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1 - Is filing for bankruptcy the best option considering overwhelming amounts of debt?
2 - Should I have multiple high yield savings accounts if my cash on hand exceeds the FDIC limit?
3 - What options does my husband have to invest as he waits on his US citizenship?
4 - Would a HELOC be a smart way to pay off some credit card debt?
5 - Will filing an insurance claim for my cracked windshield cause my premiums to go up?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Out of Money. I'm Joel, I'm Att, and
today we're answering your listener questions.
Speaker 2 (00:24):
That's right, buddy, we have some very specific personalized money
questions to get tuesday. We're not just talking in the abstract.
We're not talking about the theoretical, but we're talking about
how personal finances are personal for you as an individual.
So we've got uh.
Speaker 1 (00:38):
We'll say, by the way, when we take these questions,
the great thing is like there's hopefully a lot of
advice targeted towards the person asking the question, but.
Speaker 2 (00:46):
Learn general advice. But I guess all the personal details.
That's what makes it fun, that's what adds all the color.
That's why I love and Yeah. A listener is wondering
if they should make the car insurance claim, to make
the car insurance claim, Joel, or to not make the
car insurance claim. How about that? That is the question,
very Shakespeare and that we're going to answer today. Another
listener is wondering when whether or not filing for bankruptcy,
(01:06):
if that is going to be the best option for them.
And another listener has essentially the opposite problem, what to
do if you are over the FDIC limit within their
savings accounts. So we'll get to those plus a couple
others today.
Speaker 1 (01:19):
The short answer, get a scrooge mcdug fault, toss it
all in there, swim in the money. I would say,
if you got that kind of cash going on, we'll
get to that more in just a second of speaking
though mat of savings accounts and potentially having too much
on hand. One listener, Molly, she reached out via email
recently and she mentioned the wealth Front cash account and
I hadn't really thought of this, but it is true
(01:41):
that a lot of save these accounts that pay the
highest rates have some slightly onerous restrictions, right like, for instance,
my Discover account, they.
Speaker 2 (01:49):
Have the most scrooge like restrictions. Perhaps, yeah, they don't
want you trying to continue with things good. We can
keep going that as long as you want. They basically
won't allow you to do more than say, transactions in
a given month out of that account. So if you
wanted to, let's say, pay your mortgage and pay your
credit card bill and pay everything essentially out of that
savings account, well sorry, at some point they're gonna slap
(02:11):
your wrists and say no, no, can do so then
you got to transfer money from savings into checking and
it's a thing, right, it's just kind of annoying. Well,
these more modern banks or neo banks, right who are
paying high rates of interest, wealth Front being one of them.
Betterment has another account that's paying north of five percent
right now, Well they're allowing for unlimited withdrawals from these
(02:31):
account accounts. And it made me think like, oh, yeah,
you don't even have to really redik about that. It
reduces some of that friction. Yeah, you want to.
Speaker 1 (02:39):
Stop moving is sending money from one MAK account to
another all the time. You can literally just keep all
your money in that high interest account and then have
all your transactions coming out out of that. That would
simplify things. So yeah, great tip for Malli. And it
makes me think I'm going to reorder some things in
my own life just because yeah, I hate moving stuff
around all the time and being like when's that coming
out of that account?
Speaker 2 (03:00):
I don't mind on that much personally. Yeah, So here's
my issue is in uh, you call this superstition, you
call this being ill informed, Just put your lucky rabbits
foot in your podect I. Personally, I don't like for
any other institution out in the ether to know my
actual savings account number. The only basically the only account
(03:22):
that is linked to that is my actual checking account,
and I use my checking account routing and account number
of course to go and bill pay at auto bill
pay just all the different accounts that are polling payments
from there when the time comes at the end of
the months, you know, like credit cards what not, things
like that. But when it comes to my actual savings account,
it is not anywhere out on the internet, And in
my mind, I don't know, I just posted it, actually,
(03:44):
just just go ahead tweeted it out. In my mind,
that feels slightly more secure because there is less of
a chance for where the bulk of my savings where
that's residing. That makes sense for that to be less
I don't know, it feels less prone to being leaked
in some sort of data hackers thing like that. So
I've not researched this, but this is my reasoning for
why it is that I always only pull money from
(04:08):
my checking account or an ally they call it the spending,
call it doxing.
Speaker 1 (04:11):
I don't yeah, I don't want your savings account to
get docked publicly announced anybody. No, I think that makes
sense too. I think the other thing you can do
is instead of having those accounts pulled, you could push
some of those payments instead from the account that you use.
Speaker 2 (04:23):
So so your actual savings account is where you have
the account information and then you're pushing enough. Yeah.
Speaker 1 (04:27):
So that's another way, like similar through bill pay instead
of through there you go an ah pull from the
credit card company itself.
Speaker 2 (04:33):
Yeah.
Speaker 1 (04:33):
I always feel bad by the way, like Discover will
send me a physical letter in the mail because that's
where I do most of my banking right now, and
they'll say, hey, you've gone over your six limit transaction
and your savings account. We're not going to do anything
to you, but at some point you might want to
think about stopping that. I just wanted to let you know,
and I don't like to break the rules, Matt, so
I feel I feel like they don't like me for that.
They're like looking down their nose, and so I'm tired
(04:55):
of receiving those letters. I might try something different.
Speaker 2 (04:57):
I was gonna say that you're going to complain about
just wasting paper in treaties, Well not too the fact
that they mail it. Somebody has got to keep the
Post Office USPS.
Speaker 1 (05:04):
Send me a text, Bra, I'll take a look kind
of that way. All right, let's move on this mention.
The beer we're having on this episode. It is called
Heineken Silver. Have you heard of it? It's a mass
produced craft beer that we are drinking. It's still is
a self flagellation.
Speaker 2 (05:19):
This is our last week of only drinking the most
unworthy beer.
Speaker 1 (05:23):
Fortunately, because I'm getting tired of bad beers too. We'll
get back to the good stuff to your regularly scheduled
programming sooner rather than later.
Speaker 2 (05:30):
It's hard to talk about our quote unquote craft beer
equivalent when we're over here drinking heine But this reinforces
that we like real beer and not bad beer. Absolutely true.
Speaker 1 (05:38):
Every once in a while, you got a slummit to
recognize what life's worth living format, and craft beer is
one of those things that makes life great.
Speaker 2 (05:45):
All right.
Speaker 1 (05:45):
If you have a money question, by the way, and
you'd like Matt and I to take it on an
upcoming episode, just go to have the Money dot com
slash ask. You can record a voice memo, send it
our way. It's super easy, and hopefully we'll take it
next week on the show, Matt. This first question comes
from a listener who is really actually asking this question
on behalf of someone.
Speaker 3 (06:03):
Who loves Hi Matin Jeel. This is Rob from Michigan.
When does it make sense to declare personal bankruptcy? My
sister in law recently reached out for help with her
financial situation. Without getting too deep into details, she has
a large amount of credit card debt, as well as educational,
(06:23):
personal and car loans. Thanks to her debt, her expenses
exceed her income even in an essential's only budget. Her
only asset is a partially paid off car, and she
is currently living rent free. On my advice, she attempted
to open a new line of credit to transfer some
of her thirty percent APR debt to a more manageable rate,
(06:46):
but she was denied. Thanks to a recent windfall, she
has enough savings to last about six months before she's
completely out of money, assuming she adheres to the spartan budget.
I have also suggested she call the credit card companies
to see if they can work with her. Unfortunately, her
(07:06):
debt is too much for us to take on in
any impactful way. Are there any other steps you would recommend?
When is bankruptcy the best option. Thank you, Rob Okay.
Speaker 2 (07:17):
First off, I am sorry to hear about what it
is that your sister in law is going through. I think, honestly,
getting to the point to where your debt amount, like
your payments going out where that exceeds your income, that's
got to be tough. And I'll also say I appreciate
your willingness to help her with her debts even though
you can't afford to. You mentioned that how like the
I guess the financial assistance that you'd be able to
(07:39):
provide her, you could do it, but it would not
be enough to actually put a dent in it. The
heart is there, right, yeah, which means a lot. But
that being said, this isn't something that I would recommend doing.
Uh not because being helpful is bad a forth, but
because I think that could throw a wrench obviously in
your finances. But I also think that like I didn't
necessarily hear you mention that your sister in law is
(08:00):
having like a change of heart, and I think there
is a chance that you could potentially be doing more
harm than good by not addressing some of these underlying issues.
Whether it is on the expensive side, but maybe it's
also on the income side of things as well, and
so it just feels like slapping a band aid on
top of something that doesn't necessarily need a band aid
slapped on, as opposed to kind of like the underlying issues.
(08:23):
The truth is, the.
Speaker 1 (08:24):
Problem often rears its ugly head again if there is
some sort of behavioral change that goes along with it.
Even if you paid off all her debt, she might
end up in the same position, and then everybody's in
a worse spot at the end of the day. Makes
me think that her to interview with Charles Barkley not
too long ago, the famous basketball player, and he was
talking about when he got rich, like what he started
to do was to buy things for his friends and family,
and he would give his money away to people that
(08:45):
were close to him. He's like, ah, we grew up together,
Like I got ridiculously rich, I should share the pie,
which sounds like the right thing to do, and it
sounds like the right way to make your friends happy.
But then you talked about how if you turned this
bigot off, people got instantly angry with him and actually
soured those relationships. It ruined some of those relationships where
he had been generous, and he realized he had reined
(09:05):
it in, and then it turns out, bam, that relationship
wasn't what he thought.
Speaker 2 (09:09):
It was called the hedonic treadmill right there, though immediately
got used to that hires as cost of living.
Speaker 1 (09:15):
So it's gonna be really hard when you're talking about
finances with relatives and anytime you are exceedingly generous, Not
that you can't or shouldn't be generous, That's not what
I'm trying to say, But it's just that, like, if
you're offering money to help fix this problem, it's easy
for people to get used to that and seeing you
as the ATM, and it changes the dynamics of your relationship. Right,
(09:36):
So instead of offering her money, I think being there
for her, walking her through the process of getting help,
that's the ideal route to take, not just like you know,
breaking off one hundred dollars bills to pay these debts
off and to help her get back to a place
of financial normalcy.
Speaker 2 (09:50):
Exactly. Yeah, Yeah, she asked you for help, Rob, but
you didn't necessarily say what kind of help she reached
out to you for. Was it to provide some of
that knowledge that you have or was it? Surely from
a financial standpoint, But what is it that you should
do at this point, because it does sound like you
already have a pretty good idea of her incoming and
her outgoing expenses, you know, the overall debt situation, and
(10:11):
specifically you're certainly aware that her current income isn't going
to allow her to pay off those debts in any
sort of reliable way. I will say, I love that
you that you try to help her to contact the
credit card companies directly in an attempt to get her
APR lowered, because that's something that they will oftentimes do. Yeah.
Speaker 1 (10:29):
We talked about that last week with Matt Schultz, right,
that a lot more people have the have success asking
for a reduction in APR from their credit card company.
Speaker 2 (10:38):
Basically three out of four people, you would ask.
Speaker 1 (10:40):
Yeah, so, I mean, she's one of the in the
in the lesser statistic there, But it makes sense, I
would say, given kind of where she's at with their
debts too.
Speaker 2 (10:47):
Yeah, so that was a good move. But that being said,
she is likely going to have better luck working with
a non profit debt counseling agency. They've got these relationships
with the major lenders. Out there in the banks, which
means they have a greater ability to negotiate lower interest
rates and even honestly partial debt forgiveness in some cases.
So much of it comes down to her unique circumstances.
(11:09):
So I'm glad that you started to interact with some
of the different financial institutions, whether with her or on
behalf of her, But I think we would really want
you to get her pointed in the direction of actual
debt counseling.
Speaker 1 (11:22):
Yes, yeah, they can act like as a mediator as
an advocate, And the truth is like it, it can
be hard to advocate for yourself, and you can do
your best, but sometimes there's just somebody who's in a
better position than you to advocate it. It makes me
think of like a baseball call, matt out at home plate. Well,
the person sliding can make the argument, but then the
manager comes out and argues, and let's be honest, he
(11:42):
usually gets thrown out of the game. But that's at
least just that's a better person to advocate, like a
third party who was watching, who's kind of in a
position of strength to make that argument to the umpire.
