Let’s kick off the week with some fresh listener questions we have lined up for you! And don't just stand on the sidelines- if you have a question you’d like us to answer, toss your voice memo our way. It only takes about 90 seconds to record and you can find a step by step guide over at HowToMoney.com/ask . Regardless of how random or bizarre you might think it is, we want to hear it!
1 - How necessary is a credit card to get by in life?
2 - What are some creative ways to pay for graduate school as I’m interested in a mid-life career shift?
3 - Does it make sense to switch to Roth contributions since my wife will be retiring soon?
4 - Should we drop full coverage insurance on our cars in order to beef up our savings?
5 - Cash gifts to small kids: cash in jars, earmarked in my HYSA, or their own savings account?
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- Join a thriving community of fellow money in the HTM Facebook group.
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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 Matt, and
today we're answering your listener questions.
Speaker 2 (00:24):
Happy Monday, everybody. We're gonna hear from several listeners who
had financial questions Joel. For instance, a listeners wondering about
the necessity of a credit card, whether or not it's
something you gotta have, like you gotta have it or
is it more optional?
Speaker 1 (00:37):
Sounds like like a Checkers commercial. I gotta have it?
Is that a Checker's commercial? There was something like that,
Like as I was saying I got to eat something,
it felt like where's the where's the beef? Gotta have it?
Speaker 2 (00:47):
Must eat now.
Speaker 1 (00:48):
Another listener is asking about paying for a career shift.
Speaker 2 (00:53):
Uh, he doesn't have a midlife crisis, but he's in
fact focusing maybe on a career that's going to provide
a little more fulfillments. And another listener is asking about
dropping car insurance or not like fully dropping car insurance,
but dropping the fuller more comprehensive. Oh there you go,
comprehensive in collision, specifically types of insurance, whether or not
they're in the financial position to pull that off. The
(01:14):
reason ask the question is because the money savings can
be huge, but the trade offs are meaningful to yep,
talking about that and more that's the important part. And more,
who knows what we're going to talk about?
Speaker 1 (01:23):
So much more we keep go in so many directions
just I don't know, bucklet your seat belts, kids, stay
along for the ride. Matt quick tip that a listener
Katie sent in, by the way, before we get to
those questions that I wanted to mention. She basically said, Hey,
there were a few kind of crummy trees in the
neighborhood that needed to come down, and I had I
think she had one or two trees in her yard
that had to come down too, and so she pulled resources,
(01:47):
which I think is so brilliant and so underutilized. I
have thought about this. I like it, Like with how
like different yard services are coming to like all my
neighbors around me, I'm like, what if we just do that?
Speaker 2 (01:59):
Is so yeah yeah, So basically you're saying, like you're
asking around, these are services where someone has to come
out physically, and so it makes sense to get like
a group discount, as what if you're talking about creating
your like your own neighbor based group on right of.
Speaker 1 (02:13):
Dis exactly is what you're saying exactly, Because isn't half
the problem as someone who mows lawns, the fact that
you have to drive to every lawn you have to do,
And what if you could do six back to back
to back to back to back and not have to travel.
That sounds brilliant And maybe you'd will be willing to
offer like a ten, fifteen, maybe even a twenty percent
discount because of all that time that's saved. You just
(02:33):
you're just mowing the laws man, You're not You're not
moving around to get to the lawns.
Speaker 2 (02:36):
So you know, it's mind boggling.
Speaker 1 (02:37):
And the same thing with trees, which Katie was bringing
our attention. So Katie, thank you. I just think it's
worth it.
Speaker 3 (02:41):
Yeah.
Speaker 2 (02:41):
As neighbors just being like, hey, what if we also
get this neighbor over here on board? What kind of
deal are you willing to offer us? What I was
gonna say is mind boggling. Is we live in a
neighborhood that isn't that big, and I know that there
is a teenager in this neighbor in my neighborhood who
has his own law service. He's got a pickup truck.
He's got a trailer, and I see I'm leaving the neighborhood.
Speaker 1 (03:02):
Has he ever come to your door? No?
Speaker 2 (03:04):
No, he's not stuck anything out. And so maybe the
otis is on me. Maybe I need to reach out
to him proactively and just say, hey, man, like you
could even sell that trailer.
Speaker 1 (03:14):
Yeah, you literally drive.
Speaker 2 (03:15):
Your riding lawmore from one house to the next to
the next and just end up doing the whole neighborhood.
Speaker 1 (03:19):
I would do if I was him, I would go
so much more. If I would go knock on every
door and I would say how much are you paying
for your lawn service every month? And then if I
don't know whatever, they say, oh we're paying two hundred
and twenty dollars. Great, you know what, I on to
knock fifteen percent off that, here's my rate for the month,
and let me start doing it like clockwork. I think
that may make so much sense. Think about how many
doors he could get, like he could he could be
the richest high schooler.
Speaker 2 (03:40):
In the whole city, and again keeping things lean and efficient,
Like I would love the idea that he would be
able to ditch the trailer and spending more time actually
cutting lawns.
Speaker 1 (03:50):
As opposed to you know, driving around town. I'm about
that efficiency. It sounds like Katie was able to do
it with a tree crew, So more Matt props to you, Katie.
I love it. I also of the beer.
Speaker 2 (04:01):
There's my beer review already that you and I are
going to enjoy during this episode, which is called a
Guillotine of Contemplation. That's right, This is a beer by
burial guillotine like eighteenth century France.
Speaker 1 (04:12):
Yeah, yeah, that's what that's literally in the name of
this beer. We'll give our thoughts on this one.
Speaker 2 (04:16):
I'm so happy that you were able to head up
there and pick up some of these fantastic beers.
Speaker 1 (04:21):
One of the best brederies in the country, straight from
the source, no doubt. All right, Matt. For folks out
there listening, if they want to submit a question, how
do they do it? Do you want to let them know?
They just record a.
Speaker 2 (04:30):
Voice memo on their phones and email it to us
at how Toomoney Pod at gmail dot com. Please state
your name. It's always fun because we've got one today
where he doesn't say his name, so we're.
Speaker 1 (04:38):
Gonna have to say it for him. It's always more fun.
Speaker 2 (04:40):
Yeah, I know and say where you're from as well,
because I like to look up what's going on in
your town.
Speaker 1 (04:45):
We have to give like full address, but maybe just
the city or the stuff.
Speaker 2 (04:49):
I think this context context helps and it helps me
to understand what they're going through.
Speaker 1 (04:55):
I don't know that's.
Speaker 2 (04:56):
We're not dish, not generic answers. I mean, to a
certain extent, some financial drews withstand geography, Joel, but it
can be helpful sometimes.
Speaker 1 (05:04):
For sure, personally. Okay, Matt, what if the question is
a little weird or offbeat? Do we want to hear
those two? Those are even better, man, Please please send
them in all R. Let's get to a question now, Matt.
This one specifically is about credit cards, whether they're necessary.
Speaker 3 (05:16):
Hi, Joel and Matt. My name is Ben. My question
for you is do you need a credit card to
get through life? And can they be used to help
you save money. I'm now thirty years old. I've never
had a credit card before, but I have a decent
credit score built up over the years. I haven't always
had a good relationship with money, but listening to your
(05:36):
podcast has definitely helped me to begin improving my financial
health and my relationship with money. For example, I've taken
on board your advice about building an emergency fund and
biking to work instead of driving. Interested to hear your
thoughts on whether a credit card is needed and whether
they can be used to help you save money. Thanks, Joel.
Speaker 2 (06:00):
Did you hear that how Ben's bike into work? Now?
Speaker 1 (06:03):
I can get behind that. I love it, man, Like
both of our bikes are in here today. We literally Yeah,
I walk like you often, don't bike into the to
the office, to the clubhouse here all that often. But
I ride my bike less, although I take my son
to school on the e bike every day. And I
guess I just I prefer the slightly long. I mean,
we have a mile long commute, so the bike it
(06:23):
takes me four minutes, and walking it takes me fifteen.
I just kind of like that fifteen minutes worth of decompression.
Speaker 2 (06:28):
Oh I get that. Yeah, it depends on what you're
trying to accomplish during that period of time. But biking,
what I love about it is it's the perfect habit
that then allows you to do some of the things Ben,
that you're looking to do, like build up an emergency fund,
right like you Okay, it's been a minute since we've
talked about bikes and how great biking is for you.
It's like the perfect atomic habit. Which so that's the
(06:49):
book I've been I'm rereading that. It's been a minute
a few years since I've read that one. But you've
got the short term reward of being active and moving
your body, and you're feeling healthy and you're in a
better mood. So that's like the near term what you
need to sustain you, like in the day to day
sort of thing. But then you also have like the
long term positive consequences of biking into work. If that's
(07:10):
something that you're able to do, the financial health related
and financial the financial savings, like the benefits that you're
going to be able to accrue not only save up
an emergency fund, perhaps even downsize your automobile fleet, maybe
even completely cutting a car from your life. Maybe you're
paying off debt, maybe you are investing more aggressively, all
because you have implemented a new habit in your life.
Speaker 1 (07:33):
If your biking habit gets that extreme where you can
knock a car out of your life, I mean, it's
amazing how much money you can save. Yeah, and Matt
you're I realized that it takes a lot of intentionality
for people to do that. You've been doing. You've done
that for I don't know, fifteen years, I don't know,
seventy yeah, seventeen something. It's crazy and most people say, well,
it's basically impossible in modern society.
Speaker 2 (07:53):
You got to be crazy to want to do this.
Speaker 1 (07:55):
Yeah, but then a lot of people end up having
like three or four cars in their house. Definitely overkill.
It's possible to get by on less. And when you
actually factor in, well, how much does this actually cost me,
especially with what's happened with insurance rates for car owners
these days, it could be a lot. So Ben, just yeah,
keep going, man, and keep making it happen, because that
is not a small move that you're making. It really
(08:17):
is big. Let's talk about credit cards, because I mean,
if you want us to give you the bare bones answer,
it's basically no, you don't need a credit card in
your life, not necessarily. Yeah, if you're saying do I
have to have it? No, of course, not like there
are a lot Just like a car, you don't have
to have it. There are all sorts of things we
could go without in our lives, but we choose to
(08:38):
include them because they can be helpful. So we are
fans of credit cards when you use them wisely. But
the truth is only about half of the population actually
uses credit cards. Well, it's almost exactly fifty to fifty
when you look at the statistics, So many folks really
shouldn't be using credit cards at all. A massive percentage
(09:00):
of Americans use credit cards in ways that harm them financially,
by not paying their bills on time and in full,
and where.
Speaker 2 (09:06):
They're carrying that balance.
Speaker 1 (09:07):
Yeah, and then the other thing too, Matt, part of
is that, right, it's the balance, and it's the interest rates,
But then it's also that they're spending more than they
otherwise would. They're treating it like it's fake money or
something like that. And Costco is the credit card equivalent.
I go there and I spend more just because it's
available to me. That's probably true. Yeah, I'm sure some
people do.
Speaker 2 (09:24):
Like portions are the new credit cardal we go on
to eat and then we end up eating all those
food because the portions are so large.
Speaker 1 (09:30):
Yeah, I mean, I think there's probably probably some truth
to that. Possibly, And so when there are multiple ways
to use your credit card improper improperly, and then when
you look at the average revolving monthly balance, it's it's
ballooned up to like ten thousand dollars now, and that
is truly financially harmful for anybody who uses credit cards
in that way. I think what we've come to notice
in recent year is based on feedback we've gotten from
(09:52):
our younger listeners, and then the more I've kind of
seen this phenomena, I feel the same way, Matt. Younger
people seem to be treating cash the way older generations
treated credit cards, where cash feels like it's fake money.
If I've got one hundred bucks on hand, I'm gonna
blow it. Whereas the credit card, I'm logging in and
I'm seeing my statements, and I realize I'm tying that
spending on the credit card to my monthly budget and
to the money I do or don't have in my
(10:13):
bank account. It's where it feels like that, like fake
monopoly money, that kind of thing. So it's interesting to
see that shift. We used to say, oh, well, credit
cards for most people feel like fake money, but I
think actually the opposite is true, even more even more
so these days I guess what we would say when
it comes down to aveness is we we use credit cards,
we recommend using them well, but they're they're obviously still
(10:33):
not a necessity to live like a fulfilling life or
a smart financially savvy life either.
Speaker 2 (10:38):
Yeah, and others in the personal finance space completely disagree
with us that credit cards can ever make sense. We
get where they're coming from, but we also think that
when you realize the potential pitfalls, if your eyes are
open to the ways that you can mismanagement, that you're
going to be far more likely to use them judiciously.
And the benefits, man, that's why they are legit. And
(11:00):
I'm not just talking about the rewards.
Speaker 1 (11:03):
So I looked it up man.
