We’re kicking off the week by answering your listener questions! And if you have a question that you’d like for us to answer on the show, we’d love for you to submit your own via HowToMoney.com/ask , send us your voice memo. Regardless of how random or bizarre you might think it is, we want to hear it!
1 - Should I draw on my Thrift Savings Plan to use as seed money for my new business?
2 - What advice would you have for me as a 16 year old who wants to start investing now so I don’t have to work forever?
3 - Do y’all think it’s a good idea to pay $50,000 cash for a new car when I currently have a car loan?
4 - Are all of my Roth 401k funds accessible penalty free, before age 59.5, after rolling them to a Roth IRA?
5 - I’m currently in Money Gear #7, should I pay off my home early or invest over the next couple of years?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to How to Money. I'm Joel and I am Matt,
and today we're answering your listener questions.
Speaker 2 (00:25):
Yes, sir, it is a Monday, and you know that
means we are answering your listener questions. They've got five
great ones to get to today. Do it every Monday.
Speaker 1 (00:33):
Now.
Speaker 2 (00:33):
By the way, it's Sara making a memo. You know,
we were thinking about, Okay, maybe we'll make the listener
questions be the Wednesday episode. No no, no, for whatever reason,
the ask how to Money Monday episode. It's just like
it's ingrained into my brain and that's what we're doing today. Yeah,
we uh a listener he's asking about how he can
go about ramping up a side hustle. Another listener he's
(00:54):
figuring out what to do specifically when your craft beer
equivalent are luxury sports cars.
Speaker 1 (00:59):
Oh that we've.
Speaker 2 (01:01):
Got more of a nerdy question, an early retirement question.
How to access some wroth four O one K funds early.
We'll get to those three plus a couple others during
our episode today.
Speaker 1 (01:12):
Yeah, a nice variety here, kind of like what's in
our beer? We'll give to that in a second. But
real quick, man, my uncle he and my aunt. They
take a trip together once or twice a year. Well,
my uncle, he's kind of the cheerleader type. He's always
rooting me on, which is just super sweets, nice time
an uncle like that, right, And so he and my
aunt they're making trips. They always go to historical sites
across the country. They want to see, like the house
(01:34):
where a old school president grew up or something like that,
and so whenever, all that kind of stuff. And so
my uncle is sending me pictures from all over the
United States. But what is he put in front of
those historical landmarks that had money sock? And he's sending
me pictures with our sock in front of like wait,
like a little white house and stuff like that.
Speaker 2 (01:53):
He doesn't have them on, he's just holding it in
the frame, just holding in the frame like a single
dirtyes like Dobby from Harry Potter.
Speaker 1 (02:00):
I think it's clean. I think it's clean. It's a
singular slock. But how adorable is that? It's sweet? Like
it's pretty cute. It just shows you how proud he
is and how he wants to like send me a
bunch of those and we'll post them. I will, I will.
They're very they're super cute. But on that note, I
was thinking, wow, we've still got some super sweet how
to money socks sitting around that we have not given
away to listeners. It's true, it's time to give away
some more of those because one they're comfy, two that
(02:23):
are adorable. You're gonna love them if you like the
show and so look good and they feel good. That's right.
You can already win some if you subscribe to our
newsletter and share our winter stuff.
Speaker 2 (02:32):
You can earn some or earn some, yes, but now
we're offering the opportunity I guess for folks to win.
Speaker 1 (02:37):
Some right now, the bar is very low. All you
gotta do is submit a review for our podcast, whether
it's on Spotify, Apple Podcasts, wherever you listen, and send
us an email showing that you've left one. And even
if you left one in the past, just send us
an email with a screenshot of that review and we'll
include you in this giveaway.
Speaker 2 (02:55):
Yeah, okay, I know why you doing this, because we
are A recent review gave us like three stars because
they're rip on me for talking about the five percent
student loan payment.
Speaker 1 (03:04):
Which I will say they did. They took you to
task on that. But I took you to task in
the moment because I thought that was a ridiculous thing
to say that five percent of that's not your discretion
of your buzble. Okay, you know, don't double please don't.
Speaker 2 (03:17):
I think the reason I don't touch Okay, now, when
you are when you are an entrepreneur, and I literally
have been, like been self employed my entire life. Like
there have been years where we've gone from like where
our income has decreased by like literally forty to fifty percent,
like going from like earning ninety k down to like
forty kah, and we're like, ooh, it's gonna be it's
gonna be a little bit tighter this year. I think
(03:38):
with that in mind, I'm like, oh, five percent, that
doesn't Yeah, doesn't seem that big of a deal. Sure,
I understand it certainly impacts folks, but at least it's
better than ten, which it certainly is. But I'm not
I certainly don't discount the folks out there who are
feeling that crunch more significantly.
Speaker 1 (03:51):
I totally get that. I think that's probably how but
that's that's where you want to give some socks. Well,
we've got to make up for your indiscretions and hopefully
get reviews from people who love it and don't hold
it against you.
Speaker 2 (04:01):
I still appreciate that they at least give us three stars,
because it's not like they went from loving the show
to hating it. They're just kind of annoyed at maybe
some of the stuff we said recently.
Speaker 1 (04:10):
Sure, and so that's fair if you want to help
help us, those reviews really do matter. They help other
people who are interested in potentially listening to the show
know what they're getting into. And so if you've liked it,
we'd love it if you would leave a review, leave
us a solid one over there, Yeah, especially if you've
been listening for a while haven't yet, And you will
be entered to win away one of five pairs of
socks who are given away. We will make that happen
(04:32):
by let's say, Wednesday, by midnight, Wednesday midnight, and we
will announce on the Friday flight the five winners of
the How To Money Socks. No doubt, all right, so
we have looking socks. We hope you win. May the
odds be ever in your favor. But the beer that
we're having on today's episode is called Dream. It is
a strawberry cherry cotton candy jelly bean sour. We'll give
our thoughts on this kitchen sink of a beer at
(04:54):
the end of the episode of a beer that was
made by a ten year old, or like an oop
a loopa in a candy store. Right, what's it called?
Is it dream? It's like Jay Yeah, with Jay Dream
Jeram Joe Raim. That's right, makes me think of like
Kareem abdul Jabbar Fly to the Concords. Oh, okay, was
it der?
Speaker 3 (05:11):
Yeah?
Speaker 1 (05:12):
Boy, I haven't thought about that one in a while.
Be neither.
Speaker 2 (05:14):
All right, let's get to all that. Note, it's Business
Times the topic at hand.
Speaker 1 (05:18):
We are get to it. Answer your listener questions. We
do it every Monday, and if you have a question
for us, we would love we would love to hear
it and tackle it on an upcoming ask htm episode.
All you got to do is record a voice memo
and send it our way. If you want the specific instructions,
just go to how tomoney dot com slash ask. Let's
get to the first question, though, Matt. This one comes
from a listener who wants to ramp up a side
(05:38):
hustle turn it into a legit business.
Speaker 4 (05:40):
Hey Matt and Joel Justin from northeastern Oklahoma. Here. I
really want to start my own word working business and
transition to working for a full time over the next
few years, while I continue to work my job at
the post office long enough to be able to make
a smooth transition from one profitable gig to the other.
My current shop situation is not ideal, to say the
least is in working out of my uninsulated and unconditioned
(06:01):
garage and find it is mentally and physically straining to
get out there to work in the frigid cold or
blazing humid heat we tend to get here. I have
about twenty seven thousand dollars in my TSP I could
draw on to either retrofit my garage to a nice
small shop or build a larger separate shop altogether, which
(06:22):
would be ideal so my wife could have a garage back.
Do you think it's a good idea to draw upon
retirement savings to invest in starting up a personal small business.
Other financing methods I've considered are cash out, refinancing, heelock,
the old bootstrap method which I've been using or potentially crowdfunding.
Any thoughts or recommendations. Obviously, building the shop would be
(06:44):
more expensive than a retrofit. I'd like your thoughts on
that as well. Thank you for your time and your response,
and I love the podcast.
Speaker 1 (06:52):
Joe.
Speaker 2 (06:52):
What do you think Nick Offerman would say to Justin
about getting out there in the hot or the cold?
I mean, I think you'd say, grin and Barrett, that's right,
you pull out his inner Ron Swanson. I can't not
think of ronoff nick Offerman or Ron Swanson rot.
Speaker 1 (07:05):
Yeah. I love that, you Off, because that's how everyone
thinks of him. Now he's done other great stuff too,
beyond just Ron Swanson and part.
Speaker 2 (07:12):
He will always be known though. Yeah, I'm playing that role.
Speaker 1 (07:15):
He was great in that that one episode of the
Last of Us. I mean he's done a lot of
good stuff. Oh that's right, Yeah, fantastic. Yeah. Well, and
I gotta say, Justin's calling from Oklahoma. We actually have
two listeners from Oklahoma on this episode, and it makes
me think of one of my favorite artists I've been
listening to a whole lot lately, Zack Bryan from Oklahoma. Dude. Yeah, okay, yeah,
I'll give him music wreck here, I'm not I'm not
afraid if you like kinda Brian kind of sounds like country.
(07:37):
It's like indie country for sure. So yeah, if you
like that, col I like the I don't like the
radio country. But if you like indie sort of country,
then Zack Bryan's for you. You don't like it to be
too polished, right exactly, Or I don't want to think
about pontoon boats like that's just.
Speaker 2 (07:51):
But pontoon boats and boots and right and the dog
that where you put them and yeah, that kind of stuff.
Speaker 1 (07:56):
I don't care about that. Suff But first off, justin
we are rooting for you, man, I mean, I think
it's important to mention. First off, there's a difference between
side gigs and starting your own business. That difference is stark.
A side hustle can help you snag cash in return
for your time. Think of this as driving for Uber
something like that probably the most significant well known side
hustle out there.
Speaker 2 (08:16):
Right Typically where beholding to a specific platform who could
on a whim change the rules of the game.
Speaker 1 (08:21):
Starting this business that you're looking to start right now,
it might not be immediately lucrative, whereas with Uber, you
can turn on this bigot right away. You might not
make a ton, but you can start making money right now.
The truth is, though, that you're far more likely to
be able to turn this effort the one to start
this business instead of going with a side hustle into
a recurring and sustainable income. Right, And some gigs make
(08:41):
sense sometimes, but building a business is a better long
term proposition. That's what we want to encourage people to
go in that direction. And it sounds like you're taking
the right approach. Yeah.
Speaker 2 (08:49):
Yeah, We actually dedicated an entire episode to this very topic,
the difference between side gigs, side hustles and what would
eventually be able to become a business, something that you're
able to run yourself.
Speaker 1 (08:59):
Will make sure to link to that way. Well, that's
that's really difference between gig, a gig, and a side hustle.
I think a side hustle ability that you're looking to
turn into a full fledged business and it might take
a while and you might not be making any money
for a minute while you're doing.
Speaker 2 (09:10):
It, whereas like the different gig apps, those are the
end in and of themselves. Yeah, and they're not a
great end that's right for most people. Yeah, so justin
let's talk about building out that shop. Let's talk about
how you can go about it. We are all about
investing your in yourself in this future business, which can
pay some massive dividends right often bigger ones than just
simply investing in the market. Focusing on your own personal development.
(09:34):
This can just lead to higher earnings, it can lead
to better career prospects. But do you need this tricked
out shop at which shop? In order to get the
side hustle off the ground?
Speaker 1 (09:43):
Do you have to have exhibit being proud of your
shop in order for it to be you know enough
for you to do what you need to do in it.
Speaker 2 (09:49):
And then on top of that, should you tap your
retirement savings, specifically your TSP in order to pull this off?
Speaker 1 (09:55):
We would definitely say.
Speaker 2 (09:57):
No to the latter. Tapping retirement funds. It's rarely a
good idea because you're going to be paying tax on
the amount that you're going to be withdrawing at your
income level, at your income bracket, plus a ten percent penalty,
which is in our opinion, too stiff of a punishment
for you to take. And by the way, TSPs are
thrift savings plans. Which are essentially government for one case,
(10:18):
they've got the same withdrawal rules and limitations and whatnot.
They're just yeah, four one k's for government workers with
them being working for the post office.
Speaker 1 (10:27):
That's how he has that ts Because of course, it
can't be simple. We can't just have like one plan
all the way across. We have to have a bunch
of different alpha alphabet soups worth of plans. That's just
how we roll with the best country. Hey, I like thrift.
Speaker 2 (10:37):
It's got the word thrift in it, which makes me happy. Well,
by the way, I like thrift savings plan better than
four to one k.
Speaker 1 (10:43):
Do you think most of our listeners got that exhibit reference?
Do you think they watched to pit my ride back
in the day. I'm gonna get fifty to fifty That
was a cultural phenomenon back in the day. But if
you didn't back, you're in the trunk. I got a
fish take it. It was pretty great. Yeah's awesome. All right. Well,
here's the thing plus on top of that, you don't
have those dollars working for your future, right if you
opt to take that money out talking about your actual
(11:05):
retirement dollars, Yeah, build out that place for you to work.
Buil out the workshop. You're not only paying tax and penalty,
you're also saying, Hey, all these twenty seven thousand dollars
that I've essentially pigeonholed for my future that's going to
build and grow, Well, it's no longer doing that. So
it's a double whammy. You'd really be starting from scratch.
Then when it came to retirement savings, which is not
a place we want you to find yourself, it's a
(11:26):
better idea to reduce your contributions moving forward so you
can build up a shop, renovation, nest egg more quickly. Right,
instead of taking the money out, just put less money
in and do that bootstrap method you were kind of
talking about, Like, we'll try to help you think outside
of the box too. Could you maybe continue using that
garage if you put insulation in it and used a
portable HVAC. I think both of those things combined would
(11:48):
cost you something like a thousand bucks, plus there's a
federal tax credit for putting in that insulation. Makes me
think about we just kind of did some things to
our sunroom. We insulated it. It was just like a
room where you couldn't hang out the summer in the
winter and how you can And so just a thirty
percent off that johnk Right's right insulation in a mini
split which come with federal tax rebates, and it was
pretty inexpensive overall, and it made that room far more livable.
(12:11):
And so it doesn't necessarily solve the problem of your
wife wanting her garage back. It's not perfect, but it
cannot solve that problem. No, no, I don't know that
we can solve at all. But it gives you a
more comfortable place to work at least while you're trying
to see if it's going to make sense to go
in this direction full time or not. That's right.