I don't know, I just always like watching them yell
at each other, but we're.
Speaker 2 (11:55):
Talking, even though it doesn't change anything. Well, I've ever
seen it a call reversed very rarely. Yeah, but usually
they go back to the videotape.
Speaker 1 (12:01):
But it makes me think of the Atlanta Braves long
standing manager Bobby Cox. I think he got thrown out
of more games than any other manager in history, really,
so I just got used to He was like the
sweetest guy, but he would always stand up for his players,
and I love that about him.
Speaker 2 (12:13):
He's a great advocate.
Speaker 1 (12:14):
Yeah, you don't usually get that call reverse, but you
might with a nonprofit debt counseling firm. So MMI is
one of the best places to turn Money Management International
the NFCC National Foundation for Credit Counseling. You can go
to both those websites. Will put them both in the
show notes for this episode. Those are the two biggest
nonprofits in the country with local chapters all over the place,
(12:36):
but because of their relationships with the big financial institutions,
they can make progress where individuals fail. It's kind of
like Game Genie for your finances, right again, they have
this ability to do something that you wouldn't be able
to do yourself. So talking to someone at either of
these organizations is ideal because they'll have so much insight
as to whether a debt management plan what they call
a DMP or filing for bankruptcy would be the best
(12:59):
best path forward for her to take. It's kind of
hard for Matt and I to armshare quarterback and say
because we don't know all the details, but they will
pour through all the details and help you make a
wise decision. Bankruptcy can be more expensive, right, She might
not qualify for bankruptcy either. The process as well can
be onerous, so avoiding it just because of that can
be the wisest move if there's another path forward. And
(13:20):
then bankruptcy too, whether we're talking about Chapter seven or
Chapter thirteen, can affect her finances for years to come,
which has to be said, right, I mean, basically, this
is a really significant decision, and you do not want
her to make it lightly just because she, of course
understandably feels overwhelmed with her current financial situation.
Speaker 2 (13:39):
Another piece of information you shared Rob too, you said
educational costs. I assume we're talking about student loans, which
are also I mean, those are even harder to have
discharged in bankruptcy. Although it's become easier to become easier.
But I mean, it's just something else to consider. Because
you have to file an adversary preceding, there's additional steps,
there are additional costs more likely if you have private
(14:01):
student loans, given the fact that with federal student loans,
with the debt repayment, the save plan essentially there are
more options out there that are available to folks.
Speaker 1 (14:11):
Depending on her income, the save plan might dramatically reduce,
if not eliminate a monthly payment need from you know,
and then eventually provide her forgiveness too. So that could
be a massive.
Speaker 2 (14:21):
Help to her. That's on the horizon that maybe she
hasn't factored in totally. Yeah, so that's something else to consider.
But really, whether or not she should file for bankruptcy,
it's a question of degrees. It's less black and white
and it's a little more gray, a little more there
in the middle. Because it certainly sounds like, you know, bankruptcy,
it might be the best option, especially considering the fact
that you mentioned her budget is it's really paired down.
(14:43):
I think he says like she's got a spartan budget,
but even still, she doesn't have the income to support that.
So it's not like there are additional cuts that she
can make, and so it and honestly, from our vantage point,
it does seem like that that might be the best
solution because if her income's not going to go up
like that's one piece of information that I would want
to know, what is the likelihood of your income increasing,
(15:03):
Because it doesn't matter if you are going to make
additional cuts, if you don't have enough money to service
these debts and pay them off completely, it doesn't really,
it doesn't matter a whole lot. All you're doing is
prolonging the inevitable. And so again, this is something that
working with a debt counselor that they might be able
to resolve, because if you're able to get some of
those amounts reduced or partially forgiven, well that could completely
(15:26):
change the game. That could change the story.
Speaker 1 (15:28):
And when you meet with them, they'll typically know because
they met with hundreds of similar people, and they'll say, okay,
clearly like you you're either like right here on the
line and we you know, here's the pros and cons
of going in either direction, or they'll say, oh, you're
definitely more over in the bankruptcy camp or no, wait,
we can totally do a DMP. You can be out
of debt in four to five years something like that,
because we've got relationships with this credit card company whatever.
(15:50):
Just that initial meeting I think will tell her a lot.
But that's where I would want to go if I
was her, I would want to turn to experts who
are incentivized to help, who aren't going to you know,
try urn arm and a leg to provide great advice.
Speaker 2 (16:02):
Yeah, and Rob mentioned too that she had a small windfall,
so it sounds like she has some additional savings there
in the bank. But don't just kick back and think that, oh, okay,
things have been fixed. I'm fine, because I think he
only said that it's maybe going to cover like the
next six months worth of living. Yeah, a fuse has
been lit, and I.
Speaker 1 (16:19):
Don't use it to pay down debt right now, because
maybe you might lose some leverage and you might lose
the ability to pay for necessities too, exactly.
Speaker 2 (16:26):
And so yeah, basically, the way I see it, there's
like a taking time that's going on that's about to
explode here in six months or at least, That's how
I would want to approach it. Don't kick back and relax,
but use the next six months to figure out what
it is that you're going to do with this debt.
View this additional money there in the bank as additional
I guess mental headspace that is going to allow you
(16:47):
to really address this.
Speaker 1 (16:48):
Yeah, I think procrastination can only make things worse on
this one. So Rob, kudos to you for helping out
your sister in law and man. We hope that this
answer helps push you both in the right direction, and
we're hoping the best. Now we've got more questions to
get to and we're gonna specifically talk about shifting your
debt around, trying to make it less egregious. We'll talk
about that and more right after this.
Speaker 2 (17:17):
All right, Jil, we are back from the break, and
let's know here from a long time listener who is
crushing it when it comes to her financial goals.
Speaker 4 (17:25):
Hi, Matt and Joel. It's Yessel from New York City
with yet another ask kind of money question. Thanks as
always for your amazing work on your podcast, newsletter and blog.
This is why I keep coming back to you with
all these questions. So thanks to you, I moved all
my savings out of Wells Fargo and Bank of America
into an ally online high Yield savings account, So thanks
(17:47):
for that advice. After doing that, I do have more
than the insured amount of the two hundred and fifty k.
This feels a little precarious to me, so I'd like
your advice on what to do with the excess cash.
I have two iras through m one. One is traditional
IRA that I'm going to max out through bi weekly contributions,
and I have a step IRA since I'm self employed,
(18:10):
that I'm also contributing to bi weekly. And since I
said I am self employed, I don't get to put
anything into an HSA. Do you think I should open
another high yield savings account at another online bank like
CI and or should I put the cash into a
new taxable brokerage account at one of the suggested places
(18:32):
like Vanguard, Schwab or Fidelity do both? Anything else you
have in mind, whatever advice you have, would be very helpful.
Thanks as always, have a great day, y'all.
Speaker 2 (18:43):
Matt.
Speaker 1 (18:43):
First, mad props to Yessel for ditching the big banks.
Oh yeah, they're so bad. There's just no reason to
stay with the biggest banks. We've been screaming this from
the hilltops for a long time. A lot of people
still miss the memo, and I'm always fascinated when I
run into people they're like, oh, I'm just gonna go
down to willisbergro over here, And I'm like, now, what
are you doing? Why would you have a relationship with
(19:04):
a bank that hates you? But yes, well no longer does.
Speaker 2 (19:07):
Which is awesome.
Speaker 1 (19:08):
The reason to do that isn't just because they're not
paying a high as high of a rate. That's one thing, right,
It's like, hey, pay me what's fair in the marketplace.
But it's more than that, right. The big banks are
just the tree customers poorly, they charge higher fees, and
if all those lawsuits, especially against Wells Fargo, the judgments,
the news articles don't cause you to leave, what will.
(19:28):
We don't see any compelling reason to do business with
the four biggest banks with credit cards, I would say,
being the major exception. There's some great credit cards that
they offer that are competitive and some of the best
actually around. But when it comes to just traditional banking,
online banks just for the win, that's right.
Speaker 2 (19:43):
And yes, well you seem to be the rare person
with loads of cash on hand, and not that we're
predicting the downfall of any sort of banking sector collapse
kind of thing. But the SVB, the Silicon Valley Bank,
and the subsequent regional banking collapses that should have taught
us all a lesson because even though the Fed's backstopped
all the money, and I.
Speaker 1 (20:04):
Don't know what lesson we learned in some ways because
like you're right, they didn't handle it the way they
were supposed to. They said, oh, we're going to make
sure everyone's made whole. So that's not traditionally what FDIC
insurance is supposed to do.
Speaker 2 (20:14):
Yeah, again, it comes down to enabling and the incentives
that you are providing folks or not providing folks. But
bottom line, there is a limit of two hundred and
fifty thousand dollars and because of that, that certainly could
mean opening up another count. You could have one with Ally,
but you could have another with CIT because I mentioned CIT,
because they are they're paying one of the highest rates
(20:35):
on their savings accounts out there. But bottom line, that
makes a whole lot of sense to me if that's
a route that you wanted to go, If you are
somebody who is going to continue to maintain a lot
of money in savings. Yeah.
Speaker 1 (20:47):
Yeah, And we can talk about whether or not that
makes sense here in just a second. I think another option, Matt.
One option, yes, is to have a second bank account
and to say, listen, I'm going to transfer another big
chunk of the savings over here. I'm gonna keep both
accounts below the two hundred fifty thousand dollars limit, and
since with separate institutions, I have coverage for both of
those accounts. Another option would be to transfer all of
(21:09):
your savings over to Betterment or to Wealth Front, the
account we mentioned earlier. Betterment's actually paying five and a
half percent right now. The extra half a percent is
a three month bonus when you sign up. But that's
the highest rate we've seen. But here's the deal.
Speaker 2 (21:23):
You're not just.
Speaker 1 (21:24):
Moving money over for a slightly better rate. Betterment selling
proposition in Wealth Front two is that they're able to
offer you even more FDIC insurance coverage so they're not
forced to adhere to the strict two hundred and fifty
thousand dollars limit. Well, how is that, Well, it's because
they don't just have one partner bank. They've got a
bunch of them. So you can deposit up to two
million dollars as a single individual and four million dollars
(21:45):
on a joint account and you have the whole amount
completely covered. So that's kind of cool. It's like a
one stop shop, right. Those are actually some of the
most flexible, easy to use accounts now paying the highest
rate extra FDIC coverage. And I think large because they're
attached to an investment platform that makes sense. Investors might
be cashing out of the big thing, sticking it into
the you know, into their general cash fund or something
(22:07):
like that, and so it makes them even more competitive
in that marketplace. But I think of those accounts as
great places to turn. Actually, some of the investment houses
have some of the best bank accounts now, better than
some of what the banks are offering.
Speaker 2 (22:18):
Yeah, it's like a four x double word score all
on your savings account, which is pretty sweet much certainly
much better than what it is at C and triple
word and triple letter what they're offering. I used a
q anaz in that word map quiz. So what I
was alluding to, though, is whether or not having an
amassing a massive savings amount like that, whether or not
whether or not that makes sense, because Yessel, you asked
(22:41):
about sticking a portion of your savings into a taxable
brokerage account instead, and I'm gonna say that that's probably wise,
And specifically, I'm gonna say probably because if you're planning
on using that large sum of dollar bills soon, well
that's not a great suggestion because you don't want to
have that money tied up in investments. You want to
keep it liquid. But that's a really large supply of savings.
(23:04):
And so unless you're looking to buy a really nice house,
I think you should likely be investing a decent chunk
of that savings instead. She mentioned too, that she's self employed.
That's why she's got that sep IRA. When you are
self employed, that's a riskier proposition. And so maybe she's thinking,
all right, no, I want to have a really nice,
padded emergency fund, maybe with a really fat emergency fund
(23:26):
on top of some additional savings goals that she has.
