot of
newbi investors.
Speaker 2 (08:31):
Totally, and plus you would likely pay way too much
money if you ended up going with a financial advisor
as well, so a budget coach. I think that makes
a whole lot more sense.
Speaker 1 (08:41):
Yeah. The cheapest model we know of essentially to get
a financial advisor on your team to help you out
basically is a minimum one hundred and fifty dollars per
hour long session, and that's through the website Hello Nectreen.
But even they it used to be flat fee hundred
and fifty. Now it's flat fee one fifty to three hundred,
and so the price to hire a financial advisor is
in credibly steep. We've had budget coaches Matt on the
(09:02):
show before, and you know, one of those folks or
one of those types of folks is likely the right
choice for you. An it's just it's such a great
segment of the finance base and it doesn't get enough love.
Like nobody talks about budget coaches or money coaches. These
folks they offer, they're often offering services because they've had
a meaningful financial awakening themselves. They've had to go through
(09:24):
a debt payoff journey that was a multi year long slog.
They learned a whole lot through trial and error in
the DIY process, and so they've also, on top of that,
been through the emotional roller coaster right that can be
and often is living to pay paycheck to paycheck. They
know the right questions to ask and that often allows
them to better speak to how to turn the ship around,
(09:47):
right to speak into your life about what's going on
because of what they've gone through themselves. And typically they
get paid yeah, like an hourly rate or they charge
for a specific number of sessions. I don't know, maybe
like three hundred and fifty bucks for four sessions something
like that. But I do think that budget coach. One
it's going to be cheaper, and two it's going to
be more highly targeted to what you're going through. It's
(10:09):
going to be more relevant. A couple of specific folks
we've had on the show, or even ones that we
haven't but that we can recommend. Erica Jung she's been
on the show. Elena Fengal she's also been on the show.
And then this couple who runs a podcast called The
Price of Avocado Toast. There are awesome folks and they're
also financial coaches on the side too, So.
Speaker 2 (10:26):
That being said, and doesn't have a ton of money,
so I also want to point her towards free and
cheap resources from some different nonprofits. In particular, I'm thinking
of MMI, which is Money Management International, which by the way,
sounds super fancy and like wealth advisory, but they're not.
They're there to help folks deal with that and turn
their finances around. Also, National Foundation for Credit Counseling. These
(10:49):
are both excellent resources in order for you to gain credit,
to gain some budget counseling. You can get one on
one advice from a certified counselor there with a organizations,
and they'll typically help you to create a personalized plan
kind of like like if you're looking for a roadmap
for moving forward. If you know you find yourself kind
of spinning your tires a little bit, perhaps this is
(11:11):
going to allow you to gain some of that traction.
And I'm not sure how much debt you specifically have,
but I think they can help you to create a
debt management plan to get rid of it more quickly.
But don't trust some of the for profit companies who
make these massive promises and end up under delivering. I
will also say a money coach is no substitute for
you learning some of this yourself. And so I'm talking
(11:33):
about a DIY education. It makes me think of someone
who's interested in becoming a real estate investor who opts to,
let's say, hire a property manager. Well, if that were
to be you, like you wouldn't even know the important
questions to ask in order to hire a good property manager. Yeah,
because you've never been exposed to this at all. And
so I think listening to podcasts like this, reading books
(11:55):
this is still crucial. We've actually got a link to
some different resources up on the website to where I
don't know. I think that can help you to get
you your journey started. One other free resource too. Don't
underestimate the power of community and friendship. I think the
ability to link up with somebody or to man. This
isn't something that we said in a long time, but
one of the goals for our show is for money
(12:18):
personal finances to not be taboo, and when it is,
people are afraid to talk about it. And when it's not,
it's something that you talk about, you engage with, you
challenge each other, you hold each other accountable, and it
allows you to see incredible progress, I think on a
very truncated timeline. So not to mention this is something
we've talked about recently, but the fact that relationships are
(12:39):
always key to long lasting happiness, and so you're kind
of like doing like a two for one here by
talking to your friends about personal finances. It should be
something we engage with and ask each other questions about,
as opposed to it never coming up.
Speaker 1 (12:53):
I think there's also a lot of shame and for
a lot of people when it comes to their personal finances.
And the more we can kind of normalize talking about it,
the more we can kind of take some of that
shame away, bring out those mistakes into the light, because
guess what, everybody has made similar mistakes, right, So where
Anne is, it's not uncommon, and there's also nothing to
feel ashamed about. There's also a way forward. What it
(13:14):
comes down to Anne to get this ship right back
on the right path. It's going to take changing some
habits right, feeling some pain along the way as well. Right,
you might need to go on a bare bones budget,
which we have articles about on our website if you
want to check it out for a few months, to
gain some savings, to gain some stability. And I think
it's important to mention that for most folks getting into
(13:35):
a financial hole where they're living paycheck to paycheck or
where they're in debt that they didn't see coming that
they weren't planning on taking on, well, it often took.
It was little things over the course of many many months,
if not many many years, and then once the light
dawns on you, Hey, I'm ready to make a change.
A lot of people think, all, how am I going
to get out of this in the next three months,
(13:55):
and it's just it's just not possible. Right, So you
also have to have a realistic time frame and expectation
about how long it's going to take to turn this
thing around. And I think there are times to hire
an expert, right, And the information, the accountability you receive,
it certainly might be worth the money that you put
out there, the money you're forking over, you might even
make progress more quickly. Right. Also, you mentioned you didn't
(14:17):
want spreadsheets, Well what about software? Software is something that's
at least worth bringing into this conversation wine app which
is short for you Need a budget and Monarch. Those
are really great software programs. It's not kind of the
worksheet you mentioned, but when you kind of put all
of your financial information in one place, they can help
you think through where your money's going.
Speaker 6 (14:38):
You know.
Speaker 1 (14:38):
Monarch even pops up, Hey, you get this recurring subscription,
you're about to pay for it, and you'd be like,
wait a second, I forgot about that, and you can
go cancel it really quickly. Just some of those benefits
could far exceed the costs with a financial software. With
a budgeting software like WINABB or a Monarch it's not
the same thing as hiring an individual, but it could
be I think a decent middle ground solution. Yeah, and
(14:59):
I think that those are in a completely different class
and different category than worksheets, which in my mind, there's
a whole lot of like thinking and dwelling and trying
to like discovery that typically takes place with worksheets, but
with software like these are tools that allow you to
immediately take action, and that's what's so great about that. Also,
like you mentioned too that you don't have any investments,
and I want to point out that, yes, you need
(15:21):
to get your financial footing in a good place, but
beyond that, I want you to set your sites a
little bit higher to not just living, not living paycheck
to paycheck.
Speaker 2 (15:28):
But you know, starting with the money gears, making sure
you've got a basic emergency fund set up. Wish do
you remember the amount to the new.
Speaker 1 (15:36):
Updated inflation in like thirty five fifty thirty forty five,
okay thirty so three thousand, forty five dollars that is
the new inflation adjusted emergency fund. Once you've got that
in place, though, start I want you to start thinking
about yourself as an investor, because you still got some
time to be able to make sure that you are
going to be in a more comfortable position when the
time comes for retirement. But Joe, we got more to
(15:58):
get to you. We're gonna talk about old trucks, student loans,
that and more. Right after this, Matt, the tz made
before the break had me thinking of a country song.
It's like my old down broken trucks, other country songs
as the woman who left me about student loans, though
(16:19):
there should be at this point, there should be. They've
been pretty that truly would be the status in existence.
All right, Let's take this question from listener Phil Matt.
He has a question about saving for his down payment,
and he highlights an account you and I don't talk about,
maybe as much as he'd like him.
Speaker 3 (16:34):
Matt and Joel, I'm in the process of saving for
a down payment for a house, and I've been advised
to put some of my money into a money market account.
I don't hear you guys talk a lot about these,
and I was curious if it's something you don't recommend,
or if you do recommend, and why or why not.
I have looked online for some information, but haven't found
a lot of information about money markets. The account that
(16:56):
I was recommended was pco xx and its average about
a five and a half percent return this last year
and the year before was about six and a half percent,
and I assume with the interest rates going down, it'll
lower a little bit this year. That being said, I
have a high interest checking account with Lake Michigan Credit
(17:16):
Union and it offers three percent apy but only up
to fifteen K. So since I'm over that in saving
for a down payment on my house, I'm looking for
a single place to put.
Speaker 1 (17:26):
All my money.
Speaker 3 (17:29):
I did look it up with Dave Ramsey and he
suggests a CD over a money market account, but didn't
really explain why other than he said the rates were better. However,
I don't see that the rates are better in CDs
right now. Just for reference sake, I'm planning to purchase
a house in twelve to eighteen months, so I'm looking
to have this money available and liquid easily, and from
(17:53):
what I understand, money market accounts you can get the
money back relatively quickly when you need it. Thanks for
your help, Dociate everything, Phil.
Speaker 2 (18:01):
Joel's actually going to make a donation if you could
just put together a gofund to me for home down payment.
Speaker 1 (18:07):
Yeahel's going to pitch in about thirty two cents. That's
what I can spare. Right.
Speaker 2 (18:12):
By the way, did Phil did he actually say his name?
I don't know he said his name, but we know
his name because he sent us the email, of course.
But Phil, good question. There are a lot of different
places where you can save your down payment these days.
You can save your money over in Joel's account and
he'll that's right.
Speaker 1 (18:26):
No, the interest rates much worse than what Phil's describing.
Speaker 2 (18:29):
CDs, money markets savings. These are all different accounts. Each
one of these exists for different reasons, so we'll do
our best to explain which one might make the most
sense for you.
Speaker 1 (18:39):
Yeah, they sure have a lot of similarities, I will say,
but they have distinctive qualities that Phil's kind of looking
to parse the details, So Matt, let's parse the details.
Let's start off by talking about CDs, and I think
they're out for Phil, right. I think he knows that too.
But because he said he needs liquid cash for the
home purchase, that's really not in the too far distant future.