Speaker 2 (12:26):
Yeah, so don't dig into your retirement dollars. And in
regards to financing, you also mentioned cash out refinances there
on your home. Kind of depends on your current rate,
but probably not. This is probably not an option that
we would recommend as well, because you're likely giving up
an incredible fixed rate.
Speaker 1 (12:43):
In order to do that cash out reformentioned closing costs.
Speaker 2 (12:46):
Yeah, a helock, that's a maybe if you've got a
plan to pay it back quickly. But then again, you
mentioned bootstrapping there at the end, and that is, honestly,
I think, going to be the best way to go
about this, especially let's say this small business venture doesn't
quite take off like you thought it would. Obviously hopefully
that that's not the case. Again, we're rooting for you.
We want this to work, but we don't want you
(13:08):
to be left in the lurch. Basically at the end
of the day, we don't want you to not only
have no savings, but even no money invested for your
future with the workshop, a nice workshop that that isn't
producing the revenue that you hope for. You know, you
really want to achieve like a proof of concept before
pouring even more money into creating a nicer space, which
it sounds like you might be able to do because
(13:28):
it sounds like this is something you're already pursuing. But
I think finding a way for you to gradually ramp
up this side hustle into like a legitimate business, that
that is the best way forward.
Speaker 1 (13:38):
It makes you think of when we were starting the podcast,
Matt and we were nobody nowhere, nobody, We had no
listeners for the first few episodes, and there was there's
a big hill to climb. But what if we had
said let's build out this sweet podcast studio, hoping that
we're going to be successful in this business. Well, we
needed some sort of proof of concepts, some sort of
like listenership revenue in order to justify sinking more mone
(14:00):
the end of the business. And so we needed a
bare minimum recording at your dining room table to get
off the ground and occasionally your dining room table. Yeah,
but beyond that, we tried to keep it, you know,
keep it cheap. Yeah.
Speaker 2 (14:11):
I mean we literally borrowed gear the cheapest what is it,
the sure sight, it's the ubiquitous universal mic that you
see everywhere. We didn't like, what are the like we've
I don't even.
Speaker 1 (14:20):
Know what these are. Seven So now the seven bees,
four hundred.
Speaker 2 (14:23):
These are nice mics, but we didn't even get these
until like two years ago something like that. We did
not and we just continue to use our old microphones.
Obviously these are nicer and they certainly benefit the podcast.
But that was after we had been you know, certainly
showing that Okay, this is something that's actually earning money,
it's not necessarily just a hobby.
Speaker 1 (14:39):
Yeah, And let me just mention this one last thing.
Justin mentioned crowd funny. He said that what if I like,
take to the streets, or take to the internet, take
to Facebook, and see if other people want to help
fund my venture. I'd say one of the best ways
to get the funds to do the build out would
be to pre sell some items that you're planning on making.
Could you get the word out and start taking orders now,
instead of thinking you have like furnished the showroom and
(15:00):
before you start making sales, think about it the other way.
You can say, hey, listen, I'm making all this cool stuff.
Here is here are a couple examples of what it's
going to look like. Can I make you a custom
bench for your front porch or swing for your front porch,
whatever it is that you're making and show people a
proof of concept and then take orders, get those orders
pre funded, essentially have people pay in advance, and that
(15:23):
hopefully helps you go down the path without begging for money,
which I think is some crowdfunding kind of like that, like,
can you help me do this even though I'm not
giving you anything in return? Like that's how some of
the crowdfunding things feel to me.
Speaker 2 (15:35):
Sure, So I was talking about ensuring that this just
doesn't become a hobby. There's nothing wrong with hobbies. Sure,
there's nothing wrong with pouring money into hobbies, but really
really expensive hobbies that you justify and kind of call
a business in your mind, that's what we want you
to avoid. And so I think to that end, maybe
what this takes is just being slightly more organized with
your finances. Again, I'm not saying that you're not, but
(15:56):
if you have currently maybe because he said he goes
out in the ground, you know, out there and make stuff,
So maybe he is making some stuff and he's selling
some stuff. But maybe what it takes is opening an
actual business, a checking account, and keeping those finances separate,
because then you can start to quantify and show that like, okay, sweet,
I'm actually generating revenue as opposed to maybe just absorbing
some of those dollars into your general monthly budget, right,
(16:19):
and also absorbing some of those expenses that maybe perhaps
even more than what you're generating. But I think having
that delineated and separated will allow you to and it's
like fuel on the fire to get you producing more,
creating an excellent product, getting it out there, marketing it.
In order for you to know that the light at
the end of the tunnel is to have enough on hand,
(16:39):
Like Joll said, maybe at first to insulate, get the
HVA like a little portable air conditioning thing out there.
But then beyond that, okay, get a fairly comfortable space.
Next let's make let's get I don't know, twenty thirty
thousand dollars up that way we can I can get
a slab poored, a nice big garage, big workshop. I
think maybe if you start treating this more like an
(17:00):
official business and jumping through some of the hoops that
go with getting an EI in the employee identification number,
just some of the more official things, that might change
how it is that you are viewing viewing the side
hustle as well.
Speaker 1 (17:14):
Yeah, And I think one episode I would recommend you
go back and listen to Justin is episode two forty
seven that we did with Alan Donegan, and that whole
episode was about starting the business with zero dollars and
he was really creative, I think in a lot of
ways that he approached helping other people start a business.
He runs something called I think business school startup and
like that. So yeah, Alan Rox and his motto is
(17:35):
fail fast and fail cheap, which I think is a
good one, right to keep in mind as you're getting
this off the ground. Start that business, yes, but find
creative ways to keep your retirement intact and keep your
debt to a minimum while you're doing so. You'll be
glad you did, especially once money starts coming in. That's
profit that's not coming just to pay down the debt
you took out. So I think if you start in
a way that is, like you said, bootstrapping, and I
(17:56):
think that is the best way to go for your
personal finances, and it's going to make you think about
how you go about doing this business thing more intentionally. Yeah, totally. Yeah.
Speaker 2 (18:07):
So I just thought of another little side thing. There's
a or at least in town, there was a woodworking
shop they're building out furniture for different restaurants and breweries
and whatnot, and they would they had like a burn
like a stamp that they stuck on their tables, and
that was a way that anybody and everybody that went
to that brewery saw that stamp there on the table.
And so maybe that's a way to offer a discount
(18:28):
and just like, hey, I'm willing to do this for you.
Normally I would charge this, but if you let me
put my business name or my logo or something like
that on there, that might be a way for you
to start spreading the word a little more quickly. That way,
you're able to ramp up more quickly, you're able to
quit scale more quickly as well.
Speaker 1 (18:42):
One other thought, what about renting someone else's space who
already does it? Maybe they work Monday through Friday, and
you say, hey, can I rent your space on Saturdays
for this amount of money. I don't know that there's
all sorts of ways to skin the cat. Maybe what
just going to the most expensive option, which is folding
a new workshop that's in that he didn't cold and
all that stuff. That's probably a one step two far
(19:03):
at this point in the game.
Speaker 2 (19:04):
That's right, Yeah, I couldn't agree more. All right, we've
got more questions to get to, including the luxury sports
car question. We'll get to that plus others right after this.
Speaker 1 (19:22):
All right, Matt, let's keep going. We've got more listener
questions to get to. It always warms my heart when
we get questions from teenage listeners. We got another one here.
Speaker 5 (19:31):
Hi. My name is Amerius. I am sixteen years old
and living in Ontario.
Speaker 3 (19:35):
Canada.
Speaker 5 (19:36):
I listened to your podcasts all the time, and today
a question popped into my head while I was listening
to the ninth episode, Retirement investing is simpler than you think.
My question is can I still earn money and possibly
have a head start in managing it at even an
early age. My worst fear is to be financially struggling,
whether it that's because I don't have good money management
(19:57):
skills or because I don't have enough money for retirement
and work till I'm dead. So I was wondering if
you could talk about how I could start managing my
money as early as possible so I can have experience
from when I'm older and also kind of have a
head to start with retirement and such. If you have
any advice, be as brutal as you want. I am
always open to honesty and you guys are great at that.
(20:19):
That's a great week, and thank you for your time.
Speaker 1 (20:22):
That's two weeks in a row.
Speaker 2 (20:23):
Now that we've heard from somebody younger from Canada, did
you do some sort of like Canadian marketing?
Speaker 6 (20:29):
Uh?
Speaker 1 (20:30):
Planned out iodates and Facebook targeted ads? Hey straight to
I like it. Anybody who likes hockey and maple syrup.
Speaker 2 (20:37):
It might be an over genitalization of Maris. I hope
you're not offended at Joel. It is Joel who said
that about it this time. Yeah, I do cringe honestly
thinking about some of those older episodes that are still
up and available for listening. But Ameris, I am incredibly
impressed that not only are you listening to the podcast,
you have reached out and now we're answering your question.
We're getting to you and hopefully we can help you
(20:59):
out here. But you just have it's amazing that you've
got like this desire, that you've got the maturity to
achieve some of these goals, some of these financial goals
at such a young age. It's just crazy impressive.
Speaker 1 (21:09):
And well, there we are.
Speaker 2 (21:10):
Best to tell you what we would have told ourselves
at your age, because I think I speak for both
of the jol that we were both pretty dumb at either.
Speaker 1 (21:17):
Year sage of sixteen. I did not know anything about
anything at that point in time, much less money and investment.
So like some of it I knew, but even still no,
I didn't.
Speaker 2 (21:29):
It didn't change how I acted because I'm like, well,
I know what I'm supposed to do or what I
should be interested in. But the fact is, I think
Emeris is she has the knowledge, but she's also got
the desire and like the willpower to actually see it through.
To me, that's more impressive than just having the information.
Speaker 1 (21:44):
Yeah, I know, it's a potent combo for sure, And
so yeah, let's talk about what Ameris needs to know
so she can get where she wants to go. And first, Ameres,
the first encouragement we would give you is to become
a lifelong learner. You're already doing this, right. You're listening
to personal finance podcasts when most your friends are probably not.
Speaker 3 (22:01):
Right.
Speaker 1 (22:02):
I can't imagine that most of your friends are listening
to how to Money or anything like that. They're probably
listening to some comedy podcast, which is great. There's some
great comedy podcasts out there. But if y'all are listening,
shout out to all of the Maris' friends, Yeah, exactly,
or to any teenagers out there. We love that you're again,
Matt and I. It's hard for us to imagine that
considering where we were at sixteen, Like we weren't thinking
about this stuff, and it's so encouraging to hear younger
(22:23):
folks actually listening to this stuff and caring. But everything
you're learning is giving you a leg up, and those
skills and lessons are going to compound in their effectiveness
over time. So like the average person, they really don't
start asking these questions until age forty, and then it
can feel like they're drinking from a fire hose. Our
brain loses plasticity right as we age. I was just
(22:44):
thinking about that the other day and how I'm just
my daughter is like better with technology than I am,
and she's ten. And so the I think the more
regularly you read, you listen, and you talk about these things,
the more curiosity you bring to the game right now,
the more you're gonna thrive. And so that involved continuing
to go down this path, continuing to listen, and continuing
to implement all along the way.
Speaker 2 (23:04):
Yeah, I think this is a really important point. It
makes me think of something we just briefly mentioned in
response to Justin's question about investing in yourself, because it's
certainly tempting to hear about compounding returns, right, and then
you start shoveling as much money as possible into different
investment accounts. That being said, don't neglect to grow your
career prospects. Don't neglect to grow your income at the
(23:26):
same time, because that can have really far reaching impacts
allowing you to sock away more money over time. Right,
And it's not just about the here now. But again
going back to Justin, he's not just working on the
gig apps because he's looking to make a buck now.
He's looking at a larger time horizon, and we want
you to do that as well when it comes to
(23:47):
how it is that you're handling your money. Because a
high income it doesn't always lead to financial success, but
increasing your earning potential it's a really big part of
the equation. And yeah, but it also takes balance as well,
because I'm like, we're focusing on like financial success and
career success. But some other advice I wish I'd maybe
(24:08):
had as well is that, like I think you might
be hearing this, and again, it feels like you're kind
of getting the cheat code. You know how money works,
and if you go for that, like with like full bore,
you might neglect relationships, you might neglect hobbies like we're
talking about earlier, and we want you to have like
life success, not just financial and career success. So don't
forget about the things that interest you. Don't forget about
(24:31):
forget about your family, don't forget about like your physical
and your emotional health, like all the different aspects of
life that make it interesting. Because at the end of
the end of the day, if you're only focused on money,
and obviously that's we're all about. Focusing on money, that's
what we talk about here day in and day out.
But if that is all that you're thinking about and
you're not broadening that aperture to take in some of
(24:53):
the other things that make life awesome, well, at the
end of the day, you're not gonna have anything else.
You're just gonna have money, which is helpful, But need
to make sure that you are developing these other aspects.
Speaker 1 (25:02):
Of your life as well, which is the main theme
throughout one of my favorite stories, a Christmas Carol. Right,
like Evanezer Scrooge. Sure he's got money, but he don't
have any in friends, and his family hates him, and
he doesn't care about people who are less fortunate than
he is. And so obviously the author, Charles Dickens, is
trying to tell us that this is no way to
live a life, and so yes, we want you to
learn how to make more money, how to invest and
(25:25):
save it. Well, but I think Matt, you're spot on.
You don't want to do it to the point where
you've given up other things that matter and make us
human and make life worth living. But another good idea
we would say is to keep your debt load to
a minimum because like let's say it's important as well. Yeah,
you have to use credit cards, which we're totally fine with.
We'll pay them off on time and in full every
single month, and then you know, set that payment to
(25:46):
auto pay maybe so you don't forget. Automating is a
really helpful thing to do. And from what we hear,
at least college is cheaper in Canada, which is great.
But if you opt to pursue a higher education, try
to minimize the death that you take on your early twenties.
Self will thank you just a few years down the road.
But man, keeping that debt to a minimum on the
front end will create less pain less difficulty for you
(26:07):
financially later in life. That's going to help you to
be able to stack away more money in those early
working years than your peers who have opted to take
on bigger debt burdens. So you're in this prime age
to be able to think about, well, how much am
I going to take on debt wise for school for
higher education? You might even say, guess what, I've got
these other interests to these entrepreneurial bents, and I don't
even know if college is for me, but yeah, it's
(26:30):
at least it's very much worth thinking about the value proposition,
how much you're likely to make based on the degree
you're getting, how much joy you're going to get from it,
and then also how you can limit the debt to
get that degree.
Speaker 2 (26:40):
Totally Okay, So you just said a bunch there that
made me think of two additional things, all which are,
like you're talking about her peers who might be saddled
with college debt. The community that you surround yourself with.