Speaker 2 (11:04):
Way back in episode one, we talked about the I
forget the name of it, but secondary tertiary credit card benefits.
We talked about fraud, liability, we talked about unauthorized charge protection,
things like that cash and debit cards don't have nearly
the same protections. But of course the cash rewards, man,
that's what kind of keeps me coming back month after
(11:24):
a month.
Speaker 1 (11:24):
If you drop your cash, someone picks it up. Yes,
common you drop your credit card, someone spends money on it,
you're not responsible for any of the charges that were
made using that credit card. A lot's the beautiful thing,
a lot of sweet benefits. And even with debit cards
they look the exact same, Matt. But in that episode
we talked about how there's not as much legal coverage
that you have using a debit card. Or if someone
excuse me, if someone uses that debit card as if
(11:46):
they were you and you don't find it out in
quite enough time, you can be on the hook for
some of those charges.
Speaker 2 (11:50):
Yeah, debit cards are more like guilty until proven innocent,
whereas credit cards more like innocent until proven guilt.
Speaker 1 (11:55):
That's a great way to say it. Yeah, And the
culture is just that you have to pay attention, right
because using credit cards the way that you would use cash.
That's really the secret to using credit cards in a
way that's going to help you and not hurt you. Basically,
don't buy stuff you can't afford, and don't buy more
than you otherwise would always pay the bill on time
and in full. Otherwise, of course you're gonna be working
(12:17):
over twenty percent plus in interest to the credit card companies,
and that's a recipe for disaster, and that there were
recent stats that came out about how people are going
to pay more in interest than what their balance is
because of how little they're paying towards their credit card
bill every month. Like you ain't got to make much
money doing that. In fact, you're going in the opposite direction.
(12:39):
So credit cards they can be this double edged sword,
and then we want you wielding the sword, well, we
don't want you getting cut to pieces by it. I
think it's maybe we should bring in just a couple
other benefits too that are worth mentioning. There are cash
and travel awards that you can earn. Everybody knows that.
I don't know that we need to say much about that.
But having a couple of credit cards in your arsenal
two to three, and then you know, the more you
(13:01):
feel like you're handling them well and you know what
you're doing, you can increase that. But having even just
a couple and using them judiciously can start you on
that cycle of some of those bonuses for opening an
account and then the perpetual rewards that you get just
from using it responsibly. But then secondary benefits are I
think those are what get mentioned a whole lot less,
(13:21):
like using that credit card overseas and not paying a
diamond foreign transaction fees. Well, that can just make travel
so much easier. There are extra insurance products you could
get using credit cards, travel insurance or primary rental car
insurance like that's another one. Those can save you money,
like so the or cell phone protection right and other
purchase protection. Those secondary benefits of credit cards can really
(13:44):
add up to hundreds of dollars worth of value every
year pretty easily. I mean, think about even just some
of the airport lounges you can get into with some
of the fancier travel cards. I know, some of the
how to Money audience, they're obsessed with that. They love
that love being able to hit up the sweet lounges
before their trip. But of course I have to reiterate,
(14:05):
no matter how good the rewards are, they're just not
worth it if you carry a balance. And some people think, oh,
the rewards are great, and then they carry balance and
it's like, no, you just nullified all the rewards you
got because of the interest that you paid. And it
just feels like a duh thing to say. But I
think there are a lot of people out there who
think using credit cards in that way is still beneficial
to them when it's not. That's right.
Speaker 2 (14:23):
And by the way, this isn't something that we mention
all that often, but you mentioned being able to pay
for things overseas. We're talking about the foreign transaction fees.
And by the way, if you go to howdomoney dot
com forward slash credit card tool, you can sort the
different credit cards that are out there by whether or
not that car charges a zero percent foreign transaction fees,
essentially whether or not you can use that card while
(14:43):
abroad while not paying extra.
Speaker 1 (14:46):
For those different charges, So be sure to check that out.
Speaker 2 (14:49):
For Ben specifically, you have said that you've never had
a credit card, but you still have a decent credit score.
One of the reasons having a credit card can be
so helpful is that responsible use can help you to
or to maintain a solid credit score. But you're also
living proof that you don't need to have a credit
card to achieve that. It sounds like you have made
(15:10):
a lot of progress, especially recently, which is awesome, but
you've also highlighted you're not so great money history, and
so with that in mind for you, I would tread
lightly with credit cards to begin with. For you, I
would say, like, let's go ahead and open up a
two percent cash back card across the board, use it
for a few recurring purchases perhaps, and if that goes well,
(15:30):
that's when I would look to open another card. Perhaps
I wouldn't like, don't head over to the point skuy
and open up a dozen different credit cards. Maybe that's
something you'll do eventually at some point down the road,
but for now, I would just start small. Get you
something like a zero annual fee card like a City
Double Cash for instance, where you're getting that two percent
no matter what, you're able to keep it super simple.
(15:52):
It's even something I'm considering doing as well, because I
have the very complicated credit card strategy where I have
specific credit cards for categories of spending. And that's when
my life was a little more simple. But I've maintained
that practice while my life has gotten busier and more complicated,
and I'm starting to wonder. I wonder if like the
juice is worth the squeeze anymore, something to consider, not
(16:13):
only for someone like Ben, but even for even a
seasoned credit card user.
Speaker 1 (16:17):
Makes me think, like, if you were gonna sign up
for a race if you're like I'm gonna be a runner,
and you pick your first race as like I'm why not,
I'm gonna go do the Boston Marathon, which I think
happened like a month ago or something like that. Sorry,
that's a really bad idea. Might want to start with
like a local five k instead, right, and work your
way up. Maybe that's like you perhaps three year goal exactly,
that's your two to three year goal. So same with
(16:39):
credit cards, like open one and see how it goes.
Start small, like you said, a few recurring purchases. Make
it your credit card for gas or something like that
and for streaming services, and then go from there over time. Ben,
you don't need a credit card, but they could be
a benefit to your finances if you use them well
over time. All right, Matt, We've got more to get
to on this episod, including let's talk about saving money
(17:02):
on college and wroth accounts. We'll get to questions about
both those things right after this.
Speaker 2 (17:15):
All right, buddy, we are back for the break. Let's
now hear from a listener who is looking to invest
a little bit more in himself. We're talking about higher education.
Speaker 4 (17:26):
Hi, Joel him Matt, my name is Edward. I'm forty
years old. I am in a good career field when
it comes to money, but it's not giving me a
lot of job satisfaction. And I'm looking to make a
change and go back to grad school and become a
registered dietitian and help people with their health and weight,
(17:48):
which has going to struggle for me personally. But I'm
balking at the amount of money that it's gonna cost.
It's gonna cost about seventy three thousand dollars over the
course of two and a half years. And I was
wondering if you guys had any resource is that I
could use to.
Speaker 1 (18:03):
Like grants, scholarships.
Speaker 4 (18:05):
I really want to avoid student loans and I have
no interest in that. It's hoping you'd be able to
maybe point me in the right direction.
Speaker 1 (18:11):
Thank you. Oh Matt, let's see what we can do
to help Edward out here. That's pay for grad school.
Is that sound familiar to you, Joel. Yeah, literally just
got done paying that joker off. And well, we never
took out a loan. We paid for it in cash
as we went. But and I don't know, I have
to look back and see exactly how much we spent
but it's a lot of money. There's a lot of
(18:32):
money in total. Yeah, and we're hoping for Emily's marriage
and family counseling that she went through and hopefully that
means increased lifetime earnings and really a lot of increased
job satisfaction too, which is one of the things that
Edward was alluding to here. And I think that's that's
a reason a lot of people go back and get
an advanced degree at this point in their life. I mean,
(18:53):
he's forty, I mean forty years old. That's that's that's
around the time people say, I feel like I know
myself a little bit better, and I know that I
want to pursue this path, but there's no way for
me to get there without getting more education. And I
love that, So I guess I love that Edward's wanting
to make a career change here. And it's a tough choice,
especially if you're making a solid salary, like those golden
(19:13):
handcuffs of a solid job can be difficult to cast
off if you're like if I've talked to another friend recently, Matt,
who left like a pretty high faluton career in the
energy field because he wasn't feeling fulfilled, and he makes
a heck of a lot less money now, but guess what,
he's way happier, and so I think important. There's a
lot to be said for that, right, And it sounds
like Edward really knows what he wants to do based
(19:36):
on his personal experience and his interests, And I just
think there's a good chance that he's gonna have greater
levels of success doing something that he loves as his
next career. So I'm excited for him. But let's try
to help him do it without forking over quite as much. Yeah, totally.
Speaker 2 (19:50):
And he even said that he's not interested in the
student loans, but not everyone has the money on hand
to be able to pay for that. And I'm going
to say, like at the outset here, finding money for
grad school is harder than finding money for undergrad and
specifically universities, they make more money on graduate programs than
they do on many of their other degree offerings. So
(20:12):
finding those dollars to help you out it's not going
to be easy. And we're talking about a lot of
money here, seventy three thousand dollars. You are looking to
avoid student loans, we want you to avoid them. As well,
and in part because and this is for everyone else again,
not you, Edward, you are It sounds like you are set.
It makes sense too. He's he's in his is he
forty or he is in his forties, he's forty looking
(20:32):
to make some changes. It sounds like he's had a
fairly lucrative career. I'm guessing he's looking to cash flow
this thing. But for everyone else out there, when you're
looking at grad school, you're talking about interest rates in
the nine percent range from the federal government right now,
which is pretty scary when it comes to student loans specifically.
Speaker 1 (20:49):
It's a far cry from where they were like ten
fifteen years ago to I mean.
Speaker 2 (20:53):
So you might be able to get like some better
rates from private lenders, yeah, if that's something you're considering.
Speaker 1 (20:58):
But yeah, which is a good point.
Speaker 2 (21:00):
And this makes it a bit more nerve racking to
take out student loans for something like this.
Speaker 1 (21:06):
Yeah, And there are some people who are incredibly scared
of private student loans, but I think, especially in today's environment,
private student loans might offer a better rate. And you're
the federal protections that student loan borrowers are afforded have
been kind of going away anyway, So I think I
would at least look in that direction. I would also
(21:26):
want to know what my likely post degree earnings would
be Edward, I think it's an important question to ask right,
ask around to people who are doing the jobs you
want to do, and not that you would opt to
not pursue this degree, because of course you've got a passion.
But I think it's you know, knowing what you stand
again by getting this degree, it's an important part of
this decision making process, and it could influence your specific
(21:50):
decisions here too.
Speaker 2 (21:51):
I think it kind of helps to just not justify
a little bit, but it's you're able to put a
finger on Okay, I know I am giving up this
kind of salary. I know I am also going to
spa this much in order to get this degree to
hopefully put me in a position to earn what. Yeah, like,
it's good to at least be able to put your
finger then on what it is that you'll be earnings.
Like a basic math equation solve for X, yeah, and
(22:11):
you want to know X so that you can make
an informed decision. And it feels like a way to
potentially stem the bleeding as opposed to kind of like
this endless cycle of like, well, what's going to happen
off of the future? Who knows? You need to have
some definites out there that you can project to.
Speaker 1 (22:23):
And it'll help you know how much debt you can
feel comfortable taking on, because typically, like what we advise
with an undergrad is to say, don't take out any
more than what you're likely to make in your first
year in that job. And I think it's pretty good advice, right,
And if you don't have any other debt, I think
you might be able to apply that to a master's
program as well.
Speaker 2 (22:44):
But even then, like taking on lessons, well, in Edwards
case too, he's not interested in student loans. But from
an emotional standpoint, yes, I think it can just be
incredibly helpful too, just to personally sort of run through
that equation and just like to say, what am I
willing to put into this to earn what?
Speaker 1 (22:59):
Yeah? Yeah, next year or not next year, but maybe
three years from now? Sure, all right, So I'll make
a couple of suggestions here. One, does your employer offer
any financial incentive to get more education, because a lot
of employers do, and there are often no stipulations about
what course of study you take. It's funny because Matte
of one of our buddies, his wife, her employer does
(23:19):
this very thing, and she has been going back and
taking nutrition classes and she could get a degree in
nutrient that's like her hopeful second career. But she's getting
the education while she has her day job because they're
paying for it, and they haven't made any stipulations and
said like nice, sorry, underwater basket weaving is off limits.
Like she can do whatever she wants and that's pretty cool.
(23:40):
And a lot of employers do that. They say, go
get a degree, a nextra degree if you're interested, will
help foot a lot of the bill.
Speaker 2 (23:45):
Is that not what Edward said, that he's interested into nutrition?