(19:02):
You could, I guess, feel op for a short term
CD since you said you need the money, and like,
let's say twelve to eighteen months, but hey, what if
you put it in a twelve month CD you found
the perfect home in eleven months and you're like, man,
I need that down payment, Like now what, It's just
not worth the loss of the interest you would take
by breaking that CD would typically you forfeit the last
(19:23):
three months of interest, which would mean hey, basically any
other savings vehicle you picked would have been better than
the CD. I think it's just a non starter. Like,
I wouldn't even consider it. There are Matt, you know
this well because you're an ALLY customer. There are no
penalty CDs from Ally, which I believe you put your
money in at one point, but you pay right for
that more flexible product by agreeing to a lower starting
(19:44):
interest rate. So there's something. I don't think it's quite
half a point, but there's a there's a decent gap
between signing up for a CD that doesn't have a
no penalty writer on it essentially through Ally, and so yeah,
you're just going to paid less on your money, and
it just doesn't make sense for what you're trying to
accomplish here, although CDs might still make sense for other
(20:05):
people right, especially if they need downside protection against the
possibility of following interest rates for their cash. That's when
a CD makes sense. But only if like, hey, you
can lock it up, you know, you're not going to
need to touch it before him, And that's just not
the case that fills in.
Speaker 2 (20:19):
Yeah, he wants to be ready to pounce, And we're
gonna not recommend CDs because Dave Ramsey someone like he
recommended that to Phil. So we're gonna immediately just say
the opposite.
Speaker 1 (20:28):
Of whatever Day says. Now that doesn't surprise me. Did
Dave tell you safe for retirement? Don't do it? Phil?
You better? You better not. It makes sense that Dave
or someone you know over that was a part of
his crew mentioned that because just I feel like, generally speaking,
they're a little bit more risk averse, at least when
it comes to debt taking on. Well, yeah, I guess
we're not talking about debt here. We're talking about savings.
Speaker 2 (20:50):
But there are a lot of things that we do
agree with when it comes to Dave and some of
his principles. But there's some things that we don't agree with,
like credit cards, namely, but.
Speaker 1 (20:58):
I'd pay off your mortgage right there.
Speaker 2 (21:00):
Yeah, I get the desire wanting to cross check some
of these different recommendations, But when it comes to high
yield savings accounts versus money market funds, I'm gonna say
that we're probably a bit more partial to highield savings.
But you truly you can't go wrong either way here
because they're very similar account types. One is offered by brokerages,
(21:20):
that being money market funds, and the others is going
to be banks. The high old Savings account, of course,
Vanguard's v m f x X is actually a fantastic
choice on the money market front. You do have to
have an account at Vanguard, but the holdings of that
fund are in very stable assets like cash, government securities
(21:41):
as well.
Speaker 1 (21:42):
Fidelity they've got a cash management account. That's that's pretty good. Uh.
And one perk of that that yeah, not spanks, SPACs,
spa uh huh. A perk of that versus high old
savings account is you can use a debit card and
you can write checks directly from that, which you typically
can't do from a high yield savings account. Oh, that
being said, is not too difficult to transfer money over
(22:04):
from the high Old Savings directly to a checking account,
assuming you also have a checking account with that particular institution,
and they offer free checks, but the returns they're close
to or sometimes oftentimes, I guess at least lately, they've
exceeded some of the highest returns on high yields savings
accounts as well. So if you are a van guard
or if you're a Fidelity customer, this is a I
(22:27):
would say, a very reasonable place to stash or cash
that you're gonna need for a down payment. Yeah. So
I think money market funds definitely a recent option, and
there's a reason I think more and more people have
gravitated towards having doing essentially all of their money business
with a low cost brokerage firm, because it's like, hey,
I'm gonna invest there, I'm gonna have my cash management account.
(22:48):
I'm just going to have it literally all under one roof.
And the perks of some of those cash management accounts
at the brokerage firms have gotten really good, right when
it comes to like no fees free atm with rawals.
I think Schwab kind of started that Fidelity has a
great option now too, so more and more people are
saying that works for me, and they're just saying I
don't think I need a bank at all. I also
(23:09):
just want to say I think banks do a really
good Some banks do a really good job on the front,
obviously not the big banks. So we love c We
talked about CIT regularly when you've got lots of money,
like a down payment fund, because they've been paying top
notch returns that are at or above some of these
money market fund rates. If we're talking about like small
time savings, like hey, I've got fifteen hundred bucks to save,
should I move banks? Well the stakes are lowered there,
(23:29):
right if you don't have a lot of money on hand.
But if you've got a lot of cash because you're
saving for to buy a house, then every half a
point or something like that matters quite a bit when
it comes to your overall amount of returns, how much
money your money is making. There's just no reason to
not be with an online bank that offers highly competitive rates.
Phil mentioned that he has a three percent checking account
(23:52):
with strict limits. What fifteen k, Matt, you can't earn
above that? Probably at over fifteen k you're making point
zero one percent or something like that. Well, now it's
the perfect time to move get out of that. Credit
unions are great for borrowing, they're not great for savers,
and so they're just great highlight savings accounts out there
for you, Phil that are gonna you know, you're gonna
(24:12):
get a good bit more on your money with zero caps,
so you're gonna make the full four plus percent on
all the money that you have right in that account.
We don't want folks jumping around all the time to
score slightly higher interest rate. But moving your funds and
your business to a bank that consistently pays customers incredibly well,
I think. I think it's a no brainer.
Speaker 2 (24:33):
Yeah, specifically because it's something that you want to do regardless.
It's not like you're only doing it for this down payment.
This is just good general personal finance hygiene essentially. Also,
Betterment's got a pretty solid cash management account too. I
think right now you can snag an extra half a
percent as a new customer for three months for a
total of four and a half percent right now.
Speaker 1 (24:52):
So that's pretty cool. That's yeah, like about the best
I know of it. Yeah, of course, I want to
point out here with your timeline, Phil, do not invest
any of these dollars and which might bring up a
small note when it comes to the semantics here, because
there is a technical difference between a money market deposit
account versus a money market fund and the one that
(25:14):
you specifically called out. Technically it is an investment, but
it's an investment that is very, very unlikely to ever
go down in value. So a deposit account is actually
FDIC ensured, whereas the fund is technically an investment, and
technically that means you could see that go down, but
effectively it's not going to go down.
Speaker 2 (25:33):
Yeah, so I wouldn't I wouldn't worry too much about
that because the Fed they're gonna come swooping in. They're
gonna save the day, which is what happened I think
the last.
Speaker 1 (25:40):
Time was that like two thousand and nine. Yeah, there's
the Great Recession when that was the case, happened to
what one or two of those accounts, And yeah, it
was a big deal then, But it's not something you
have to effectively worry about now, even though technically I'm
saying not to invest, but you are investing. Just a
small note something to be aware of. And that's another
just parsing of the details between hya SAMES accounts and
(26:01):
some of these money market funds. And you also notice
that these different brokerage firms have multiple different versions of
cash management accounts or money market funds, and they're all
created a little differently, so know what you're getting into.
That's why I think for most people met the simplicity
of Ohio Sames account with one of our favorite online
banks that consistently pays high rate. It's tough to be, Yeah,
it's tough to be, but I'm glad these other options exist.
(26:24):
And I do think the cash management accounts at some
of these low coast brokeg firms have only gotten better
and better and better. They become a more compelling product
and recenters. Nice. All right, let's hear from a listener
who is calling on behalf of not herself, but actually
her sister.
Speaker 5 (26:38):
Hi, joel In Matt.
Speaker 6 (26:39):
This is Heather from Ohio and I'm a longtime listener
and fan. My question is regarding my sister and her
student loan payments. She graduated from college about ten years ago.
She's been making the income driven repayments and her amount
that she owes has actually tripled from her original amount,
(27:00):
even though she hasn't missed any payments. She's been making
them religiously, but I believe that after twenty years her
amount would be that she always would be canceled. But
I wasn't sure if that was true or like, what
can I guide her to because I feel like it's
not clear.
Speaker 5 (27:19):
Thanks so much for any help.
Speaker 1 (27:21):
Well, Matt, to see your balance triple. I gotta imagine
that sucks. That feels like a punch to the face.
So I hate seeing people go through the immercial emotional
turmoil of making payments on time, of like doing the
right thing that they're supposed to do.
Speaker 3 (27:37):
Right.
Speaker 1 (27:37):
Hey, I was told that this is what my student
loan payment needs to be and doing the right thing
every single month like clockwork, and then hey, the balance
continues to increase. It's so unnerving, Like, I can't imagine
going through that. It just doesn't feel right. Do you
make on time payments seeing the balance increase? And then
on top of that, with the political football that student
(27:58):
loans have become, quarries are mounting for student loan borrowers
of all stripes. Yeah, especially ones who are like, well,
I know the Biden forgiveness thing, that's not going to happen,
But what about the forms of forgiveness that were essentially
promised for many, many years before Joe Biden came in office.
Or is that going to stick around there? Yeah, well
(28:19):
most of that is going to stick around. The Safe
Plan is sunk, but these other income based plans, it
just definitely seems like even if changes are made that
all existing loans would still have access to current payback plans.
So for folks who.
Speaker 2 (28:31):
Are paying back their loans on an income driven repayment plan,
like your sister Heather, I wouldn't be sitting on pins
and needles. I would keep paying as agreed, just under
the assumption that the federal government is going to hold
up their end of the bargain. But this is just
a sad outcome of the political environment that we are
currently living in and not I mean, I'm going to
risk alienating listeners here, but this is why, like truly,
(28:52):
our political system is broken, because when you make a
bunch of sweeping actions based on executive orders, which is
what happened the last administration, and what happens when the
other party inevitably comes to power, well with the strike
of a pen and a phone you know, and phone
calls with with a pen and with a cellphone, jel.