Maybe she's exactly where she wants to be, where she
needs to be. And if that's what it takes for
you to feel comfortable, yes, and for you to de
risk in that way, more power to you. I'm not
going to tell you what it is that you should
and should not be saving for, but I just want
to plant that idea in your head as well, just
to make sure that you're not continuing to do this
thing because you've always essentially done it.
Speaker 3 (23:46):
Well.
Speaker 1 (23:46):
We've been saying that regularly too. Right, Hey, five percent
rate of return for savers is great, and it's beating
inflation now, and so being a saber doesn't suck for
the first time in a long time. But still it's
possible to get a little too comfortable higher savings rates
and neglect the riskier but overall less risky over the
(24:06):
decades alternative of investing more of those dollars, right, And
so yeah, if you don't have a near term goal
for that money, it might be enticing to keep them
in savings because rates don't suck. But we all know
the average returns to the market are going to outpace
what your savings can earn, even if it's a guaranteed
five percent return. Right, you could either make a lump
sum investment into the market, like a one time deal,
(24:27):
just put an extra one hundred K or whatever it is. Say,
I don't need this much savings, let me thrust that
into the market. That's typically the advisable thing to do
when you look at the numbers. But if dollar cost
averaging would make it easier to stomach, just make a
plan to get a chunk of those savings dollars into
the market regularly over the next year or so. And
so maybe that's a few thousand dollars every two weeks
or whatever. I mean, it depends on how much you're
(24:49):
trying to put in and what time frame you want
to get that money in over and of course keep
some savings on hand for security and liquidity purposes, especially
as a self employed individual. We're not trying to make
you cash poor, but we also want to make sure
you're just not overdoing it in that direction.
Speaker 2 (25:03):
That's right, And she is investing. She's got multiple iras,
like we mentioned, she's got investment dollars with M one
and so I would say, feel free to open up
a taxable brokerage acount over there, and you can't go
wrong with the other low cost investment options that you
also mentioned. But over time, this is going to be
a great thing to have, specifically the taxable brokerage account,
(25:23):
because now you're going to have greater pre retirement flexibility
to use some of those funds. In particular, So obviously
you don't get the tax break, but the ability to
tap some of the funds before you're fifty nine and
a half man, that's a that's a pretty sweet proposition. Yeah,
But for everyone else out there, we don't want folks
to freak out for every dollar that they have over
that two hundred and fifty thousand dollars mark. I mean, personally,
(25:43):
I wouldn't be too concerned about it. And something else
remember too, Again for other couples out there as well,
it's per person and so if you have a joint account,
you're not looking at two hundred and fifty k, you're
looking at five hundred k. Yeah, and so just keep
that in mind as well. But I think this, I
wouldn't trust the fence to bail me out like they
did time. Like they might.
Speaker 1 (26:01):
True, they might continue to do that, but I wouldn't
bank on it. Yeah, I would not make a pun intended.
Speaker 2 (26:05):
But again, more than anything, I think this is a
good reminder to make sure that you have goals for
your money. It's just to not sock that money away.
I think that's the biggest takeaway Joel that you mentioned
it feels good and you see that interest payment hit
the account there at the end of the month, and
you're like, oh, yeah, I'm making money doing nothing, But
that money could actually be doing a whole lot more
for you if it was actually invested.
Speaker 1 (26:25):
Yeah, And sometimes the biggest risk we can take is
de risking too much. All right, Matt, let's get to
the next question. This one is about investing, but it's
got an interesting twist to it.
Speaker 5 (26:35):
Hi, Matt and Joel, this is Katie from Colorado. My
husband and I recently got married after a long visa
wait for him to come from his home country in Bolivia.
While he finally has a work permit, he's still waiting
for his residency, which could take another year or more.
He's about to start his first job and we would
like to invest some of his earnings in a retirement account.
(26:58):
I currently use Vanguard for both wrath ira and a
traditional ira, but when I spoke with Vanguard, only citizens
and in some cases US residents can hold an account
with Vanguard. His new job doesn't offer any retirement options.
Do you have any suggestions for retirement investment options? While
he waits on his residency or citizenship or no of
(27:20):
other companies that don't have the same restrictions. Thanks so much.
Your show is such a great resource.
Speaker 2 (27:27):
Oh so, Joel, this might be an instance where Vanguard
isn't the number one pick because I feel like oftentimes
it is Vain. We're like, oh, the solution is always Vanguard.
For Kenny's question, they answer may not be Vanguard.
Speaker 1 (27:38):
Vanguard has been losing some of its lusterer in recent years.
I think they started the whole low cost We talked
about that back in the day with Robin Wigglesworth Worth.
He wrote the book about basically Vanguard starting the index
funds revolution. But the hangloves come off a little bit
of Vanguard.
Speaker 2 (27:53):
They've got a new CEO. I don't know.
Speaker 1 (27:55):
The customer service has kind of taken a dump, at
least from some of the stuff I've read online. So
I still love me some Vanguard, but I don't know.
Speaker 2 (28:03):
Who has better their customer service over the past five years.
That's a good question. But Okay, enough about dis Vanguard,
I guess broadly speaking, but Katie, you specifically congrats on
getting married, by the way, I think that's certainly something
worth celebrating. And it's true that it is often harder
for non residents to invest within the US, and this
(28:23):
actually stems back to the post nine to eleven Patriot Act.
And because of that, banks investment firms out there, they
have more of an obligation to essentially know their customer,
and so different companies are going to have varied policies
in place. Your husband, he might have to go in
person and might have to fill out paperwork there like
(28:43):
within an office, in order to open an account with
some brokerages out there. But then he might have to
show up and provide proof of employment to different companies,
to different brokerages. But then others like Vanguard, it seems
they're out there trying to make things even more difficult
for you.
Speaker 1 (28:59):
Yeah, yeah, I mean, it just depends on how strict
some of these companies are in trying to adhere to
this law. And yeah, I saw what I would do
at Katie Is, I'd reach out to some of the
other best low cost brokerage firms like Fidelity and Schwab.
Low costs are important, but so is being able to
do business with that brokerage too, And a Vanguards is
going to make you get a hydrid hoops, I would
(29:21):
be like, screw you, I'm going to go elsewhere. And
so Schwab, for instance, has a team called the International
account Solutions Team, and they've got a form that you
can fill out online. I'm not sure how difficult it is,
but it's probably worth barking up that tree. From everything
I could tell, it seems like Schwab makes it a
little bit easier for folks living in the US who
aren't yet citizens to invest, and like I just I
(29:43):
don't think they're making it as difficult as Vanguard is.
Speaker 2 (29:46):
Yeah, but then specifically investing within a brokerage account like
that alone, that is not ideal. It's going to be nice,
of course to invest in some of our favorite tax
advantaged accounts as well. But your husband, he shouldn't only
have brokerage accounts at his disposal. He should be able
to contribute to a traditional or a roth ira as well.
One of the hurdles that it sounds like he has
(30:07):
successfully cleared is having taxable income here within the US.
So the key here is just to find a brokerage
firm that won't make it too difficult to open an
account and start a relationship. Most of the different firms
out there at least require a Social Security number, And Katie,
with your husband having already received his work permit, that
sounds like something that he should already have, if not
(30:29):
something that he's already applied for. But but that being said,
some brokerages actually don't even require a social Security number,
so it comes down to the individual company. It's funny.
It's funny that she's with Vanguard because they're, like you said,
I mean, they seem to be making it harder than
anyone else, more than anybody else. They're like, Vanguard is
an old curmudgeon and they don't like new things, and
they're they're playing it safe. Like if Vanguard goes out
(30:50):
to the restaurant, Vanguard orders steak and potatoes no matter what.
Do you want to hear the daily special? Nope, I'm
just gonna get stake, Like Vanguard does not like variety.
What about a farragus?
Speaker 4 (31:00):
No?
Speaker 2 (31:01):
Like nothing. So again, it's just funny that you are
with Vanguard. And of course we we love Vanguard, we
have accounts with them. But it seems maybe your husband
won't like I like this personification of Vanguard, Like what
would Vanguard order for dessert, Matt, No, no dessert for Vanguard. Really.
Oh yeah, I was gonna say Brownie ala mode. I
just picture like Charlie Munger is sitting there when I
(31:22):
picture Vanguard. Jack Vocal had a lot of the two
guys from the Muppets that sit up in the is
it clicking klank?
Speaker 1 (31:30):
No, the car I don't remember their name. I forget
their names, but my eight year old daughter is deathly
afraid of the Muppets. Yes, it's the funniest thing ever.
It's like clowns for our generation.
Speaker 2 (31:41):
Yeah. I don't know why that.
Speaker 1 (31:43):
There's the guys from Car Talk, right, aren't they Yeah,
clicking clack, Yeah, that's right, And I said clanky. Okay,
So I love Vanguard's good. Hate the Vanguard sucks on this,
especially for Katie and for her husband. I don't know
why they're making it harder than other companies. But the
truth is Schwab or somebody else is going to get
the bulk of his investing dollars. And it's a bit
of a hassle, I guess. But the joke's on Vanguard here,
(32:04):
because one of these days their family is gonna have
like Bookoo dollars and Vanguard doesn't get to reap the rewards.
They don't get to be the custodian of that massive
nest egg moving forward. Somebody else who makes it a
little bit easier is going to win their allegiance. That's
that's how it should be.
Speaker 2 (32:21):
Yeah, one of the few instances where we are not
making the Vanguard a recommendation. But Joe, we've got more
to get to here. In a second, we will take
a question from a listener to file acclaim or to
not file acclaim. We got that and more right after this.
(32:42):
All right, we'll back.
Speaker 1 (32:42):
We've got more questions to get to on this episode.
I'm gonna talk about money stuff, of course, for the
next fifteen to twenty minutes or so. Matt, let's get
to the Facebook question.
Speaker 2 (32:51):
Of the week.
Speaker 1 (32:51):
This one comes from an anonymous poster who said, I'm
looking for some credit card debt advice. Is it worth
it to get a helock HOMEQ? We like to credit
or home equity loan to pay off my credit card debt.
I have about forty thousand dollars inequity and thirty thousand
dollars in credit card debt between myself and my husband,
I was wondering if a helock might be a good
route to go to get those debts paid off and
(33:14):
reduce the interest rates. Right now, we are able to
pay minimums except for one card that we're paying extra.
We're doing the snowball method. We don't use the cards
and we haven't for over a year. Basically hard lessons
learned from our younger times.
Speaker 2 (33:26):
Okay, so this is a great debt payoff question, and
the heart of the answer it revolves around that last
little bit of information there in the post. This poster
isn't using the cards anymore, and they haven't for more
than a year. It kind of goes they've changed their waist. Yeah, yeah, yeah,
they've changed their ways. And what that shows me though,
is that they've developed some restraint. There is some behavior
(33:47):
modification that has taken place. They're paying off their debt
and they've got a plan. And so because of that,
the snowball method can be a great way to move forward.
If you want more in depth information on the snowball
versus the debt avalanche methods, we have an article that
we will link to within the show notes. But the
key to knowing whether or not turning credit card debt
(34:07):
into helock debt is the intensity. It has a lot
to do with a debt pay off timeline as well.
Speaker 1 (34:12):
Yeah, for sure, but there are also other factors, right,
Because if you can't pay your credit card bill on time,
that's one thing. If you can't pay your heelock payments,
your home can end up in foreclosure if things don't
go the way you planned. So you're turning unsecured debt
into secured debt. And yes, that means a lower rate,
which can help you pay off that debt more quickly,
but it's also not like it's a zero risk endeavor
(34:35):
with that strategy, right, And if home values continue to
go up, and hey, you pay off that debt and
no time, no harm, no foul. But for let's say
home values go down, let's say you lose your job,
you're putting your home at risk by turning what was
credit card debt into debt against your home. So that's
something to be at least aware of before you make
this move.
Speaker 2 (34:53):
Yeah, and I think there's a chance too that by
going with the helock you might slow down the snowball method.
Like right now, it feels like the have a whole
lot of momentum behind them, and because that's what the
snowball is all about. But if you switch it over
to the helock, you might lose that psychological, that mental
edge that you currently have by putting the snowball method
to work. So that's just something to keep in mind.