Speaker 1 (23:48):
Yeah exactly, Yeah, okay, Yeah, I think that's cool and
maybe they could chat. I think it's just worth looking
at your company's internal website or asking the HR department
because yeah, maybe there's something there, maybe there's a benefit
there that you didn't know about or you just hadn't considered. Also,
what about getting that degree over a longer timeline. I
(24:09):
think that's a way to save money too, and maybe
cash flow the cost maybe graduating in four years instead
of two and a half. That's actually the route that
we took one. It just felt like it was going
to be too difficult, right to actually condense that education
that Emily was gonna be taking extra classes and meant
a lot more homework. It was gonna be tough to
have the balance that we wanted in our lives. But
(24:30):
also stretching out those classes well can make it easier
to kind of keep that income rolling in while also
reducing the annual cost of school, which just means, hey,
I've got more time to work, less money actually going
to the school itself. So yeah, maybe i won't be
in my new career as quickly as I'd hoped, but
at least I'm going to be able to pay it
(24:51):
off as I go.
Speaker 2 (24:51):
Yeah, well, and what about asking the school that you're
planning on attending how other students.
Speaker 1 (24:55):
Are affording it?
Speaker 2 (24:56):
Like, what you're literally doing here is putting the ball
in their court. I think by starting the conversation here,
like you were showing that you were taking a proactive approach,
and I don't know, you might even find a way
to negotiate that price a little bit. Like if you
don't ask, Like it's almost like the art of asking
for a discount, Like you're definitely not going to get
it if you don't ask. And so I think even
just by starting the conversation, I think that that could
(25:17):
be yeah, a whole lot. I don't I could see
that being financially beneficial.
Speaker 1 (25:20):
I'll have other students been able to pull this off,
and you might get some some answers so that you
weren't expecting, and you might get some resources thrown your
way that you didn't expect it.
Speaker 2 (25:29):
Just because you're the squeaking wheel. You might even be
surprised at any financial aid that they might offer, just
because you're asking that. They're like, well, we've actually got
this program, and then you look into the program a
little bit and turns out, well, there's five figures here
waiting on somebody who jumps.
Speaker 1 (25:43):
Through the right hoops, which Edward might have the ability
to do.
Speaker 2 (25:46):
I would also say that you might want to consider
other schools that offer a similar degree, because even schools
that have a similar like quote unquote sticker price, they
might offer substantially different amounts of aid to students. And
I think like it sounds like he's pretty set on
what it is he wants to study. I think it's
okay to get married to a particular course of study,
(26:08):
but don't marry a particular school just yet, not until
you see what they're willing to how they're willing to
meet you halfway.
Speaker 1 (26:16):
Perhaps dream degree is one thing, dream school is another,
because that dream degree is offered a whole bunch of
places in all likelihood, and so there's no need to
kind of get your heart set on that one specific place.
You might even find, Hey, I can get this degree
for a third of the price if I take an
online classes at this place. It's not even in my state,
and you know, the end result is kind of the
same at least from a credentialism standpoint and what you're
(26:38):
able to learn. But you just save a whole lot
of money in the process. It's at least worth considering.
Also consider fellowships, right, that's just another option worth exploring
for some grad students. I'm not sure how applicable that
is in your field of study, but it's it's at
least worth looking. And when it comes to scholarships, the
Internet is your friend. There's a website called scally. It's
run by Sally May these days. That's worth that's worth
(27:01):
at least like thumbing through and then don't forget to
fill out your FAFSA. You might find that you're eligible
for some grants for some financial aid that you weren't
aware of. And something else worth considering is where you
work after you get the degree. We talked about asking
your employer now about what sort of benefits they offer
if you go back to get a degree, But a
lot of employers offer tuition reimbursement. So while you may
(27:24):
not be able to pay for your degree in cash
right now, you might be able to have some of
that debt if you took some on forgiven over time
as an employer perk, if you choose the right employer
to utilize that degree after you get it totally.
Speaker 2 (27:39):
Yeah, ask around some different employers or different hospitals or practices,
and they might have some some perks. I would hate
to see him. I don't know if this is even
a thing, but I would hate to see him like
sign away a certain number of years of his life
where he's just like, I'm willing to be an indentured
servant for so many years. But it kind of depends
on how much they might be willing to offset the
(27:59):
cost of that higher education. Yeah, in particular, when you're
talking about seventy three thousand dollars Joel. Let's hear from
another listener they are waiting into the WROTH versus traditional
debate as they are contemplating quasi early retirement.
Speaker 5 (28:15):
My wife is fifty one years old and we'll retire
in the next three to five years. She will have
a pension that will cover our living expenses. Currently, she
has seven hundred and twenty five thousand in a four
percent matched traditional four to seven deferred compensation account, which
she contributes the annuel maximum for her remaining three to
five years. I'm thinking of switching her future contributions into
(28:37):
a ROTH four to fifty seven deferred compensation account. Can
you tell me is there a benefit to making future
contributions into a ROTH four fifty seven versus maintaining the
traditional four to five seven deferred account in order to
hedge against future tax liabilities related to any withdrawals from
that traditional four to five seven pre tax deferred compensation account. Also,
(29:03):
if we're able, should we convert any of her seven
hundred and twenty five thousand from the traditional four five
seven funds to a ROTH four. Thanks again for your time.
Appreciate it.
Speaker 1 (29:16):
Matt. It sounds like Mike. That is his name, by
the way, he didn't stay it at the beginning. That's okay, Mike,
Well maybe it's okay, yeah, his or did he say
where he's from?
Speaker 2 (29:24):
That's true, like you know, maybe he's in Alaska, could
be maybe he's in Rhode Island, big difference.
Speaker 1 (29:28):
Who knows. Well, your wife is going to be a
young retiree. It sounds like Mike, and you said something
crucial by the way, that her pension will cover your
living expenses, which is fantastic, Like what a great position
to be in. It means that you're going to have
a lot of freedom because of those additional dollars that
she's worked hard to amass over the years. A pension
(29:50):
is great, but when a pension is substantial enough to
cover all of your living expenses, that just the flexibility
you have with your retirement accounts can be incredible. It's
pretty sweet. But one thing that Mike didn't say anything
about was his job. And you're interes sitting at home
watching Sports Center. Maybe because of that, maybe your household
(30:11):
overall judgment, no judgment that would partially dictate whether or
not you opt for a roth or traditional for your
wife these days, if you are both let's say at
peak earning years, well, then you know, if you're finding
yourself in the twenty four percent tax bracket or even higher,
I might continue to opt to contribute to the traditional
account in hopes of paying less in tax during your
(30:33):
timing years.
Speaker 2 (30:34):
And this is coming from someone who is a huge
fan of the of.
Speaker 1 (30:37):
All the different wroth varieties out there.
Speaker 2 (30:40):
That being said, it still makes particular sense to prioritize
a roth specifically in your early career years when you
aren't earning a ton of money, when you aren't in
those higher tax brackets, and for many when they're making
bank it makes sense to take the tax deduction now
with the traditional accounts. And like he alluded to, you
can always convert to roth in the you know, first
years of retirement where you can zero in on a
(31:02):
particular withdrawal rate where you are targeting a specific tax
bracket when you convert. And you know, there's some science
to it, but it's oftentimes more of an art than science.
There are so many different factors that come into play
as to whether or not you go with the ROTH
versus the traditional and specifically.
Speaker 1 (31:20):
Whether or not you convert those dollars later in life.
And it's almost always like a multi year thing to
convert little bits at a time so that you're continuing
to keep the taxes that you pay on those conversions minimal. Right, Sure,
but if you're already retired, let's say, and your wife
is the only one working, Hey, your income has likely
already declined from those peak earning years. If you have
(31:41):
cut your income, let's say, in half, I'm just making
a guess here. If that's the case, contributing directly to
a WROTH with additional investing dollars, that's what I would
do in all likelihood, Right, it's all about those specifics.
But if that's been the case, it's like we've had
two full time jobs, lots of income coming in. That's
why we've kind of prioritized traditional That makes sense. And hey,
(32:02):
maybe now maybe you were retired last year or something
like that, and now the only paycheck that's coming in
is hers, and so that has brought your justin gross
income down significantly for the time being, that might be
a perfect time to utilize ROTH contributions kind of like
you're alluding to, like your ass.
Speaker 2 (32:18):
Which maybe that's what he's thinking. He's thinking through He's
just like life is going to look different for the
next three to five years. Like you said, it also
comes down to a guess from my play, we don't
have all the information exactly.
Speaker 1 (32:28):
I was gonna say too.
Speaker 2 (32:28):
It also depends not only on their income, but also
their expected expenses off in the future as well, because
I'm thinking of let's say they both went from both
working full time jobs, so now they're both retired, they've
got a lot more time on their hands, and what
are they gonna do with that extra extra additional time?
Speaker 1 (32:43):
Pickleball?
Speaker 2 (32:44):
Let's maybe is pickleball, which it sounds very affordable, in
which case you can see your expenses go down significantly,
in which case, making let's say the Wroth option now
while she is working actually the unwise choice, because essentially,
the fewer dollars you need to realize down the road,
the more likely it makes sense to take advantage of
(33:06):
the traditional now because.
Speaker 1 (33:08):
And especially if part of it depends too, like you're
alluding to, on your overall balance in those retirement accounts.
Because rm ds coming down the road, they might not
be that might they might not be that substantial if
you don't have tons of money safe.
Speaker 2 (33:19):
So so what you said was like pickleball, which is
sort of like the frugal Like, if you expect a
future retirement of like simple living, frugal living, pickleball, I'm
gonna splurge and spend like one hundred and fifty bucks
on a paddle.
Speaker 1 (33:30):
Okay, that's nothing scheme.
Speaker 2 (33:34):
In the big scheme of things. But like let's say,
for instance, you're plenty to travel the world, and you're
gonna expect to see your expenses go up significantly because hey,
not only is the pension completely covering our cost of
living here that we're that we've been used to, but
we've got a ton of money set aside to be
able to live the life to do all the traveling. Well,
what that means is that you're gonna have to realize
(33:54):
some of those four to fifty seven dollars, which is
going to increase your Those dollars are tax as ordinary income,
is what I'm saying, which could potentially lead to you
needing to tap more of those dollars, putting you in
a potentially higher tax bracket later down the road, So
that would be an instance where opting for the wrath
actually did make sense because you took the tax hit
(34:16):
when you were realizing fewer of those dollars. So basically, retirement.
Speaker 1 (34:20):
It's not a straightforward, easy answer, no, and there are
a lot of factors at play, and this might be
something you want to do over time, and it comes
down to income. It comes down to account balances and
retirement accounts, current.
Speaker 2 (34:32):
In future income, but also current in future expenses and
the kind of lifestyle you're looking to be able to
afford as well.
Speaker 1 (34:39):
Yeah, let's talk about roth conversions for just a second.
Whether or not you choose to do that, it depends
on your income two and also somewhat on what's going
on with the stock market. So given that current combination
of fairly low tax rates and a market that is
down a little bit, I think converting to a roth ira,
some of those dollars would be at least on my ra.
(35:01):
But your wife also might not have that ability. So
you know, converting to a roth ira is it's often
an option once you've left your job, but if you're
still actively employed, you're making contributions to that account that's
not always allowed. Some plans do allow for in service withdrawals,
that's what it's called. But you need to check and
see first. So if your wife's employer offers a WROTH
(35:22):
four fifty seven B option, you might be able to
do what's known as an in plan rollover from the
traditional four to fifty seven B into the WROTH. That
might be the only maneuver to turn to when you're
talking about rothifying those dollars. I'd consider pursuing it, but
you got to know whether that's an option first, And
you also have to take into consideration some of those
things that we mentioned before before you opt for a
(35:44):
wroth conversion, Especially when we're talking about like a bulk
wroth conversion, that might be something that's best done for
tax purposes over an extended period of time, not in
one fell swoop.
Speaker 2 (35:54):
Also, keep in mind you've got to have the cash
on hand on the sidelines as like dry powder, to
be able to pay these taxes as well. But my
guess is that a lot of folks are considering the
option right now to convert because it's the it's like
the one silver lining two a declining portfolio.
Speaker 1 (36:10):
It's like that in tax loss harvesting, right, Yeah, that's true.
There's two silver lines.
Speaker 2 (36:14):
But like so we're talking about corrections and bear markets,
and you know that can be the perfect time to
go ahead and pay the piper so that you can
avoid the growing tax liability off in the future forever,
something that you never have to worry about ever again,
because if the market then recovers and it always has
and then it gains even more, we're talking about a
much bigger tax bill on the horizon, and there are
(36:36):
a whole lot of different factors like we have kind
of talked through to take into account. And with that mind,
because there are so many dollars that are on the
line here, I would most definitely consider a financial advisor,
either talking to a CPA or reaching out to a
flat fee advisor at like Hello Nectarine, to be able
to talk through some different scenarios just to make sure
(36:57):
that you're making the best choice not only for y'all
right now, but also oft in the future. Yeah, we
talked about a Wroth conversion calculator that Fidelity has, Matt,
that I looked up about a month ago or something.