All of that gets undone, and who suffers. It's the
(29:13):
American people. And so it's it's the part of our
politics that I hate the most, the fact that it
seems like it's they're more as entertainment as opposed to
doing the boring work of governing in the legislating, which
is where it actually does need to take place. Right
if if these were laws that were truly laws, as
opposed to eos, I think we would see the American
public in particular get jerked around a lot.
Speaker 1 (29:34):
Less, which says process matters. And it seems like Congress
has become like a commentating class. They like to go
on the nightly new shows and talk about the moves
back and forth instead of legislating. Yeah, if they would
legislate less public servants, less public servants, and more using
the platform for themselves as individuals as opposed to serving
the country. Yeah, and it would feel like you're getting less done,
(29:54):
I think as the president. But it's the right way
to go about things, and it's the way Founding fathers
set it up so that we would have slower gradual
change instead up the whiplash we've all been enduring. But Heather,
your instinct right is that this is clear as mud
is kind of true. The smartest way to proceed, I think,
is as if the current arrangement stands and will continue
(30:16):
to stand. Kind of like Matt mentioned, you said that
she graduated from college a decade ago. I'm assuming this
is undergrad Under current IDR rules, she is eligible for
forgiveness after twenty years of payment. So basically, hey, she's
halfway there. And I think that's another reason that the
ballooning balance it's just not something to freak out about,
even if it's tough to watch, even if it's hard
(30:37):
to stomach. That advice doesn't apply to everyone. I think
some other people might be better off trying to pay
their loans in full, not waiting on forgiveness. It just
might not make the most math sense to hold on
for twenty years and opt for a small amount of forgiveness.
But especially for your sister, it sounds like clearly forgiveness
is going to be needs to be. The aim is
(30:57):
going to be kind of her salvation to a certain extent.
Especially think about what's going to happen over the next
ten years. Matt. If the balance is already tripled. Well,
chances are it's going to grow a heck of a
lot more. Think about ultimately what heather sister is going
to be forgiven the amount of student loan debt that
will just be wiped off the face of the earth
for her in one fell swoop, it's it's going to
(31:19):
be massive. Yeah, And there are even ways for your
sister to work to maximize her forgiveness. So let's talk
about that strategicy here for a second. And what I
mean by that is lowering her payment by reducing her income. So,
for instance, the more she in her job, is that
what we're saying about.
Speaker 2 (31:34):
Yeah, they can't tax you if you don't have any income.
The more she invests in traditional tax advantage accounts, and
the more it's going to reduce her adjusted gross income
that would be a traditional IRA or a traditional four
to one K or an HSA. The more that she
can sock into those accounts, the less that she's going
(31:54):
to owe the government when it comes to the student loans.
Speaker 1 (31:56):
It's just the way it is. Obviously she does you know,
she's got to have money to pay for a roof,
overhead for her head, to pay for food, groceries. But
making these additional contributions can reduce her payment amount, which
would increase her balance even more over time wait for it,
but lead to more overall forgiveness. At the end of
this period of time, it means less of her money
actually going towards student loan repayment. Yeah. So it's just
(32:20):
it's tough to stomach, but it almost seems like that
this can just be a stage of life where there's
a whole lot of difference spending. She's really focused on investing,
because investing right now it is a double edged sword
because it means more time that money is going to
have to compound over time, but it also means the
added benefit of paying less right now towards her student loans. Yep.
So it feels like a gamble, but I think that's
(32:43):
the right approach, is to try and minimize the amount
of money going out in monthly form towards a student
loan payment. Yeah, which means the balance is going to grow,
but ultimately there's a big win at the end of
the day or at the end of the decade of
the decade. Yeah, and last but not least, I would
say it's a good idea for your start to start
saving though for a potential tax bill now. And that
(33:03):
is because the one caveat at the end of forgiveness
is that you're growing balance. Well, when that's forgiven, it
could end up generating tax consequences. And so I say
could because that is the biggest unknown. What is Congress
going to do about that. There's currently a law in
place that prevents individuals from incurring what's been called a
student loan forgiveness tax bomb, but that law is set
(33:25):
to expire at the end of this year. And so
anybody who has had their student loans forgiven in recent history,
they haven't had any sort of tax bill at the
end of the day. They haven't had to pay anything.
But let's just assume that there was like one hundred
and fifty thousand dollars in forgiveness mat of student loan
debt ten years from now, the tax bill would be
(33:47):
not insignificant. And so Heather, for your sake and for
your sister's sake, I hope that gets extended. But if not,
just be prepared and be ready, be saving up. Your
sister should be saving up for a tax bill that
it might come to pass.
Speaker 2 (34:01):
Yeah, Yeah, so you're you're addressing the tax implications one
of the one of the thought going back to her
reducing her justic gross income, the implications were she to
get married. I didn't get an impression that she's necessarily
married right now. It sounds like she might. Her sister
might be flying solo at the moment. But were she
to get married, this might be an instance.
Speaker 1 (34:18):
And this is really hypothetical, I guess, but if she
combines her income with her partner, who might make a
ton of money, well, that would that's gonna have a
dramatic impact on the amount that gets forgiven. So that
might be an instance with where where she would continue
to file married but filing separately because she would essentially
want to isolate her own income to keep that technically
(34:41):
artificially low for their overall health. So if Heather Mary,
if Heather sister marries rich Mary's prince charming, like Heather's
been trying to convince her to do exactly, that's when
you got to really think about we're reading between the lines.
I know kind of conversations Heather and her sister have, right,
I think it's I think it's a good device if
that comes to past. It's a strategy I'd employed. Or
we've got more questions to get to more of your
(35:01):
money questions, including using a credit card to pay for
medical debt. It's kind of squirrely, but it could pay off.
We'll talk about that and more right after this. We
are back from the break and we'll get to that
truck question here in a second Joel. But first we
(35:23):
now have the Facebook question of the week, which is
from Matthew partial to that name. So I will probably
have to pay off about.
Speaker 2 (35:30):
Three thousand dollars in medical bills coming up soon. Should
I just find a good rewards card and do that?
I don't have one at the moment. What do you think, Joel?
Is it time to this.
Speaker 1 (35:42):
Is where we separate ourselves from the Dave Ramseys of
the world. Yeah, oh yeah, yeah, I would say probably
right yea. But we need to then go into the specifics.
I think the main question for Matthew here is can
you pay off the balance on time and in full
when the bill comes to That's three thousand bucks, right,
So yeah, get the credit card if you have three
thousand plus dollars in savings and you're going to be
(36:02):
able to pay the bill. If not, though, no, because
the rewards just aren't worth it, even the more significant
rewards that you can get from an initial sign up bonus,
which is what makes having a significant bill that's like
a silver lining, I guess macause nobody wants to pay
like three thousand dollars and medical bills. But if it
means new credit card and sign up bonus, that can
(36:24):
make that can just reduce the pain a little bit,
depending on what pain is going on in your body.
I don't know that it's actually medically prescribed to do that,
but it can reduce the financial pain. And so I
think if I had a three thousand dollars medical bill,
I would be looking to get a new credit card, right,
getting the brand new one, getting the sweet sign up
bonus for paying that one bill. Right, even if medical
bills aren't that fun to pay. I think that makes sense,
(36:47):
and it's nice to do it, not over a slew
of transactions trying to monitor your progress, but being like
Boom at the sign up bonus makes it easy and
with one swipe or one tap that's kind of awesome. Yeah,
assuming though that you do have the cash on hand
and that you're not actually going to go into credit
card debt. But also don't forget that you might have
some recourse here to reduce the size of this medical
(37:07):
bill pretty meaningfully, or maybe even have a completely eradicated
depending on your income, and so look into the financial
aid possibilities that are offered there through that hospital or
through that medical provider.
Speaker 2 (37:20):
Maybe you'll actually owe a whole lot less. That being said,
kind of sounds like maybe he's done that because he
said I'll probably have to pay off about three thousand dollars,
So sounds like it's something that he it's a journey.
Speaker 1 (37:31):
He's been arched up that tree, and maybe the bill
was higher and now it's been reduced to three thousand
and he can't get it and he's.
Speaker 2 (37:36):
Finally coming to terms that this is what it is.
But last, but not least, head over to the how
to Money credit card tool to see what card might
make the most sense for you. The top rewards often
come in the form of travel points, so hopefully that's
something you're open to. If that's the case, the Capital
one venture X is well worth considering right now. If
that's not something that you're interested in interested in even
(37:58):
something like the Blue Cash preferred card, which there's a
similar theme that we've been discussing today, which is like
doing something that you're already planning to do. The Blue
Cash Preferred Card is a fantastic card because it's not
that hard to spend a ton of money at the
grocery store these days, and so depending on how it
is that you spend, that could be well worth the money.
Speaker 1 (38:15):
Yeah, let's get to another question, Matt. This one comes
from anonymous, which is a name I'm partial to, and
they say, we all less than ten thousand dollars on
a house. We'll pay it off this year. Three vehicles
all paid off. Old truck isn't getting much use. We
use it occasionally, less than five thousand miles and a
year the truck could fetch about five thousand bucks and
(38:35):
that money would pay off the house several months faster.
Would you sell it? Well, I would say the value
of the truck, like how much they can get for
is only a part of the answer to this question,
because I think the bigger question is the ongoing cost
of keeping the truck. So I'm talking about the cost
of insurance, which has skyrocketed in recent years, but also
(38:56):
repairs and maintenance.
Speaker 2 (38:58):
So even though this vehicle is close to full depreciation,
you're still losing money in other ways if you keep
it around. So holding on to it when you're using
it so little likely means that there isn't enough value,
and instead selling it is going to be smart for you.
So I love that you are prioritizing owning paid off vehicles,
which is a rare tack to take when it comes
(39:20):
to our transportation.
Speaker 1 (39:21):
Yeah, all three of them owned. Yeah that's awesome, but
we've almost never heard of someone who's regretted. Reducing their
car fleet just makes life a lot simpler as well,
less clutter, and when it's like the largest item other
than your actual house that you own, I'm all four
clear and nothing out. But I think you're totally right
to point out not what you could gain, but point
out what you're actually losing month after a month, basically
(39:43):
in perpetuity by keeping that around.