(35:15):
The bottom line, I think a balanced transfer card, I
think that is likely a better option. And again some
of this depends on the timeline, but the good news
is that you might get like fifteen, eighteen, even twenty
one months of no interest, although you do typically pay
a three percent transfer fee, but still with a like
a hard nosed dedication, I think you might be able
(35:35):
to get that debt close to eradicated within that window
where you're paying nothing on that And by the way,
like we mentioned earlier, a nonprofit debt counselor might make
a whole lot of sense for you as well, because
if that eighteen month window, if that sounds a bit
too short and you're facing maybe more of an uphill
climb than you might want to enlist a nonprofit professional
to help you out. Bottom Line, credit card debt sucks.
(35:57):
We are rooting for you to call yourself out in
record time and Honestly, I think this anonymous poster, they've
got it going on. They have learned again, they've learned
the quote unquote hard lessons from our younger times, and
it makes it seem like it's very much a different person,
you know, like that has happened in the past, that
is no longer something that they do, that is no
longer how they treat their credit card.
Speaker 1 (36:17):
Something else worth mentioning is that if you have forty
thousand dollars in equity, that doesn't mean you can tap
all that equity because typically you still have to keep
twenty percent. Like, the bank doesn't want to allow you
access to some of that equity because let's say home
values do go down. They don't want you to have
one hundred percent of the home finance and find yourself underwater.
So just because you have that home equity doesn't mean
it's tappable, And even if it is tappable, it doesn't
mean that it's advisable. So I think, yes, staying the
(36:40):
course the way things are, trying to pay off your
debt the snowball method, but trying to do so in
a determined manner that allows you to accelerate that debt
payoff as quickly as possible. You don't necessarily have to
change the terms, and if there is a way, I think, Matt,
you're right, the balance transfer card is probably a better approach.
Speaker 2 (36:55):
Yeah, that's right man. All right, Let's take another quick question.
This one is from Oaksana, and he writes, Hi, I
just cracked my windshield. Do you think it's better to
get car insurance to cover it or to pay for
it out of pocket so that my insurance doesn't go up?
It is a twenty twenty two Toyota RAV four, so
it's going to be around fifteen hundred dollars. Joel, what
do you think your spirit car? Isn't it? Matt? For
(37:17):
a hot minute there, I was really wanting a late
model you were aw four. I don't know why. Dare
I say lusting after rav Force for a while. I'm
just glad we weren't put in a position to where
we actually needed the second vehicle because I've been able
to maintain the one car household. But if we were
in a position to where we needed that second vehicle,
instead of buying like a five thousand dollars beater, I
would have instead probably dropped like twenty five thousand, Yeah,
(37:39):
thirty five thousand on something maybe that I didn't necessarily need. Yeah,
and I think I may have regretted it. That's what
I'm saying.
Speaker 1 (37:44):
I took the Beata route. We got a second car,
That's what'm talking about.
Speaker 2 (37:47):
It's working out. It's working out well so far. I
love it.
Speaker 1 (37:50):
But Okay, this is a good question. It's the kind
of practical conundrum, Matt, I think a lot of people
face all the time. It's the minor damage to the
home or car. Do I use my insurance pol or
do I self insure? And I would say the TLDR
the too long don't read is don't do it. But
it also depends on where you live, because I will
say this, in some states, insurance companies are required to
(38:11):
fix your busted windshield and they're not allowed to jack
up your rates. I didn't know about this until I
think my friend lived in Virginia and you have like
a crack in his windshield, and they have, like by
state law, they have to get their car inspected every year.
Cracked windshields are one of those things where you have
to get it fixed asap.
Speaker 2 (38:26):
That's true. So it depends on where you live. I
guess South Carolina is one of those states. Okay, well,
but there are many of them. Yeah, yeah, exactly. It's rare,
but it's something to at least be on the lookout for.
I don't know where Oaksana lives, but yeah, if there's
no deductible required on your end and they can't jack
up your rates for replacing that windshield, look into that first.
Make sure that's not the case. But yeah, in most states,
(38:46):
you're gonna have to pay deductible, You're gonna have to
fork over some money, and you might also see your
premiums go up at the same time for making that claim. Yeah,
so I think there is a lot to consider. Because
you said that you probably wouldn't do it. I think
it like I might considerate, And it depends on a
few things. I'll say, Like, generally speaking, the way we
like to approach insurance is that it's something that you
don't use. We encourage folks to raise your deductibles. With
(39:11):
that you're gonna see your premiums decrease, and you put
those excess savings within your savings account so that you're
able to self ensure to a certain extent. Definitely, don't
use the life insurance to stay alive. Yeah, uh yeah,
don't let the tail like the dog here. But the
reason I say I might consider it, so assuming that's
basically how we want folks to to use their insurance,
but a general approach. Yeah, But that being said, not
(39:31):
everyone has taken those steps. And I think there are
two different factors that might cause me to say, okay,
go ahead and make the claim. Well, first of all,
fifteen hundred dollars, that's like a crazy expensive windshield. Like
last time I replaced the windshield, it is like three
hundred dollars, and so I don't understand why it's costing
you that much money, and so I don't know. I
might recommend going and getting another quote first of all,
(39:53):
because that just seems incredibly steep. But if you are
someone who has not yet raised your deductible and you've
been paying on your car insurance and you've had higher
premiums because you've got like a one hundred dollars deductible
set aside, so A that's a first consideration, But B,
I would only consider pulling the trigger if you've not
made a claim anytime recently, like definitely not in the
(40:14):
past year. But honestly, even in the past couple two
or three years.
Speaker 1 (40:17):
Because I make claim on this and then you have
another claim six months down the road, and hey, I
mean like then it puts you in the really negative category.
Speaker 2 (40:23):
It could put you in a really bad position. But
so much of it depends on the individual ensure, like
no matter what, it's going to show up on your
clue report. But as to but again, because this is
a no fault claim, it's not like you were speeding
and you ran a red light and you've told somebody
else's vehicle and by the way, you told yours as well.
That is looked at a whole lot differently by the
insurers than something like a glass replacement with it being
(40:44):
a no fault claim. So with that mind, I would
consider it because again, fifteen hundred dollars it's more than
I would have expected to replace the twenty twenty two
rould or windshield. But at the same time, I don't know,
I might be willing to essentially take the gamble if
you do have a lower a lower deductible set, it's
not worth it if your deductibles is higher. If you
have a thousand dollars deductible Oh, absolutely, not no way, Jose. Yeah,
(41:06):
but a lot of folks keep their deductibles between like
one five third bucks.
Speaker 1 (41:09):
Yeah, and which makes which makes me shudder, because I
think most people should have deductibles exactly.
Speaker 2 (41:14):
That's not how you want to approach it.
Speaker 1 (41:15):
You need at least run the numbers, figure out how
much you could save by jacking your deductible up. But
I think you're right man. You mentioned Matt the Clue Report,
and most people are probably like, huh, what's that? Because
I think the average person is not familiar with what
the Clue Report is. And it's essentially this database.
Speaker 2 (41:28):
What does it stayed for?
Speaker 1 (41:29):
Run by Lexus Nexus. It stands for Comprehensive Loss and
Underwriting Exchange.
Speaker 2 (41:34):
Okay, I have guess comprehensive liability. I would not have
remember what he stands for. Yeah, so it's it's this.
Speaker 1 (41:41):
It's this database essentially that all the insurers are in
putting claims into so that you file a claim Matt,
let's say two years ago, or let's literally go with
my real life example, filing the claim for the homeowners
insurance claim when the tree fell through my roof. Well,
if I try to go get another insurance policy now
and leave the insurer i'm currently with. What they're going
to do is check my clue report and they're gonna say,
(42:03):
wait a second, dude, I don't know if we want
you as our customer because you file a claim a
couple of years ago.
Speaker 2 (42:08):
This guy's a filer, right, this guy's a claimer. Yeah.
Speaker 1 (42:11):
And let's say you get a couple of claims on there,
they're gonna think long and hard about whether they want
you to be a customer, and they're going to jack
up your rates accordingly. So it might kind of force
you to stay in a relationship with your current insure
you and you might not be able to benefit from
shopping around and saving if your rates continue to creep
up with that ensure. By not filing, you're playing the
longer game.
Speaker 2 (42:31):
Yep.
Speaker 1 (42:31):
The short term benefit is you save some money right now,
but the long term benefit if you don't file a
claim might be that you save more money over the
long run.
Speaker 2 (42:39):
Exactly. Yeah. And again, because because this is glass, it's
one thing if you've never made a claim before and
you file a glass replacement claim like this. It's another
thing if you do that every single year for like
four years. Yeah, because they I mean, they build, they compound,
sure and ensures take that into account as well. We've
never talked about it as you have. You seen that
your home insurance has gone up because of that claim.
Speaker 1 (43:01):
It really has not been impacted in a massive way.
Speaker 2 (43:04):
Yet you're like, please don't check it.
Speaker 1 (43:06):
Yeah, exactly, So, I mean I know that it's if
I were to shop around, I'm guessing you would have
an impact then, because it's like a.
Speaker 2 (43:13):
Fresh poll of the reboard.
Speaker 1 (43:15):
That's something that they're looking at, exactly. But for the
time being, I haven't good for him. It's just been
like the standard what like fifteen percent increase that everyone's
saying yeah right now, but it doesn't seem to have
anything beyond that.
Speaker 2 (43:25):
That's good. Yeah, just the standard hike. Glad you're not
having to pay off the nose. The standard hike these
days is just honestly, feel like you're paying out the
nose even with the standard pike.
Speaker 1 (43:33):
Yeah, and everyone's feeling it right now. It's like, what
the number one factor influencing inflation right now is insurance.
Speaker 2 (43:39):
It's it's tough, it is, all right, let's get back
to our beer. You and I enjoyed a Heineken silver.
It says on here Joel refreshing taste. It said, extra
refreshing taste. I believe. Oh it does it? Yeah, Oh
it does yeah. Yeah. Which it's like flavor has it. Yeah,
it's like it's like gum marketing almost Oh my gosh, chewy,
(44:00):
like oh yeah, what are your thoughts on this? I
don't have many good ones? This was crazy. This is
the worst of the craft beers we've had. I think
you think, so I do. It's odd. I don't necessarily
know how to explain it because it doesn't have a
whole lot of flavor. But the flavor that is there
is off putting. It's kind of harsh. It's kind of like,
uh yeah, it's kind of like caustic or something. Okay,
So I don't know.
Speaker 1 (44:18):
Yeah, I guess I'm struggling to understand why beers like
this stick around, because for a long time we didn't
have tasty non alcoholic beers, but now we do, right
with like Athletic Brewing Company and stuff like that. So
who is still turning to the really poorly made local
Heineken beers when you can get something that's local and
actually tasty and maybe you want, I guess to still
(44:39):
be drinking alcohol. Well, there's better versions of like low
calorie alcohol than this too, So.
Speaker 2 (44:45):
Different craft brewers out there that are making lighter, light
gravity beers.
Speaker 1 (44:49):
Yeah, so this to me is in a is in
a category that should be defunct.
Speaker 2 (44:55):
But if you're somewhere and you've got some spicy wings
and you're you're gonna order a pitcher or something like,
that's the kind of pick a better light beer. That's
the kind of scenario where you're gonna order a light beer.
It's it's something that, yeah, you don't necessarily want a
whole lot of flavor, but you do want it to
be wet. And this beer that's why these things, these
beers are more they're so affordable as well, because there's
(45:15):
just mostly I mean, I guess all beer is mostly water,
but these beers more than any other craft beer. It's
like it has a higher water ratio the ingredients.
Speaker 1 (45:23):
Pour twelve ounces of water in it, so and then
blended it together. Just switch the can around. But yeah,
we'll get back to again good craft beer soon on
the show. Only Yeah, all right, that's gonna do it
for this one though. And and by the way, If
you have a money question, please do send it our way.
You just record your voice membo shoot it, shoot it
over to us via email at how to Moneypod at
gmail dot com. That's right, but that's gonna be it
(45:46):
for this episode. You can find show notes up on
the website at howtomoney dot com. But until next time,
best friends out, Best Friends out.