I was looking into it and.
Speaker 1 (37:10):
I ran some numbers with the market down well, it
was just really interesting to see the fidelity basically said, well,
if you do roth conversions in this way, then your
balance is probably going to be five hundred thousand dollars
more over time, which is fascinating that, like small wrath
conversions in the right way can mean you have more
money to spend. Joel rich Stady Fat Sacks over there,
(37:32):
I just I wasn't even my numbers. I was just like, oh,
I want to use this calculator and kind of see
what it has, what it has going on under the hood,
and it's fascinating to see how, you know, even talking
about hundreds of thousands of dollars worth of roth conversions
if done properly, the amount of money that it can
save you in tax and the amount of spending power
that can kind of add to your arsenal, it's it's
not insignificant. So making sure you do it right is
(37:55):
of massive importance because we're talking about lots of dollars
and we're talking about lots of potent tax at stake,
So speaking of turanga pro could be the best way
to go.
Speaker 2 (38:04):
Speaking of tax, one thing, we didn't even talk about
our future potential future tax rates. Yeah, which we're not
even going to touch on because who the heck know is.
Speaker 1 (38:10):
Still up in the air what the future holds. Yeah,
all right, we've got more to get to on this episode,
more questions of yours, including cash gifts, how do you
do that? And talk about auto insurance as well. We'll
hit those up right after this. You know what, We've
(38:32):
got more how to money for you.
Speaker 2 (38:33):
Now that we are back from the break, it is
now time for the Facebook question of the week, which
is from David, and he writes, Hey, y'all, we are
in our mid thirties. You can tell David's a Southerner.
So he says, y'all, we are in our mid thirties,
about three quarters of the way through money gear four,
with some in Gear five. We have two vehicles at
two thousand and eight Toyota worth about twelve thousand dollars
(38:55):
and a two thousand and nine Honda worth about three
thousand dollars. We've got full coverage on them with higher
liability limits than our state's minimum, as well as five
hundred dollars deductibles and all of the coverage items. I
looked at how much we could save if we just
all coverage except the state minimum liability, and it was
only seventy eight dollars per month, roughly fifty percent savings.
(39:16):
If I multiply seventy eight dollars though by one hundred
and seventy three, we get thirteen thousand, four hundred and
ninety four dollars, which is what we could roughly be
worth if invested into the S and P five hundred
each month. We don't make a lot of money, so
I'm looking for ways to cut costs so we can
increase our savings. But I also don't love the idea
of putting the bill for a total vehicle. And I'll
(39:37):
mention too, David, he that's the rule of one to
seventy three. It's a monthly savings amount. Were you to
invest that, it's the compounding return were you to continue
to then invest that dollar amount every single month over
the course of a decade, over ten years exactly, and
I'll say thirteen thousand dollars. It doesn't sound all that much,
but that's just like at the very beginning of the compounding.
Like if you do that for another decade and you're
(39:59):
looking at figure like easily three times, that.
Speaker 1 (40:03):
Is what you would see. Yeah, which I think is
worth pointing out. And you're also talking about a fifty
percent cut in what you're putting towards insurance every single month.
And this is just one of my favorite topics to discuss,
and I feel like in the personal finance space it
goes under discussed just how to save money on insurance,
Like you don't want to like cut your insurance to
the bare bones, Like, hey, I'm gonna eliminate my health
(40:23):
insurance because that's going to save me, you know, seven
hundred dollars in premiums every single month. And then you
fall out of a tree and like break your femur
or something like that, and you've got to go to
the emergency room. Think about all those bills. Why you
even then the tree Joel, Yeah, I know exactly. I
was getting my cat or something like that. I don't know,
but that those are the kind of decisions that are
short sighted, and you know, you're better off to pay
the health insurance premium because of what could happen. And
(40:46):
with car insurance, the stakes are a little bit lower,
but they're still really important and there is a lot
at stake. And I'm kind of biased and I think
that Folks with older vehicles that have appreciated substantially should
get rid of full coverage. That is actually one of
the primary benefits of driving an older car, specifically something
that is almost twenty years old, like David's doing right,
(41:10):
But that is only if you can easily afford to
self insurance take on that additional risk. If your savings
are paltry, if they're minimal, you still need to keep
full coverage in my opinion, even if it's more costly,
which just I think incentivizes you to save more money
so that you can afford to ditch the full coverage,
And no one can guarantee that it's going to be
the best result. You could always get into a wreck
(41:32):
next week the week after you drop the full coverage
on your insurance policy, which would be yes frustrating, and
it is potentially part of the deal. Like the odds
though are in your financial favor. Makes me think of Matt,
the insurance policy I have on my home, and I
have a percentage based insurance policy, and when the tree
came crashing down through our roof, I believe you asked me,
(41:54):
are you going to change that now because you're deductible?
Was so ridiculous. And I said, I didn't ask you
that other people, other people, because I know the answer
as no, I'm not because just mathematically and when you
think about it, yeah, could a tree fall through my
roof again this year? Next year?
Speaker 2 (42:10):
Sure?
Speaker 1 (42:10):
And would that harm me financially? Yes? Overall though I'm
looking at the numbers and I believe I will come
out ahead, although it didn't feel like it when the
event occurred.
Speaker 2 (42:19):
When you're forking out, yeah, five figures. So when it
came out to the deductible there. But David, he mentioned
that he doesn't make a lot of money, which makes
it even harder to buy a new car outright if
he needed it post accident, and he eliminated that coverage.
So I'm not sure what, David, what your savings looks like,
which is the most relevant factor here. But this is
a case where his attemptional to be frugal could end
(42:42):
up being cheap because if he got in an accident,
you might have to take out a loan to then
buy let's say, you know, any type of car, but
let's say a newer car without any sort of insurance payout,
And if it happened before he was able to bank
the savings by reducing his premiums, he could find himself
in a real bind and it.
Speaker 1 (42:59):
Would like not be worth it for him.
Speaker 2 (43:02):
He mentioned too that he's three quarters of the way
through money gear number four and one of year number four.
Maybe folks are out there asking which money gear is that. Again,
that's a fully funny funded emergency fund, and if it
was me personally, I think I would be less likely
to cut some of these coverages until that thing is like, yeah,
fully beefed up and fully stopped.
Speaker 1 (43:22):
But maybe that's maybe that's a good answer is once
you get there, once you achieve the full emergency fund,
that's the perfect time.
Speaker 2 (43:28):
I would be more than willing to give myself commission
at that point. But until then, it does kind of
feel like, all right, well, I'm trying to be frugal here,
but yeah, it ends up being.
Speaker 1 (43:37):
A cheap move. Okay, So I'm going to say this, like,
seventy eight dollars a month is not nothing, right, that's
almost one thousand bucks a year in savings. I think
it is worth having the goal of increasing his overall
savings amount his emergency fund to the what we prescribe.
Before he attempts to fully clawse this back. But what
if he kind of split the difference here, and what
(44:00):
if he the Honda in particular that's worth three thousand dollars, Well,
that might need not need full coverage. I would say,
maybe consider keeping full coverage on the Toyota that's worth
a whole lot more twelve grand yep, and then the
Honda that's worth three thousand dollars that's fully depreciate it
out essentially. I like that you're gonna save not as
(44:20):
much money, but you're gonna save some. So maybe instead
of saving seventy eight a month, you're gonna save thirty
two a month something like that.
Speaker 2 (44:26):
But it's a step in the right direction. Yeah, yeah,
cut the cut all the unnecessary coverage on the Honda Civic.
Speaker 1 (44:31):
Yeah.
Speaker 2 (44:32):
Whereas that's an old Toyota that's worth twelve.
Speaker 1 (44:36):
I like a c sekoya it it could be a Sequoia,
or it could be a land cruiser. Maybe this lank
cruiser like the older retain their value. Those things are beefy,
yeah as well.
Speaker 2 (44:46):
But yeah, I feel like that's the way you can
have your cake and need it too. Let's do another
quick one from anonymous. What is your recommendation for setting
aside cash that relatives give as birthday gifts to small kids.
I'm not able to contribute to long term savings for her. Yeah,
so we're talking about a few hundred dollars here and there.
Do I just put it in my high interest savings
and then give her the interest that it earned? Is
(45:07):
there a low cost way of handling this by putting
it in her name? What do you think, Joel? What
do you do with kids and cash gifts?
Speaker 1 (45:14):
That's a good question, and I do you think? You
probably want to make it tangible for them as it's
a way to teach them. Right, Hey, you got this money,
and whatever you want to teach them matters, like where
they're talking about saving, investing, and giving money away, whatever
you prioritize as a family, you want to make sure
that money is tangible in a way that they can understand.
(45:35):
This is typically what happens with money that comes into
our lives. We choose these different things. You're making an
argument for cash here, keeping it as cash as opposed
to opening up a fancy account, which is I'm going
to say, this is what I did. Yeah, because early
on I thought.
Speaker 2 (45:49):
Oh, the world that our kids are going to be
living in money is digital. It's zeros and ones, it's
all in the app. It's you know, it's a number
getting into it early. It's a number on a screen.
But I've done and about faced and we are like
fully doing the cash system because I want it to
be tangible because of the lessons I'm trying to focus
on while they're young and at home.
Speaker 1 (46:08):
Well, in this poster specifically said small kids. And I
think there's a difference between small kids and teenagers. And
teenagers are they do are living in that digital world
a little bit more?
Speaker 2 (46:20):
I think they kill more independence.
Speaker 1 (46:21):
They might have an app on the phone, even if
that phone lives at home, they can check their bank
account balance or something like that. And so yeah, maybe
that is the time to get them in. And so
my kids, we have transitioned now to which I mentioned
on the show before the Capitol one checking accounts for teens.
That are I think kids as young as eight can
partake in for kids, Yeah, and that's great, but I
(46:42):
wouldn't want to do that with a four or five
year old because I tried that with the really young
kids and it didn't go so hot. So I think
cash is probably king, and if you're talking about interest,
I think you know, yeah, you could put it in
your high savings account or something like that, but the
interest is going to be paltry. If you want your
kids to understand how interest works, you're going to need
(47:02):
to use your own money to incentivize them, kind of
to make interest almost like, hey, we're gonna give you
a ten percent interest rate on whatever money you have
in savings, just to make it feel tangible. Because we're
talking about such small numbers. It almost doesn't. It doesn't
move the needle.
Speaker 2 (47:18):
Yeah, yeah, I will say so we I was looking
into so ally they've got saving the savings bucket feature.
Speaker 1 (47:24):
Our eldest started.
Speaker 2 (47:26):
She's a mass a decent chunk of money, and I
was curious to see how the interest was gonna work.
And I saw that we had to do was you
had to designate which bucket you wanted the interest of
your overall saving is to go to, which I was
actually kind of bummed about because I wanted the percentage
amount of money that was in that in that specific
bucket to then earn interest to go in that bucket. Right,
(47:46):
that makes sense if you're thinking about it that way.
But to your point, what you could do is you
could designate your kid's savings bucket as the interest receiving bucket,
specifically if you are with ally, and that would be
a way for you to not have to pay out
of pocket at all for dollars that they would experience
from a kind of compounding standpoint. And it would also
(48:07):
be larger than just say a couple hundred dollars here
and there. You know, let's say you've got you know,
many times more than that, let's say twenty thirty forty
thousand dollars in there, because you've got your emergency fund
set aside in there, and for them to experience the
compounding and the interest growth that that money would receive
would be obviously much more than the standard three four
percent that hiyo Savings are paying right now. That would
(48:29):
be an option in a way to kind of take
advantage of some of the different builds in features of
hiyod Savings account that already exists while keeping things simple,
because I think for me, that's what it would be
all about, is just not having to open an additional count,
you know, to teach a lesson that may or may
not be able to even be absorbed at such a
young age.
Speaker 1 (48:47):
I do think though, kind of what you're getting at
with the cash for particularly young kids, I think probably
around the age of nine is when that starts to
change and digital makes a little more sense. But probably
even more in those pre teen years is when is
when a debit card attached to a checking account can
make a little bit more sense. But I guess the
other thing I would mention too is typically we recommend
(49:09):
high oot savings accounts with online banks, but when it
comes specifically to children's accounts, credit unions can be great
at this. So we don't typically love credit unions for savings.
We like them for more borrowing products. But some local
credit unions have some of the best accounts for kids
out there these days. So if you kind of want
something local, you want them to actually go in and
deposit their money, and you want them to have that
(49:30):
experience because I remember.
Speaker 2 (49:31):
That as a kid, it's an event, yes, uh huh, And.