Speaker 2 (39:45):
Although I will say, okay, Devil's Advocate, I had a
friend who they ended up selling an old vehicle. Heads up,
get a quote from your insurance provider and see what
your premiums would go to because if you have teen drivers,
in particular, because my buddy, his teenage driver was on
the old was a full time driver because they have
to put him down as a full time driver on
(40:05):
the oldest car, and by getting rid of that old car,
they were forced to put him on a newer car.
And so what they ended up doing was reducing the
total number of cars that they had covered by car
insurance by this provider. And what happened to the premium,
It didn't, in fact go down.
Speaker 1 (40:19):
It went up, okay, And so he was pulling his
hair out when he discovered that, because he thought there.
Speaker 2 (40:24):
Was no way that that was likely at all a possibility.
But that is something. So that's the counter.
Speaker 1 (40:29):
That's a smart tip. That's the counter to the cost
of insurance. Yeah, normally things like that. Normally you get
rid of a car from your fleet, your insurance cost
is going to go down. But you know, those rare
occasions it might not. So I think it's a good
point tenage driver's man, hop on the phone with your
insurance company first and figure out what that would look like.
And maybe you might say, oh, well, it's not going
to send me anything on insurance, or it's going to
(40:49):
send me so little to make it negligible. I'm going
to keep this puppy around because hey, it's not going
to cost me really any more money in depreciation, which
is the biggest nasty factor going against car owners. And
the plus side I guess of owning that car or
that truck for longer is that it's kind of convenient.
The value is not going to decline meaningfully. You've got
to spare when another car is in the shop or
(41:10):
something like that. But there are other solutions to that problem,
and I think that just require a little more inconvenience,
like renting a car, borrowing one from a friend in
a pinch, or uber like I think the sharing economy,
the reality of the sharing economy, it might be the
perfect solution, right to save this poster a bit of
money here. Plus, you don't have to worry about fixing
the old truck as more issues start to pop up
(41:33):
with it, as all of us know who have driven
older vehicles. Once you start getting to that point, I'm
not trying to We don't want people to get rid
of their old car trade up to a new car
because of potential fixes they'll have to make most of
the time. But the truth is the older the ride,
the more repairs you're gonna have to make, and it
just becomes a more dicey, difficult decision when the repair
(41:53):
bills get expensive and the value of the vehicle goes down.
And so getting rid of it while it's still running,
well maybe avoid you from having to make a decision
like that. Yeah, unloading it essentially before it's a problem.
Speaker 2 (42:07):
I'll point a two. Getting five thousand dollars is cool.
You know, you get that money back in your hands.
You're talking about paying off the house early. I would
be very hesitant to do that considering where you are
on the amortization schedule of that house, the fact that
you're basically paying no money to the bank right now,
regardless of what your interest I mean, you're paying something,
(42:27):
but like relatively speaking, you're paying almost nothing, and regardless
of what your actual stated interest rate is, you are
paying much much, much less than that right now because
of where you are on the schedule. Most of the
money that's going towards your payment is actual principle, that
is paying down the balance of that house.
Speaker 1 (42:44):
And so it's a complete opposite of those early months
and years of having the mortgage. I mean, you're literally
in like the last few months, like I can. I've
never been to that stage of the payment cycle, so
maybe that does something to you psychologically and maybe you
want to get rid of it sooner, But at least
I get the impulse Right now where I'm sitting, I'm
just like, uh, no way that. It's basically your.
Speaker 2 (43:05):
Own money, So why pay it off when you don't
need to, and when instead what you could do is
invest that money, assuming that you are in a stage
of life where you are still growing your wealth, I
would one hundred percent be investing that money as opposed
to paying off that.
Speaker 1 (43:18):
Debt or even saving honestly and just paid off as agreed,
just because, like you said, what you're actually forking over
an interest is infintestaly small and so prioritizing mortgage payoff
although I get the psychological benefit when you pay it
off as agreed, given kind of the terms you likely
have in place in that mortgage and where you stand
in it, it just makes almost no financial sense at all.
(43:40):
It's really only a psychological win that you get this, right, Joel.
The beer that you and I enjoyed today was a
spring which was a Belgian style white ale by one
of our favorites, creature comforts. This you know, it's called
a white, but I feel like this just tasted full
on like Belgian golden, Like not necessarily from the style golden.
I don't know. I just tasted like liquid gold. Really
(44:03):
enjoyed it, would you think, Yeah, I didn't quite have
Like the most famous beer in this style is Allagash White, right,
and it didn't quite have some of those like coriander
notes that that that beer has, and that's just a
classic beer. I mean, it's such a good beer. And
this beer I thought was fantastic. It was in that vein,
but a little bit different, a little more orange, a
little more floral, a little more refreshing, even a little crisper. Yeah.
(44:26):
I kind of want to try him side by side
to see the difference, because yeah, and this is not
my favorite beer style, but my goodness, especially this time
of year, I did it. I think that's pretty tasty. Yeah, totally.
Speaker 2 (44:36):
The way I'm picturing an Aligash white is it's a
lot hazier and so like like it's got more of
those Belgian yeasts, whereas so it's like this really creamy, Yeah,
like you're drinking a lot of yeasts, whereas this seems
a lot more filtered, a lot more refreshing, but.
Speaker 1 (44:50):
Perfect to enjoy during some of these spring time months.
Is it still spring technically? Yeah, it feels like spring
was like a month ago.
Speaker 2 (44:57):
It's falling hot now, which means enjoying more of these
bad boys, buddy, But that's gonna be it for this episode.
You can find our show notes up on the website
at hownamoney dot com where we'll have some of the
different resources that we mentioned during this episode. And that's
gonna be it, so buddy, until next time, best Friends Out,
Best Friends Out.
Welcome to Out of Money. I'm Joel, I am Matt.
Today we're answering your listener questions.
Speaker 2 (00:24):
You know, a buddy, and we hope everyone had a
fantastic weekend.
Speaker 1 (00:27):
We're glad to see you back here, back in the
podcast here, back into the groove. It's Monday morning. You
got stuff to do, you got podcasts to listen to,
so we're glad to see you. They don't know this.
We're monitoring all their movements. Yeah, it's like her, she
I forget. I never actually watched the movie with the
phone I go, and I was like, that'll never happen.
The AI girlfriends, it's happening. Little did you know, Joel?
(00:48):
If that's the dystopian reality we now live in. Not
in my life, but it's some people's life.
Speaker 2 (00:51):
So we are going to take listener questions. The listeners
asking about breaking the paycheck to paycheck cycle. She's specifically
wondering if professional help is in order. Another listener is
asking about our take on money market accounts. He's looking
to park some down payment money, and we'll discuss student loans.
The best way to proceed, whether or not forgiveness is
(01:12):
actually something that this listener can count on. We'll get
to that more on today's Ask how many episodes, buddy.
Speaker 1 (01:19):
This ain't that blanket forgiveness?
Speaker 3 (01:20):
Oh?
Speaker 1 (01:20):
Is that going to come to pass? I think everybody
knows that's not going to happen. Happening, Yeah, that's yeah.
But this is kind of more specified forgiveness that has
been around for a long time. Is that going to remain?
And other questions? Matt, real quick, before we get to
all of these great questions, just one idea for people.
It's interesting, Actually, Americans used to move in a whole
lot more numbers. We should just be more willing to
(01:40):
uproot go somewhere for opportunity. And I guess that's actually
maybe a little bit less necessary because of work from home. Right,
So it has it declined? It has declined. Yeah, just
people are ready to take a look at the latest
BLS statistics and charts. But my sister, my sister, my
little sister, is an exception to this rule. She and
her husband are moving to a new city for a
job offer, and one of the first things that came
(02:03):
out of their mouth that they were excited about the job,
They're excited about the town. But after that, one of
the first things they mentioned was, oh my gosh, you
know how much money we're gonna save by moving there.
And because it's a smaller town they live in kind
of the heart of a big city right now, very
expensive to live there from a tax perspective, from a
rent perspective, even just from an activity perspective, like everything
(02:24):
costs more where they live than where they're moving too.
Nice and so I just think secondary cities in particular
can offer a lot of those job opportunities, but then
the living expenses go down considerably. He was able to
negotiate essentially to get the same exact pay for the
job he's moving too. She's able to keep her job
sort of, so he didn't. So they didn't get a
(02:45):
pay increase. They're able to maintain it, but effectively they
got to It feels a raise, like a massive pay
bomp because the cost of everything else is going down.
I mean, I'm assuming they're moving because they're looking to
switch things up a little bit. Yeah, sometimes you just
want to check out a new place. Sure, he knows
it's a very different town than where they currently are,
so yeah, but they were some more natural outdoor sort
(03:06):
of attraction as well. For sure, and they I think
they were estimating they'd be able to save six hundred
dollars a month in rent to rent something similar where
they're moving to, which is kind of crazy when you
think about it. That's like over seven thousand dollars a
year back in their pocket. So think of it like that,
it's like an untaxed rays of that amount. That's pretty significant.
(03:26):
A move in the frugal direction for sure. I like it,
and I also like the beer that we're going to
enjoy today. Well, there goes my review from the end
of the episode. Now we are going to enjoy a Spring,
which is a beer by Creature Comforts and uh not
the Spring that is my favorite local restaurant, but Spring
the beer and I will share our thoughts at the end. Yeah,
Michelin Award winning local restaurant. Correct, we've been once since
(03:50):
they won that Stark and prices go up pafterwards. Yeah
you better believe, really and rightly. So it's an amazing place. Yeah,
I'm gonna guess supplying a man Baby, prices went up
around twenty to thirty percent for the exact same dishes,
and they weren't pompous or show voting, but you could
kind of look off down the side towards the kitchen.