Speaker 2 (46:00):
The only, the only speak
Welcome to Out of Money. I'm Joel, I'm Att, and
today we're answering your listener questions.
Speaker 2 (00:24):
That's right, buddy, we have some very specific personalized money
questions to get tuesday. We're not just talking in the abstract.
We're not talking about the theoretical, but we're talking about
how personal finances are personal for you as an individual.
So we've got uh.
Speaker 1 (00:38):
We'll say, by the way, when we take these questions,
the great thing is like there's hopefully a lot of
advice targeted towards the person asking the question, but.
Speaker 2 (00:46):
Learn general advice. But I guess all the personal details.
That's what makes it fun, that's what adds all the color.
That's why I love and Yeah. A listener is wondering
if they should make the car insurance claim, to make
the car insurance claim, Joel, or to not make the
car insurance claim. How about that? That is the question,
very Shakespeare and that we're going to answer today. Another
listener is wondering when whether or not filing for bankruptcy,
(01:06):
if that is going to be the best option for them.
And another listener has essentially the opposite problem, what to
do if you are over the FDIC limit within their
savings accounts. So we'll get to those plus a couple
others today.
Speaker 1 (01:19):
The short answer, get a scrooge mcdug fault, toss it
all in there, swim in the money. I would say,
if you got that kind of cash going on, we'll
get to that more in just a second of speaking
though mat of savings accounts and potentially having too much
on hand. One listener, Molly, she reached out via email
recently and she mentioned the wealth Front cash account and
I hadn't really thought of this, but it is true
(01:41):
that a lot of save these accounts that pay the
highest rates have some slightly onerous restrictions, right like, for instance,
my Discover account, they.
Speaker 2 (01:49):
Have the most scrooge like restrictions. Perhaps, yeah, they don't
want you trying to continue with things good. We can
keep going that as long as you want. They basically
won't allow you to do more than say, transactions in
a given month out of that account. So if you
wanted to, let's say, pay your mortgage and pay your
credit card bill and pay everything essentially out of that
savings account, well sorry, at some point they're gonna slap
(02:11):
your wrists and say no, no, can do so then
you got to transfer money from savings into checking and
it's a thing, right, it's just kind of annoying. Well,
these more modern banks or neo banks, right who are
paying high rates of interest, wealth Front being one of them.
Betterment has another account that's paying north of five percent
right now, Well they're allowing for unlimited withdrawals from these
(02:31):
account accounts. And it made me think like, oh, yeah,
you don't even have to really redik about that. It
reduces some of that friction. Yeah, you want to.
Speaker 1 (02:39):
Stop moving is sending money from one MAK account to
another all the time. You can literally just keep all
your money in that high interest account and then have
all your transactions coming out out of that. That would
simplify things. So yeah, great tip for Malli. And it
makes me think I'm going to reorder some things in
my own life just because yeah, I hate moving stuff
around all the time and being like when's that coming
out of that account?
Speaker 2 (03:00):
I don't mind on that much personally. Yeah, So here's
my issue is in uh, you call this superstition, you
call this being ill informed, Just put your lucky rabbits
foot in your podect I. Personally, I don't like for
any other institution out in the ether to know my
actual savings account number. The only basically the only account
(03:22):
that is linked to that is my actual checking account,
and I use my checking account routing and account number
of course to go and bill pay at auto bill
pay just all the different accounts that are polling payments
from there when the time comes at the end of
the months, you know, like credit cards what not, things
like that. But when it comes to my actual savings account,
it is not anywhere out on the internet, And in
my mind, I don't know, I just posted it, actually,
(03:44):
just just go ahead tweeted it out. In my mind,
that feels slightly more secure because there is less of
a chance for where the bulk of my savings where
that's residing. That makes sense for that to be less
I don't know, it feels less prone to being leaked
in some sort of data hackers thing like that. So
I've not researched this, but this is my reasoning for
why it is that I always only pull money from
(04:08):
my checking account or an ally they call it the spending,
call it doxing.
Speaker 1 (04:11):
I don't yeah, I don't want your savings account to
get docked publicly announced anybody. No, I think that makes
sense too. I think the other thing you can do
is instead of having those accounts pulled, you could push
some of those payments instead from the account that you use.
Speaker 2 (04:23):
So so your actual savings account is where you have
the account information and then you're pushing enough. Yeah.
Speaker 1 (04:27):
So that's another way, like similar through bill pay instead
of through there you go an ah pull from the
credit card company itself.
Speaker 2 (04:33):
Yeah.
Speaker 1 (04:33):
I always feel bad by the way, like Discover will
send me a physical letter in the mail because that's
where I do most of my banking right now, and
they'll say, hey, you've gone over your six limit transaction
and your savings account. We're not going to do anything
to you, but at some point you might want to
think about stopping that. I just wanted to let you know,
and I don't like to break the rules, Matt, so
I feel I feel like they don't like me for that.
They're like looking down their nose, and so I'm tired
(04:55):
of receiving those letters. I might try something different.
Speaker 2 (04:57):
I was gonna say that you're going to complain about
just wasting paper in treaties, Well not too the fact
that they mail it. Somebody has got to keep the
Post Office USPS.
Speaker 1 (05:04):
Send me a text, Bra, I'll take a look kind
of that way. All right, let's move on this mention.
The beer we're having on this episode. It is called
Heineken Silver. Have you heard of it? It's a mass
produced craft beer that we are drinking. It's still is
a self flagellation.
Speaker 2 (05:19):
This is our last week of only drinking the most
unworthy beer.
Speaker 1 (05:23):
Fortunately, because I'm getting tired of bad beers too. We'll
get back to the good stuff to your regularly scheduled
programming sooner rather than later.
Speaker 2 (05:30):
It's hard to talk about our quote unquote craft beer
equivalent when we're over here drinking heine But this reinforces
that we like real beer and not bad beer. Absolutely true.
Speaker 1 (05:38):
Every once in a while, you got a slummit to
recognize what life's worth living format, and craft beer is
one of those things that makes life great.
Speaker 2 (05:45):
All right.
Speaker 1 (05:45):
If you have a money question, by the way, and
you'd like Matt and I to take it on an
upcoming episode, just go to have the Money dot com
slash ask. You can record a voice memo, send it
our way. It's super easy, and hopefully we'll take it
next week on the show, Matt. This first question comes
from a listener who is really actually asking this question
on behalf of someone.
Speaker 3 (06:03):
Who loves Hi Matin Jeel. This is Rob from Michigan.
When does it make sense to declare personal bankruptcy? My
sister in law recently reached out for help with her
financial situation. Without getting too deep into details, she has
a large amount of credit card debt, as well as educational,
(06:23):
personal and car loans. Thanks to her debt, her expenses
exceed her income even in an essential's only budget. Her
only asset is a partially paid off car, and she
is currently living rent free. On my advice, she attempted
to open a new line of credit to transfer some
of her thirty percent APR debt to a more manageable rate,
(06:46):
but she was denied. Thanks to a recent windfall, she
has enough savings to last about six months before she's
completely out of money, assuming she adheres to the spartan budget.
I have also suggested she call the credit card companies
to see if they can work with her. Unfortunately, her
(07:06):
debt is too much for us to take on in
any impactful way. Are there any other steps you would recommend?
When is bankruptcy the best option. Thank you, Rob Okay.
Speaker 2 (07:17):
First off, I am sorry to hear about what it
is that your sister in law is going through. I think, honestly,
getting to the point to where your debt amount, like
your payments going out where that exceeds your income, that's
got to be tough. And I'll also say I appreciate
your willingness to help her with her debts even though
you can't afford to. You mentioned that how like the
I guess the financial assistance that you'd be able to
(07:39):
provide her, you could do it, but it would not
be enough to actually put a dent in it. The
heart is there, right, yeah, which means a lot. But
that being said, this isn't something that I would recommend doing.
Uh not because being helpful is bad a forth, but
because I think that could throw a wrench obviously in
your finances. But I also think that like I didn't
necessarily hear you mention that your sister in law is
(08:00):
having like a change of heart, and I think there
is a chance that you could potentially be doing more
harm than good by not addressing some of these underlying issues.
Whether it is on the expensive side, but maybe it's
also on the income side of things as well, and
so it just feels like slapping a band aid on
top of something that doesn't necessarily need a band aid
slapped on, as opposed to kind of like the underlying issues.
(08:23):
The truth is, the.
Speaker 1 (08:24):
Problem often rears its ugly head again if there is
some sort of behavioral change that goes along with it.
Even if you paid off all her debt, she might
end up in the same position, and then everybody's in
a worse spot at the end of the day. Makes
me think that her to interview with Charles Barkley not
too long ago, the famous basketball player, and he was
talking about when he got rich, like what he started
to do was to buy things for his friends and family,
and he would give his money away to people that
(08:45):
were close to him. He's like, ah, we grew up together,
Like I got ridiculously rich, I should share the pie,
which sounds like the right thing to do, and it
sounds like the right way to make your friends happy.
But then you talked about how if you turned this
bigot off, people got instantly angry with him and actually
soured those relationships. It ruined some of those relationships where
he had been generous, and he realized he had reined
(09:05):
it in, and then it turns out, bam, that relationship
wasn't what he thought.
Speaker 2 (09:09):
It was called the hedonic treadmill right there, though immediately
got used to that hires as cost of living.
Speaker 1 (09:15):
So it's gonna be really hard when you're talking about
finances with relatives and anytime you are exceedingly generous, Not
that you can't or shouldn't be generous, That's not what
I'm trying to say, But it's just that, like, if
you're offering money to help fix this problem, it's easy
for people to get used to that and seeing you
as the ATM, and it changes the dynamics of your relationship. Right,
(09:36):
So instead of offering her money, I think being there
for her, walking her through the process of getting help,
that's the ideal route to take, not just like you know,
breaking off one hundred dollars bills to pay these debts
off and to help her get back to a place
of financial normalcy.
Speaker 2 (09:50):
Exactly. Yeah, Yeah, she asked you for help, Rob, but
you didn't necessarily say what kind of help she reached
out to you for. Was it to provide some of
that knowledge that you have or was it? Surely from
a financial standpoint, But what is it that you should
do at this point, because it does sound like you
already have a pretty good idea of her incoming and
her outgoing expenses, you know, the overall debt situation, and
(10:11):
specifically you're certainly aware that her current income isn't going
to allow her to pay off those debts in any
sort of reliable way. I will say, I love that
you that you try to help her to contact the
credit card companies directly in an attempt to get her
APR lowered, because that's something that they will oftentimes do. Yeah.
Speaker 1 (10:29):
We talked about that last week with Matt Schultz, right,
that a lot more people have the have success asking
for a reduction in APR from their credit card company.
Speaker 2 (10:38):
Basically three out of four people, you would ask.
Speaker 1 (10:40):
Yeah, so, I mean, she's one of the in the
in the lesser statistic there, But it makes sense, I
would say, given kind of where she's at with their
debts too.
Speaker 2 (10:47):
Yeah, so that was a good move. But that being said,
she is likely going to have better luck working with
a non profit debt counseling agency. They've got these relationships
with the major lenders. Out there in the banks, which
means they have a greater ability to negotiate lower interest
rates and even honestly partial debt forgiveness in some cases.
So much of it comes down to her unique circumstances.
(11:09):
So I'm glad that you started to interact with some
of the different financial institutions, whether with her or on
behalf of her, But I think we would really want
you to get her pointed in the direction of actual
debt counseling.
Speaker 1 (11:22):
Yes, yeah, they can act like as a mediator as
an advocate, And the truth is like it, it can
be hard to advocate for yourself, and you can do
your best, but sometimes there's just somebody who's in a
better position than you to advocate it. It makes me
think of like a baseball call, matt out at home plate. Well,
the person sliding can make the argument, but then the
manager comes out and argues, and let's be honest, he
(11:42):
usually gets thrown out of the game. But that's at
least just that's a better person to advocate, like a
third party who was watching, who's kind of in a
position of strength to make that argument to the umpire.
I don't know, I just always like watching them yell
at each other, but we're.