Speaker 1 (49:33):
So there's something about that as opposed to like, don't worry, mommy,
put the money in your account. Well, there's there's something
really cool about taking them in there and them doing
giving the money to the teller so that it's in
their account and then they get a printed out receipt
of how much money is in their account. That's an
experience too, and it leaves an imprint. So think about
that and find out if one of your local credit
unions has some of them offered like ridiculous interest rates
(49:54):
on up to three thousand.
Speaker 2 (49:55):
Dollars or something like that. Kids like three five thousand dollars.
Beyond that, they're paying nothing but for that first five thousand.
They're trying to incentivize kids to be.
Speaker 1 (50:02):
Saviors, which is awesome. That's like the kind of that stuff.
Credit unions are great at so at least look into that.
But says like you had a couple options, and just
keeping the cash in envelopes at or jars or something
like that at home and then adding to it with
mommy paid interest or something like that, that might even
be the best option here.
Speaker 2 (50:20):
You know, are you going to take us back to
the beer. This delicious, so tasty, amazing.
Speaker 1 (50:24):
Beer that you and I got to enjoy during this episode,
Ten out of ten would drink again. It was awesome
and I think I loved just without the pineapple, this
would have been a fantastic IPA. But me, it's kind
of like this tropical edge though.
Speaker 2 (50:37):
So it was aged on on pineapple and I don't
exactly know what that looks like, but like it sounds
kind of gimmicky.
Speaker 1 (50:44):
It is not gimmicky at all. It tastes so good.
And some fruited gash they taste too fruity, and this doesn't.
This tastes like real pineapple in my mouth, in my beer.
This was this beer what was it called again? A
guillotine of consciousness, A guillotine of contemplation, Oh, contempt, And
now I want to cut my head off and do
some thinking. Don't do it with this beer in my hand.
Speaker 2 (51:04):
So, like pineapple has like the sharpness to it, right, Like,
I don't know, do you enjoy eating fresh pineapple sometimes
sometimes because it'll bust up your mouth?
Speaker 1 (51:12):
Yeah, Like I don't know if it's the acid you
mentioned that one time. What is that called that it does?
Speaker 2 (51:16):
Oh, it literally starts breaking down, because that's why sometimes
you use pineapple to marinate meat. In a similar way, though,
that sharpness from the pineapple I feel like compliments the
freshness that you get with some of these hops where
it has like that hop bite that I typically refer to,
and the combination of the pineapple with the hops that
they've got going on makes us an incredibly delicious, hazy
ipa so good.
Speaker 1 (51:36):
One of the best beers from one of the best breweries,
highly recommended.
Speaker 2 (51:39):
By the way, if you see some berry on the
shelf at your local package store and you live like
on the West Coast, for instance, and you're like, oh, okay,
that's burial. I've heard, you know, heard the Fellows talk
about that Surflax. This is not okay. Surflax is like
the standard. It's a great beer, it's a fine beer.
It is not like the stuff that they're putting out
that you're able to pick up there at the brewery.
Speaker 1 (51:59):
It's a whole other level. So don't don't. I don't
want to conflate the two. As is the case with
many breweries. It's like what ends up in distribution is
their mass produce stuff. It's I and the stuff you
get at the brewery itself is yeah, the more one
off stuff. So totally agree, this is a good one.
All right, that's gonna do it for this episode. Don't
forget to send us your money questions please and go
to our website howtomoney dot com for more money saving info.
(52:21):
It's open twenty four to seven. All right, Matt, Until
next time, best friends out, Best Friends Out,
Welcome to Out of Money. I'm Joel, I'm Matt, and
today we're answering your listener questions.
Speaker 2 (00:24):
Happy Monday, everybody. We're gonna hear from several listeners who
had financial questions Joel. For instance, a listeners wondering about
the necessity of a credit card, whether or not it's
something you gotta have, like you gotta have it or
is it more optional?
Speaker 1 (00:37):
Sounds like like a Checkers commercial. I gotta have it?
Is that a Checker's commercial? There was something like that,
Like as I was saying I got to eat something,
it felt like where's the where's the beef? Gotta have it?
Speaker 2 (00:47):
Must eat now.
Speaker 1 (00:48):
Another listener is asking about paying for a career shift.
Speaker 2 (00:53):
Uh, he doesn't have a midlife crisis, but he's in
fact focusing maybe on a career that's going to provide
a little more fulfillments. And another listener is asking about
dropping car insurance or not like fully dropping car insurance,
but dropping the fuller more comprehensive. Oh there you go,
comprehensive in collision, specifically types of insurance, whether or not
they're in the financial position to pull that off. The
(01:14):
reason ask the question is because the money savings can
be huge, but the trade offs are meaningful to yep,
talking about that and more that's the important part. And more,
who knows what we're going to talk about?
Speaker 1 (01:23):
So much more we keep go in so many directions
just I don't know, bucklet your seat belts, kids, stay
along for the ride. Matt quick tip that a listener
Katie sent in, by the way, before we get to
those questions that I wanted to mention. She basically said, Hey,
there were a few kind of crummy trees in the
neighborhood that needed to come down, and I had I
think she had one or two trees in her yard
that had to come down too, and so she pulled resources,
(01:47):
which I think is so brilliant and so underutilized. I
have thought about this. I like it, Like with how
like different yard services are coming to like all my
neighbors around me, I'm like, what if we just do that?
Speaker 2 (01:59):
Is so yeah yeah, So basically you're saying, like you're
asking around, these are services where someone has to come
out physically, and so it makes sense to get like
a group discount, as what if you're talking about creating
your like your own neighbor based group on right of.
Speaker 1 (02:13):
Dis exactly is what you're saying exactly, Because isn't half
the problem as someone who mows lawns, the fact that
you have to drive to every lawn you have to do,
And what if you could do six back to back
to back to back to back and not have to travel.
That sounds brilliant And maybe you'd will be willing to
offer like a ten, fifteen, maybe even a twenty percent
discount because of all that time that's saved. You just
(02:33):
you're just mowing the laws man, You're not You're not
moving around to get to the lawns.
Speaker 2 (02:36):
So you know, it's mind boggling.
Speaker 1 (02:37):
And the same thing with trees, which Katie was bringing
our attention. So Katie, thank you. I just think it's
worth it.
Speaker 3 (02:41):
Yeah.
Speaker 2 (02:41):
As neighbors just being like, hey, what if we also
get this neighbor over here on board? What kind of
deal are you willing to offer us? What I was
gonna say is mind boggling. Is we live in a
neighborhood that isn't that big, and I know that there
is a teenager in this neighbor in my neighborhood who
has his own law service. He's got a pickup truck.
He's got a trailer, and I see I'm leaving the neighborhood.
Speaker 1 (03:02):
Has he ever come to your door? No?
Speaker 2 (03:04):
No, he's not stuck anything out. And so maybe the
otis is on me. Maybe I need to reach out
to him proactively and just say, hey, man, like you
could even sell that trailer.
Speaker 1 (03:14):
Yeah, you literally drive.
Speaker 2 (03:15):
Your riding lawmore from one house to the next to
the next and just end up doing the whole neighborhood.
Speaker 1 (03:19):
I would do if I was him, I would go
so much more. If I would go knock on every
door and I would say how much are you paying
for your lawn service every month? And then if I
don't know whatever, they say, oh we're paying two hundred
and twenty dollars. Great, you know what, I on to
knock fifteen percent off that, here's my rate for the month,
and let me start doing it like clockwork. I think
that may make so much sense. Think about how many
doors he could get, like he could he could be
the richest high schooler.
Speaker 2 (03:40):
In the whole city, and again keeping things lean and efficient,
Like I would love the idea that he would be
able to ditch the trailer and spending more time actually
cutting lawns.
Speaker 1 (03:50):
As opposed to you know, driving around town. I'm about
that efficiency. It sounds like Katie was able to do
it with a tree crew, So more Matt props to you, Katie.
I love it. I also of the beer.
Speaker 2 (04:01):
There's my beer review already that you and I are
going to enjoy during this episode, which is called a
Guillotine of Contemplation. That's right, This is a beer by
burial guillotine like eighteenth century France.
Speaker 1 (04:12):
Yeah, yeah, that's what that's literally in the name of
this beer. We'll give our thoughts on this one.
Speaker 2 (04:16):
I'm so happy that you were able to head up
there and pick up some of these fantastic beers.
Speaker 1 (04:21):
One of the best brederies in the country, straight from
the source, no doubt. All right, Matt. For folks out
there listening, if they want to submit a question, how
do they do it? Do you want to let them know?
They just record a.
Speaker 2 (04:30):
Voice memo on their phones and email it to us
at how Toomoney Pod at gmail dot com. Please state
your name. It's always fun because we've got one today
where he doesn't say his name, so we're.
Speaker 1 (04:38):
Gonna have to say it for him. It's always more fun.
Speaker 2 (04:40):
Yeah, I know and say where you're from as well,
because I like to look up what's going on in
your town.
Speaker 1 (04:45):
We have to give like full address, but maybe just
the city or the stuff.
Speaker 2 (04:49):
I think this context context helps and it helps me
to understand what they're going through.
Speaker 1 (04:55):
I don't know that's.
Speaker 2 (04:56):
We're not dish, not generic answers. I mean, to a
certain extent, some financial drews withstand geography, Joel, but it
can be helpful sometimes.
Speaker 1 (05:04):
For sure, personally. Okay, Matt, what if the question is
a little weird or offbeat? Do we want to hear
those two? Those are even better, man, Please please send
them in all R. Let's get to a question now, Matt.
This one specifically is about credit cards, whether they're necessary.
Speaker 3 (05:16):
Hi, Joel and Matt. My name is Ben. My question
for you is do you need a credit card to
get through life? And can they be used to help
you save money. I'm now thirty years old. I've never
had a credit card before, but I have a decent
credit score built up over the years. I haven't always
had a good relationship with money, but listening to your
(05:36):
podcast has definitely helped me to begin improving my financial
health and my relationship with money. For example, I've taken
on board your advice about building an emergency fund and
biking to work instead of driving. Interested to hear your
thoughts on whether a credit card is needed and whether
they can be used to help you save money. Thanks, Joel.
Speaker 2 (06:00):
Did you hear that how Ben's bike into work? Now?
Speaker 1 (06:03):
I can get behind that. I love it, man, Like
both of our bikes are in here today. We literally Yeah,
I walk like you often, don't bike into the to
the office, to the clubhouse here all that often. But
I ride my bike less, although I take my son
to school on the e bike every day. And I
guess I just I prefer the slightly long. I mean,
we have a mile long commute, so the bike it
(06:23):
takes me four minutes, and walking it takes me fifteen.
I just kind of like that fifteen minutes worth of decompression.
Speaker 2 (06:28):
Oh I get that. Yeah, it depends on what you're
trying to accomplish during that period of time. But biking,
what I love about it is it's the perfect habit
that then allows you to do some of the things Ben,
that you're looking to do, like build up an emergency fund,
right like you Okay, it's been a minute since we've
talked about bikes and how great biking is for you.
It's like the perfect atomic habit. Which so that's the
(06:49):
book I've been I'm rereading that. It's been a minute
a few years since I've read that one. But you've
got the short term reward of being active and moving
your body, and you're feeling healthy and you're in a
better mood. So that's like the near term what you
need to sustain you, like in the day to day
sort of thing. But then you also have like the
long term positive consequences of biking into work. If that's
(07:10):
something that you're able to do, the financial health related
and financial the financial savings, like the benefits that you're
going to be able to accrue not only save up
an emergency fund, perhaps even downsize your automobile fleet, maybe
even completely cutting a car from your life. Maybe you're
paying off debt, maybe you are investing more aggressively, all
because you have implemented a new habit in your life.
Speaker 1 (07:33):
If your biking habit gets that extreme where you can
knock a car out of your life, I mean, it's
amazing how much money you can save. Yeah, and Matt
you're I realized that it takes a lot of intentionality
for people to do that. You've been doing. You've done
that for I don't know, fifteen years, I don't know,
seventy yeah, seventeen something. It's crazy and most people say, well,
it's basically impossible in modern society.
Speaker 2 (07:53):
You got to be crazy to want to do this.
Speaker 1 (07:55):
Yeah, but then a lot of people end up having
like three or four cars in their house. Definitely overkill.