You kind of see the Michelin Star plaque kind of
(04:12):
like subtly placed with in view of the diners, but
not like it would have been I would say, lacking
taste if they stuck at like on its own little
pedestal in the middle. I would be interested to know,
random before we get the list of questions. I'd be
interested to know for restaurants who win a Michelin Star
if that's the norm. I gotta imagine is, Yeah, there's
enough foodies who follow Michelin Star awards and they say, oh,
(04:33):
now I want to go to that restaurant, and it
just increases bookings. More demand means hey, we're gonna have
to raise rates to just kind of create equilibrium here.
Speaker 2 (04:41):
Yeah, there's been articles written about how winning these awards
just completely ruins the restaurant because of the different expectations
and essentially you have to you do have to cater
to a different crowd, a different kind of folks who
are looking for maybe a heightened experience, and then all
the regulars who.
Speaker 1 (04:56):
Were there the whole time that made it. The help.
I don't know, if you help them make it, but
you help them keep the doors open. You aren't back
to the amount of money, No, Chef, I will say
the amount of money that we spent there. I felt
like we single handedly did it. Joel, Okay, no, not quite.
All right, let's get to listener questions, and if you
have a money question, we want to hear from you.
The funkier the better. You can just yeah, literally record
(05:16):
a voice memo on the voicemo app of your phone.
Say hey, I'm Denise from San Diego, and then your question.
And if you really are Denise from San Diego, we
definitely want to hear from you. But whatever your money
keeps looking at her phone and like they really are
watching it. How did they actually know they I thought
they were joking. So if you want the directions, got
to how to money dot com slash ask but it's
super simple. We look forward to hearing yours and taking it.
(05:38):
Next week on the show, Matt, let's get to a
question about living paycheck to paycheck and how to escape
that cycle.
Speaker 4 (05:45):
I'm ann and I'm in California. I'm a single woman,
sixty one years old. I believe that I'm in the
lower end of middle class lately, I find that I'm.
Speaker 5 (05:55):
Living paycheck to paycheck. I looked into using.
Speaker 4 (05:59):
A financial planner, however, I found that they really only
work with investments, and I don't have any investments. What
I'd like is a financial coach, someone who can help
me with budgeting and looking at my situation and then
making suggestions. I'd like to meet with a person for
a low cost. I'm not interested in an online worksheet
(06:23):
type program.
Speaker 5 (06:24):
My question is, is there such a person who can
do this? Thank you, bye bye.
Speaker 1 (06:30):
Oh Joe. What do you think about ann hating on
all the worksheets and the different programs out there that
folks are well, folks are selling or sometimes giving away.
We've got worksheets on our website can give away. I
think those can be really helpful. But I also get
I get what she's saying, the desire to have a
one on one relationship with a human who can help
you out through this. Like that makes sense to me.
(06:51):
I think totally that's how I work best.
Speaker 2 (06:53):
But a real life person, Yeah, I don't want to
talk to no AI Chat Bob, give me a real
person with issues.
Speaker 1 (06:59):
I was literally talking to friend the other day and
he was like, you guys should totally have an AI chatbot.
You have all the podcasts, all the content on your website.
You could feed it in there and it could spit
out Matt and Joel answers right and left to people.
And I don't know, man, I'm just kind of trying
to avoid that AI game as much as possible. That
was one of the first questions. So, man, we're really
going off the rails here. But back when we were
talking to somebody we had that we had hired to
(07:19):
do some work on the site, and one of our
questions was about AI. We're talking about these large language models.
Can we create our own chatbot, train it on our
episodes and essentially have answers in our voice the way
that we would talk about it. It's a unique proposition
is but he's just like, we're not quite there yet.
Maybe we are now because that wasn't again the rate
(07:39):
at which things go. Yeah, it might actually be a reality.
But and I've got to say, your desire here to
avoid a financial advisor and instead to work with a
money coach specifically is brilliant. Most folks, they tend to
think of advisors as the only game in town when
it comes to help with their money. But the average
advisor they don't do a whole lot with how budgets
(08:00):
and holding people accountable, So your desire to find like
a coach is totally.
Speaker 2 (08:06):
It makes a ton of sense. Advisors are going to
be more interested in helping you to invest, and then
the vast majority like they're not even gonna want to
work with you unless you've got like six figures of
investable assets to your name either. This is also why
rebo advisors they found a nice niche as well for
them to people who don't have a ton of money,
but they are looking for some of that additional help,
(08:26):
not unlike an AI chat bogie.
Speaker 1 (08:28):
Kind of in between step there for a lot of
newbi investors.
Speaker 2 (08:31):
Totally, and plus you would likely pay way too much
money if you ended up going with a financial advisor
as well, so a budget coach. I think that makes
a whole lot more sense.
Speaker 1 (08:41):
Yeah. The cheapest model we know of essentially to get
a financial advisor on your team to help you out
basically is a minimum one hundred and fifty dollars per
hour long session, and that's through the website Hello Nectreen.
But even they it used to be flat fee hundred
and fifty. Now it's flat fee one fifty to three hundred,
and so the price to hire a financial advisor is
in credibly steep. We've had budget coaches Matt on the
(09:02):
show before, and you know, one of those folks or
one of those types of folks is likely the right
choice for you. An it's just it's such a great
segment of the finance base and it doesn't get enough love.
Like nobody talks about budget coaches or money coaches. These
folks they offer, they're often offering services because they've had
a meaningful financial awakening themselves. They've had to go through
(09:24):
a debt payoff journey that was a multi year long slog.
They learned a whole lot through trial and error in
the DIY process, and so they've also, on top of that,
been through the emotional roller coaster right that can be
and often is living to pay paycheck to paycheck. They
know the right questions to ask and that often allows
them to better speak to how to turn the ship around,
(09:47):
right to speak into your life about what's going on
because of what they've gone through themselves. And typically they
get paid yeah, like an hourly rate or they charge
for a specific number of sessions. I don't know, maybe
like three hundred and fifty bucks for four sessions something
like that. But I do think that budget coach. One
it's going to be cheaper, and two it's going to
be more highly targeted to what you're going through. It's
(10:09):
going to be more relevant. A couple of specific folks
we've had on the show, or even ones that we
haven't but that we can recommend. Erica Jung she's been
on the show. Elena Fengal she's also been on the show.
And then this couple who runs a podcast called The
Price of Avocado Toast. There are awesome folks and they're
also financial coaches on the side too, So.
Speaker 2 (10:26):
That being said, and doesn't have a ton of money,
so I also want to point her towards free and
cheap resources from some different nonprofits. In particular, I'm thinking
of MMI, which is Money Management International, which by the way,
sounds super fancy and like wealth advisory, but they're not.
They're there to help folks deal with that and turn
their finances around. Also, National Foundation for Credit Counseling. These
(10:49):
are both excellent resources in order for you to gain credit,
to gain some budget counseling. You can get one on
one advice from a certified counselor there with a organizations,
and they'll typically help you to create a personalized plan
kind of like like if you're looking for a roadmap
for moving forward. If you know you find yourself kind
of spinning your tires a little bit, perhaps this is
(11:11):
going to allow you to gain some of that traction.
And I'm not sure how much debt you specifically have,
but I think they can help you to create a
debt management plan to get rid of it more quickly.
But don't trust some of the for profit companies who
make these massive promises and end up under delivering. I
will also say a money coach is no substitute for
you learning some of this yourself. And so I'm talking
(11:33):
about a DIY education. It makes me think of someone
who's interested in becoming a real estate investor who opts to,
let's say, hire a property manager. Well, if that were
to be you, like you wouldn't even know the important
questions to ask in order to hire a good property manager. Yeah,
because you've never been exposed to this at all. And
so I think listening to podcasts like this, reading books
(11:55):
this is still crucial. We've actually got a link to
some different resources up on the website to where I
don't know. I think that can help you to get
you your journey started. One other free resource too. Don't
underestimate the power of community and friendship. I think the
ability to link up with somebody or to man. This
isn't something that we said in a long time, but
one of the goals for our show is for money
(12:18):
personal finances to not be taboo, and when it is,
people are afraid to talk about it. And when it's not,
it's something that you talk about, you engage with, you
challenge each other, you hold each other accountable, and it
allows you to see incredible progress, I think on a
very truncated timeline. So not to mention this is something
we've talked about recently, but the fact that relationships are
(12:39):
always key to long lasting happiness, and so you're kind
of like doing like a two for one here by
talking to your friends about personal finances. It should be
something we engage with and ask each other questions about,
as opposed to it never coming up.
Speaker 1 (12:53):
I think there's also a lot of shame and for
a lot of people when it comes to their personal finances.
And the more we can kind of normalize talking about it,
the more we can kind of take some of that
shame away, bring out those mistakes into the light, because
guess what, everybody has made similar mistakes, right, So where
Anne is, it's not uncommon, and there's also nothing to
feel ashamed about. There's also a way forward. What it
(13:14):
comes down to Anne to get this ship right back
on the right path. It's going to take changing some
habits right, feeling some pain along the way as well. Right,
you might need to go on a bare bones budget,
which we have articles about on our website if you
want to check it out for a few months, to
gain some savings, to gain some stability. And I think
it's important to mention that for most folks getting into
(13:35):
a financial hole where they're living paycheck to paycheck or
where they're in debt that they didn't see coming that
they weren't planning on taking on, well, it often took.
It was little things over the course of many many months,
if not many many years, and then once the light
dawns on you, Hey, I'm ready to make a change.
A lot of people think, all, how am I going
to get out of this in the next three months,
(13:55):
and it's just it's just not possible. Right, So you
also have to have a realistic time frame and expectation
about how long it's going to take to turn this
thing around. And I think there are times to hire
an expert, right, And the information, the accountability you receive,
it certainly might be worth the money that you put
out there, the money you're forking over, you might even
make progress more quickly. Right. Also, you mentioned you didn't
(14:17):
want spreadsheets, Well what about software? Software is something that's
at least worth bringing into this conversation wine app which
is short for you Need a budget and Monarch. Those
are really great software programs. It's not kind of the
worksheet you mentioned, but when you kind of put all
of your financial information in one place, they can help
you think through where your money's going.
Speaker 6 (14:38):
You know.