Speaker 2 (11:55):
Talking, even though it doesn't change anything. Well, I've ever
seen it a call reversed very rarely. Yeah, but usually
they go back to the videotape.
Speaker 1 (12:01):
But it makes me think of the Atlanta Braves long
standing manager Bobby Cox. I think he got thrown out
of more games than any other manager in history, really,
so I just got used to He was like the
sweetest guy, but he would always stand up for his players,
and I love that about him.
Speaker 2 (12:13):
He's a great advocate.
Speaker 1 (12:14):
Yeah, you don't usually get that call reverse, but you
might with a nonprofit debt counseling firm. So MMI is
one of the best places to turn Money Management International
the NFCC National Foundation for Credit Counseling. You can go
to both those websites. Will put them both in the
show notes for this episode. Those are the two biggest
nonprofits in the country with local chapters all over the place,
(12:36):
but because of their relationships with the big financial institutions,
they can make progress where individuals fail. It's kind of
like Game Genie for your finances, right again, they have
this ability to do something that you wouldn't be able
to do yourself. So talking to someone at either of
these organizations is ideal because they'll have so much insight
as to whether a debt management plan what they call
a DMP or filing for bankruptcy would be the best
(12:59):
best path forward for her to take. It's kind of
hard for Matt and I to armshare quarterback and say
because we don't know all the details, but they will
pour through all the details and help you make a
wise decision. Bankruptcy can be more expensive, right, She might
not qualify for bankruptcy either. The process as well can
be onerous, so avoiding it just because of that can
be the wisest move if there's another path forward. And
(13:20):
then bankruptcy too, whether we're talking about Chapter seven or
Chapter thirteen, can affect her finances for years to come,
which has to be said, right, I mean, basically, this
is a really significant decision, and you do not want
her to make it lightly just because she, of course
understandably feels overwhelmed with her current financial situation.
Speaker 2 (13:39):
Another piece of information you shared Rob too, you said
educational costs. I assume we're talking about student loans, which
are also I mean, those are even harder to have
discharged in bankruptcy. Although it's become easier to become easier.
But I mean, it's just something else to consider. Because
you have to file an adversary preceding, there's additional steps,
there are additional costs more likely if you have private
(14:01):
student loans, given the fact that with federal student loans,
with the debt repayment, the save plan essentially there are
more options out there that are available to folks.
Speaker 1 (14:11):
Depending on her income, the save plan might dramatically reduce,
if not eliminate a monthly payment need from you know,
and then eventually provide her forgiveness too. So that could
be a massive.
Speaker 2 (14:21):
Help to her. That's on the horizon that maybe she
hasn't factored in totally. Yeah, so that's something else to consider.
But really, whether or not she should file for bankruptcy,
it's a question of degrees. It's less black and white
and it's a little more gray, a little more there
in the middle. Because it certainly sounds like, you know, bankruptcy,
it might be the best option, especially considering the fact
that you mentioned her budget is it's really paired down.
(14:43):
I think he says like she's got a spartan budget,
but even still, she doesn't have the income to support that.
So it's not like there are additional cuts that she
can make, and so it and honestly, from our vantage point,
it does seem like that that might be the best
solution because if her income's not going to go up
like that's one piece of information that I would want
to know, what is the likelihood of your income increasing,
(15:03):
Because it doesn't matter if you are going to make
additional cuts, if you don't have enough money to service
these debts and pay them off completely, it doesn't really,
it doesn't matter a whole lot. All you're doing is
prolonging the inevitable. And so again, this is something that
working with a debt counselor that they might be able
to resolve, because if you're able to get some of
those amounts reduced or partially forgiven, well that could completely
(15:26):
change the game. That could change the story.
Speaker 1 (15:28):
And when you meet with them, they'll typically know because
they met with hundreds of similar people, and they'll say, okay,
clearly like you you're either like right here on the
line and we you know, here's the pros and cons
of going in either direction, or they'll say, oh, you're
definitely more over in the bankruptcy camp or no, wait,
we can totally do a DMP. You can be out
of debt in four to five years something like that,
because we've got relationships with this credit card company whatever.
(15:50):
Just that initial meeting I think will tell her a lot.
But that's where I would want to go if I
was her, I would want to turn to experts who
are incentivized to help, who aren't going to you know,
try urn arm and a leg to provide great advice.
Speaker 2 (16:02):
Yeah, and Rob mentioned too that she had a small windfall,
so it sounds like she has some additional savings there
in the bank. But don't just kick back and think that, oh, okay,
things have been fixed. I'm fine, because I think he
only said that it's maybe going to cover like the
next six months worth of living. Yeah, a fuse has
been lit, and I.
Speaker 1 (16:19):
Don't use it to pay down debt right now, because
maybe you might lose some leverage and you might lose
the ability to pay for necessities too, exactly.
Speaker 2 (16:26):
And so yeah, basically, the way I see it, there's
like a taking time that's going on that's about to
explode here in six months or at least, That's how
I would want to approach it. Don't kick back and relax,
but use the next six months to figure out what
it is that you're going to do with this debt.
View this additional money there in the bank as additional
I guess mental headspace that is going to allow you
(16:47):
to really address this.
Speaker 1 (16:48):
Yeah, I think procrastination can only make things worse on
this one. So Rob, kudos to you for helping out
your sister in law and man. We hope that this
answer helps push you both in the right direction, and
we're hoping the best. Now we've got more questions to
get to and we're gonna specifically talk about shifting your
debt around, trying to make it less egregious. We'll talk
about that and more right after this.
Speaker 2 (17:17):
All right, Jil, we are back from the break, and
let's know here from a long time listener who is
crushing it when it comes to her financial goals.
Speaker 4 (17:25):
Hi, Matt and Joel. It's Yessel from New York City
with yet another ask kind of money question. Thanks as
always for your amazing work on your podcast, newsletter and blog.
This is why I keep coming back to you with
all these questions. So thanks to you, I moved all
my savings out of Wells Fargo and Bank of America
into an ally online high Yield savings account, So thanks
(17:47):
for that advice. After doing that, I do have more
than the insured amount of the two hundred and fifty k.
This feels a little precarious to me, so I'd like
your advice on what to do with the excess cash.
I have two iras through m one. One is traditional
IRA that I'm going to max out through bi weekly contributions,
and I have a step IRA since I'm self employed,
(18:10):
that I'm also contributing to bi weekly. And since I
said I am self employed, I don't get to put
anything into an HSA. Do you think I should open
another high yield savings account at another online bank like
CI and or should I put the cash into a
new taxable brokerage account at one of the suggested places
(18:32):
like Vanguard, Schwab or Fidelity do both? Anything else you
have in mind, whatever advice you have, would be very helpful.
Thanks as always, have a great day, y'all.
Speaker 2 (18:43):
Matt.
Speaker 1 (18:43):
First, mad props to Yessel for ditching the big banks.
Oh yeah, they're so bad. There's just no reason to
stay with the biggest banks. We've been screaming this from
the hilltops for a long time. A lot of people
still miss the memo, and I'm always fascinated when I
run into people they're like, oh, I'm just gonna go
down to willisbergro over here, And I'm like, now, what
are you doing? Why would you have a relationship with
(19:04):
a bank that hates you? But yes, well no longer does.
Speaker 2 (19:07):
Which is awesome.
Speaker 1 (19:08):
The reason to do that isn't just because they're not
paying a high as high of a rate. That's one thing, right,
It's like, hey, pay me what's fair in the marketplace.
But it's more than that, right. The big banks are
just the tree customers poorly, they charge higher fees, and
if all those lawsuits, especially against Wells Fargo, the judgments,
the news articles don't cause you to leave, what will.
(19:28):
We don't see any compelling reason to do business with
the four biggest banks with credit cards, I would say,
being the major exception. There's some great credit cards that
they offer that are competitive and some of the best
actually around. But when it comes to just traditional banking,
online banks just for the win, that's right.
Speaker 2 (19:43):
And yes, well you seem to be the rare person
with loads of cash on hand, and not that we're
predicting the downfall of any sort of banking sector collapse
kind of thing. But the SVB, the Silicon Valley Bank,
and the subsequent regional banking collapses that should have taught
us all a lesson because even though the Fed's backstopped
all the money, and I.
Speaker 1 (20:04):
Don't know what lesson we learned in some ways because
like you're right, they didn't handle it the way they
were supposed to. They said, oh, we're going to make
sure everyone's made whole. So that's not traditionally what FDIC
insurance is supposed to do.
Speaker 2 (20:14):
Yeah, again, it comes down to enabling and the incentives
that you are providing folks or not providing folks. But
bottom line, there is a limit of two hundred and
fifty thousand dollars and because of that, that certainly could
mean opening up another count. You could have one with Ally,
but you could have another with CIT because I mentioned CIT,
because they are they're paying one of the highest rates
(20:35):
on their savings accounts out there. But bottom line, that
makes a whole lot of sense to me if that's
a route that you wanted to go, If you are
somebody who is going to continue to maintain a lot
of money in savings. Yeah.
Speaker 1 (20:47):
Yeah, And we can talk about whether or not that
makes sense here in just a second. I think another option, Matt.
One option, yes, is to have a second bank account
and to say, listen, I'm going to transfer another big
chunk of the savings over here. I'm gonna keep both
accounts below the two hundred fifty thousand dollars limit, and
since with separate institutions, I have coverage for both of
those accounts. Another option would be to transfer all of
(21:09):
your savings over to Betterment or to Wealth Front, the
account we mentioned earlier. Betterment's actually paying five and a
half percent right now. The extra half a percent is
a three month bonus when you sign up. But that's
the highest rate we've seen. But here's the deal.
Speaker 2 (21:23):
You're not just.
Speaker 1 (21:24):
Moving money over for a slightly better rate. Betterment selling
proposition in Wealth Front two is that they're able to
offer you even more FDIC insurance coverage so they're not
forced to adhere to the strict two hundred and fifty
thousand dollars limit. Well, how is that, Well, it's because
they don't just have one partner bank. They've got a
bunch of them. So you can deposit up to two
million dollars as a single individual and four million dollars
(21:45):
on a joint account and you have the whole amount
completely covered. So that's kind of cool. It's like a
one stop shop, right. Those are actually some of the
most flexible, easy to use accounts now paying the highest
rate extra FDIC coverage. And I think large because they're
attached to an investment platform that makes sense. Investors might
be cashing out of the big thing, sticking it into
the you know, into their general cash fund or something
(22:07):
like that, and so it makes them even more competitive
in that marketplace. But I think of those accounts as
great places to turn. Actually, some of the investment houses
have some of the best bank accounts now, better than
some of what the banks are offering.
Speaker 2 (22:18):
Yeah, it's like a four x double word score all
on your savings account, which is pretty sweet much certainly
much better than what it is at C and triple
word and triple letter what they're offering. I used a
q anaz in that word map quiz. So what I
was alluding to, though, is whether or not having an
amassing a massive savings amount like that, whether or not
whether or not that makes sense, because Yessel, you asked
(22:41):
about sticking a portion of your savings into a taxable
brokerage account instead, and I'm gonna say that that's probably wise,
And specifically, I'm gonna say probably because if you're planning
on using that large sum of dollar bills soon, well
that's not a great suggestion because you don't want to
have that money tied up in investments. You want to
keep it liquid. But that's a really large supply of savings.
(23:04):
And so unless you're looking to buy a really nice house,
I think you should likely be investing a decent chunk
of that savings instead. She mentioned too, that she's self employed.
That's why she's got that sep IRA. When you are
self employed, that's a riskier proposition. And so maybe she's thinking,
all right, no, I want to have a really nice,
padded emergency fund, maybe with a really fat emergency fund
(23:26):
on top of some additional savings goals that she has.
Maybe she's exactly where she wants to be, where she
needs to be. And if that's what it takes for
you to feel comfortable, yes, and for you to de
risk in that way, more power to you. I'm not
going to tell you what it is that you should
and should not be saving for, but I just want
to plant that idea in your head as well, just
to make sure that you're not continuing to do this
thing because you've always essentially done it.
Speaker 3 (23:46):
Well.