I think that's really important as well, because I think
your friends can have just an outsized impact on your
financial and life trajectory, right cause, yeah, if you are
(27:01):
with a group of folks who seemingly are doing great
in school and they're all on the path to go
to prestigious colleges and whatnot, and that's just what you've
always been told, and you're going to apply to all
the best schools and no matter what, if you get accepted,
you gotta go, no matter the cost. As opposed to
maybe folks who are thinking slightly counter culturally and they're thinking, maybe,
like you said, more entrepreneurially, like what problems are out
(27:24):
in the world, What service or product could I provide
and solve this problem in creative manner? That's business right there. Like,
I think a lot of times folks here business and
they think of, oh, you got to go to business
school and you got to learn all this stuff. No, like,
there are ways to be in business that are as
simple as that, where you are just solving a very clear,
(27:45):
identifiable problem that population are really to pay for.
Speaker 1 (27:49):
Yeah.
Speaker 2 (27:49):
Absolutely, And along those lines as well as far as
college goes, I think more like the more the older
I get and the older my kids get, I am
I just really love the idea of a gap year.
And I think for thirteen, you know years, by the
time someone graduates as a senior, they've never made a
decision as to what they're going to do next, Like
(28:09):
what am I gonna do next year? Well, I don't know,
that's been Oh yeah, maybe that's because you didn't have
to decide. You just went from sixth grade to seventh grade. Right, Oh,
you just went from ninth grade to tenth grade. You're
on this track, this education track. And I think a
gap year can be so important when it comes to
pausing for a second and thinking what else does.
Speaker 1 (28:26):
Life have to offer?
Speaker 2 (28:27):
Like, how else are other people making a living? I
think that's one of the aspects of travel that's so
important and so valuable because you can see that, oh man,
there are people living all different sorts of ways that
don't necessarily involve going to four plus more years of college.
It can broads in order to make a living. So yeah,
I think I think the gap year taking even just
(28:48):
going like a tech getting a job, learning a trade,
doing something for a few months, can just be such
a good departure to hit pause on that education track.
And I'm a huge fan of higher education, but I
do think there are a lot of college attendees who
are there and when they haven't necessarily thought about why
they're there.
Speaker 1 (29:07):
That's the gap year. That's what it's perfect for you,
helping you figure out whether or not that's the right
move for you. And I and I think it can
give you a renewed passion to go back to school,
like you have put more effort in it too. And
I thought that's how Emily has felt to going back
to grad school. Took a big, a big gap between
college and grad school, and now like there's a decade plus,
there's a difference in the gap decade. Yeah, there's. Yeah,
there's a difference in how she views the classes she's
taken then the early to mid twenty somethings, just because
(29:31):
I bet that time off and that passion has taken
time to build. But last thing, this is probably the
knee jerk response you'd hear from most personal finance podcast
is like stick money into tax advantage retirement accounts so
that you can you know, you're starting young, there's more
time for that money to grow and compound. And it
is true, like that is an important thing to mention here,
but I think I really think all of the other
(29:53):
things we've talked about are far more important than that,
because as you become a lifelong learner, as you hopefully
increase your income, you learn to live a life that
you want to live, you're going to you're going to
be funneling money in that direction, and so sure, yes,
please do be sticking money into those tax advantage retirement accounts.
I know in Canada they're different than they are here
(30:14):
in the States, say, have a similar alphabet soup of
retirement accounts available to them. But the earlier you get started, yes,
the better. But I would say, as long as you're
not neglecting to invest in future, you into your own endeavors.
Maybe that is. Oh man, I'm not going to put
money into a taxi avanage retirement out because I'm gon
travel on that gap year. That's a good decision because
you know what, You'll get a job and you'll be
(30:35):
able to start investing regularly right when you get that
first job. So definitely focus on that, make sure it's
a priority, but also don't let that be the main focus,
especially right now. That's right, Yeah, And you.
Speaker 2 (30:46):
Knew that we were going to get to investing based
on the fact that you're talking the episode that you
were listening to was investing for retirement is easier than
you think. It truly is easier than you think. It's
just about getting that ball rolling at an early age
and those those returns are going to compound, which is
why we spent so much time talking about all of
the other non money things, right, which maybe you weren't
expecting and didn't want to hear. But we think personally
(31:08):
that they could be even more powerful. And it's our
show and we can.
Speaker 1 (31:11):
Do what we want.
Speaker 2 (31:12):
It's one of the things that you get to do.
Start thrown a business, Joel, Let's get to our next listener.
He has a question regarding his craft beer equivalent.
Speaker 6 (31:22):
And Matt and Jewel. Dave from New Jersey moving to Pennsylvania.
Been a listener to the pod for about four years.
You guys are great, keep up the good work. So
I'm twenty six sales engineer, just moving in with my girlfriend,
moving to Pennsylvania. Actually so lower cross living. That's great.
Probably gonna get engaged by that ring in next six months,
(31:45):
less than a year. I have about eighty thousand saved
and in cash and one hundred thousand in retirement, so
I'm pretty well set up. And my question is should
I throw my money into the car loan, pay it
off and be financially free for that for a bit,
or should I keep just saving, paying it off and
(32:06):
go from there. The only question I asked is because
it's a twenty twenty two out of s four cert
if I pre owned car is great, got very low mileage,
and I'm really obsessed with alexisis five hundred five liters
V eight reworal drive, super reliable, super comfortable, and it's
kind of a car I would want to keep forever
because it's so unique. Hopefully it's also more of a
(32:28):
behavior than it is a financial problem, because I obviously
could afford the car. So my question to you guys
is from a financial perspective, should I pay off the
car and then personally develop some good habits of looking
at my line items, continuing to budget, maybe reduce some expenses,
or maybe you know, pay off the car, feel those
(32:48):
payments for a couple months, and then decide if I.
Speaker 1 (32:51):
Want to get the car.
Speaker 6 (32:52):
Thanks for early help and thanks for making the pod.
Hopefully you guys enjoy this question, as cars are definitely
anti finance, But let me know what you think. Thanks guys.
Speaker 2 (33:03):
Dave Man, good luck on your move, and I think
and on that hopeful engagement. Yeah, I hope she says yes,
but don't.
Speaker 1 (33:11):
Well, Okay, so.
Speaker 2 (33:12):
Actually he was talking about how much cash he has
on hand. I was actually thinking, Oh no, I thought
he was about to ask how much of that eighty
thousand he should spend on a ring, and I was like,
there's too much money.
Speaker 1 (33:22):
He gets like the direction he was going with it
was getting a little nervous. Then, Yeah, I'm trying to
remember how much I spent on my ring. Family. I
didn't spend that much. Yeah, no, definitely, not anywhere close
to that. But it's still a nice ring. She loves it.
But going anywhere with the lower cost of living, it's
always nice, and Matt, we've experienced a little bit of
that since moving up to the Burbs. That is a
nice by product. You don't necessarily move for lower taxers
(33:43):
or lower cost of living if you love where you live,
but that can be helpful. And there's just a lot
going on in this question. It sounds like cars are
Matt you alluded to this his craft beer equivalent. He
likes the expensive ones, which means, Dave, you gotta be
careful so you don't make some financially unsound moves just
because you've got an obsession and an expensive one of that.
(34:03):
That's true.
Speaker 2 (34:04):
Yeah, and so Dave, you first asked about paying off
the current car loan, and that partly depends on the
interest rate that you have on that car. It sounds
like you do have the cash on hand in order
to pay that off, but if you have a rate
of around let's say four percent, but then let's say
that your cash is earning you five percent from a
(34:25):
number standpoint, there is no need to pay that thing off.
It's kind it's more of a mental thing, I guess.
And if you really want to get rid of it,
and you'd still have enough money set aside in your
emergency fund after paying off, you totally can. And at
this point it's just a personal decision that kind of
falls into a pretty.
Speaker 1 (34:42):
Solid gray area.
Speaker 2 (34:43):
But it also it also kind of depends on what
you're doing with that money, because in this case, it
sounds like, unfortunately, you're not thinking about maintaining that balance
within a high yield taving's account where you're out earning
what it is that you're paying an interest towards that car.
Note you're actually talking about spending.
Speaker 1 (34:59):
It onward depreciating asset on another depreciating asset, which is
the part that makes you love, which is good, but
that's what makes me the most uncomfortable Okay, so let's
talk about transportation costs for a second, because Dave mentioned
in this question that cars are anti finance, which isn't
far from the truth, right, Yeah, if we're getting down
to brass tacks, the reality is that this is the
area where most people have the biggest ability to change
(35:20):
their financial lives, to change their future. The typical person
Matt thinks of buying a new car for fifty thousand dollars,
financing it for seven years and an interest rate of
nine percent or something like that is no big deal.
But living like a normal American is a bad idea,
and it is a big deal that the whole thrust
of the show is to get you to live in
a way that is not ordinary, that is hopefully extraordinary,
(35:42):
and that changes your financial stress levels and your ability
to achieve financial independence. And so changing just this one thing,
how much you spend on cars, is going to have
an incredible impact on your ability to save and invest
for the future. That's right.
Speaker 2 (35:55):
So a quick example, because maybe some specific numbers would
actually help. The average monthly car payment today is seven
hundred and eighty nine dollars. And now if instead you
took that money, you took that seven hundred and eighty
nine bucks a month and instead you invested it for
forty years, you would have four point four million dollars.
Speaker 1 (36:13):
We needed a drum roll for that because that's really
your point four million hard to have them like that
is so much money. It's a ton just by avoiding
on average returns that we've seen over the within the
stock market.
Speaker 2 (36:23):
So I just wanted to put that out of because
that's a lot of money. And please in perspective we
will exactly. We want to put things in the right
perspective for you, because it's clear that you're not in
the boat of the average American. You are crushing it
when it comes to your finances. And so we bring
this up because it's helpful to think about the different
trade offs that you're going to be making if you
choose to own two really nice cars. Think about some
(36:44):
of the other things too, like secondary costs, like recurring costs,
and what other potential goals might you have to push
aside were you to, you know, splurge and get this
really expensive craft beer equivalent. So it's the decision only
you can make. We're not going to judge you.
Speaker 1 (36:59):
Here kind of comes down to what it is that
you want to achieve in the next ten plus years.
I think this makes me think I'm just really glad
that I don't like cars and don't care about them
to that extent, because man, it really is an expensive hobby.
Certain certain hobbies are made more expensive than others, and
it's okay to have that hobby, but we just want
to make sure Dave, that you're doing it at doing
things in the right order. And so if you can
(37:19):
avoid car debt altogether and keep your car costs reasonable
as a percentage of your budget, all while saving and
investing for your future, planning and paying for that ring
and for that wedding, you might be able to afford
that other fancy car. But given the fact that you
have a car note currently and you're out of place
in time where every dollar matters, we would start saving
for that goal, but hold off on the actual purchase
(37:40):
for the time being, because you know, you said that
you can obviously afford the car, but that too is
in the eye of the beholder.
Speaker 2 (37:46):
Right.
Speaker 1 (37:46):
You hear the term house poor, people instinctively know what
that is. It's possible to be car poor too, And
I think again, you've done a better job saving and
investing than most people. But you might kind of fall
into that camp if you had two expensive rides like this,
And we don't want that for you. We want you
to build up your finances so that you can easily
afford that car splurge in the future where it's like
(38:07):
you know, and both of them pretty and clear. And yeah,
it's still an expensive endeavor, but it's not nearly as
expensive as it would be if you were getting rid
of all your cash, or if you were taking on
a boatload of debt or keeping expensive debt around.
Speaker 2 (38:20):
Yeah, that's why, Okay, yeah, I mean the longer I
think about it, the more I think I would encourage him,
even if he does have a lower interest rate Carlin,
to go ahead and pay it off, because I think
it would just feel different. A he would have less
money in the bank because you know, like I think
he said, it's an audie. The audis are expensive, and
so he might have to pay right here, like twenty
five thousand just to pay that thing off. And so
(38:41):
you're talking about twenty five yo, maybe even more twenty
five k less in the bank. That might feel a
little different. And on top of that, just again. Yeah,
you mentioned some of the different life changes that he's
got coming up. I think saving up in advance. You know,
I may not have made that decision myself to spend
that much money on things, but sim will take.
Speaker 1 (39:00):
I kind of did do that.
Speaker 2 (39:01):
Like I think back to my history in my past,
I can easily put myself in Dave's shoes, Like I
was kind of like I had a.
Speaker 1 (39:09):
Cool jeep Cherokee with a four leader or was it
a five leader?
Speaker 2 (39:12):
I don't know, it was in line six, like my
next jeep, like I it was a V eight five
point two leader, Like I still remember these things because
I was into cars, Like I had a classic rain Drover.
I love those things. I didn't have them all the
same time. But today, what do I drive an eleven
year old Hana Minivan?
Speaker 1 (39:30):
So I don't know.
Speaker 2 (39:31):
I guess I want to put that perspective out there, Dave,
because I would hate for you to plunk down a
whole lot of money on something that you might feel
differently about in the future, because you even said, like,
hopefully this is a car that you might keep forever.
But man, if there's anything I've learned about myself at
least is that my tastes change. The things I'm interested in,
My priorities, they shift over time, and I would just
(39:54):
be cautious. That would be advice I would that I
would give anybody in their twenties. Just be cautious about
the thing that you're pursuing and how much money that it's.
Speaker 1 (40:02):
Going to require of you. Yeah, try not to let
them disrupt your future. Even if it's something you want
to pursue, do it within health, healthy boundaries. Right, Yeah, Okay,
tell me about Matt. The engine on the Honda Odyssey
twenty thirteen. Is it turbo charged? How many leaders? I
don't know. I could I literally couldn't tell you.
Speaker 2 (40:18):
Hemmy, I don't know anything about the engine and our
van now except that I know it's a V six yeah,
and that I get the little change because I want
that thing run in full. Ever, Man, we're at like
close to one hundred and sixty thousand miles now, I think.
Speaker 1 (40:30):
Well, okay, we got more questions to get to on
this episode, Matt, including one about how accessible Roth funds
are for you if you want to retire early. We'll
get to that and more right after this.
Speaker 2 (40:48):
All right, we are back we're taking two more questions,
and this specific question has to do with early retirement.
Let's get nerdy with it for a second.
Speaker 7 (40:56):
Hey man, Joel, this is Nate from Oklahoma. I have
a question about a roth for one k conversion to
a roth ira conversion when it comes to laddering for retirement.