It's possible to get by on less. And when you
actually factor in, well, how much does this actually cost me,
especially with what's happened with insurance rates for car owners
these days, it could be a lot. So Ben, just yeah,
keep going, man, and keep making it happen, because that
is not a small move that you're making. It really
(08:17):
is big. Let's talk about credit cards, because I mean,
if you want us to give you the bare bones answer,
it's basically no, you don't need a credit card in
your life, not necessarily. Yeah, if you're saying do I
have to have it? No, of course, not like there
are a lot Just like a car, you don't have
to have it. There are all sorts of things we
could go without in our lives, but we choose to
(08:38):
include them because they can be helpful. So we are
fans of credit cards when you use them wisely. But
the truth is only about half of the population actually
uses credit cards. Well, it's almost exactly fifty to fifty
when you look at the statistics, So many folks really
shouldn't be using credit cards at all. A massive percentage
(09:00):
of Americans use credit cards in ways that harm them financially,
by not paying their bills on time and in full,
and where.
Speaker 2 (09:06):
They're carrying that balance.
Speaker 1 (09:07):
Yeah, and then the other thing too, Matt, part of
is that, right, it's the balance, and it's the interest rates,
But then it's also that they're spending more than they
otherwise would. They're treating it like it's fake money or
something like that. And Costco is the credit card equivalent.
I go there and I spend more just because it's
available to me. That's probably true. Yeah, I'm sure some
people do.
Speaker 2 (09:24):
Like portions are the new credit cardal we go on
to eat and then we end up eating all those
food because the portions are so large.
Speaker 1 (09:30):
Yeah, I mean, I think there's probably probably some truth
to that. Possibly, And so when there are multiple ways
to use your credit card improper improperly, and then when
you look at the average revolving monthly balance, it's it's
ballooned up to like ten thousand dollars now, and that
is truly financially harmful for anybody who uses credit cards
in that way. I think what we've come to notice
in recent year is based on feedback we've gotten from
(09:52):
our younger listeners, and then the more I've kind of
seen this phenomena, I feel the same way, Matt. Younger
people seem to be treating cash the way older generations
treated credit cards, where cash feels like it's fake money.
If I've got one hundred bucks on hand, I'm gonna
blow it. Whereas the credit card, I'm logging in and
I'm seeing my statements, and I realize I'm tying that
spending on the credit card to my monthly budget and
to the money I do or don't have in my
(10:13):
bank account. It's where it feels like that, like fake
monopoly money, that kind of thing. So it's interesting to
see that shift. We used to say, oh, well, credit
cards for most people feel like fake money, but I
think actually the opposite is true, even more even more
so these days I guess what we would say when
it comes down to aveness is we we use credit cards,
we recommend using them well, but they're they're obviously still
(10:33):
not a necessity to live like a fulfilling life or
a smart financially savvy life either.
Speaker 2 (10:38):
Yeah, and others in the personal finance space completely disagree
with us that credit cards can ever make sense. We
get where they're coming from, but we also think that
when you realize the potential pitfalls, if your eyes are
open to the ways that you can mismanagement, that you're
going to be far more likely to use them judiciously.
And the benefits, man, that's why they are legit. And
(11:00):
I'm not just talking about the rewards.
Speaker 1 (11:03):
So I looked it up man.
Speaker 2 (11:04):
Way back in episode one, we talked about the I
forget the name of it, but secondary tertiary credit card benefits.
We talked about fraud, liability, we talked about unauthorized charge protection,
things like that cash and debit cards don't have nearly
the same protections. But of course the cash rewards, man,
that's what kind of keeps me coming back month after
(11:24):
a month.
Speaker 1 (11:24):
If you drop your cash, someone picks it up. Yes,
common you drop your credit card, someone spends money on it,
you're not responsible for any of the charges that were
made using that credit card. A lot's the beautiful thing,
a lot of sweet benefits. And even with debit cards
they look the exact same, Matt. But in that episode
we talked about how there's not as much legal coverage
that you have using a debit card. Or if someone
excuse me, if someone uses that debit card as if
(11:46):
they were you and you don't find it out in
quite enough time, you can be on the hook for
some of those charges.
Speaker 2 (11:50):
Yeah, debit cards are more like guilty until proven innocent,
whereas credit cards more like innocent until proven guilt.
Speaker 1 (11:55):
That's a great way to say it. Yeah, And the
culture is just that you have to pay attention, right
because using credit cards the way that you would use cash.
That's really the secret to using credit cards in a
way that's going to help you and not hurt you. Basically,
don't buy stuff you can't afford, and don't buy more
than you otherwise would always pay the bill on time
and in full. Otherwise, of course you're gonna be working
(12:17):
over twenty percent plus in interest to the credit card companies,
and that's a recipe for disaster, and that there were
recent stats that came out about how people are going
to pay more in interest than what their balance is
because of how little they're paying towards their credit card
bill every month. Like you ain't got to make much
money doing that. In fact, you're going in the opposite direction.
(12:39):
So credit cards they can be this double edged sword,
and then we want you wielding the sword, well, we
don't want you getting cut to pieces by it. I
think it's maybe we should bring in just a couple
other benefits too that are worth mentioning. There are cash
and travel awards that you can earn. Everybody knows that.
I don't know that we need to say much about that.
But having a couple of credit cards in your arsenal
two to three, and then you know, the more you
(13:01):
feel like you're handling them well and you know what
you're doing, you can increase that. But having even just
a couple and using them judiciously can start you on
that cycle of some of those bonuses for opening an
account and then the perpetual rewards that you get just
from using it responsibly. But then secondary benefits are I
think those are what get mentioned a whole lot less,
(13:21):
like using that credit card overseas and not paying a
diamond foreign transaction fees. Well, that can just make travel
so much easier. There are extra insurance products you could
get using credit cards, travel insurance or primary rental car
insurance like that's another one. Those can save you money,
like so the or cell phone protection right and other
purchase protection. Those secondary benefits of credit cards can really
(13:44):
add up to hundreds of dollars worth of value every
year pretty easily. I mean, think about even just some
of the airport lounges you can get into with some
of the fancier travel cards. I know, some of the
how to Money audience, they're obsessed with that. They love
that love being able to hit up the sweet lounges
before their trip. But of course I have to reiterate,
(14:05):
no matter how good the rewards are, they're just not
worth it if you carry a balance. And some people think, oh,
the rewards are great, and then they carry balance and
it's like, no, you just nullified all the rewards you
got because of the interest that you paid. And it
just feels like a duh thing to say. But I
think there are a lot of people out there who
think using credit cards in that way is still beneficial
to them when it's not. That's right.
Speaker 2 (14:23):
And by the way, this isn't something that we mention
all that often, but you mentioned being able to pay
for things overseas. We're talking about the foreign transaction fees.
And by the way, if you go to howdomoney dot
com forward slash credit card tool, you can sort the
different credit cards that are out there by whether or
not that car charges a zero percent foreign transaction fees,
essentially whether or not you can use that card while
(14:43):
abroad while not paying extra.
Speaker 1 (14:46):
For those different charges, So be sure to check that out.
Speaker 2 (14:49):
For Ben specifically, you have said that you've never had
a credit card, but you still have a decent credit score.
One of the reasons having a credit card can be
so helpful is that responsible use can help you to
or to maintain a solid credit score. But you're also
living proof that you don't need to have a credit
card to achieve that. It sounds like you have made
(15:10):
a lot of progress, especially recently, which is awesome, but
you've also highlighted you're not so great money history, and
so with that in mind for you, I would tread
lightly with credit cards to begin with. For you, I
would say, like, let's go ahead and open up a
two percent cash back card across the board, use it
for a few recurring purchases perhaps, and if that goes well,
(15:30):
that's when I would look to open another card. Perhaps
I wouldn't like, don't head over to the point skuy
and open up a dozen different credit cards. Maybe that's
something you'll do eventually at some point down the road,
but for now, I would just start small. Get you
something like a zero annual fee card like a City
Double Cash for instance, where you're getting that two percent
no matter what, you're able to keep it super simple.
(15:52):
It's even something I'm considering doing as well, because I
have the very complicated credit card strategy where I have
specific credit cards for categories of spending. And that's when
my life was a little more simple. But I've maintained
that practice while my life has gotten busier and more complicated,
and I'm starting to wonder. I wonder if like the
juice is worth the squeeze anymore, something to consider, not
(16:13):
only for someone like Ben, but even for even a
seasoned credit card user.
Speaker 1 (16:17):
Makes me think, like, if you were gonna sign up
for a race if you're like I'm gonna be a runner,
and you pick your first race as like I'm why not,
I'm gonna go do the Boston Marathon, which I think
happened like a month ago or something like that. Sorry,
that's a really bad idea. Might want to start with
like a local five k instead, right, and work your
way up. Maybe that's like you perhaps three year goal exactly,
that's your two to three year goal. So same with
(16:39):
credit cards, like open one and see how it goes.
Start small, like you said, a few recurring purchases. Make
it your credit card for gas or something like that
and for streaming services, and then go from there over time. Ben,
you don't need a credit card, but they could be
a benefit to your finances if you use them well
over time. All right, Matt, We've got more to get
to on this episod, including let's talk about saving money
(17:02):
on college and wroth accounts. We'll get to questions about
both those things right after this.
Speaker 2 (17:15):
All right, buddy, we are back for the break. Let's
now hear from a listener who is looking to invest
a little bit more in himself. We're talking about higher education.
Speaker 4 (17:26):
Hi, Joel him Matt, my name is Edward. I'm forty
years old. I am in a good career field when
it comes to money, but it's not giving me a
lot of job satisfaction. And I'm looking to make a
change and go back to grad school and become a
registered dietitian and help people with their health and weight,
(17:48):
which has going to struggle for me personally. But I'm
balking at the amount of money that it's gonna cost.
It's gonna cost about seventy three thousand dollars over the
course of two and a half years. And I was
wondering if you guys had any resource is that I
could use to.
Speaker 1 (18:03):
Like grants, scholarships.
Speaker 4 (18:05):
I really want to avoid student loans and I have
no interest in that. It's hoping you'd be able to
maybe point me in the right direction.
Speaker 1 (18:11):
Thank you. Oh Matt, let's see what we can do
to help Edward out here. That's pay for grad school.
Is that sound familiar to you, Joel. Yeah, literally just
got done paying that joker off. And well, we never
took out a loan. We paid for it in cash
as we went. But and I don't know, I have
to look back and see exactly how much we spent
but it's a lot of money. There's a lot of
(18:32):
money in total. Yeah, and we're hoping for Emily's marriage
and family counseling that she went through and hopefully that
means increased lifetime earnings and really a lot of increased
job satisfaction too, which is one of the things that
Edward was alluding to here. And I think that's that's
a reason a lot of people go back and get
an advanced degree at this point in their life. I mean,
(18:53):
he's forty, I mean forty years old. That's that's that's
around the time people say, I feel like I know
myself a little bit better, and I know that I
want to pursue this path, but there's no way for
me to get there without getting more education. And I
love that, So I guess I love that Edward's wanting
to make a career change here. And it's a tough choice,
especially if you're making a solid salary, like those golden
(19:13):
handcuffs of a solid job can be difficult to cast
off if you're like if I've talked to another friend recently, Matt,
who left like a pretty high faluton career in the
energy field because he wasn't feeling fulfilled, and he makes
a heck of a lot less money now, but guess what,
he's way happier, and so I think important. There's a
lot to be said for that, right, And it sounds
like Edward really knows what he wants to do based
(19:36):
on his personal experience and his interests, And I just
think there's a good chance that he's gonna have greater
levels of success doing something that he loves as his
next career. So I'm excited for him. But let's try
to help him do it without forking over quite as much. Yeah, totally.
Speaker 2 (19:50):
And he even said that he's not interested in the
student loans, but not everyone has the money on hand
to be able to pay for that. And I'm going
to say, like at the outset here, finding money for
grad school is harder than finding money for undergrad and
specifically universities, they make more money on graduate programs than
they do on many of their other degree offerings. So
(20:12):
finding those dollars to help you out it's not going
to be easy. And we're talking about a lot of
money here, seventy three thousand dollars. You are looking to
avoid student loans, we want you to avoid them. As well,
and in part because and this is for everyone else again,
not you, Edward, you are It sounds like you are set.
It makes sense too. He's he's in his is he
forty or he is in his forties, he's forty looking
(20:32):
to make some changes. It sounds like he's had a
fairly lucrative career. I'm guessing he's looking to cash flow
this thing. But for everyone else out there, when you're
looking at grad school, you're talking about interest rates in
the nine percent range from the federal government right now,
which is pretty scary when it comes to student loans specifically.
Speaker 1 (20:49):
It's a far cry from where they were like ten
fifteen years ago to I mean.
Speaker 2 (20:53):
So you might be able to get like some better
rates from private lenders, yeah, if that's something you're considering.
Speaker 1 (20:58):
But yeah, which is a good point.
Speaker 2 (21:00):
And this makes it a bit more nerve racking to
take out student loans for something like this.