Speaker 1 (14:38):
Monarch even pops up, Hey, you get this recurring subscription,
you're about to pay for it, and you'd be like,
wait a second, I forgot about that, and you can
go cancel it really quickly. Just some of those benefits
could far exceed the costs with a financial software. With
a budgeting software like WINABB or a Monarch it's not
the same thing as hiring an individual, but it could
be I think a decent middle ground solution. Yeah, and
(14:59):
I think that those are in a completely different class
and different category than worksheets, which in my mind, there's
a whole lot of like thinking and dwelling and trying
to like discovery that typically takes place with worksheets, but
with software like these are tools that allow you to
immediately take action, and that's what's so great about that. Also,
like you mentioned too that you don't have any investments,
and I want to point out that, yes, you need
(15:21):
to get your financial footing in a good place, but
beyond that, I want you to set your sites a
little bit higher to not just living, not living paycheck
to paycheck.
Speaker 2 (15:28):
But you know, starting with the money gears, making sure
you've got a basic emergency fund set up. Wish do
you remember the amount to the new.
Speaker 1 (15:36):
Updated inflation in like thirty five fifty thirty forty five,
okay thirty so three thousand, forty five dollars that is
the new inflation adjusted emergency fund. Once you've got that
in place, though, start I want you to start thinking
about yourself as an investor, because you still got some
time to be able to make sure that you are
going to be in a more comfortable position when the
time comes for retirement. But Joe, we got more to
(15:58):
get to you. We're gonna talk about old trucks, student loans,
that and more. Right after this, Matt, the tz made
before the break had me thinking of a country song.
It's like my old down broken trucks, other country songs
as the woman who left me about student loans, though
(16:19):
there should be at this point, there should be. They've
been pretty that truly would be the status in existence.
All right, Let's take this question from listener Phil Matt.
He has a question about saving for his down payment,
and he highlights an account you and I don't talk about,
maybe as much as he'd like him.
Speaker 3 (16:34):
Matt and Joel, I'm in the process of saving for
a down payment for a house, and I've been advised
to put some of my money into a money market account.
I don't hear you guys talk a lot about these,
and I was curious if it's something you don't recommend,
or if you do recommend, and why or why not.
I have looked online for some information, but haven't found
a lot of information about money markets. The account that
(16:56):
I was recommended was pco xx and its average about
a five and a half percent return this last year
and the year before was about six and a half percent,
and I assume with the interest rates going down, it'll
lower a little bit this year. That being said, I
have a high interest checking account with Lake Michigan Credit
(17:16):
Union and it offers three percent apy but only up
to fifteen K. So since I'm over that in saving
for a down payment on my house, I'm looking for
a single place to put.
Speaker 1 (17:26):
All my money.
Speaker 3 (17:29):
I did look it up with Dave Ramsey and he
suggests a CD over a money market account, but didn't
really explain why other than he said the rates were better. However,
I don't see that the rates are better in CDs
right now. Just for reference sake, I'm planning to purchase
a house in twelve to eighteen months, so I'm looking
to have this money available and liquid easily, and from
(17:53):
what I understand, money market accounts you can get the
money back relatively quickly when you need it. Thanks for
your help, Dociate everything, Phil.
Speaker 2 (18:01):
Joel's actually going to make a donation if you could
just put together a gofund to me for home down payment.
Speaker 1 (18:07):
Yeahel's going to pitch in about thirty two cents. That's
what I can spare. Right.
Speaker 2 (18:12):
By the way, did Phil did he actually say his name?
I don't know he said his name, but we know
his name because he sent us the email, of course.
But Phil, good question. There are a lot of different
places where you can save your down payment these days.
You can save your money over in Joel's account and
he'll that's right.
Speaker 1 (18:26):
No, the interest rates much worse than what Phil's describing.
Speaker 2 (18:29):
CDs, money markets savings. These are all different accounts. Each
one of these exists for different reasons, so we'll do
our best to explain which one might make the most
sense for you.
Speaker 1 (18:39):
Yeah, they sure have a lot of similarities, I will say,
but they have distinctive qualities that Phil's kind of looking
to parse the details, So Matt, let's parse the details.
Let's start off by talking about CDs, and I think
they're out for Phil, right. I think he knows that too.
But because he said he needs liquid cash for the
home purchase, that's really not in the too far distant future.
(19:02):
You could, I guess, feel op for a short term
CD since you said you need the money, and like,
let's say twelve to eighteen months, but hey, what if
you put it in a twelve month CD you found
the perfect home in eleven months and you're like, man,
I need that down payment, Like now what, It's just
not worth the loss of the interest you would take
by breaking that CD would typically you forfeit the last
(19:23):
three months of interest, which would mean hey, basically any
other savings vehicle you picked would have been better than
the CD. I think it's just a non starter. Like,
I wouldn't even consider it. There are Matt, you know
this well because you're an ALLY customer. There are no
penalty CDs from Ally, which I believe you put your
money in at one point, but you pay right for
that more flexible product by agreeing to a lower starting
(19:44):
interest rate. So there's something. I don't think it's quite
half a point, but there's a there's a decent gap
between signing up for a CD that doesn't have a
no penalty writer on it essentially through Ally, and so yeah,
you're just going to paid less on your money, and
it just doesn't make sense for what you're trying to
accomplish here, although CDs might still make sense for other
(20:05):
people right, especially if they need downside protection against the
possibility of following interest rates for their cash. That's when
a CD makes sense. But only if like, hey, you
can lock it up, you know, you're not going to
need to touch it before him, And that's just not
the case that fills in.
Speaker 2 (20:19):
Yeah, he wants to be ready to pounce, And we're
gonna not recommend CDs because Dave Ramsey someone like he
recommended that to Phil. So we're gonna immediately just say
the opposite.
Speaker 1 (20:28):
Of whatever Day says. Now that doesn't surprise me. Did
Dave tell you safe for retirement? Don't do it? Phil?
You better? You better not. It makes sense that Dave
or someone you know over that was a part of
his crew mentioned that because just I feel like, generally speaking,
they're a little bit more risk averse, at least when
it comes to debt taking on. Well, yeah, I guess
we're not talking about debt here. We're talking about savings.
Speaker 2 (20:50):
But there are a lot of things that we do
agree with when it comes to Dave and some of
his principles. But there's some things that we don't agree with,
like credit cards, namely, but.
Speaker 1 (20:58):
I'd pay off your mortgage right there.
Speaker 2 (21:00):
Yeah, I get the desire wanting to cross check some
of these different recommendations, But when it comes to high
yield savings accounts versus money market funds, I'm gonna say
that we're probably a bit more partial to highield savings.
But you truly you can't go wrong either way here
because they're very similar account types. One is offered by brokerages,
(21:20):
that being money market funds, and the others is going
to be banks. The high old Savings account, of course,
Vanguard's v m f x X is actually a fantastic
choice on the money market front. You do have to
have an account at Vanguard, but the holdings of that
fund are in very stable assets like cash, government securities
(21:41):
as well.
Speaker 1 (21:42):
Fidelity they've got a cash management account. That's that's pretty good. Uh.
And one perk of that that yeah, not spanks, SPACs,
spa uh huh. A perk of that versus high old
savings account is you can use a debit card and
you can write checks directly from that, which you typically
can't do from a high yield savings account. Oh, that
being said, is not too difficult to transfer money over
(22:04):
from the high Old Savings directly to a checking account,
assuming you also have a checking account with that particular institution,
and they offer free checks, but the returns they're close
to or sometimes oftentimes, I guess at least lately, they've
exceeded some of the highest returns on high yields savings
accounts as well. So if you are a van guard
or if you're a Fidelity customer, this is a I
(22:27):
would say, a very reasonable place to stash or cash
that you're gonna need for a down payment. Yeah. So
I think money market funds definitely a recent option, and
there's a reason I think more and more people have
gravitated towards having doing essentially all of their money business
with a low cost brokerage firm, because it's like, hey,
I'm gonna invest there, I'm gonna have my cash management account.
(22:48):
I'm just going to have it literally all under one roof.
And the perks of some of those cash management accounts
at the brokerage firms have gotten really good, right when
it comes to like no fees free atm with rawals.
I think Schwab kind of started that Fidelity has a
great option now too, so more and more people are
saying that works for me, and they're just saying I
don't think I need a bank at all. I also
(23:09):
just want to say I think banks do a really
good Some banks do a really good job on the front,
obviously not the big banks. So we love c We
talked about CIT regularly when you've got lots of money,
like a down payment fund, because they've been paying top
notch returns that are at or above some of these
money market fund rates. If we're talking about like small
time savings, like hey, I've got fifteen hundred bucks to save,
should I move banks? Well the stakes are lowered there,
(23:29):
right if you don't have a lot of money on hand.
But if you've got a lot of cash because you're
saving for to buy a house, then every half a
point or something like that matters quite a bit when
it comes to your overall amount of returns, how much
money your money is making. There's just no reason to
not be with an online bank that offers highly competitive rates.
Phil mentioned that he has a three percent checking account
(23:52):
with strict limits. What fifteen k, Matt, you can't earn
above that? Probably at over fifteen k you're making point
zero one percent or something like that. Well, now it's
the perfect time to move get out of that. Credit
unions are great for borrowing, they're not great for savers,
and so they're just great highlight savings accounts out there
for you, Phil that are gonna you know, you're gonna
(24:12):
get a good bit more on your money with zero caps,
so you're gonna make the full four plus percent on
all the money that you have right in that account.
We don't want folks jumping around all the time to
score slightly higher interest rate. But moving your funds and
your business to a bank that consistently pays customers incredibly well,
I think. I think it's a no brainer.
Speaker 2 (24:33):
Yeah, specifically because it's something that you want to do regardless.
It's not like you're only doing it for this down payment.
This is just good general personal finance hygiene essentially. Also,
Betterment's got a pretty solid cash management account too. I
think right now you can snag an extra half a
percent as a new customer for three months for a
total of four and a half percent right now.