Speaker 1 (23:46):
We've been saying that regularly too. Right, Hey, five percent
rate of return for savers is great, and it's beating
inflation now, and so being a saber doesn't suck for
the first time in a long time. But still it's
possible to get a little too comfortable higher savings rates
and neglect the riskier but overall less risky over the
(24:06):
decades alternative of investing more of those dollars, right, And
so yeah, if you don't have a near term goal
for that money, it might be enticing to keep them
in savings because rates don't suck. But we all know
the average returns to the market are going to outpace
what your savings can earn, even if it's a guaranteed
five percent return. Right, you could either make a lump
sum investment into the market, like a one time deal,
(24:27):
just put an extra one hundred K or whatever it is. Say,
I don't need this much savings, let me thrust that
into the market. That's typically the advisable thing to do
when you look at the numbers. But if dollar cost
averaging would make it easier to stomach, just make a
plan to get a chunk of those savings dollars into
the market regularly over the next year or so. And
so maybe that's a few thousand dollars every two weeks
or whatever. I mean, it depends on how much you're
(24:49):
trying to put in and what time frame you want
to get that money in over and of course keep
some savings on hand for security and liquidity purposes, especially
as a self employed individual. We're not trying to make
you cash poor, but we also want to make sure
you're just not overdoing it in that direction.
Speaker 2 (25:03):
That's right, And she is investing. She's got multiple iras,
like we mentioned, she's got investment dollars with M one
and so I would say, feel free to open up
a taxable brokerage acount over there, and you can't go
wrong with the other low cost investment options that you
also mentioned. But over time, this is going to be
a great thing to have, specifically the taxable brokerage account,
(25:23):
because now you're going to have greater pre retirement flexibility
to use some of those funds. In particular, So obviously
you don't get the tax break, but the ability to
tap some of the funds before you're fifty nine and
a half man, that's a that's a pretty sweet proposition. Yeah,
But for everyone else out there, we don't want folks
to freak out for every dollar that they have over
that two hundred and fifty thousand dollars mark. I mean, personally,
(25:43):
I wouldn't be too concerned about it. And something else
remember too, Again for other couples out there as well,
it's per person and so if you have a joint account,
you're not looking at two hundred and fifty k, you're
looking at five hundred k. Yeah, and so just keep
that in mind as well. But I think this, I
wouldn't trust the fence to bail me out like they
did time. Like they might.
Speaker 1 (26:01):
True, they might continue to do that, but I wouldn't
bank on it. Yeah, I would not make a pun intended.
Speaker 2 (26:05):
But again, more than anything, I think this is a
good reminder to make sure that you have goals for
your money. It's just to not sock that money away.
I think that's the biggest takeaway Joel that you mentioned
it feels good and you see that interest payment hit
the account there at the end of the month, and
you're like, oh, yeah, I'm making money doing nothing, But
that money could actually be doing a whole lot more
for you if it was actually invested.
Speaker 1 (26:25):
Yeah, And sometimes the biggest risk we can take is
de risking too much. All right, Matt, let's get to
the next question. This one is about investing, but it's
got an interesting twist to it.
Speaker 5 (26:35):
Hi, Matt and Joel, this is Katie from Colorado. My
husband and I recently got married after a long visa
wait for him to come from his home country in Bolivia.
While he finally has a work permit, he's still waiting
for his residency, which could take another year or more.
He's about to start his first job and we would
like to invest some of his earnings in a retirement account.
(26:58):
I currently use Vanguard for both wrath ira and a
traditional ira, but when I spoke with Vanguard, only citizens
and in some cases US residents can hold an account
with Vanguard. His new job doesn't offer any retirement options.
Do you have any suggestions for retirement investment options? While
he waits on his residency or citizenship or no of
(27:20):
other companies that don't have the same restrictions. Thanks so much.
Your show is such a great resource.
Speaker 2 (27:27):
Oh so, Joel, this might be an instance where Vanguard
isn't the number one pick because I feel like oftentimes
it is Vain. We're like, oh, the solution is always Vanguard.
For Kenny's question, they answer may not be Vanguard.
Speaker 1 (27:38):
Vanguard has been losing some of its lusterer in recent years.
I think they started the whole low cost We talked
about that back in the day with Robin Wigglesworth Worth.
He wrote the book about basically Vanguard starting the index
funds revolution. But the hangloves come off a little bit
of Vanguard.
Speaker 2 (27:53):
They've got a new CEO. I don't know.
Speaker 1 (27:55):
The customer service has kind of taken a dump, at
least from some of the stuff I've read online. So
I still love me some Vanguard, but I don't know.
Speaker 2 (28:03):
Who has better their customer service over the past five years.
That's a good question. But Okay, enough about dis Vanguard,
I guess broadly speaking, but Katie, you specifically congrats on
getting married, by the way, I think that's certainly something
worth celebrating. And it's true that it is often harder
for non residents to invest within the US, and this
(28:23):
actually stems back to the post nine to eleven Patriot Act.
And because of that, banks investment firms out there, they
have more of an obligation to essentially know their customer,
and so different companies are going to have varied policies
in place. Your husband, he might have to go in
person and might have to fill out paperwork there like
(28:43):
within an office, in order to open an account with
some brokerages out there. But then he might have to
show up and provide proof of employment to different companies,
to different brokerages. But then others like Vanguard, it seems
they're out there trying to make things even more difficult
for you.
Speaker 1 (28:59):
Yeah, yeah, I mean, it just depends on how strict
some of these companies are in trying to adhere to
this law. And yeah, I saw what I would do
at Katie Is, I'd reach out to some of the
other best low cost brokerage firms like Fidelity and Schwab.
Low costs are important, but so is being able to
do business with that brokerage too, And a Vanguards is
going to make you get a hydrid hoops, I would
(29:21):
be like, screw you, I'm going to go elsewhere. And
so Schwab, for instance, has a team called the International
account Solutions Team, and they've got a form that you
can fill out online. I'm not sure how difficult it is,
but it's probably worth barking up that tree. From everything
I could tell, it seems like Schwab makes it a
little bit easier for folks living in the US who
aren't yet citizens to invest, and like I just I
(29:43):
don't think they're making it as difficult as Vanguard is.
Speaker 2 (29:46):
Yeah, but then specifically investing within a brokerage account like
that alone, that is not ideal. It's going to be nice,
of course to invest in some of our favorite tax
advantaged accounts as well. But your husband, he shouldn't only
have brokerage accounts at his disposal. He should be able
to contribute to a traditional or a roth ira as well.
One of the hurdles that it sounds like he has
(30:07):
successfully cleared is having taxable income here within the US.
So the key here is just to find a brokerage
firm that won't make it too difficult to open an
account and start a relationship. Most of the different firms
out there at least require a Social Security number, And Katie,
with your husband having already received his work permit, that
sounds like something that he should already have, if not
(30:29):
something that he's already applied for. But but that being said,
some brokerages actually don't even require a social Security number,
so it comes down to the individual company. It's funny.
It's funny that she's with Vanguard because they're, like you said,
I mean, they seem to be making it harder than
anyone else, more than anybody else. They're like, Vanguard is
an old curmudgeon and they don't like new things, and
they're they're playing it safe. Like if Vanguard goes out
(30:50):
to the restaurant, Vanguard orders steak and potatoes no matter what.
Do you want to hear the daily special? Nope, I'm
just gonna get stake, Like Vanguard does not like variety.
What about a farragus?
Speaker 4 (31:00):
No?
Speaker 2 (31:01):
Like nothing. So again, it's just funny that you are
with Vanguard. And of course we we love Vanguard, we
have accounts with them. But it seems maybe your husband
won't like I like this personification of Vanguard, Like what
would Vanguard order for dessert, Matt, No, no dessert for Vanguard. Really.
Oh yeah, I was gonna say Brownie ala mode. I
just picture like Charlie Munger is sitting there when I
(31:22):
picture Vanguard. Jack Vocal had a lot of the two
guys from the Muppets that sit up in the is
it clicking klank?
Speaker 1 (31:30):
No, the car I don't remember their name. I forget
their names, but my eight year old daughter is deathly
afraid of the Muppets. Yes, it's the funniest thing ever.
It's like clowns for our generation.
Speaker 2 (31:41):
Yeah. I don't know why that.
Speaker 1 (31:43):
There's the guys from Car Talk, right, aren't they Yeah,
clicking clack, Yeah, that's right, And I said clanky. Okay,
So I love Vanguard's good. Hate the Vanguard sucks on this,
especially for Katie and for her husband. I don't know
why they're making it harder than other companies. But the
truth is Schwab or somebody else is going to get
the bulk of his investing dollars. And it's a bit
of a hassle, I guess. But the joke's on Vanguard here,
(32:04):
because one of these days their family is gonna have
like Bookoo dollars and Vanguard doesn't get to reap the rewards.
They don't get to be the custodian of that massive
nest egg moving forward. Somebody else who makes it a
little bit easier is going to win their allegiance. That's
that's how it should be.
Speaker 2 (32:21):
Yeah, one of the few instances where we are not
making the Vanguard a recommendation. But Joe, we've got more
to get to here. In a second, we will take
a question from a listener to file acclaim or to
not file acclaim. We got that and more right after this.
(32:42):
All right, we'll back.
Speaker 1 (32:42):
We've got more questions to get to on this episode.
I'm gonna talk about money stuff, of course, for the
next fifteen to twenty minutes or so. Matt, let's get
to the Facebook question.
Speaker 2 (32:51):
Of the week.
Speaker 1 (32:51):
This one comes from an anonymous poster who said, I'm
looking for some credit card debt advice. Is it worth
it to get a helock HOMEQ? We like to credit
or home equity loan to pay off my credit card debt.
I have about forty thousand dollars inequity and thirty thousand
dollars in credit card debt between myself and my husband,
I was wondering if a helock might be a good
route to go to get those debts paid off and
(33:14):
reduce the interest rates. Right now, we are able to
pay minimums except for one card that we're paying extra.
We're doing the snowball method. We don't use the cards
and we haven't for over a year. Basically hard lessons
learned from our younger times.
Speaker 2 (33:26):
Okay, so this is a great debt payoff question, and
the heart of the answer it revolves around that last
little bit of information there in the post. This poster
isn't using the cards anymore, and they haven't for more
than a year. It kind of goes they've changed their waist. Yeah, yeah, yeah,
they've changed their ways. And what that shows me though,
is that they've developed some restraint. There is some behavior
(33:47):
modification that has taken place. They're paying off their debt
and they've got a plan. And so because of that,
the snowball method can be a great way to move forward.
If you want more in depth information on the snowball
versus the debt avalanche methods, we have an article that
we will link to within the show notes. But the
key to knowing whether or not turning credit card debt
(34:07):
into helock debt is the intensity. It has a lot
to do with a debt pay off timeline as well.
Speaker 1 (34:12):
Yeah, for sure, but there are also other factors, right,
Because if you can't pay your credit card bill on time,
that's one thing. If you can't pay your heelock payments,
your home can end up in foreclosure if things don't
go the way you planned. So you're turning unsecured debt
into secured debt. And yes, that means a lower rate,
which can help you pay off that debt more quickly,
but it's also not like it's a zero risk endeavor
(34:35):
with that strategy, right, And if home values continue to
go up, and hey, you pay off that debt and
no time, no harm, no foul. But for let's say
home values go down, let's say you lose your job,
you're putting your home at risk by turning what was
credit card debt into debt against your home. So that's
something to be at least aware of before you make
this move.
Speaker 2 (34:53):
Yeah, and I think there's a chance too that by
going with the helock you might slow down the snowball method.
Like right now, it feels like the have a whole
lot of momentum behind them, and because that's what the
snowball is all about. But if you switch it over
to the helock, you might lose that psychological, that mental
edge that you currently have by putting the snowball method
to work. So that's just something to keep in mind.