Speaker 1 (21:06):
Yeah, And there are some people who are incredibly scared
of private student loans, but I think, especially in today's environment,
private student loans might offer a better rate. And you're
the federal protections that student loan borrowers are afforded have
been kind of going away anyway, So I think I
would at least look in that direction. I would also
(21:26):
want to know what my likely post degree earnings would
be Edward, I think it's an important question to ask right,
ask around to people who are doing the jobs you
want to do, and not that you would opt to
not pursue this degree, because of course you've got a passion.
But I think it's you know, knowing what you stand
again by getting this degree, it's an important part of
this decision making process, and it could influence your specific
(21:50):
decisions here too.
Speaker 2 (21:51):
I think it kind of helps to just not justify
a little bit, but it's you're able to put a
finger on Okay, I know I am giving up this
kind of salary. I know I am also going to
spa this much in order to get this degree to
hopefully put me in a position to earn what. Yeah, like,
it's good to at least be able to put your
finger then on what it is that you'll be earnings.
Like a basic math equation solve for X, yeah, and
(22:11):
you want to know X so that you can make
an informed decision. And it feels like a way to
potentially stem the bleeding as opposed to kind of like
this endless cycle of like, well, what's going to happen
off of the future? Who knows? You need to have
some definites out there that you can project to.
Speaker 1 (22:23):
And it'll help you know how much debt you can
feel comfortable taking on, because typically, like what we advise
with an undergrad is to say, don't take out any
more than what you're likely to make in your first
year in that job. And I think it's pretty good advice, right,
And if you don't have any other debt, I think
you might be able to apply that to a master's
program as well.
Speaker 2 (22:44):
But even then, like taking on lessons, well, in Edwards
case too, he's not interested in student loans. But from
an emotional standpoint, yes, I think it can just be
incredibly helpful too, just to personally sort of run through
that equation and just like to say, what am I
willing to put into this to earn what?
Speaker 1 (22:59):
Yeah? Yeah, next year or not next year, but maybe
three years from now? Sure, all right, So I'll make
a couple of suggestions here. One, does your employer offer
any financial incentive to get more education, because a lot
of employers do, and there are often no stipulations about
what course of study you take. It's funny because Matte
of one of our buddies, his wife, her employer does
(23:19):
this very thing, and she has been going back and
taking nutrition classes and she could get a degree in
nutrient that's like her hopeful second career. But she's getting
the education while she has her day job because they're
paying for it, and they haven't made any stipulations and
said like nice, sorry, underwater basket weaving is off limits.
Like she can do whatever she wants and that's pretty cool.
(23:40):
And a lot of employers do that. They say, go
get a degree, a nextra degree if you're interested, will
help foot a lot of the bill.
Speaker 2 (23:45):
Is that not what Edward said, that he's interested into nutrition?
Speaker 1 (23:48):
Yeah exactly, Yeah, okay, Yeah, I think that's cool and
maybe they could chat. I think it's just worth looking
at your company's internal website or asking the HR department
because yeah, maybe there's something there, maybe there's a benefit
there that you didn't know about or you just hadn't considered. Also,
what about getting that degree over a longer timeline. I
(24:09):
think that's a way to save money too, and maybe
cash flow the cost maybe graduating in four years instead
of two and a half. That's actually the route that
we took one. It just felt like it was going
to be too difficult, right to actually condense that education
that Emily was gonna be taking extra classes and meant
a lot more homework. It was gonna be tough to
have the balance that we wanted in our lives. But
(24:30):
also stretching out those classes well can make it easier
to kind of keep that income rolling in while also
reducing the annual cost of school, which just means, hey,
I've got more time to work, less money actually going
to the school itself. So yeah, maybe i won't be
in my new career as quickly as I'd hoped, but
at least I'm going to be able to pay it
(24:51):
off as I go.
Speaker 2 (24:51):
Yeah, well, and what about asking the school that you're
planning on attending how other students.
Speaker 1 (24:55):
Are affording it?
Speaker 2 (24:56):
Like, what you're literally doing here is putting the ball
in their court. I think by starting the conversation here,
like you were showing that you were taking a proactive approach,
and I don't know, you might even find a way
to negotiate that price a little bit. Like if you
don't ask, Like it's almost like the art of asking
for a discount, Like you're definitely not going to get
it if you don't ask. And so I think even
just by starting the conversation, I think that that could
(25:17):
be yeah, a whole lot. I don't I could see
that being financially beneficial.
Speaker 1 (25:20):
I'll have other students been able to pull this off,
and you might get some some answers so that you
weren't expecting, and you might get some resources thrown your
way that you didn't expect it.
Speaker 2 (25:29):
Just because you're the squeaking wheel. You might even be
surprised at any financial aid that they might offer, just
because you're asking that. They're like, well, we've actually got
this program, and then you look into the program a
little bit and turns out, well, there's five figures here
waiting on somebody who jumps.
Speaker 1 (25:43):
Through the right hoops, which Edward might have the ability
to do.
Speaker 2 (25:46):
I would also say that you might want to consider
other schools that offer a similar degree, because even schools
that have a similar like quote unquote sticker price, they
might offer substantially different amounts of aid to students. And
I think like it sounds like he's pretty set on
what it is he wants to study. I think it's
okay to get married to a particular course of study,
(26:08):
but don't marry a particular school just yet, not until
you see what they're willing to how they're willing to
meet you halfway.
Speaker 1 (26:16):
Perhaps dream degree is one thing, dream school is another,
because that dream degree is offered a whole bunch of
places in all likelihood, and so there's no need to
kind of get your heart set on that one specific place.
You might even find, Hey, I can get this degree
for a third of the price if I take an
online classes at this place. It's not even in my state,
and you know, the end result is kind of the
same at least from a credentialism standpoint and what you're
(26:38):
able to learn. But you just save a whole lot
of money in the process. It's at least worth considering.
Also consider fellowships, right, that's just another option worth exploring
for some grad students. I'm not sure how applicable that
is in your field of study, but it's it's at
least worth looking. And when it comes to scholarships, the
Internet is your friend. There's a website called scally. It's
run by Sally May these days. That's worth that's worth
(27:01):
at least like thumbing through and then don't forget to
fill out your FAFSA. You might find that you're eligible
for some grants for some financial aid that you weren't
aware of. And something else worth considering is where you
work after you get the degree. We talked about asking
your employer now about what sort of benefits they offer
if you go back to get a degree, But a
lot of employers offer tuition reimbursement. So while you may
(27:24):
not be able to pay for your degree in cash
right now, you might be able to have some of
that debt if you took some on forgiven over time
as an employer perk, if you choose the right employer
to utilize that degree after you get it totally.
Speaker 2 (27:39):
Yeah, ask around some different employers or different hospitals or practices,
and they might have some some perks. I would hate
to see him. I don't know if this is even
a thing, but I would hate to see him like
sign away a certain number of years of his life
where he's just like, I'm willing to be an indentured
servant for so many years. But it kind of depends
on how much they might be willing to offset the
(27:59):
cost of that higher education. Yeah, in particular, when you're
talking about seventy three thousand dollars Joel. Let's hear from
another listener they are waiting into the WROTH versus traditional
debate as they are contemplating quasi early retirement.
Speaker 5 (28:15):
My wife is fifty one years old and we'll retire
in the next three to five years. She will have
a pension that will cover our living expenses. Currently, she
has seven hundred and twenty five thousand in a four
percent matched traditional four to seven deferred compensation account, which
she contributes the annuel maximum for her remaining three to
five years. I'm thinking of switching her future contributions into
(28:37):
a ROTH four to fifty seven deferred compensation account. Can
you tell me is there a benefit to making future
contributions into a ROTH four fifty seven versus maintaining the
traditional four to five seven deferred account in order to
hedge against future tax liabilities related to any withdrawals from
that traditional four to five seven pre tax deferred compensation account. Also,
(29:03):
if we're able, should we convert any of her seven
hundred and twenty five thousand from the traditional four five
seven funds to a ROTH four. Thanks again for your time.
Appreciate it.
Speaker 1 (29:16):
Matt. It sounds like Mike. That is his name, by
the way, he didn't stay it at the beginning. That's okay, Mike,
Well maybe it's okay, yeah, his or did he say
where he's from?
Speaker 2 (29:24):
That's true, like you know, maybe he's in Alaska, could
be maybe he's in Rhode Island, big difference.
Speaker 1 (29:28):
Who knows. Well, your wife is going to be a
young retiree. It sounds like Mike, and you said something
crucial by the way, that her pension will cover your
living expenses, which is fantastic, Like what a great position
to be in. It means that you're going to have
a lot of freedom because of those additional dollars that
she's worked hard to amass over the years. A pension
(29:50):
is great, but when a pension is substantial enough to
cover all of your living expenses, that just the flexibility
you have with your retirement accounts can be incredible. It's
pretty sweet. But one thing that Mike didn't say anything
about was his job. And you're interes sitting at home
watching Sports Center. Maybe because of that, maybe your household
(30:11):
overall judgment, no judgment that would partially dictate whether or
not you opt for a roth or traditional for your
wife these days, if you are both let's say at
peak earning years, well, then you know, if you're finding
yourself in the twenty four percent tax bracket or even higher,
I might continue to opt to contribute to the traditional
account in hopes of paying less in tax during your
(30:33):
timing years.
Speaker 2 (30:34):
And this is coming from someone who is a huge
fan of the of.
Speaker 1 (30:37):
All the different wroth varieties out there.
Speaker 2 (30:40):
That being said, it still makes particular sense to prioritize
a roth specifically in your early career years when you
aren't earning a ton of money, when you aren't in
those higher tax brackets, and for many when they're making
bank it makes sense to take the tax deduction now
with the traditional accounts. And like he alluded to, you
can always convert to roth in the you know, first
years of retirement where you can zero in on a
(31:02):
particular withdrawal rate where you are targeting a specific tax
bracket when you convert. And you know, there's some science
to it, but it's oftentimes more of an art than science.
There are so many different factors that come into play
as to whether or not you go with the ROTH
versus the traditional and specifically.
Speaker 1 (31:20):
Whether or not you convert those dollars later in life.
And it's almost always like a multi year thing to
convert little bits at a time so that you're continuing
to keep the taxes that you pay on those conversions minimal. Right, Sure,
but if you're already retired, let's say, and your wife
is the only one working, Hey, your income has likely
already declined from those peak earning years. If you have
(31:41):
cut your income, let's say, in half, I'm just making
a guess here. If that's the case, contributing directly to
a WROTH with additional investing dollars, that's what I would
do in all likelihood, Right, it's all about those specifics.
But if that's been the case, it's like we've had
two full time jobs, lots of income coming in. That's
why we've kind of prioritized traditional That makes sense. And hey,
(32:02):
maybe now maybe you were retired last year or something
like that, and now the only paycheck that's coming in
is hers, and so that has brought your justin gross
income down significantly for the time being, that might be
a perfect time to utilize ROTH contributions kind of like
you're alluding to, like your ass.
Speaker 2 (32:18):
Which maybe that's what he's thinking. He's thinking through He's
just like life is going to look different for the
next three to five years. Like you said, it also
comes down to a guess from my play, we don't
have all the information exactly.
Speaker 1 (32:28):
I was gonna say too.
Speaker 2 (32:28):
It also depends not only on their income, but also
their expected expenses off in the future as well, because
I'm thinking of let's say they both went from both
working full time jobs, so now they're both retired, they've
got a lot more time on their hands, and what
are they gonna do with that extra extra additional time?
Speaker 1 (32:43):
Pickleball?
Speaker 2 (32:44):
Let's maybe is pickleball, which it sounds very affordable, in
which case you can see your expenses go down significantly,
in which case, making let's say the Wroth option now
while she is working actually the unwise choice, because essentially,
the fewer dollars you need to realize down the road,
the more likely it makes sense to take advantage of
(33:06):
the traditional now because.
Speaker 1 (33:08):
And especially if part of it depends too, like you're
alluding to, on your overall balance in those retirement accounts.
Because rm ds coming down the road, they might not
be that might they might not be that substantial if
you don't have tons of money safe.
Speaker 2 (33:19):
So so what you said was like pickleball, which is
sort of like the frugal Like, if you expect a
future retirement of like simple living, frugal living, pickleball, I'm
gonna splurge and spend like one hundred and fifty bucks
on a paddle.
Speaker 1 (33:30):
Okay, that's nothing scheme.
Speaker 2 (33:34):
In the big scheme of things. But like let's say,
for instance, you're plenty to travel the world, and you're
gonna expect to see your expenses go up significantly because hey,
not only is the pension completely covering our cost of
living here that we're that we've been used to, but
we've got a ton of money set aside to be
able to live the life to do all the traveling. Well,
what that means is that you're gonna have to realize
(33:54):
some of those four to fifty seven dollars, which is
going to increase your Those dollars are tax as ordinary income,
is what I'm saying, which could potentially lead to you
needing to tap more of those dollars, putting you in
a potentially higher tax bracket later down the road, So
that would be an instance where opting for the wrath
actually did make sense because you took the tax hit
(34:16):
when you were realizing fewer of those dollars. So basically, retirement.