Speaker 1 (24:52):
So that's pretty cool. That's yeah, like about the best
I know of it. Yeah, of course, I want to
point out here with your timeline, Phil, do not invest
any of these dollars and which might bring up a
small note when it comes to the semantics here, because
there is a technical difference between a money market deposit
account versus a money market fund and the one that
(25:14):
you specifically called out. Technically it is an investment, but
it's an investment that is very, very unlikely to ever
go down in value. So a deposit account is actually
FDIC ensured, whereas the fund is technically an investment, and
technically that means you could see that go down, but
effectively it's not going to go down.
Speaker 2 (25:33):
Yeah, so I wouldn't I wouldn't worry too much about
that because the Fed they're gonna come swooping in. They're
gonna save the day, which is what happened I think
the last.
Speaker 1 (25:40):
Time was that like two thousand and nine. Yeah, there's
the Great Recession when that was the case, happened to
what one or two of those accounts, And yeah, it
was a big deal then, But it's not something you
have to effectively worry about now, even though technically I'm
saying not to invest, but you are investing. Just a
small note something to be aware of. And that's another
just parsing of the details between hya SAMES accounts and
(26:01):
some of these money market funds. And you also notice
that these different brokerage firms have multiple different versions of
cash management accounts or money market funds, and they're all
created a little differently, so know what you're getting into.
That's why I think for most people met the simplicity
of Ohio Sames account with one of our favorite online
banks that consistently pays high rate. It's tough to be, Yeah,
it's tough to be, but I'm glad these other options exist.
(26:24):
And I do think the cash management accounts at some
of these low coast brokeg firms have only gotten better
and better and better. They become a more compelling product
and recenters. Nice. All right, let's hear from a listener
who is calling on behalf of not herself, but actually
her sister.
Speaker 5 (26:38):
Hi, joel In Matt.
Speaker 6 (26:39):
This is Heather from Ohio and I'm a longtime listener
and fan. My question is regarding my sister and her
student loan payments. She graduated from college about ten years ago.
She's been making the income driven repayments and her amount
that she owes has actually tripled from her original amount,
(27:00):
even though she hasn't missed any payments. She's been making
them religiously, but I believe that after twenty years her
amount would be that she always would be canceled. But
I wasn't sure if that was true or like, what
can I guide her to because I feel like it's
not clear.
Speaker 5 (27:19):
Thanks so much for any help.
Speaker 1 (27:21):
Well, Matt, to see your balance triple. I gotta imagine
that sucks. That feels like a punch to the face.
So I hate seeing people go through the immercial emotional
turmoil of making payments on time, of like doing the
right thing that they're supposed to do.
Speaker 3 (27:37):
Right.
Speaker 1 (27:37):
Hey, I was told that this is what my student
loan payment needs to be and doing the right thing
every single month like clockwork, and then hey, the balance
continues to increase. It's so unnerving, Like, I can't imagine
going through that. It just doesn't feel right. Do you
make on time payments seeing the balance increase? And then
on top of that, with the political football that student
(27:58):
loans have become, quarries are mounting for student loan borrowers
of all stripes. Yeah, especially ones who are like, well,
I know the Biden forgiveness thing, that's not going to happen,
But what about the forms of forgiveness that were essentially
promised for many, many years before Joe Biden came in office.
Or is that going to stick around there? Yeah, well
(28:19):
most of that is going to stick around. The Safe
Plan is sunk, but these other income based plans, it
just definitely seems like even if changes are made that
all existing loans would still have access to current payback plans.
So for folks who.
Speaker 2 (28:31):
Are paying back their loans on an income driven repayment plan,
like your sister Heather, I wouldn't be sitting on pins
and needles. I would keep paying as agreed, just under
the assumption that the federal government is going to hold
up their end of the bargain. But this is just
a sad outcome of the political environment that we are
currently living in and not I mean, I'm going to
risk alienating listeners here, but this is why, like truly,
(28:52):
our political system is broken, because when you make a
bunch of sweeping actions based on executive orders, which is
what happened the last administration, and what happens when the
other party inevitably comes to power, well with the strike
of a pen and a phone you know, and phone
calls with with a pen and with a cellphone, jel.
All of that gets undone, and who suffers. It's the
(29:13):
American people. And so it's it's the part of our
politics that I hate the most, the fact that it
seems like it's they're more as entertainment as opposed to
doing the boring work of governing in the legislating, which
is where it actually does need to take place. Right
if if these were laws that were truly laws, as
opposed to eos, I think we would see the American
public in particular get jerked around a lot.
Speaker 1 (29:34):
Less, which says process matters. And it seems like Congress
has become like a commentating class. They like to go
on the nightly new shows and talk about the moves
back and forth instead of legislating. Yeah, if they would
legislate less public servants, less public servants, and more using
the platform for themselves as individuals as opposed to serving
the country. Yeah, and it would feel like you're getting less done,
(29:54):
I think as the president. But it's the right way
to go about things, and it's the way Founding fathers
set it up so that we would have slower gradual
change instead up the whiplash we've all been enduring. But Heather,
your instinct right is that this is clear as mud
is kind of true. The smartest way to proceed, I think,
is as if the current arrangement stands and will continue
(30:16):
to stand. Kind of like Matt mentioned, you said that
she graduated from college a decade ago. I'm assuming this
is undergrad Under current IDR rules, she is eligible for
forgiveness after twenty years of payment. So basically, hey, she's
halfway there. And I think that's another reason that the
ballooning balance it's just not something to freak out about,
even if it's tough to watch, even if it's hard
(30:37):
to stomach. That advice doesn't apply to everyone. I think
some other people might be better off trying to pay
their loans in full, not waiting on forgiveness. It just
might not make the most math sense to hold on
for twenty years and opt for a small amount of forgiveness.
But especially for your sister, it sounds like clearly forgiveness
is going to be needs to be. The aim is
(30:57):
going to be kind of her salvation to a certain extent.
Especially think about what's going to happen over the next
ten years. Matt. If the balance is already tripled. Well,
chances are it's going to grow a heck of a
lot more. Think about ultimately what heather sister is going
to be forgiven the amount of student loan debt that
will just be wiped off the face of the earth
for her in one fell swoop, it's it's going to
(31:19):
be massive. Yeah, And there are even ways for your
sister to work to maximize her forgiveness. So let's talk
about that strategicy here for a second. And what I
mean by that is lowering her payment by reducing her income. So,
for instance, the more she in her job, is that
what we're saying about.
Speaker 2 (31:34):
Yeah, they can't tax you if you don't have any income.
The more she invests in traditional tax advantage accounts, and
the more it's going to reduce her adjusted gross income
that would be a traditional IRA or a traditional four
to one K or an HSA. The more that she
can sock into those accounts, the less that she's going
(31:54):
to owe the government when it comes to the student loans.
Speaker 1 (31:56):
It's just the way it is. Obviously she does you know,
she's got to have money to pay for a roof,
overhead for her head, to pay for food, groceries. But
making these additional contributions can reduce her payment amount, which
would increase her balance even more over time wait for it,
but lead to more overall forgiveness. At the end of
this period of time, it means less of her money
actually going towards student loan repayment. Yeah. So it's just
(32:20):
it's tough to stomach, but it almost seems like that
this can just be a stage of life where there's
a whole lot of difference spending. She's really focused on investing,
because investing right now it is a double edged sword
because it means more time that money is going to
have to compound over time, but it also means the
added benefit of paying less right now towards her student loans. Yep.
So it feels like a gamble, but I think that's
(32:43):
the right approach, is to try and minimize the amount
of money going out in monthly form towards a student
loan payment. Yeah, which means the balance is going to grow,
but ultimately there's a big win at the end of
the day or at the end of the decade of
the decade. Yeah, and last but not least, I would
say it's a good idea for your start to start
saving though for a potential tax bill now. And that
(33:03):
is because the one caveat at the end of forgiveness
is that you're growing balance. Well, when that's forgiven, it
could end up generating tax consequences. And so I say
could because that is the biggest unknown. What is Congress
going to do about that. There's currently a law in
place that prevents individuals from incurring what's been called a
student loan forgiveness tax bomb, but that law is set
(33:25):
to expire at the end of this year. And so
anybody who has had their student loans forgiven in recent history,
they haven't had any sort of tax bill at the
end of the day. They haven't had to pay anything.
But let's just assume that there was like one hundred
and fifty thousand dollars in forgiveness mat of student loan
debt ten years from now, the tax bill would be
(33:47):
not insignificant. And so Heather, for your sake and for
your sister's sake, I hope that gets extended. But if not,
just be prepared and be ready, be saving up. Your
sister should be saving up for a tax bill that
it might come to pass.
Speaker 2 (34:01):
Yeah, Yeah, so you're you're addressing the tax implications one
of the one of the thought going back to her
reducing her justic gross income, the implications were she to
get married. I didn't get an impression that she's necessarily
married right now. It sounds like she might. Her sister
might be flying solo at the moment. But were she
to get married, this might be an instance.
Speaker 1 (34:18):
And this is really hypothetical, I guess, but if she
combines her income with her partner, who might make a
ton of money, well, that would that's gonna have a
dramatic impact on the amount that gets forgiven. So that
might be an instance with where where she would continue
to file married but filing separately because she would essentially
want to isolate her own income to keep that technically
(34:41):
artificially low for their overall health. So if Heather Mary,
if Heather sister marries rich Mary's prince charming, like Heather's
been trying to convince her to do exactly, that's when
you got to really think about we're reading between the lines.
I know kind of conversations Heather and her sister have, right,
I think it's I think it's a good device if
that comes to past. It's a strategy I'd employed. Or
we've got more questions to get to more of your
(35:01):
money questions, including using a credit card to pay for
medical debt. It's kind of squirrely, but it could pay off.
We'll talk about that and more right after this. We
are back from the break and we'll get to that
truck question here in a second Joel. But first we
(35:23):
now have the Facebook question of the week, which is
from Matthew partial to that name. So I will probably
have to pay off about.