(35:15):
The bottom line, I think a balanced transfer card, I
think that is likely a better option. And again some
of this depends on the timeline, but the good news
is that you might get like fifteen, eighteen, even twenty
one months of no interest, although you do typically pay
a three percent transfer fee, but still with a like
a hard nosed dedication, I think you might be able
(35:35):
to get that debt close to eradicated within that window
where you're paying nothing on that And by the way,
like we mentioned earlier, a nonprofit debt counselor might make
a whole lot of sense for you as well, because
if that eighteen month window, if that sounds a bit
too short and you're facing maybe more of an uphill
climb than you might want to enlist a nonprofit professional
to help you out. Bottom Line, credit card debt sucks.
(35:57):
We are rooting for you to call yourself out in
record time and Honestly, I think this anonymous poster, they've
got it going on. They have learned again, they've learned
the quote unquote hard lessons from our younger times, and
it makes it seem like it's very much a different person,
you know, like that has happened in the past, that
is no longer something that they do, that is no
longer how they treat their credit card.
Speaker 1 (36:17):
Something else worth mentioning is that if you have forty
thousand dollars in equity, that doesn't mean you can tap
all that equity because typically you still have to keep
twenty percent. Like, the bank doesn't want to allow you
access to some of that equity because let's say home
values do go down. They don't want you to have
one hundred percent of the home finance and find yourself underwater.
So just because you have that home equity doesn't mean
it's tappable, And even if it is tappable, it doesn't
mean that it's advisable. So I think, yes, staying the
(36:40):
course the way things are, trying to pay off your
debt the snowball method, but trying to do so in
a determined manner that allows you to accelerate that debt
payoff as quickly as possible. You don't necessarily have to
change the terms, and if there is a way, I think, Matt,
you're right, the balance transfer card is probably a better approach.
Speaker 2 (36:55):
Yeah, that's right man. All right, Let's take another quick question.
This one is from Oaksana, and he writes, Hi, I
just cracked my windshield. Do you think it's better to
get car insurance to cover it or to pay for
it out of pocket so that my insurance doesn't go up?
It is a twenty twenty two Toyota RAV four, so
it's going to be around fifteen hundred dollars. Joel, what
do you think your spirit car? Isn't it? Matt? For
(37:17):
a hot minute there, I was really wanting a late
model you were aw four. I don't know why. Dare
I say lusting after rav Force for a while. I'm
just glad we weren't put in a position to where
we actually needed the second vehicle because I've been able
to maintain the one car household. But if we were
in a position to where we needed that second vehicle,
instead of buying like a five thousand dollars beater, I
would have instead probably dropped like twenty five thousand, Yeah,
(37:39):
thirty five thousand on something maybe that I didn't necessarily need. Yeah,
and I think I may have regretted it. That's what
I'm saying.
Speaker 1 (37:44):
I took the Beata route. We got a second car,
That's what'm talking about.
Speaker 2 (37:47):
It's working out. It's working out well so far. I
love it.
Speaker 1 (37:50):
But Okay, this is a good question. It's the kind
of practical conundrum, Matt, I think a lot of people
face all the time. It's the minor damage to the
home or car. Do I use my insurance pol or
do I self insure? And I would say the TLDR
the too long don't read is don't do it. But
it also depends on where you live, because I will
say this, in some states, insurance companies are required to
(38:11):
fix your busted windshield and they're not allowed to jack
up your rates. I didn't know about this until I
think my friend lived in Virginia and you have like
a crack in his windshield, and they have, like by
state law, they have to get their car inspected every year.
Cracked windshields are one of those things where you have
to get it fixed asap.
Speaker 2 (38:26):
That's true. So it depends on where you live. I
guess South Carolina is one of those states. Okay, well,
but there are many of them. Yeah, yeah, exactly. It's rare,
but it's something to at least be on the lookout for.
I don't know where Oaksana lives, but yeah, if there's
no deductible required on your end and they can't jack
up your rates for replacing that windshield, look into that first.
Make sure that's not the case. But yeah, in most states,
(38:46):
you're gonna have to pay deductible, You're gonna have to
fork over some money, and you might also see your
premiums go up at the same time for making that claim. Yeah,
so I think there is a lot to consider. Because
you said that you probably wouldn't do it. I think
it like I might considerate, And it depends on a
few things. I'll say, Like, generally speaking, the way we
like to approach insurance is that it's something that you
don't use. We encourage folks to raise your deductibles. With
(39:11):
that you're gonna see your premiums decrease, and you put
those excess savings within your savings account so that you're
able to self ensure to a certain extent. Definitely, don't
use the life insurance to stay alive. Yeah, uh yeah,
don't let the tail like the dog here. But the
reason I say I might consider it, so assuming that's
basically how we want folks to to use their insurance,
but a general approach. Yeah, But that being said, not
(39:31):
everyone has taken those steps. And I think there are
two different factors that might cause me to say, okay,
go ahead and make the claim. Well, first of all,
fifteen hundred dollars, that's like a crazy expensive windshield. Like
last time I replaced the windshield, it is like three
hundred dollars, and so I don't understand why it's costing
you that much money, and so I don't know. I
might recommend going and getting another quote first of all,
(39:53):
because that just seems incredibly steep. But if you are
someone who has not yet raised your deductible and you've
been paying on your car insurance and you've had higher
premiums because you've got like a one hundred dollars deductible
set aside, so A that's a first consideration, But B,
I would only consider pulling the trigger if you've not
made a claim anytime recently, like definitely not in the
(40:14):
past year. But honestly, even in the past couple two
or three years.
Speaker 1 (40:17):
Because I make claim on this and then you have
another claim six months down the road, and hey, I
mean like then it puts you in the really negative category.
Speaker 2 (40:23):
It could put you in a really bad position. But
so much of it depends on the individual ensure, like
no matter what, it's going to show up on your
clue report. But as to but again, because this is
a no fault claim, it's not like you were speeding
and you ran a red light and you've told somebody
else's vehicle and by the way, you told yours as well.
That is looked at a whole lot differently by the
insurers than something like a glass replacement with it being
(40:44):
a no fault claim. So with that mind, I would
consider it because again, fifteen hundred dollars it's more than
I would have expected to replace the twenty twenty two
rould or windshield. But at the same time, I don't know,
I might be willing to essentially take the gamble if
you do have a lower a lower deductible set, it's
not worth it if your deductibles is higher. If you
have a thousand dollars deductible Oh, absolutely, not no way, Jose. Yeah,
(41:06):
but a lot of folks keep their deductibles between like
one five third bucks.
Speaker 1 (41:09):
Yeah, and which makes which makes me shudder, because I
think most people should have deductibles exactly.
Speaker 2 (41:14):
That's not how you want to approach it.
Speaker 1 (41:15):
You need at least run the numbers, figure out how
much you could save by jacking your deductible up. But
I think you're right man. You mentioned Matt the Clue Report,
and most people are probably like, huh, what's that? Because
I think the average person is not familiar with what
the Clue Report is. And it's essentially this database.
Speaker 2 (41:28):
What does it stayed for?
Speaker 1 (41:29):
Run by Lexus Nexus. It stands for Comprehensive Loss and
Underwriting Exchange.
Speaker 2 (41:34):
Okay, I have guess comprehensive liability. I would not have
remember what he stands for. Yeah, so it's it's this.
Speaker 1 (41:41):
It's this database essentially that all the insurers are in
putting claims into so that you file a claim Matt,
let's say two years ago, or let's literally go with
my real life example, filing the claim for the homeowners
insurance claim when the tree fell through my roof. Well,
if I try to go get another insurance policy now
and leave the insurer i'm currently with. What they're going
to do is check my clue report and they're gonna say,
(42:03):
wait a second, dude, I don't know if we want
you as our customer because you file a claim a
couple of years ago.
Speaker 2 (42:08):
This guy's a filer, right, this guy's a claimer. Yeah.
Speaker 1 (42:11):
And let's say you get a couple of claims on there,
they're gonna think long and hard about whether they want
you to be a customer, and they're going to jack
up your rates accordingly. So it might kind of force
you to stay in a relationship with your current insure
you and you might not be able to benefit from
shopping around and saving if your rates continue to creep
up with that ensure. By not filing, you're playing the
longer game.
Speaker 2 (42:31):
Yep.
Speaker 1 (42:31):
The short term benefit is you save some money right now,
but the long term benefit if you don't file a
claim might be that you save more money over the
long run.
Speaker 2 (42:39):
Exactly. Yeah. And again, because because this is glass, it's
one thing if you've never made a claim before and
you file a glass replacement claim like this. It's another
thing if you do that every single year for like
four years. Yeah, because they I mean, they build, they compound,
sure and ensures take that into account as well. We've
never talked about it as you have. You seen that
your home insurance has gone up because of that claim.
Speaker 1 (43:01):
It really has not been impacted in a massive way.
Speaker 2 (43:04):
Yet you're like, please don't check it.
Speaker 1 (43:06):
Yeah, exactly, So, I mean I know that it's if
I were to shop around, I'm guessing you would have
an impact then, because it's like a.
Speaker 2 (43:13):
Fresh poll of the reboard.
Speaker 1 (43:15):
That's something that they're looking at, exactly. But for the
time being, I haven't good for him. It's just been
like the standard what like fifteen percent increase that everyone's
saying yeah right now, but it doesn't seem to have
anything beyond that.
Speaker 2 (43:25):
That's good. Yeah, just the standard hike. Glad you're not
having to pay off the nose. The standard hike these
days is just honestly, feel like you're paying out the
nose even with the standard pike.
Speaker 1 (43:33):
Yeah, and everyone's feeling it right now. It's like, what
the number one factor influencing inflation right now is insurance.
Speaker 2 (43:39):
It's it's tough, it is, all right, let's get back
to our beer. You and I enjoyed a Heineken silver.
It says on here Joel refreshing taste. It said, extra
refreshing taste. I believe. Oh it does it? Yeah, Oh
it does yeah. Yeah. Which it's like flavor has it. Yeah,
it's like it's like gum marketing almost Oh my gosh, chewy,
(44:00):
like oh yeah, what are your thoughts on this? I
don't have many good ones? This was crazy. This is
the worst of the craft beers we've had. I think
you think, so I do. It's odd. I don't necessarily
know how to explain it because it doesn't have a
whole lot of flavor. But the flavor that is there
is off putting. It's kind of harsh. It's kind of like,
uh yeah, it's kind of like caustic or something. Okay,
So I don't know.
Speaker 1 (44:18):
Yeah, I guess I'm struggling to understand why beers like
this stick around, because for a long time we didn't
have tasty non alcoholic beers, but now we do, right
with like Athletic Brewing Company and stuff like that. So
who is still turning to the really poorly made local
Heineken beers when you can get something that's local and
actually tasty and maybe you want, I guess to still
(44:39):
be drinking alcohol. Well, there's better versions of like low
calorie alcohol than this too, So.
Speaker 2 (44:45):
Different craft brewers out there that are making lighter, light
gravity beers.
Speaker 1 (44:49):
Yeah, so this to me is in a is in
a category that should be defunct.
Speaker 2 (44:55):
But if you're somewhere and you've got some spicy wings
and you're you're gonna order a pitcher or something like,
that's the kind of pick a better light beer. That's
the kind of scenario where you're gonna order a light beer.
It's it's something that, yeah, you don't necessarily want a
whole lot of flavor, but you do want it to
be wet. And this beer that's why these things, these
beers are more they're so affordable as well, because there's
(45:15):
just mostly I mean, I guess all beer is mostly water,
but these beers more than any other craft beer. It's
like it has a higher water ratio the ingredients.
Speaker 1 (45:23):
Pour twelve ounces of water in it, so and then
blended it together. Just switch the can around. But yeah,
we'll get back to again good craft beer soon on
the show. Only Yeah, all right, that's gonna do it
for this one though. And and by the way, If
you have a money question, please do send it our way.
You just record your voice membo shoot it, shoot it
over to us via email at how to Moneypod at
gmail dot com. That's right, but that's gonna be it
(45:46):
for this episode. You can find show notes up on
the website at howtomoney dot com. But until next time,
best friends out, Best Friends out.
Speaker 2 (46:00):
The only, the only speak
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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United States of Kennedy
United States of Kennedy is a podcast about our cultural fascination with the Kennedy dynasty. Every week, hosts Lyra Smith and George Civeris go into one aspect of the Kennedy story.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com