I see all sorts of articles around rolling over traditional
four one k into a traditional ra and then converting
(41:17):
it into a roth in the five year strategy. But
I don't see rolling over a roth four one k
into a roth ra.
Speaker 3 (41:25):
So this is my question. My question is, when you
roll over a roth four one k into a roth ray?
Does the full amount that you roll over? Is that
something you can access before fifteen nine and a half?
Thanks guys, I appreciate it all.
Speaker 1 (41:39):
Right, Matt. Now I'm thinking about my one of my
new favorite songs on the new Jason Isbel album called
The King of Oklahoma. There's a lot of Oklahoma references
in this one, but Oklahoma so hot these days. It's
such a good song, and you know what, Nate is
setting himself up to be the King of Oklahoma financially speaking.
Let's let's get to this question. Nate we're big fans
of roth money. We talked about that actually a couple
of weeks ago on a Friday flight. And the reasons
(42:02):
are that ROTH dollars are more flexible, and while contributing
to a roth ira or four to one k increases
what you're going to pay in taxes now, it makes
a lot of sense for a lot of folks from
a future tax rate and tax planning perspective. It sounds
like you have realized that, and that's kind of why
you're opting for the ROTH version of some of those
retirement accounts. That's right, yeah, Nate.
Speaker 2 (42:22):
He also mentioned the five year rule, which basically means
that you can't take money out of a roth ira
unless that account's been in existence for at least five years.
And it doesn't actually matter how old you are, right
even if you are older than fifty nine and a half.
And so this is just another reason to open a
roth ira earlier in life. And you could be one
hundred and then be like, sorry, you gotta wait.
Speaker 1 (42:42):
Tight even if you can only contribute a tiny little bit,
if you're rolling over those funds into.
Speaker 2 (42:48):
A roth ira that you've had for a while. Though,
the four one K funds that you move over, they
get treated favorably. They're actually grandfathered in essentially, And so
that's not the case if you're opening a new wroth ira,
and Nate, you also might be referring to the five
year seasoning process of funds that you are able to
convert from a traditional four oh one K to a
(43:10):
roth ira as well, and so the way that works
for other folks who are less familiar with it. But basically,
that money that gets converted from a traditional four one K,
it's got to sit there for five years before you
can get your hands on it, even if that account
has been open more than five years.
Speaker 1 (43:23):
Again, lots of rules here. Yeah, it comes to retirement account. Again,
we're getting rerdy with it. Sometimes it gets tricky. But
the heart of your question, Nate, is about whether or
not you can tap those funds before fifty nine and
a half, once they've settled into the roth ira, once
you've taken roth four o one K money and said no, no, no,
now it's roth Ira money. And so the thing is
that the money you roll over from your wroth fool
and k it actually retains the same properties and characteristics.
(43:45):
A helpful way to think about this is this is
why it's called a Wroth four one K to roth
Ira rollover because yeah, so actually he's it's it's interesting
because in his question he called it a conversion. It's
technically not a conversion. It's a rollover. It's still post tax.
It's apples stapples instead of apples. Don't warn to exactly right. Yeah,
but the good news is that any of your contributions
made to the Wroth four oh one K, I can
(44:07):
try to stay that clearly, the Wroth four one K
those are actually they are accessible tax and penalty free
once they have been rolled over into a roth Ira. Yeah.
Speaker 2 (44:17):
Okay, So it might be helpful to give another quick
quick example here, And this is actually an illustration that
our friend Sean mulaney. He's a CPA, he's a fee
only fiduciary planner and a financial independence enthusiast. Yes he's
he's given this examples, but with these specific numbers. So
let's say you've got a Wroth four oh one K
with one hundred thousand dollars in it, seventy thousand dollars
(44:37):
as contributions, and thirty thousand dollars as earnings and when
you roll over that Wroth four to one K into
a wroth IRA, it maintains that same split. And since
you're able to withdraw roth Ira contributions tax and penalty free,
you now have access to those funds in quote unquote
early retirement, the seventy thousand dollars specifically prior to the
(44:59):
all importan fifty nine and a half age marker. And
so it sounds like that this is what you're asking about,
But it never hurts to check with the tax professional
before making major changes because we don't give financial tax
advice here. We are this is for entertainment purposes only.
But if this was me, this is exactly how I
would be approaching the situation with. If you're going back
(45:20):
to a Roth conversion ladder right where you're converting four
to one K funds into a wroth IRA. That's a
conversion and that entire bucket, and I think that's what
you're asking about. That entire bucket is accessible early after
its seasons for five years. But since you're talking about
the Wroth four one k, it's only the contributions that
you make to that Roth four one K that you
can tap early.
Speaker 1 (45:40):
Yeah, by the way if you need help doing that,
Rollover Capitalizes a great company who can help you make
it happen for free. They make it easy. We've got
a review on the website that will link to and
anybody else out there who's like I need to do
a rollover or a conversion. Capitalized can help and they're
pretty solid, so they're worth looking into. And Nate, good luck.
Keep talking money away into those ROTH accounts. Future you
is is going to be thankful, Matt. Let's get to
(46:02):
our last question for this episode. This one is really
coming from a guy who has done it all right,
and it's an optimization play.
Speaker 8 (46:12):
Hey guys, my name's Kenton. I'm thirty eight from Ohio.
My question is should I pay off my mortgage early
or add to my investments with my extra money? Currently,
I have one hundred and ninety thousand dollars in investments
and I'm adding about twenty percent between my four to
one k at work and a maxed out ROTH. My
(46:33):
mortgage has sixty thousand left and seventeen years on a
thirty year mortgage, which is four and a half percent.
I'm fully funded for any other emergencies and have no
other debts. I will have around twenty two hundred dollars
a month to either a pay off my home in
a little over two years or b add it to
(46:54):
my other investments. I just don't know if one's better
than the others. Curious what you guys think. You guys
are awesome and keep up the great word.
Speaker 3 (47:04):
Thank you.
Speaker 2 (47:05):
Actually, Kenton, you are awesome. You are crushing it.
Speaker 1 (47:09):
I just want to be like Knton when I grow up.
Speaker 2 (47:12):
I mean, I have a paid for a house right
in a couple of years. I feel like this is
a classic personal finance question for sure. But Kenton, the
world is your oyster because you have made such great
financial choices over the years. And honestly, here's here's the
big reveal. Whichever direction you go is gonna be fine. Right,
Like we are talking about making an optimized choice. This
(47:33):
is the last little percent that's gonna get you exactly
perhaps to where you want, as opposed to some of
the initial moves that are able to get folks most
of the way there. Yeah, no, no, no, you have
the ability now to fine tune it and get you
exactly where it is that you want to be. So
kudos man, right, yeah, right off the back great job.
Speaker 1 (47:49):
Yeah, it's like an embarrassment of riches. This is really
like the definition of a cat bird seat. Yeah.
Speaker 2 (47:54):
I think there are a lot of folk who are thinking, oh, yeah, okay,
I just wish that I had enough money on hand
that I'm trying to figure out what to do with it,
as opposed to having the need or the desire drive
the decision.
Speaker 1 (48:05):
I guarantee you Kent didn't get there overnight though, And
a lot of people they see this, they hear this,
and they're like, well, man, I wish I could be there,
But I guarantee you it was a lot, a lot
of hard work and a lot of like years and
consistency doing the right thing paycheck paycheck in, paycheck out
and stuff like that, making my choices. So Kenton, Yeah, congrats.
(48:25):
And when you have a maxed out ROTH and a
twenty percent contribution to your workplace retirement account, Matt, you're
going to be able to retire early. You're going to
be able to retire, you know, probably in your late
forties or fifties if you wanted to as well. This
is these are the kind of choices Kenton's going to
have at as disposal. Plus a fully funded emergency fund
and no debt besides some mortgage. I mean this again,
this is a great place to be, but this is
(48:46):
and this is really a money gear number seven question
where you get to choose your own adventure.
Speaker 3 (48:50):
We have.
Speaker 1 (48:51):
You know, you can find the money gears up on
our website at how to money dot com. There are
seven money gears. Money gear number seven is when you've
kind of made it. You're basically on the press of
financial independence, and these kind of questions are the ones
you get to decide what you want to do with.
There isn't necessarily a next thing you have to do,
and so if you'd like the mental satisfaction, let's say
(49:11):
Kenton of having zero debt, if that means a lot
to you, then that's probably the direction you should go.
And you should probably pay off the mortgage sooner rather
than later. But if we're if we're going just by
the numbers, that's probably not the best decision necessarily.
Speaker 2 (49:23):
Sure, yeah, yeah, to pay it off early, that would
be I would give him the emotional win, But to
keep it around, that's technically the numbers win. If you're
just crunching the numbers and getting technical with it and
that's because you can clearly earn more in a savings
account than you would by paying off that mortgage. Like
you literally don't even have to take on any investing
risk in order to outperform. And specifically, he said, sixty
(49:45):
thousand dollars at four and a half percent, like that
is something that I personally would probably keep around, sure,
and I would be prioritizing other financial goals, but again
it's a personal choice. This really does all come down
to the things that you're pursuing your personal goals, and
like it kind of sounds like you're a little indifferent
as to whether or not you keep the mortgage around
or whether you pay it off. And so with that
(50:05):
in mind, I if this was me, I would optimize
for the numbers and then build up some cash that's
accessible and just wait and see give yourself the ability
to pounce on an opportunity that might come along, because
right now is again you don't have a need or
a desire that's fueling you or pointing you in a
direction to make a certain financial decision. And so instead
give yourself the most liquidity possible, and what that means
(50:28):
is socking up a lot of money within your high
yield savings, sitting on that and waiting for the ability
to invest in a business startup. The desire might come
along in a couple of years for you to start
your own business or like again Justino the very beginning
of the episode, and you would have the cash on
hand to say, oh, my gosh, I am a great
woodworker who like who knew this is something that I
(50:49):
am good at that I would want to pursue.
Speaker 1 (50:52):
Boom.
Speaker 2 (50:53):
You could be in position to build out the dopest
woodworking shop of all time there on your property.
Speaker 1 (50:58):
So it feels me that's what I. Building up canal
to set yourself up means building up optionality options. Yep. Yeah.
And so why when you're not forced to pay this
debt off early and the numbers seem totally in your
favor keeping it around, would you pay it off when
you could retain those options with no harm no harm done.
I think if Matt if savings account rates were still
(51:20):
at like half a percent and his mortgage was at
four and a half and this was like the last
debt in his life, we would our answer would probably
be different. But when savings accounts are paying five percent,
then there's just no reason to feel like feel compelled
to pay it off more quickly. That's true, and this
often just last thing for Kenton. You can also enjoy
some of your money too. I don't know if you
(51:41):
are like me in that way.
Speaker 2 (51:42):
He didn't share his craft beer equivalent, right, but maybe
he could find a couple more craft beer equivalents.
Speaker 1 (51:48):
Yeah, And I'm not saying you need to take a
page out of Dave's book and buy some fancy automobile
or anything like that. Dave not trying to throw you
under the bus man, but unless that's your thing, can
if it is, get you another audite, get you the
lexus whatever. Yeah, if you've been putting something like that
off though, like purchases you enjoy for years and years
and years because you've been doing the right thing, make
sure to take a step back and say, what am
I doing this for? What are my bigger goals? How
(52:10):
do I in what ways can I spend money that
moves the needle as well? Because you have the ability
and the right to be able to spend some of
that money that comes in, to be able to make
your life better and be able to enjoy some of
the fruits of your labors, So don't push that back
off being one of those hyper frugal people who never
allows themselves the benefit of some of the money that
(52:30):
comes in and some of the gains that they've made.
Speaker 2 (52:32):
That's right, Yeah, And if you have no idea what
it is that you want to spend your money on,
but just be like, hey, just go out with some
friends and cover dinner. Start start there, because I don't know.
That sounds like a lot of fun to me as well,
cover drinks, cover the cost of dinner.
Speaker 1 (52:44):
But can way to go.
Speaker 2 (52:45):
You are crushing it and keep up the good work, Joel.
Let's get back to the beer that you and I
enjoyed during this episode. This is with a J dream
right j r.
Speaker 1 (52:55):
Ea M.
Speaker 2 (52:56):
This is a strawberry cherry, cotton candy jellybean sour. Was
it's kind of like a pastry kind of had some
pastry notes going on, but who's the spine?
Speaker 1 (53:06):
It was like Burley Oak Brewing Company. Did you hear
that at the beginning? I don't know if I did. Okay,
but yeah, I'll say it was good. This was This
was interesting. It was it was not too over the top.
I thought it was going to be based on reading
what was in it, I was like, this is ridiculous. Yeah,
but no, I feel like pretty good. The brewer pulled
off a balanced delight here of a beverage with some
light vanilla notes, the kind of fruitiness coming together as
(53:30):
well with that, it made it really smooth, really tasty.
It's it's not necessarily like a go to style for me,
but it's a rare breed and so I enjoyed this one.
Speaker 2 (53:37):
It made me think of so recently the coffee shop
that's right here next to us near us that they
moved locations recently, and when they did that.
Speaker 1 (53:45):
They literally across the street.
Speaker 2 (53:47):
They started offering Dippin' dots. So just to they sell dip,
they sell Dippin' dots and King King of pops like
the local Atlanta popsicle.
Speaker 1 (53:57):
So I was there with my I'm gonna go broke
when I go with my kids.
Speaker 2 (53:59):
I was with three out of four of my kids,
and the lady she didn't I don't want to say
she made the mistake of saying this, but she was
just like, oh, and by the way, we've got dippin' dots,
and all the kids were like, dippin' dots.
Speaker 1 (54:12):
I was just like, oh, cheese, I scream of the
future since nineteen eighty two.
Speaker 2 (54:15):
I guess we're gonna do that. But this beer reminds
me of one of the flavors, which is rainbow. That's
just the flavor, right, So it's just kind of like
a fruit punch metally. Remind you've, like pourn some skittles
in your hand, thrown it back right, Rainbow, It's got
all the difference or I guess I'm thinking of nerds
as well. But okay, just like a multi flavored fruit
(54:36):
punch action going on. But like you said, I agree,
it wasn't over the top, wasn't too sweet. I appreciate
that that it didn't necessarily spike my blood sugar as we.
Speaker 1 (54:44):
Sat here and enjoy this one.
Speaker 2 (54:45):
But yeah, fun to specifically have a beer from a
brewery that we've never I've been able to enjoy before.
But buddy, that's gonna be it for this episode.
Speaker 1 (54:54):
Don't forget to leave some solid reviews over on Apple Podcasts.