Speaker 2 (35:30):
Three thousand dollars in medical bills coming up soon. Should
I just find a good rewards card and do that?
I don't have one at the moment. What do you think, Joel?
Is it time to this.
Speaker 1 (35:42):
Is where we separate ourselves from the Dave Ramseys of
the world. Yeah, oh yeah, yeah, I would say probably
right yea. But we need to then go into the specifics.
I think the main question for Matthew here is can
you pay off the balance on time and in full
when the bill comes to That's three thousand bucks, right,
So yeah, get the credit card if you have three
thousand plus dollars in savings and you're going to be
(36:02):
able to pay the bill. If not, though, no, because
the rewards just aren't worth it, even the more significant
rewards that you can get from an initial sign up bonus,
which is what makes having a significant bill that's like
a silver lining, I guess macause nobody wants to pay
like three thousand dollars and medical bills. But if it
means new credit card and sign up bonus, that can
(36:24):
make that can just reduce the pain a little bit,
depending on what pain is going on in your body.
I don't know that it's actually medically prescribed to do that,
but it can reduce the financial pain. And so I
think if I had a three thousand dollars medical bill,
I would be looking to get a new credit card, right,
getting the brand new one, getting the sweet sign up
bonus for paying that one bill. Right, even if medical
bills aren't that fun to pay. I think that makes sense,
(36:47):
and it's nice to do it, not over a slew
of transactions trying to monitor your progress, but being like
Boom at the sign up bonus makes it easy and
with one swipe or one tap that's kind of awesome. Yeah,
assuming though that you do have the cash on hand
and that you're not actually going to go into credit
card debt. But also don't forget that you might have
some recourse here to reduce the size of this medical
(37:07):
bill pretty meaningfully, or maybe even have a completely eradicated
depending on your income, and so look into the financial
aid possibilities that are offered there through that hospital or
through that medical provider.
Speaker 2 (37:20):
Maybe you'll actually owe a whole lot less. That being said,
kind of sounds like maybe he's done that because he
said I'll probably have to pay off about three thousand dollars,
So sounds like it's something that he it's a journey.
Speaker 1 (37:31):
He's been arched up that tree, and maybe the bill
was higher and now it's been reduced to three thousand
and he can't get it and he's.
Speaker 2 (37:36):
Finally coming to terms that this is what it is.
But last, but not least, head over to the how
to Money credit card tool to see what card might
make the most sense for you. The top rewards often
come in the form of travel points, so hopefully that's
something you're open to. If that's the case, the Capital
one venture X is well worth considering right now. If
that's not something that you're interested in interested in even
(37:58):
something like the Blue Cash preferred card, which there's a
similar theme that we've been discussing today, which is like
doing something that you're already planning to do. The Blue
Cash Preferred Card is a fantastic card because it's not
that hard to spend a ton of money at the
grocery store these days, and so depending on how it
is that you spend, that could be well worth the money.
Speaker 1 (38:15):
Yeah, let's get to another question, Matt. This one comes
from anonymous, which is a name I'm partial to, and
they say, we all less than ten thousand dollars on
a house. We'll pay it off this year. Three vehicles
all paid off. Old truck isn't getting much use. We
use it occasionally, less than five thousand miles and a
year the truck could fetch about five thousand bucks and
(38:35):
that money would pay off the house several months faster.
Would you sell it? Well, I would say the value
of the truck, like how much they can get for
is only a part of the answer to this question,
because I think the bigger question is the ongoing cost
of keeping the truck. So I'm talking about the cost
of insurance, which has skyrocketed in recent years, but also
(38:56):
repairs and maintenance.
Speaker 2 (38:58):
So even though this vehicle is close to full depreciation,
you're still losing money in other ways if you keep
it around. So holding on to it when you're using
it so little likely means that there isn't enough value,
and instead selling it is going to be smart for you.
So I love that you are prioritizing owning paid off vehicles,
which is a rare tack to take when it comes
(39:20):
to our transportation.
Speaker 1 (39:21):
Yeah, all three of them owned. Yeah that's awesome, but
we've almost never heard of someone who's regretted. Reducing their
car fleet just makes life a lot simpler as well,
less clutter, and when it's like the largest item other
than your actual house that you own, I'm all four
clear and nothing out. But I think you're totally right
to point out not what you could gain, but point
out what you're actually losing month after a month, basically
(39:43):
in perpetuity by keeping that around.
Speaker 2 (39:45):
Although I will say, okay, Devil's Advocate, I had a
friend who they ended up selling an old vehicle. Heads up,
get a quote from your insurance provider and see what
your premiums would go to because if you have teen drivers,
in particular, because my buddy, his teenage driver was on
the old was a full time driver because they have
to put him down as a full time driver on
(40:05):
the oldest car, and by getting rid of that old car,
they were forced to put him on a newer car.
And so what they ended up doing was reducing the
total number of cars that they had covered by car
insurance by this provider. And what happened to the premium,
It didn't, in fact go down.
Speaker 1 (40:19):
It went up, okay, And so he was pulling his
hair out when he discovered that, because he thought there.
Speaker 2 (40:24):
Was no way that that was likely at all a possibility.
But that is something. So that's the counter.
Speaker 1 (40:29):
That's a smart tip. That's the counter to the cost
of insurance. Yeah, normally things like that. Normally you get
rid of a car from your fleet, your insurance cost
is going to go down. But you know, those rare
occasions it might not. So I think it's a good
point tenage driver's man, hop on the phone with your
insurance company first and figure out what that would look like.
And maybe you might say, oh, well, it's not going
to send me anything on insurance, or it's going to
(40:49):
send me so little to make it negligible. I'm going
to keep this puppy around because hey, it's not going
to cost me really any more money in depreciation, which
is the biggest nasty factor going against car owners. And
the plus side I guess of owning that car or
that truck for longer is that it's kind of convenient.
The value is not going to decline meaningfully. You've got
to spare when another car is in the shop or
(41:10):
something like that. But there are other solutions to that problem,
and I think that just require a little more inconvenience,
like renting a car, borrowing one from a friend in
a pinch, or uber like I think the sharing economy,
the reality of the sharing economy, it might be the
perfect solution, right to save this poster a bit of
money here. Plus, you don't have to worry about fixing
the old truck as more issues start to pop up
(41:33):
with it, as all of us know who have driven
older vehicles. Once you start getting to that point, I'm
not trying to We don't want people to get rid
of their old car trade up to a new car
because of potential fixes they'll have to make most of
the time. But the truth is the older the ride,
the more repairs you're gonna have to make, and it
just becomes a more dicey, difficult decision when the repair
(41:53):
bills get expensive and the value of the vehicle goes down.
And so getting rid of it while it's still running,
well maybe avoid you from having to make a decision
like that. Yeah, unloading it essentially before it's a problem.
Speaker 2 (42:07):
I'll point a two. Getting five thousand dollars is cool.
You know, you get that money back in your hands.
You're talking about paying off the house early. I would
be very hesitant to do that considering where you are
on the amortization schedule of that house, the fact that
you're basically paying no money to the bank right now,
regardless of what your interest I mean, you're paying something,
(42:27):
but like relatively speaking, you're paying almost nothing, and regardless
of what your actual stated interest rate is, you are
paying much much, much less than that right now because
of where you are on the schedule. Most of the
money that's going towards your payment is actual principle, that
is paying down the balance of that house.
Speaker 1 (42:44):
And so it's a complete opposite of those early months
and years of having the mortgage. I mean, you're literally
in like the last few months, like I can. I've
never been to that stage of the payment cycle, so
maybe that does something to you psychologically and maybe you
want to get rid of it sooner, But at least
I get the impulse Right now where I'm sitting, I'm
just like, uh, no way that. It's basically your.
Speaker 2 (43:05):
Own money, So why pay it off when you don't
need to, and when instead what you could do is
invest that money, assuming that you are in a stage
of life where you are still growing your wealth, I
would one hundred percent be investing that money as opposed
to paying off that.
Speaker 1 (43:18):
Debt or even saving honestly and just paid off as agreed,
just because, like you said, what you're actually forking over
an interest is infintestaly small and so prioritizing mortgage payoff
although I get the psychological benefit when you pay it
off as agreed, given kind of the terms you likely
have in place in that mortgage and where you stand
in it, it just makes almost no financial sense at all.
(43:40):
It's really only a psychological win that you get this, right, Joel.
The beer that you and I enjoyed today was a
spring which was a Belgian style white ale by one
of our favorites, creature comforts. This you know, it's called
a white, but I feel like this just tasted full
on like Belgian golden, Like not necessarily from the style golden.
I don't know. I just tasted like liquid gold. Really
(44:03):
enjoyed it, would you think, Yeah, I didn't quite have
Like the most famous beer in this style is Allagash White, right,
and it didn't quite have some of those like coriander
notes that that that beer has, and that's just a
classic beer. I mean, it's such a good beer. And
this beer I thought was fantastic. It was in that vein,
but a little bit different, a little more orange, a
little more floral, a little more refreshing, even a little crisper. Yeah.
(44:26):
I kind of want to try him side by side
to see the difference, because yeah, and this is not
my favorite beer style, but my goodness, especially this time
of year, I did it. I think that's pretty tasty. Yeah, totally.
Speaker 2 (44:36):
The way I'm picturing an Aligash white is it's a
lot hazier and so like like it's got more of
those Belgian yeasts, whereas so it's like this really creamy, Yeah,
like you're drinking a lot of yeasts, whereas this seems
a lot more filtered, a lot more refreshing, but.
Speaker 1 (44:50):
Perfect to enjoy during some of these spring time months.
Is it still spring technically? Yeah, it feels like spring
was like a month ago.
Speaker 2 (44:57):
It's falling hot now, which means enjoying more of these
bad boys, buddy, But that's gonna be it for this episode.
You can find our show notes up on the website
at hownamoney dot com where we'll have some of the
different resources that we mentioned during this episode. And that's
gonna be it, so buddy, until next time, best Friends Out,
Best Friends Out.
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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