Wherever it is that you listen, there's a good shot
you can win an awesome pair of socks to represent
one of your favorite money podcasts. That's right, get that
screenshot over to us before midnight on Wednesday. Email it
to how tomoneypod at gmail dot com.
Speaker 2 (55:11):
That's right, and we will announce winners on Friday. But Joel,
that's gonna be it buddy for this one. Until next time,
Best friends Out, Best Friends Out,
Welcome to How to Money. I'm Joel and I am Matt,
and today we're answering your listener questions.
Speaker 2 (00:25):
Yes, sir, it is a Monday, and you know that
means we are answering your listener questions. They've got five
great ones to get to today. Do it every Monday.
Speaker 1 (00:33):
Now.
Speaker 2 (00:33):
By the way, it's Sara making a memo. You know,
we were thinking about, Okay, maybe we'll make the listener
questions be the Wednesday episode. No no, no, for whatever reason,
the ask how to Money Monday episode. It's just like
it's ingrained into my brain and that's what we're doing today. Yeah,
we uh a listener he's asking about how he can
go about ramping up a side hustle. Another listener he's
(00:54):
figuring out what to do specifically when your craft beer
equivalent are luxury sports cars.
Speaker 1 (00:59):
Oh that we've.
Speaker 2 (01:01):
Got more of a nerdy question, an early retirement question.
How to access some wroth four O one K funds early.
We'll get to those three plus a couple others during
our episode today.
Speaker 1 (01:12):
Yeah, a nice variety here, kind of like what's in
our beer? We'll give to that in a second. But
real quick, man, my uncle he and my aunt. They
take a trip together once or twice a year. Well,
my uncle, he's kind of the cheerleader type. He's always
rooting me on, which is just super sweets, nice time
an uncle like that, right, And so he and my
aunt they're making trips. They always go to historical sites
across the country. They want to see, like the house
(01:34):
where a old school president grew up or something like that,
and so whenever, all that kind of stuff. And so
my uncle is sending me pictures from all over the
United States. But what is he put in front of
those historical landmarks that had money sock? And he's sending
me pictures with our sock in front of like wait,
like a little white house and stuff like that.
Speaker 2 (01:53):
He doesn't have them on, he's just holding it in
the frame, just holding in the frame like a single
dirtyes like Dobby from Harry Potter.
Speaker 1 (02:00):
I think it's clean. I think it's clean. It's a
singular slock. But how adorable is that? It's sweet? Like
it's pretty cute. It just shows you how proud he
is and how he wants to like send me a
bunch of those and we'll post them. I will, I will.
They're very they're super cute. But on that note, I
was thinking, wow, we've still got some super sweet how
to money socks sitting around that we have not given
away to listeners. It's true, it's time to give away
some more of those because one they're comfy, two that
(02:23):
are adorable. You're gonna love them if you like the
show and so look good and they feel good. That's right.
You can already win some if you subscribe to our
newsletter and share our winter stuff.
Speaker 2 (02:32):
You can earn some or earn some, yes, but now
we're offering the opportunity I guess for folks to win.
Speaker 1 (02:37):
Some right now, the bar is very low. All you
gotta do is submit a review for our podcast, whether
it's on Spotify, Apple Podcasts, wherever you listen, and send
us an email showing that you've left one. And even
if you left one in the past, just send us
an email with a screenshot of that review and we'll
include you in this giveaway.
Speaker 2 (02:55):
Yeah, okay, I know why you doing this, because we
are A recent review gave us like three stars because
they're rip on me for talking about the five percent
student loan payment.
Speaker 1 (03:04):
Which I will say they did. They took you to
task on that. But I took you to task in
the moment because I thought that was a ridiculous thing
to say that five percent of that's not your discretion
of your buzble. Okay, you know, don't double please don't.
Speaker 2 (03:17):
I think the reason I don't touch Okay, now, when
you are when you are an entrepreneur, and I literally
have been, like been self employed my entire life. Like
there have been years where we've gone from like where
our income has decreased by like literally forty to fifty percent,
like going from like earning ninety k down to like
forty kah, and we're like, ooh, it's gonna be it's
gonna be a little bit tighter this year. I think
(03:38):
with that in mind, I'm like, oh, five percent, that
doesn't Yeah, doesn't seem that big of a deal. Sure,
I understand it certainly impacts folks, but at least it's
better than ten, which it certainly is. But I'm not
I certainly don't discount the folks out there who are
feeling that crunch more significantly.
Speaker 1 (03:51):
I totally get that. I think that's probably how but
that's that's where you want to give some socks. Well,
we've got to make up for your indiscretions and hopefully
get reviews from people who love it and don't hold
it against you.
Speaker 2 (04:01):
I still appreciate that they at least give us three stars,
because it's not like they went from loving the show
to hating it. They're just kind of annoyed at maybe
some of the stuff we said recently.
Speaker 1 (04:10):
Sure, and so that's fair if you want to help
help us, those reviews really do matter. They help other
people who are interested in potentially listening to the show
know what they're getting into. And so if you've liked it,
we'd love it if you would leave a review, leave
us a solid one over there, Yeah, especially if you've
been listening for a while haven't yet, And you will
be entered to win away one of five pairs of
socks who are given away. We will make that happen
(04:32):
by let's say, Wednesday, by midnight, Wednesday midnight, and we
will announce on the Friday flight the five winners of
the How To Money Socks. No doubt, all right, so
we have looking socks. We hope you win. May the
odds be ever in your favor. But the beer that
we're having on today's episode is called Dream. It is
a strawberry cherry cotton candy jelly bean sour. We'll give
our thoughts on this kitchen sink of a beer at
(04:54):
the end of the episode of a beer that was
made by a ten year old, or like an oop
a loopa in a candy store. Right, what's it called?
Is it dream? It's like Jay Yeah, with Jay Dream
Jeram Joe Raim. That's right, makes me think of like
Kareem abdul Jabbar Fly to the Concords. Oh, okay, was
it der?
Speaker 3 (05:11):
Yeah?
Speaker 1 (05:12):
Boy, I haven't thought about that one in a while.
Be neither.
Speaker 2 (05:14):
All right, let's get to all that. Note, it's Business
Times the topic at hand.
Speaker 1 (05:18):
We are get to it. Answer your listener questions. We
do it every Monday, and if you have a question
for us, we would love we would love to hear
it and tackle it on an upcoming ask htm episode.
All you got to do is record a voice memo
and send it our way. If you want the specific instructions,
just go to how tomoney dot com slash ask. Let's
get to the first question, though, Matt. This one comes
from a listener who wants to ramp up a side
(05:38):
hustle turn it into a legit business.
Speaker 4 (05:40):
Hey Matt and Joel Justin from northeastern Oklahoma. Here. I
really want to start my own word working business and
transition to working for a full time over the next
few years, while I continue to work my job at
the post office long enough to be able to make
a smooth transition from one profitable gig to the other.
My current shop situation is not ideal, to say the
least is in working out of my uninsulated and unconditioned
(06:01):
garage and find it is mentally and physically straining to
get out there to work in the frigid cold or
blazing humid heat we tend to get here. I have
about twenty seven thousand dollars in my TSP I could
draw on to either retrofit my garage to a nice
small shop or build a larger separate shop altogether, which
(06:22):
would be ideal so my wife could have a garage back.
Do you think it's a good idea to draw upon
retirement savings to invest in starting up a personal small business.
Other financing methods I've considered are cash out, refinancing, heelock,
the old bootstrap method which I've been using or potentially crowdfunding.
Any thoughts or recommendations. Obviously, building the shop would be
(06:44):
more expensive than a retrofit. I'd like your thoughts on
that as well. Thank you for your time and your response,
and I love the podcast.
Speaker 1 (06:52):
Joe.
Speaker 2 (06:52):
What do you think Nick Offerman would say to Justin
about getting out there in the hot or the cold?
I mean, I think you'd say, grin and Barrett, that's right,
you pull out his inner Ron Swanson. I can't not
think of ronoff nick Offerman or Ron Swanson rot.
Speaker 1 (07:05):
Yeah. I love that, you Off, because that's how everyone
thinks of him. Now he's done other great stuff too,
beyond just Ron Swanson and part.
Speaker 2 (07:12):
He will always be known though. Yeah, I'm playing that role.
Speaker 1 (07:15):
He was great in that that one episode of the
Last of Us. I mean he's done a lot of
good stuff. Oh that's right, Yeah, fantastic. Yeah. Well, and
I gotta say, Justin's calling from Oklahoma. We actually have
two listeners from Oklahoma on this episode, and it makes
me think of one of my favorite artists I've been
listening to a whole lot lately, Zack Bryan from Oklahoma. Dude. Yeah, okay, yeah,
I'll give him music wreck here, I'm not I'm not
afraid if you like kinda Brian kind of sounds like country.
(07:37):
It's like indie country for sure. So yeah, if you
like that, col I like the I don't like the
radio country. But if you like indie sort of country,
then Zack Bryan's for you. You don't like it to be
too polished, right exactly, Or I don't want to think
about pontoon boats like that's just.
Speaker 2 (07:51):
But pontoon boats and boots and right and the dog
that where you put them and yeah, that kind of stuff.
Speaker 1 (07:56):
I don't care about that. Suff But first off, justin
we are rooting for you, man, I mean, I think
it's important to mention. First off, there's a difference between
side gigs and starting your own business. That difference is stark.
A side hustle can help you snag cash in return
for your time. Think of this as driving for Uber
something like that probably the most significant well known side
hustle out there.
Speaker 2 (08:16):
Right Typically where beholding to a specific platform who could
on a whim change the rules of the game.
Speaker 1 (08:21):
Starting this business that you're looking to start right now,
it might not be immediately lucrative, whereas with Uber, you
can turn on this bigot right away. You might not
make a ton, but you can start making money right now.
The truth is, though, that you're far more likely to
be able to turn this effort the one to start
this business instead of going with a side hustle into
a recurring and sustainable income. Right, And some gigs make
(08:41):
sense sometimes, but building a business is a better long
term proposition. That's what we want to encourage people to
go in that direction. And it sounds like you're taking
the right approach. Yeah.
Speaker 2 (08:49):
Yeah, We actually dedicated an entire episode to this very topic,
the difference between side gigs, side hustles and what would
eventually be able to become a business, something that you're
able to run yourself.
Speaker 1 (08:59):
Will make sure to link to that way. Well, that's
that's really difference between gig, a gig, and a side hustle.
I think a side hustle ability that you're looking to
turn into a full fledged business and it might take
a while and you might not be making any money
for a minute while you're doing.
Speaker 2 (09:10):
It, whereas like the different gig apps, those are the
end in and of themselves. Yeah, and they're not a
great end that's right for most people. Yeah, so justin
let's talk about building out that shop. Let's talk about
how you can go about it. We are all about
investing your in yourself in this future business, which can
pay some massive dividends right often bigger ones than just
simply investing in the market. Focusing on your own personal development.
(09:34):
This can just lead to higher earnings, it can lead
to better career prospects. But do you need this tricked
out shop at which shop? In order to get the
side hustle off the ground?
Speaker 1 (09:43):
Do you have to have exhibit being proud of your
shop in order for it to be you know enough
for you to do what you need to do in it.
Speaker 2 (09:49):
And then on top of that, should you tap your
retirement savings, specifically your TSP in order to pull this off?
Speaker 1 (09:55):
We would definitely say.
Speaker 2 (09:57):
No to the latter. Tapping retirement funds. It's rarely a
good idea because you're going to be paying tax on
the amount that you're going to be withdrawing at your
income level, at your income bracket, plus a ten percent penalty,
which is in our opinion, too stiff of a punishment
for you to take. And by the way, TSPs are
thrift savings plans. Which are essentially government for one case,
(10:18):
they've got the same withdrawal rules and limitations and whatnot.
They're just yeah, four one k's for government workers with
them being working for the post office.
Speaker 1 (10:27):
That's how he has that ts Because of course, it
can't be simple. We can't just have like one plan
all the way across. We have to have a bunch
of different alpha alphabet soups worth of plans. That's just
how we roll with the best country. Hey, I like thrift.
Speaker 2 (10:37):
It's got the word thrift in it, which makes me happy. Well,
by the way, I like thrift savings plan better than
four to one k.
Speaker 1 (10:43):
Do you think most of our listeners got that exhibit reference?
Do you think they watched to pit my ride back
in the day. I'm gonna get fifty to fifty That
was a cultural phenomenon back in the day. But if
you didn't back, you're in the trunk. I got a
fish take it. It was pretty great. Yeah's awesome. All right. Well,
here's the thing plus on top of that, you don't
have those dollars working for your future, right if you
opt to take that money out talking about your actual
(11:05):
retirement dollars, Yeah, build out that place for you to work.
Buil out the workshop. You're not only paying tax and penalty,
you're also saying, Hey, all these twenty seven thousand dollars
that I've essentially pigeonholed for my future that's going to
build and grow, Well, it's no longer doing that. So
it's a double whammy. You'd really be starting from scratch.
Then when it came to retirement savings, which is not
a place we want you to find yourself, it's a
(11:26):
better idea to reduce your contributions moving forward so you
can build up a shop, renovation, nest egg more quickly. Right,
instead of taking the money out, just put less money
in and do that bootstrap method you were kind of
talking about, Like, we'll try to help you think outside
of the box too. Could you maybe continue using that
garage if you put insulation in it and used a
portable HVAC. I think both of those things combined would
(11:48):
cost you something like a thousand bucks, plus there's a
federal tax credit for putting in that insulation. Makes me
think about we just kind of did some things to
our sunroom. We insulated it. It was just like a
room where you couldn't hang out the summer in the
winter and how you can And so just a thirty
percent off that johnk Right's right insulation in a mini
split which come with federal tax rebates, and it was
pretty inexpensive overall, and it made that room far more livable.
(12:11):
And so it doesn't necessarily solve the problem of your
wife wanting her garage back. It's not perfect, but it
cannot solve that problem. No, no, I don't know that
we can solve at all. But it gives you a
more comfortable place to work at least while you're trying
to see if it's going to make sense to go
in this direction full time or not. That's right.
Speaker 2 (12:26):
Yeah, so don't dig into your retirement dollars. And in
regards to financing, you also mentioned cash out refinances there
on your home. Kind of depends on your current rate,
but probably not. This is probably not an option that
we would recommend as well, because you're likely giving up
an incredible fixed rate.
Speaker 1 (12:43):
In order to do that cash out reformentioned closing costs.
Speaker 2 (12:46):
Yeah, a helock, that's a maybe if you've got a
plan to pay it back quickly. But then again, you
mentioned bootstrapping there at the end, and that is, honestly,
I think, going to be the best way to go
about this, especially let's say this small business venture doesn't
quite take off like you thought it would. Obviously hopefully
that that's not the case. Again, we're rooting for you.
We want this to work, but we don't want you
(13:08):
to be left in the lurch. Basically at the end
of the day, we don't want you to not only
have no savings, but even no money invested for your
future with the workshop, a nice workshop that that isn't
producing the revenue that you hope for. You know, you
really want to achieve like a proof of concept before
pouring even more money into creating a nicer space, which
it sounds like you might be able to do because
(13:28):
it sounds like this is something you're already pursuing. But
I think finding a way for you to gradually ramp
up this side hustle into like a legitimate business, that
that is the best way forward.
Speaker 1 (13:38):
It makes you think of when we were starting the podcast,
Matt and we were nobody nowhere, nobody, We had no
listeners for the first few episodes, and there was there's
a big hill to climb. But what if we had
said let's build out this sweet podcast studio, hoping that
we're going to be successful in this business. Well, we
needed some sort of proof of concepts, some sort of
like listenership revenue in order to justify sinking more mone
(14:00):
the end of the business. And so we needed a
bare minimum recording at your dining room table to get
off the ground and occasionally your dining room table. Yeah,
but beyond that, we tried to keep it, you know,
keep it cheap. Yeah.
Speaker 2 (14:11):
I mean we literally borrowed gear the cheapest what is it,
the sure sight, it's the ubiquitous universal mic that you
see everywhere. We didn't like, what are the like we've
I don't even.
Speaker 1 (14:20):
Know what these are. Seven So now the seven bees,
four hundred.
Speaker 2 (14:23):
These are nice mics, but we didn't even get these
until like two years ago something like that. We did
not and we just continue to use our old microphones.
Obviously these are nicer and they certainly benefit the podcast.
But that was after we had been you know, certainly
showing that Okay, this is something that's actually earning money,
it's not necessarily just a hobby.
Speaker 1 (14:39):
Yeah, And let me just mention this one last thing.
Justin mentioned crowd funny. He said that what if I like,
take to the streets, or take to the internet, take
to Facebook, and see if other people want to help
fund my venture. I'd say one of the best ways
to get the funds to do the build out would
be to pre sell some items that you're planning on making.
Could you get the word out and start taking orders now,
instead of thinking you have like furnished the showroom and
(15:00):
before you start making sales, think about it the other way.
You can say, hey, listen, I'm making all this cool stuff.
Here is here are a couple examples of what it's
going to look like. Can I make you a custom
bench for your front porch or swing for your front porch,
whatever it is that you're making and show people a
proof of concept and then take orders, get those orders
pre funded, essentially have people pay in advance, and that
(15:23):
hopefully helps you go down the path without begging for money,
which I think is some crowdfunding kind of like that, like,
can you help me do this even though I'm not
giving you anything in return? Like that's how some of
the crowdfunding things feel to me.
Speaker 2 (15:35):
Sure, So I was talking about ensuring that this just
doesn't become a hobby. There's nothing wrong with hobbies. Sure,
there's nothing wrong with pouring money into hobbies, but really
really expensive hobbies that you justify and kind of call
a business in your mind, that's what we want you
to avoid. And so I think to that end, maybe
what this takes is just being slightly more organized with
your finances. Again, I'm not saying that you're not, but
(15:56):
if you have currently maybe because he said he goes
out in the ground, you know, out there and make stuff,
So maybe he is making some stuff and he's selling
some stuff. But maybe what it takes is opening an
actual business, a checking account, and keeping those finances separate,
because then you can start to quantify and show that like, okay, sweet,
I'm actually generating revenue as opposed to maybe just absorbing
some of those dollars into your general monthly budget, right,
(16:19):
and also absorbing some of those expenses that maybe perhaps
even more than what you're generating. But I think having
that delineated and separated will allow you to and it's
like fuel on the fire to get you producing more,
creating an excellent product, getting it out there, marketing it.
In order for you to know that the light at
the end of the tunnel is to have enough on hand,
(16:39):
Like Joll said, maybe at first to insulate, get the
HVA like a little portable air conditioning thing out there.
But then beyond that, okay, get a fairly comfortable space.
Next let's make let's get I don't know, twenty thirty
thousand dollars up that way we can I can get
a slab poored, a nice big garage, big workshop. I
think maybe if you start treating this more like an
(17:00):
official business and jumping through some of the hoops that
go with getting an EI in the employee identification number,
just some of the more official things, that might change
how it is that you are viewing viewing the side
hustle as well.
Speaker 1 (17:14):
Yeah, And I think one episode I would recommend you
go back and listen to Justin is episode two forty
seven that we did with Alan Donegan, and that whole
episode was about starting the business with zero dollars and
he was really creative, I think in a lot of
ways that he approached helping other people start a business.
He runs something called I think business school startup and
like that. So yeah, Alan Rox and his motto is
(17:35):
fail fast and fail cheap, which I think is a
good one, right to keep in mind as you're getting
this off the ground. Start that business, yes, but find
creative ways to keep your retirement intact and keep your
debt to a minimum while you're doing so. You'll be
glad you did, especially once money starts coming in. That's
profit that's not coming just to pay down the debt
you took out. So I think if you start in
a way that is, like you said, bootstrapping, and I
(17:56):
think that is the best way to go for your
personal finances, and it's going to make you think about
how you go about doing this business thing more intentionally. Yeah, totally. Yeah.
Speaker 2 (18:07):
So I just thought of another little side thing. There's
a or at least in town, there was a woodworking
shop they're building out furniture for different restaurants and breweries
and whatnot, and they would they had like a burn
like a stamp that they stuck on their tables, and
that was a way that anybody and everybody that went
to that brewery saw that stamp there on the table.
And so maybe that's a way to offer a discount
(18:28):
and just like, hey, I'm willing to do this for you.
Normally I would charge this, but if you let me
put my business name or my logo or something like
that on there, that might be a way for you
to start spreading the word a little more quickly. That way,
you're able to ramp up more quickly, you're able to
quit scale more quickly as well.
Speaker 1 (18:42):
One other thought, what about renting someone else's space who
already does it? Maybe they work Monday through Friday, and
you say, hey, can I rent your space on Saturdays
for this amount of money. I don't know that there's
all sorts of ways to skin the cat. Maybe what
just going to the most expensive option, which is folding
a new workshop that's in that he didn't cold and
all that stuff. That's probably a one step two far
(19:03):
at this point in the game.
Speaker 2 (19:04):
That's right, Yeah, I couldn't agree more. All right, we've
got more questions to get to, including the luxury sports
car question. We'll get to that plus others right after this.
Speaker 1 (19:22):
All right, Matt, let's keep going. We've got more listener
questions to get to. It always warms my heart when
we get questions from teenage listeners. We got another one here.
Speaker 5 (19:31):
Hi. My name is Amerius. I am sixteen years old
and living in Ontario.
Speaker 3 (19:35):
Canada.
Speaker 5 (19:36):
I listened to your podcasts all the time, and today
a question popped into my head while I was listening
to the ninth episode, Retirement investing is simpler than you think.
My question is can I still earn money and possibly
have a head start in managing it at even an
early age. My worst fear is to be financially struggling,
whether it that's because I don't have good money management
(19:57):
skills or because I don't have enough money for retirement
and work till I'm dead. So I was wondering if
you could talk about how I could start managing my
money as early as possible so I can have experience
from when I'm older and also kind of have a
head to start with retirement and such. If you have
any advice, be as brutal as you want. I am
always open to honesty and you guys are great at that.
(20:19):
That's a great week, and thank you for your time.
Speaker 1 (20:22):
That's two weeks in a row.
Speaker 2 (20:23):
Now that we've heard from somebody younger from Canada, did
you do some sort of like Canadian marketing?
Speaker 6 (20:29):
Uh?
Speaker 1 (20:30):
Planned out iodates and Facebook targeted ads? Hey straight to
I like it. Anybody who likes hockey and maple syrup.
Speaker 2 (20:37):
It might be an over genitalization of Maris. I hope
you're not offended at Joel. It is Joel who said
that about it this time. Yeah, I do cringe honestly
thinking about some of those older episodes that are still
up and available for listening. But Ameris, I am incredibly
impressed that not only are you listening to the podcast,
you have reached out and now we're answering your question.
We're getting to you and hopefully we can help you
(20:59):
out here. But you just have it's amazing that you've
got like this desire, that you've got the maturity to
achieve some of these goals, some of these financial goals
at such a young age. It's just crazy impressive.
Speaker 1 (21:09):
And well, there we are.
Speaker 2 (21:10):
Best to tell you what we would have told ourselves
at your age, because I think I speak for both
of the jol that we were both pretty dumb at either.
Speaker 1 (21:17):
Year sage of sixteen. I did not know anything about
anything at that point in time, much less money and investment.
So like some of it I knew, but even still no,
I didn't.
Speaker 2 (21:29):
It didn't change how I acted because I'm like, well,
I know what I'm supposed to do or what I
should be interested in. But the fact is, I think
Emeris is she has the knowledge, but she's also got
the desire and like the willpower to actually see it through.
To me, that's more impressive than just having the information.
Speaker 1 (21:44):
Yeah, I know, it's a potent combo for sure, And
so yeah, let's talk about what Ameris needs to know
so she can get where she wants to go. And first, Ameres,
the first encouragement we would give you is to become
a lifelong learner. You're already doing this, right. You're listening
to personal finance podcasts when most your friends are probably not.
Speaker 3 (22:01):
Right.
Speaker 1 (22:02):
I can't imagine that most of your friends are listening
to how to Money or anything like that. They're probably
listening to some comedy podcast, which is great. There's some
great comedy podcasts out there. But if y'all are listening,
shout out to all of the Maris' friends, Yeah, exactly,
or to any teenagers out there. We love that you're again,
Matt and I. It's hard for us to imagine that
considering where we were at sixteen, Like we weren't thinking
about this stuff, and it's so encouraging to hear younger
(22:23):
folks actually listening to this stuff and caring. But everything
you're learning is giving you a leg up, and those
skills and lessons are going to compound in their effectiveness
over time. So like the average person, they really don't
start asking these questions until age forty, and then it
can feel like they're drinking from a fire hose. Our
brain loses plasticity right as we age. I was just
(22:44):
thinking about that the other day and how I'm just
my daughter is like better with technology than I am,
and she's ten. And so the I think the more
regularly you read, you listen, and you talk about these things,
the more curiosity you bring to the game right now,
the more you're gonna thrive. And so that involved continuing
to go down this path, continuing to listen, and continuing
to implement all along the way.
Speaker 2 (23:04):
Yeah, I think this is a really important point. It
makes me think of something we just briefly mentioned in
response to Justin's question about investing in yourself, because it's
certainly tempting to hear about compounding returns, right, and then
you start shoveling as much money as possible into different
investment accounts. That being said, don't neglect to grow your
career prospects. Don't neglect to grow your income at the
(23:26):
same time, because that can have really far reaching impacts
allowing you to sock away more money over time. Right,
And it's not just about the here now. But again
going back to Justin, he's not just working on the
gig apps because he's looking to make a buck now.
He's looking at a larger time horizon, and we want
you to do that as well when it comes to
(23:47):
how it is that you're handling your money. Because a
high income it doesn't always lead to financial success, but
increasing your earning potential it's a really big part of
the equation. And yeah, but it also takes balance as well,
because I'm like, we're focusing on like financial success and
career success. But some other advice I wish I'd maybe
(24:08):
had as well is that, like I think you might
be hearing this, and again, it feels like you're kind
of getting the cheat code. You know how money works,
and if you go for that, like with like full bore,
you might neglect relationships, you might neglect hobbies like we're
talking about earlier, and we want you to have like
life success, not just financial and career success. So don't
forget about the things that interest you. Don't forget about
(24:31):
forget about your family, don't forget about like your physical
and your emotional health, like all the different aspects of
life that make it interesting. Because at the end of
the end of the day, if you're only focused on money,
and obviously that's we're all about. Focusing on money, that's
what we talk about here day in and day out.
But if that is all that you're thinking about and
you're not broadening that aperture to take in some of
(24:53):
the other things that make life awesome, well, at the
end of the day, you're not gonna have anything else.
You're just gonna have money, which is helpful, But need
to make sure that you are developing these other aspects.
Speaker 1 (25:02):
Of your life as well, which is the main theme
throughout one of my favorite stories, a Christmas Carol. Right,
like Evanezer Scrooge. Sure he's got money, but he don't
have any in friends, and his family hates him, and
he doesn't care about people who are less fortunate than
he is. And so obviously the author, Charles Dickens, is
trying to tell us that this is no way to
live a life, and so yes, we want you to
learn how to make more money, how to invest and
(25:25):
save it. Well, but I think Matt, you're spot on.
You don't want to do it to the point where
you've given up other things that matter and make us
human and make life worth living. But another good idea
we would say is to keep your debt load to
a minimum because like let's say it's important as well. Yeah,
you have to use credit cards, which we're totally fine with.
We'll pay them off on time and in full every
single month, and then you know, set that payment to
(25:46):
auto pay maybe so you don't forget. Automating is a
really helpful thing to do. And from what we hear,
at least college is cheaper in Canada, which is great.
But if you opt to pursue a higher education, try
to minimize the death that you take on your early twenties.
Self will thank you just a few years down the road.
But man, keeping that debt to a minimum on the
front end will create less pain less difficulty for you
(26:07):
financially later in life. That's going to help you to
be able to stack away more money in those early
working years than your peers who have opted to take
on bigger debt burdens. So you're in this prime age
to be able to think about, well, how much am
I going to take on debt wise for school for
higher education? You might even say, guess what, I've got
these other interests to these entrepreneurial bents, and I don't
even know if college is for me, but yeah, it's
(26:30):
at least it's very much worth thinking about the value proposition,
how much you're likely to make based on the degree
you're getting, how much joy you're going to get from it,
and then also how you can limit the debt to
get that degree.
Speaker 2 (26:40):
Totally Okay, So you just said a bunch there that
made me think of two additional things, all which are,
like you're talking about her peers who might be saddled
with college debt. The community that you surround yourself with.
I think that's really important as well, because I think
your friends can have just an outsized impact on your
financial and life trajectory, right cause, yeah, if you are
(27:01):
with a group of folks who seemingly are doing great
in school and they're all on the path to go
to prestigious colleges and whatnot, and that's just what you've
always been told, and you're going to apply to all
the best schools and no matter what, if you get accepted,
you gotta go, no matter the cost. As opposed to
maybe folks who are thinking slightly counter culturally and they're thinking, maybe,
like you said, more entrepreneurially, like what problems are out
(27:24):
in the world, What service or product could I provide
and solve this problem in creative manner? That's business right there. Like,
I think a lot of times folks here business and
they think of, oh, you got to go to business
school and you got to learn all this stuff. No, like,
there are ways to be in business that are as
simple as that, where you are just solving a very clear,
(27:45):
identifiable problem that population are really to pay for.
Speaker 1 (27:49):
Yeah.
Speaker 2 (27:49):
Absolutely, And along those lines as well as far as
college goes, I think more like the more the older
I get and the older my kids get, I am
I just really love the idea of a gap year.
And I think for thirteen, you know years, by the
time someone graduates as a senior, they've never made a
decision as to what they're going to do next, Like
(28:09):
what am I gonna do next year? Well, I don't know,
that's been Oh yeah, maybe that's because you didn't have
to decide. You just went from sixth grade to seventh grade. Right, Oh,
you just went from ninth grade to tenth grade. You're
on this track, this education track. And I think a
gap year can be so important when it comes to
pausing for a second and thinking what else does.
Speaker 1 (28:26):
Life have to offer?
Speaker 2 (28:27):
Like, how else are other people making a living? I
think that's one of the aspects of travel that's so
important and so valuable because you can see that, oh man,
there are people living all different sorts of ways that
don't necessarily involve going to four plus more years of college.
It can broads in order to make a living. So yeah,
I think I think the gap year taking even just
(28:48):
going like a tech getting a job, learning a trade,
doing something for a few months, can just be such
a good departure to hit pause on that education track.
And I'm a huge fan of higher education, but I
do think there are a lot of college attendees who
are there and when they haven't necessarily thought about why
they're there.
Speaker 1 (29:07):
That's the gap year. That's what it's perfect for you,
helping you figure out whether or not that's the right
move for you. And I and I think it can
give you a renewed passion to go back to school,
like you have put more effort in it too. And
I thought that's how Emily has felt to going back
to grad school. Took a big, a big gap between
college and grad school, and now like there's a decade plus,
there's a difference in the gap decade. Yeah, there's. Yeah,
there's a difference in how she views the classes she's
taken then the early to mid twenty somethings, just because
(29:31):
I bet that time off and that passion has taken
time to build. But last thing, this is probably the
knee jerk response you'd hear from most personal finance podcast
is like stick money into tax advantage retirement accounts so
that you can you know, you're starting young, there's more
time for that money to grow and compound. And it
is true, like that is an important thing to mention here,
but I think I really think all of the other
(29:53):
things we've talked about are far more important than that,
because as you become a lifelong learner, as you hopefully
increase your income, you learn to live a life that
you want to live, you're going to you're going to
be funneling money in that direction, and so sure, yes,
please do be sticking money into those tax advantage retirement accounts.
I know in Canada they're different than they are here
(30:14):
in the States, say, have a similar alphabet soup of
retirement accounts available to them. But the earlier you get started, yes,
the better. But I would say, as long as you're
not neglecting to invest in future, you into your own endeavors.
Maybe that is. Oh man, I'm not going to put
money into a taxi avanage retirement out because I'm gon
travel on that gap year. That's a good decision because
you know what, You'll get a job and you'll be
(30:35):
able to start investing regularly right when you get that
first job. So definitely focus on that, make sure it's
a priority, but also don't let that be the main focus,
especially right now. That's right, Yeah, And you.
Speaker 2 (30:46):
Knew that we were going to get to investing based
on the fact that you're talking the episode that you
were listening to was investing for retirement is easier than
you think. It truly is easier than you think. It's
just about getting that ball rolling at an early age
and those those returns are going to compound, which is
why we spent so much time talking about all of
the other non money things, right, which maybe you weren't
expecting and didn't want to hear. But we think personally
(31:08):
that they could be even more powerful. And it's our
show and we can.
Speaker 1 (31:11):
Do what we want.
Speaker 2 (31:12):
It's one of the things that you get to do.
Start thrown a business, Joel, Let's get to our next listener.
He has a question regarding his craft beer equivalent.
Speaker 6 (31:22):
And Matt and Jewel. Dave from New Jersey moving to Pennsylvania.
Been a listener to the pod for about four years.
You guys are great, keep up the good work. So
I'm twenty six sales engineer, just moving in with my girlfriend,
moving to Pennsylvania. Actually so lower cross living. That's great.
Probably gonna get engaged by that ring in next six months,
(31:45):
less than a year. I have about eighty thousand saved
and in cash and one hundred thousand in retirement, so
I'm pretty well set up. And my question is should
I throw my money into the car loan, pay it
off and be financially free for that for a bit,
or should I keep just saving, paying it off and
(32:06):
go from there. The only question I asked is because
it's a twenty twenty two out of s four cert
if I pre owned car is great, got very low mileage,
and I'm really obsessed with alexisis five hundred five liters
V eight reworal drive, super reliable, super comfortable, and it's
kind of a car I would want to keep forever
because it's so unique. Hopefully it's also more of a
(32:28):
behavior than it is a financial problem, because I obviously
could afford the car. So my question to you guys
is from a financial perspective, should I pay off the
car and then personally develop some good habits of looking
at my line items, continuing to budget, maybe reduce some expenses,
or maybe you know, pay off the car, feel those
(32:48):
payments for a couple months, and then decide if I.
Speaker 1 (32:51):
Want to get the car.
Speaker 6 (32:52):
Thanks for early help and thanks for making the pod.
Hopefully you guys enjoy this question, as cars are definitely
anti finance, But let me know what you think. Thanks guys.
Speaker 2 (33:03):
Dave Man, good luck on your move, and I think
and on that hopeful engagement. Yeah, I hope she says yes,
but don't.
Speaker 1 (33:11):
Well, Okay, so.
Speaker 2 (33:12):
Actually he was talking about how much cash he has
on hand. I was actually thinking, Oh no, I thought
he was about to ask how much of that eighty
thousand he should spend on a ring, and I was like,
there's too much money.
Speaker 1 (33:22):
He gets like the direction he was going with it
was getting a little nervous. Then, Yeah, I'm trying to
remember how much I spent on my ring. Family. I
didn't spend that much. Yeah, no, definitely, not anywhere close
to that. But it's still a nice ring. She loves it.
But going anywhere with the lower cost of living, it's
always nice, and Matt, we've experienced a little bit of
that since moving up to the Burbs. That is a
nice by product. You don't necessarily move for lower taxers
(33:43):
or lower cost of living if you love where you live,
but that can be helpful. And there's just a lot
going on in this question. It sounds like cars are
Matt you alluded to this his craft beer equivalent. He
likes the expensive ones, which means, Dave, you gotta be
careful so you don't make some financially unsound moves just
because you've got an obsession and an expensive one of that.
(34:03):
That's true.
Speaker 2 (34:04):
Yeah, and so Dave, you first asked about paying off
the current car loan, and that partly depends on the
interest rate that you have on that car. It sounds
like you do have the cash on hand in order
to pay that off, but if you have a rate
of around let's say four percent, but then let's say
that your cash is earning you five percent from a
(34:25):
number standpoint, there is no need to pay that thing off.
It's kind it's more of a mental thing, I guess.
And if you really want to get rid of it,
and you'd still have enough money set aside in your
emergency fund after paying off, you totally can. And at
this point it's just a personal decision that kind of
falls into a pretty.
Speaker 1 (34:42):
Solid gray area.
Speaker 2 (34:43):
But it also it also kind of depends on what
you're doing with that money, because in this case, it
sounds like, unfortunately, you're not thinking about maintaining that balance
within a high yield taving's account where you're out earning
what it is that you're paying an interest towards that car.
Note you're actually talking about spending.
Speaker 1 (34:59):
It onward depreciating asset on another depreciating asset, which is
the part that makes you love, which is good, but
that's what makes me the most uncomfortable Okay, so let's
talk about transportation costs for a second, because Dave mentioned
in this question that cars are anti finance, which isn't
far from the truth, right, Yeah, if we're getting down
to brass tacks, the reality is that this is the
area where most people have the biggest ability to change
(35:20):
their financial lives, to change their future. The typical person
Matt thinks of buying a new car for fifty thousand dollars,
financing it for seven years and an interest rate of
nine percent or something like that is no big deal.
But living like a normal American is a bad idea,
and it is a big deal that the whole thrust
of the show is to get you to live in
a way that is not ordinary, that is hopefully extraordinary,
(35:42):
and that changes your financial stress levels and your ability
to achieve financial independence. And so changing just this one thing,
how much you spend on cars, is going to have
an incredible impact on your ability to save and invest
for the future. That's right.
Speaker 2 (35:55):
So a quick example, because maybe some specific numbers would
actually help. The average monthly car payment today is seven
hundred and eighty nine dollars. And now if instead you
took that money, you took that seven hundred and eighty
nine bucks a month and instead you invested it for
forty years, you would have four point four million dollars.
Speaker 1 (36:13):
We needed a drum roll for that because that's really
your point four million hard to have them like that
is so much money. It's a ton just by avoiding
on average returns that we've seen over the within the
stock market.
Speaker 2 (36:23):
So I just wanted to put that out of because
that's a lot of money. And please in perspective we
will exactly. We want to put things in the right
perspective for you, because it's clear that you're not in
the boat of the average American. You are crushing it
when it comes to your finances. And so we bring
this up because it's helpful to think about the different
trade offs that you're going to be making if you
choose to own two really nice cars. Think about some
(36:44):
of the other things too, like secondary costs, like recurring costs,
and what other potential goals might you have to push
aside were you to, you know, splurge and get this
really expensive craft beer equivalent. So it's the decision only
you can make. We're not going to judge you.
Speaker 1 (36:59):
Here kind of comes down to what it is that
you want to achieve in the next ten plus years.
I think this makes me think I'm just really glad
that I don't like cars and don't care about them
to that extent, because man, it really is an expensive hobby.
Certain certain hobbies are made more expensive than others, and
it's okay to have that hobby, but we just want
to make sure Dave, that you're doing it at doing
things in the right order. And so if you can
(37:19):
avoid car debt altogether and keep your car costs reasonable
as a percentage of your budget, all while saving and
investing for your future, planning and paying for that ring
and for that wedding, you might be able to afford
that other fancy car. But given the fact that you
have a car note currently and you're out of place
in time where every dollar matters, we would start saving
for that goal, but hold off on the actual purchase
(37:40):
for the time being, because you know, you said that
you can obviously afford the car, but that too is
in the eye of the beholder.
Speaker 2 (37:46):
Right.
Speaker 1 (37:46):
You hear the term house poor, people instinctively know what
that is. It's possible to be car poor too, And
I think again, you've done a better job saving and
investing than most people. But you might kind of fall
into that camp if you had two expensive rides like this,
And we don't want that for you. We want you
to build up your finances so that you can easily
afford that car splurge in the future where it's like
(38:07):
you know, and both of them pretty and clear. And yeah,
it's still an expensive endeavor, but it's not nearly as
expensive as it would be if you were getting rid
of all your cash, or if you were taking on
a boatload of debt or keeping expensive debt around.
Speaker 2 (38:20):
Yeah, that's why, Okay, yeah, I mean the longer I
think about it, the more I think I would encourage him,
even if he does have a lower interest rate Carlin,
to go ahead and pay it off, because I think
it would just feel different. A he would have less
money in the bank because you know, like I think
he said, it's an audie. The audis are expensive, and
so he might have to pay right here, like twenty
five thousand just to pay that thing off. And so
(38:41):
you're talking about twenty five yo, maybe even more twenty
five k less in the bank. That might feel a
little different. And on top of that, just again. Yeah,
you mentioned some of the different life changes that he's
got coming up. I think saving up in advance. You know,
I may not have made that decision myself to spend
that much money on things, but sim will take.
Speaker 1 (39:00):
I kind of did do that.
Speaker 2 (39:01):
Like I think back to my history in my past,
I can easily put myself in Dave's shoes, Like I
was kind of like I had a.
Speaker 1 (39:09):
Cool jeep Cherokee with a four leader or was it
a five leader?
Speaker 2 (39:12):
I don't know, it was in line six, like my
next jeep, like I it was a V eight five
point two leader, Like I still remember these things because
I was into cars, Like I had a classic rain Drover.
I love those things. I didn't have them all the
same time. But today, what do I drive an eleven
year old Hana Minivan?
Speaker 1 (39:30):
So I don't know.
Speaker 2 (39:31):
I guess I want to put that perspective out there, Dave,
because I would hate for you to plunk down a
whole lot of money on something that you might feel
differently about in the future, because you even said, like,
hopefully this is a car that you might keep forever.
But man, if there's anything I've learned about myself at
least is that my tastes change. The things I'm interested in,
My priorities, they shift over time, and I would just
(39:54):
be cautious. That would be advice I would that I
would give anybody in their twenties. Just be cautious about
the thing that you're pursuing and how much money that it's.
Speaker 1 (40:02):
Going to require of you. Yeah, try not to let
them disrupt your future. Even if it's something you want
to pursue, do it within health, healthy boundaries. Right, Yeah, Okay,
tell me about Matt. The engine on the Honda Odyssey
twenty thirteen. Is it turbo charged? How many leaders? I
don't know. I could I literally couldn't tell you.
Speaker 2 (40:18):
Hemmy, I don't know anything about the engine and our
van now except that I know it's a V six yeah,
and that I get the little change because I want
that thing run in full. Ever, Man, we're at like
close to one hundred and sixty thousand miles now, I think.
Speaker 1 (40:30):
Well, okay, we got more questions to get to on
this episode, Matt, including one about how accessible Roth funds
are for you if you want to retire early. We'll
get to that and more right after this.
Speaker 2 (40:48):
All right, we are back we're taking two more questions,
and this specific question has to do with early retirement.
Let's get nerdy with it for a second.
Speaker 7 (40:56):
Hey man, Joel, this is Nate from Oklahoma. I have
a question about a roth for one k conversion to
a roth ira conversion when it comes to laddering for retirement.
I see all sorts of articles around rolling over traditional
four one k into a traditional ra and then converting
(41:17):
it into a roth in the five year strategy. But
I don't see rolling over a roth four one k
into a roth ra.
Speaker 3 (41:25):
So this is my question. My question is, when you
roll over a roth four one k into a roth ray?
Does the full amount that you roll over? Is that
something you can access before fifteen nine and a half?
Thanks guys, I appreciate it all.
Speaker 1 (41:39):
Right, Matt. Now I'm thinking about my one of my
new favorite songs on the new Jason Isbel album called
The King of Oklahoma. There's a lot of Oklahoma references
in this one, but Oklahoma so hot these days. It's
such a good song, and you know what, Nate is
setting himself up to be the King of Oklahoma financially speaking.
Let's let's get to this question. Nate we're big fans
of roth money. We talked about that actually a couple
of weeks ago on a Friday flight. And the reasons
(42:02):
are that ROTH dollars are more flexible, and while contributing
to a roth ira or four to one k increases
what you're going to pay in taxes now, it makes
a lot of sense for a lot of folks from
a future tax rate and tax planning perspective. It sounds
like you have realized that, and that's kind of why
you're opting for the ROTH version of some of those
retirement accounts. That's right, yeah, Nate.
Speaker 2 (42:22):
He also mentioned the five year rule, which basically means
that you can't take money out of a roth ira
unless that account's been in existence for at least five years.
And it doesn't actually matter how old you are, right
even if you are older than fifty nine and a half.
And so this is just another reason to open a
roth ira earlier in life. And you could be one
hundred and then be like, sorry, you gotta wait.
Speaker 1 (42:42):
Tight even if you can only contribute a tiny little bit,
if you're rolling over those funds into.
Speaker 2 (42:48):
A roth ira that you've had for a while. Though,
the four one K funds that you move over, they
get treated favorably. They're actually grandfathered in essentially, And so
that's not the case if you're opening a new wroth ira,
and Nate, you also might be referring to the five
year seasoning process of funds that you are able to
convert from a traditional four oh one K to a
(43:10):
roth ira as well, and so the way that works
for other folks who are less familiar with it. But basically,
that money that gets converted from a traditional four one K,
it's got to sit there for five years before you
can get your hands on it, even if that account
has been open more than five years.
Speaker 1 (43:23):
Again, lots of rules here. Yeah, it comes to retirement account. Again,
we're getting rerdy with it. Sometimes it gets tricky. But
the heart of your question, Nate, is about whether or
not you can tap those funds before fifty nine and
a half, once they've settled into the roth ira, once
you've taken roth four o one K money and said no, no, no,
now it's roth Ira money. And so the thing is
that the money you roll over from your wroth fool
and k it actually retains the same properties and characteristics.
(43:45):
A helpful way to think about this is this is
why it's called a Wroth four one K to roth
Ira rollover because yeah, so actually he's it's it's interesting
because in his question he called it a conversion. It's
technically not a conversion. It's a rollover. It's still post tax.
It's apples stapples instead of apples. Don't warn to exactly right. Yeah,
but the good news is that any of your contributions
made to the Wroth four oh one K, I can
(44:07):
try to stay that clearly, the Wroth four one K
those are actually they are accessible tax and penalty free
once they have been rolled over into a roth Ira. Yeah.
Speaker 2 (44:17):
Okay, So it might be helpful to give another quick
quick example here, And this is actually an illustration that
our friend Sean mulaney. He's a CPA, he's a fee
only fiduciary planner and a financial independence enthusiast. Yes he's
he's given this examples, but with these specific numbers. So
let's say you've got a Wroth four oh one K
with one hundred thousand dollars in it, seventy thousand dollars
(44:37):
as contributions, and thirty thousand dollars as earnings and when
you roll over that Wroth four to one K into
a wroth IRA, it maintains that same split. And since
you're able to withdraw roth Ira contributions tax and penalty free,
you now have access to those funds in quote unquote
early retirement, the seventy thousand dollars specifically prior to the
(44:59):
all importan fifty nine and a half age marker. And
so it sounds like that this is what you're asking about,
But it never hurts to check with the tax professional
before making major changes because we don't give financial tax
advice here. We are this is for entertainment purposes only.
But if this was me, this is exactly how I
would be approaching the situation with. If you're going back
(45:20):
to a Roth conversion ladder right where you're converting four
to one K funds into a wroth IRA. That's a
conversion and that entire bucket, and I think that's what
you're asking about. That entire bucket is accessible early after
its seasons for five years. But since you're talking about
the Wroth four one k, it's only the contributions that
you make to that Roth four one K that you
can tap early.
Speaker 1 (45:40):
Yeah, by the way if you need help doing that,
Rollover Capitalizes a great company who can help you make
it happen for free. They make it easy. We've got
a review on the website that will link to and
anybody else out there who's like I need to do
a rollover or a conversion. Capitalized can help and they're
pretty solid, so they're worth looking into. And Nate, good luck.
Keep talking money away into those ROTH accounts. Future you
is is going to be thankful, Matt. Let's get to
(46:02):
our last question for this episode. This one is really
coming from a guy who has done it all right,
and it's an optimization play.
Speaker 8 (46:12):
Hey guys, my name's Kenton. I'm thirty eight from Ohio.
My question is should I pay off my mortgage early
or add to my investments with my extra money? Currently,
I have one hundred and ninety thousand dollars in investments
and I'm adding about twenty percent between my four to
one k at work and a maxed out ROTH. My
(46:33):
mortgage has sixty thousand left and seventeen years on a
thirty year mortgage, which is four and a half percent.
I'm fully funded for any other emergencies and have no
other debts. I will have around twenty two hundred dollars
a month to either a pay off my home in
a little over two years or b add it to
(46:54):
my other investments. I just don't know if one's better
than the others. Curious what you guys think. You guys
are awesome and keep up the great word.
Speaker 3 (47:04):
Thank you.
Speaker 2 (47:05):
Actually, Kenton, you are awesome. You are crushing it.
Speaker 1 (47:09):
I just want to be like Knton when I grow up.
Speaker 2 (47:12):
I mean, I have a paid for a house right
in a couple of years. I feel like this is
a classic personal finance question for sure. But Kenton, the
world is your oyster because you have made such great
financial choices over the years. And honestly, here's here's the
big reveal. Whichever direction you go is gonna be fine. Right,
Like we are talking about making an optimized choice. This
(47:33):
is the last little percent that's gonna get you exactly
perhaps to where you want, as opposed to some of
the initial moves that are able to get folks most
of the way there. Yeah, no, no, no, you have
the ability now to fine tune it and get you
exactly where it is that you want to be. So
kudos man, right, yeah, right off the back great job.
Speaker 1 (47:49):
Yeah, it's like an embarrassment of riches. This is really
like the definition of a cat bird seat. Yeah.
Speaker 2 (47:54):
I think there are a lot of folk who are thinking, oh, yeah, okay,
I just wish that I had enough money on hand
that I'm trying to figure out what to do with it,
as opposed to having the need or the desire drive
the decision.
Speaker 1 (48:05):
I guarantee you Kent didn't get there overnight though, And
a lot of people they see this, they hear this,
and they're like, well, man, I wish I could be there,
But I guarantee you it was a lot, a lot
of hard work and a lot of like years and
consistency doing the right thing paycheck paycheck in, paycheck out
and stuff like that, making my choices. So Kenton, Yeah, congrats.
(48:25):
And when you have a maxed out ROTH and a
twenty percent contribution to your workplace retirement account, Matt, you're
going to be able to retire early. You're going to
be able to retire, you know, probably in your late
forties or fifties if you wanted to as well. This
is these are the kind of choices Kenton's going to
have at as disposal. Plus a fully funded emergency fund
and no debt besides some mortgage. I mean this again,
this is a great place to be, but this is
(48:46):
and this is really a money gear number seven question
where you get to choose your own adventure.
Speaker 3 (48:50):
We have.
Speaker 1 (48:51):
You know, you can find the money gears up on
our website at how to money dot com. There are
seven money gears. Money gear number seven is when you've
kind of made it. You're basically on the press of
financial independence, and these kind of questions are the ones
you get to decide what you want to do with.
There isn't necessarily a next thing you have to do,
and so if you'd like the mental satisfaction, let's say
(49:11):
Kenton of having zero debt, if that means a lot
to you, then that's probably the direction you should go.
And you should probably pay off the mortgage sooner rather
than later. But if we're if we're going just by
the numbers, that's probably not the best decision necessarily.
Speaker 2 (49:23):
Sure, yeah, yeah, to pay it off early, that would
be I would give him the emotional win, But to
keep it around, that's technically the numbers win. If you're
just crunching the numbers and getting technical with it and
that's because you can clearly earn more in a savings
account than you would by paying off that mortgage. Like
you literally don't even have to take on any investing
risk in order to outperform. And specifically, he said, sixty
(49:45):
thousand dollars at four and a half percent, like that
is something that I personally would probably keep around, sure,
and I would be prioritizing other financial goals, but again
it's a personal choice. This really does all come down
to the things that you're pursuing your personal goals, and
like it kind of sounds like you're a little indifferent
as to whether or not you keep the mortgage around
or whether you pay it off. And so with that
(50:05):
in mind, I if this was me, I would optimize
for the numbers and then build up some cash that's
accessible and just wait and see give yourself the ability
to pounce on an opportunity that might come along, because
right now is again you don't have a need or
a desire that's fueling you or pointing you in a
direction to make a certain financial decision. And so instead
give yourself the most liquidity possible, and what that means
(50:28):
is socking up a lot of money within your high
yield savings, sitting on that and waiting for the ability
to invest in a business startup. The desire might come
along in a couple of years for you to start
your own business or like again Justino the very beginning
of the episode, and you would have the cash on
hand to say, oh, my gosh, I am a great
woodworker who like who knew this is something that I
(50:49):
am good at that I would want to pursue.
Speaker 1 (50:52):
Boom.
Speaker 2 (50:53):
You could be in position to build out the dopest
woodworking shop of all time there on your property.
Speaker 1 (50:58):
So it feels me that's what I. Building up canal
to set yourself up means building up optionality options. Yep. Yeah.
And so why when you're not forced to pay this
debt off early and the numbers seem totally in your
favor keeping it around, would you pay it off when
you could retain those options with no harm no harm done.
I think if Matt if savings account rates were still
(51:20):
at like half a percent and his mortgage was at
four and a half and this was like the last
debt in his life, we would our answer would probably
be different. But when savings accounts are paying five percent,
then there's just no reason to feel like feel compelled
to pay it off more quickly. That's true, and this
often just last thing for Kenton. You can also enjoy
some of your money too. I don't know if you
(51:41):
are like me in that way.
Speaker 2 (51:42):
He didn't share his craft beer equivalent, right, but maybe
he could find a couple more craft beer equivalents.
Speaker 1 (51:48):
Yeah, And I'm not saying you need to take a
page out of Dave's book and buy some fancy automobile
or anything like that. Dave not trying to throw you
under the bus man, but unless that's your thing, can
if it is, get you another audite, get you the
lexus whatever. Yeah, if you've been putting something like that
off though, like purchases you enjoy for years and years
and years because you've been doing the right thing, make
sure to take a step back and say, what am
I doing this for? What are my bigger goals? How
(52:10):
do I in what ways can I spend money that
moves the needle as well? Because you have the ability
and the right to be able to spend some of
that money that comes in, to be able to make
your life better and be able to enjoy some of
the fruits of your labors, So don't push that back
off being one of those hyper frugal people who never
allows themselves the benefit of some of the money that
(52:30):
comes in and some of the gains that they've made.
Speaker 2 (52:32):
That's right, Yeah, And if you have no idea what
it is that you want to spend your money on,
but just be like, hey, just go out with some
friends and cover dinner. Start start there, because I don't know.
That sounds like a lot of fun to me as well,
cover drinks, cover the cost of dinner.
Speaker 1 (52:44):
But can way to go.
Speaker 2 (52:45):
You are crushing it and keep up the good work, Joel.
Let's get back to the beer that you and I
enjoyed during this episode. This is with a J dream
right j r.
Speaker 1 (52:55):
Ea M.
Speaker 2 (52:56):
This is a strawberry cherry, cotton candy jellybean sour. Was
it's kind of like a pastry kind of had some
pastry notes going on, but who's the spine?
Speaker 1 (53:06):
It was like Burley Oak Brewing Company. Did you hear
that at the beginning? I don't know if I did. Okay,
but yeah, I'll say it was good. This was This
was interesting. It was it was not too over the top.
I thought it was going to be based on reading
what was in it, I was like, this is ridiculous. Yeah,
but no, I feel like pretty good. The brewer pulled
off a balanced delight here of a beverage with some
light vanilla notes, the kind of fruitiness coming together as
(53:30):
well with that, it made it really smooth, really tasty.
It's it's not necessarily like a go to style for me,
but it's a rare breed and so I enjoyed this one.
Speaker 2 (53:37):
It made me think of so recently the coffee shop
that's right here next to us near us that they
moved locations recently, and when they did that.
Speaker 1 (53:45):
They literally across the street.
Speaker 2 (53:47):
They started offering Dippin' dots. So just to they sell dip,
they sell Dippin' dots and King King of pops like
the local Atlanta popsicle.
Speaker 1 (53:57):
So I was there with my I'm gonna go broke
when I go with my kids.
Speaker 2 (53:59):
I was with three out of four of my kids,
and the lady she didn't I don't want to say
she made the mistake of saying this, but she was
just like, oh, and by the way, we've got dippin' dots,
and all the kids were like, dippin' dots.
Speaker 1 (54:12):
I was just like, oh, cheese, I scream of the
future since nineteen eighty two.
Speaker 2 (54:15):
I guess we're gonna do that. But this beer reminds
me of one of the flavors, which is rainbow. That's
just the flavor, right, So it's just kind of like
a fruit punch metally. Remind you've, like pourn some skittles
in your hand, thrown it back right, Rainbow, It's got
all the difference or I guess I'm thinking of nerds
as well. But okay, just like a multi flavored fruit
(54:36):
punch action going on. But like you said, I agree,
it wasn't over the top, wasn't too sweet. I appreciate
that that it didn't necessarily spike my blood sugar as we.
Speaker 1 (54:44):
Sat here and enjoy this one.
Speaker 2 (54:45):
But yeah, fun to specifically have a beer from a
brewery that we've never I've been able to enjoy before.
But buddy, that's gonna be it for this episode.
Speaker 1 (54:54):
Don't forget to leave some solid reviews over on Apple Podcasts.
Wherever it is that you listen, there's a good shot
you can win an awesome pair of socks to represent
one of your favorite money podcasts. That's right, get that
screenshot over to us before midnight on Wednesday. Email it
to how tomoneypod at gmail dot com.
Speaker 2 (55:11):
That's right, and we will announce winners on Friday. But Joel,
that's gonna be it buddy for this one. Until next time,
Best friends Out, Best Friends Out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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