Speaker 1 (34:20):
It's not a straightforward, easy answer, no, and there are
a lot of factors at play, and this might be
something you want to do over time, and it comes
down to income. It comes down to account balances and
retirement accounts, current.
Speaker 2 (34:32):
In future income, but also current in future expenses and
the kind of lifestyle you're looking to be able to
afford as well.
Speaker 1 (34:39):
Yeah, let's talk about roth conversions for just a second.
Whether or not you choose to do that, it depends
on your income two and also somewhat on what's going
on with the stock market. So given that current combination
of fairly low tax rates and a market that is
down a little bit, I think converting to a roth ira,
some of those dollars would be at least on my ra.
(35:01):
But your wife also might not have that ability. So
you know, converting to a roth ira is it's often
an option once you've left your job, but if you're
still actively employed, you're making contributions to that account that's
not always allowed. Some plans do allow for in service withdrawals,
that's what it's called. But you need to check and
see first. So if your wife's employer offers a WROTH
(35:22):
four fifty seven B option, you might be able to
do what's known as an in plan rollover from the
traditional four to fifty seven B into the WROTH. That
might be the only maneuver to turn to when you're
talking about rothifying those dollars. I'd consider pursuing it, but
you got to know whether that's an option first, And
you also have to take into consideration some of those
things that we mentioned before before you opt for a
(35:44):
wroth conversion, Especially when we're talking about like a bulk
wroth conversion, that might be something that's best done for
tax purposes over an extended period of time, not in
one fell swoop.
Speaker 2 (35:54):
Also, keep in mind you've got to have the cash
on hand on the sidelines as like dry powder, to
be able to pay these taxes as well. But my
guess is that a lot of folks are considering the
option right now to convert because it's the it's like
the one silver lining two a declining portfolio.
Speaker 1 (36:10):
It's like that in tax loss harvesting, right, Yeah, that's true.
There's two silver lines.
Speaker 2 (36:14):
But like so we're talking about corrections and bear markets,
and you know that can be the perfect time to
go ahead and pay the piper so that you can
avoid the growing tax liability off in the future forever,
something that you never have to worry about ever again,
because if the market then recovers and it always has
and then it gains even more, we're talking about a
much bigger tax bill on the horizon, and there are
(36:36):
a whole lot of different factors like we have kind
of talked through to take into account. And with that mind,
because there are so many dollars that are on the
line here, I would most definitely consider a financial advisor,
either talking to a CPA or reaching out to a
flat fee advisor at like Hello Nectarine, to be able
to talk through some different scenarios just to make sure
(36:57):
that you're making the best choice not only for y'all
right now, but also oft in the future. Yeah, we
talked about a Wroth conversion calculator that Fidelity has, Matt,
that I looked up about a month ago or something.
I was looking into it and.
Speaker 1 (37:10):
I ran some numbers with the market down well, it
was just really interesting to see the fidelity basically said, well,
if you do roth conversions in this way, then your
balance is probably going to be five hundred thousand dollars
more over time, which is fascinating that, like small wrath
conversions in the right way can mean you have more
money to spend. Joel rich Stady Fat Sacks over there,
(37:32):
I just I wasn't even my numbers. I was just like, oh,
I want to use this calculator and kind of see
what it has, what it has going on under the hood,
and it's fascinating to see how, you know, even talking
about hundreds of thousands of dollars worth of roth conversions
if done properly, the amount of money that it can
save you in tax and the amount of spending power
that can kind of add to your arsenal, it's it's
not insignificant. So making sure you do it right is
(37:55):
of massive importance because we're talking about lots of dollars
and we're talking about lots of potent tax at stake,
So speaking of turanga pro could be the best way
to go.
Speaker 2 (38:04):
Speaking of tax, one thing, we didn't even talk about
our future potential future tax rates. Yeah, which we're not
even going to touch on because who the heck know is.
Speaker 1 (38:10):
Still up in the air what the future holds. Yeah,
all right, we've got more to get to on this episode,
more questions of yours, including cash gifts, how do you
do that? And talk about auto insurance as well. We'll
hit those up right after this. You know what, We've
(38:32):
got more how to money for you.
Speaker 2 (38:33):
Now that we are back from the break, it is
now time for the Facebook question of the week, which
is from David, and he writes, Hey, y'all, we are
in our mid thirties. You can tell David's a Southerner.
So he says, y'all, we are in our mid thirties,
about three quarters of the way through money gear four,
with some in Gear five. We have two vehicles at
two thousand and eight Toyota worth about twelve thousand dollars
(38:55):
and a two thousand and nine Honda worth about three
thousand dollars. We've got full coverage on them with higher
liability limits than our state's minimum, as well as five
hundred dollars deductibles and all of the coverage items. I
looked at how much we could save if we just
all coverage except the state minimum liability, and it was
only seventy eight dollars per month, roughly fifty percent savings.
(39:16):
If I multiply seventy eight dollars though by one hundred
and seventy three, we get thirteen thousand, four hundred and
ninety four dollars, which is what we could roughly be
worth if invested into the S and P five hundred
each month. We don't make a lot of money, so
I'm looking for ways to cut costs so we can
increase our savings. But I also don't love the idea
of putting the bill for a total vehicle. And I'll
(39:37):
mention too, David, he that's the rule of one to
seventy three. It's a monthly savings amount. Were you to
invest that, it's the compounding return were you to continue
to then invest that dollar amount every single month over
the course of a decade, over ten years exactly, and
I'll say thirteen thousand dollars. It doesn't sound all that much,
but that's just like at the very beginning of the compounding.
Like if you do that for another decade and you're
(39:59):
looking at figure like easily three times, that.
Speaker 1 (40:03):
Is what you would see. Yeah, which I think is
worth pointing out. And you're also talking about a fifty
percent cut in what you're putting towards insurance every single month.
And this is just one of my favorite topics to discuss,
and I feel like in the personal finance space it
goes under discussed just how to save money on insurance,
Like you don't want to like cut your insurance to
the bare bones, Like, hey, I'm gonna eliminate my health
(40:23):
insurance because that's going to save me, you know, seven
hundred dollars in premiums every single month. And then you
fall out of a tree and like break your femur
or something like that, and you've got to go to
the emergency room. Think about all those bills. Why you
even then the tree Joel, Yeah, I know exactly. I
was getting my cat or something like that. I don't know,
but that those are the kind of decisions that are
short sighted, and you know, you're better off to pay
the health insurance premium because of what could happen. And
(40:46):
with car insurance, the stakes are a little bit lower,
but they're still really important and there is a lot
at stake. And I'm kind of biased and I think
that Folks with older vehicles that have appreciated substantially should
get rid of full coverage. That is actually one of
the primary benefits of driving an older car, specifically something
that is almost twenty years old, like David's doing right,
(41:10):
But that is only if you can easily afford to
self insurance take on that additional risk. If your savings
are paltry, if they're minimal, you still need to keep
full coverage in my opinion, even if it's more costly,
which just I think incentivizes you to save more money
so that you can afford to ditch the full coverage,
And no one can guarantee that it's going to be
the best result. You could always get into a wreck
(41:32):
next week the week after you drop the full coverage
on your insurance policy, which would be yes frustrating, and
it is potentially part of the deal. Like the odds
though are in your financial favor. Makes me think of Matt,
the insurance policy I have on my home, and I
have a percentage based insurance policy, and when the tree
came crashing down through our roof, I believe you asked me,
(41:54):
are you going to change that now because you're deductible?
Was so ridiculous. And I said, I didn't ask you
that other people, other people, because I know the answer
as no, I'm not because just mathematically and when you
think about it, yeah, could a tree fall through my
roof again this year? Next year?
Speaker 2 (42:10):
Sure?
Speaker 1 (42:10):
And would that harm me financially? Yes? Overall though I'm
looking at the numbers and I believe I will come
out ahead, although it didn't feel like it when the
event occurred.
Speaker 2 (42:19):
When you're forking out, yeah, five figures. So when it
came out to the deductible there. But David, he mentioned
that he doesn't make a lot of money, which makes
it even harder to buy a new car outright if
he needed it post accident, and he eliminated that coverage.
So I'm not sure what, David, what your savings looks like,
which is the most relevant factor here. But this is
a case where his attemptional to be frugal could end
(42:42):
up being cheap because if he got in an accident,
you might have to take out a loan to then
buy let's say, you know, any type of car, but
let's say a newer car without any sort of insurance payout,
And if it happened before he was able to bank
the savings by reducing his premiums, he could find himself
in a real bind and it.
Speaker 1 (42:59):
Would like not be worth it for him.
Speaker 2 (43:02):
He mentioned too that he's three quarters of the way
through money gear number four and one of year number four.
Maybe folks are out there asking which money gear is that. Again,
that's a fully funny funded emergency fund, and if it
was me personally, I think I would be less likely
to cut some of these coverages until that thing is like, yeah,
fully beefed up and fully stopped.
Speaker 1 (43:22):
But maybe that's maybe that's a good answer is once
you get there, once you achieve the full emergency fund,
that's the perfect time.
Speaker 2 (43:28):
I would be more than willing to give myself commission
at that point. But until then, it does kind of
feel like, all right, well, I'm trying to be frugal here,
but yeah, it ends up being.
Speaker 1 (43:37):
A cheap move. Okay, So I'm going to say this, like,
seventy eight dollars a month is not nothing, right, that's
almost one thousand bucks a year in savings. I think
it is worth having the goal of increasing his overall
savings amount his emergency fund to the what we prescribe.
Before he attempts to fully clawse this back. But what
if he kind of split the difference here, and what
(44:00):
if he the Honda in particular that's worth three thousand dollars, Well,
that might need not need full coverage. I would say,
maybe consider keeping full coverage on the Toyota that's worth
a whole lot more twelve grand yep, and then the
Honda that's worth three thousand dollars that's fully depreciate it
out essentially. I like that you're gonna save not as
(44:20):
much money, but you're gonna save some. So maybe instead
of saving seventy eight a month, you're gonna save thirty
two a month something like that.
Speaker 2 (44:26):
But it's a step in the right direction. Yeah, yeah,
cut the cut all the unnecessary coverage on the Honda Civic.
Speaker 1 (44:31):
Yeah.
Speaker 2 (44:32):
Whereas that's an old Toyota that's worth twelve.
Speaker 1 (44:36):
I like a c sekoya it it could be a Sequoia,
or it could be a land cruiser. Maybe this lank
cruiser like the older retain their value. Those things are beefy,
yeah as well.
Speaker 2 (44:46):
But yeah, I feel like that's the way you can
have your cake and need it too. Let's do another
quick one from anonymous. What is your recommendation for setting
aside cash that relatives give as birthday gifts to small kids.
I'm not able to contribute to long term savings for her. Yeah,
so we're talking about a few hundred dollars here and there.
Do I just put it in my high interest savings
and then give her the interest that it earned? Is
(45:07):
there a low cost way of handling this by putting
it in her name? What do you think, Joel? What
do you do with kids and cash gifts?
Speaker 1 (45:14):
That's a good question, and I do you think? You
probably want to make it tangible for them as it's
a way to teach them. Right, Hey, you got this money,
and whatever you want to teach them matters, like where
they're talking about saving, investing, and giving money away, whatever
you prioritize as a family, you want to make sure
that money is tangible in a way that they can understand.
(45:35):
This is typically what happens with money that comes into
our lives. We choose these different things. You're making an
argument for cash here, keeping it as cash as opposed
to opening up a fancy account, which is I'm going
to say, this is what I did. Yeah, because early
on I thought.
Speaker 2 (45:49):
Oh, the world that our kids are going to be
living in money is digital. It's zeros and ones, it's
all in the app. It's you know, it's a number
getting into it early. It's a number on a screen.
But I've done and about faced and we are like
fully doing the cash system because I want it to
be tangible because of the lessons I'm trying to focus
on while they're young and at home.
Speaker 1 (46:08):
Well, in this poster specifically said small kids. And I
think there's a difference between small kids and teenagers. And
teenagers are they do are living in that digital world
a little bit more?
Speaker 2 (46:20):
I think they kill more independence.
Speaker 1 (46:21):
They might have an app on the phone, even if
that phone lives at home, they can check their bank
account balance or something like that. And so yeah, maybe
that is the time to get them in. And so
my kids, we have transitioned now to which I mentioned
on the show before the Capitol one checking accounts for teens.
That are I think kids as young as eight can
partake in for kids, Yeah, and that's great, but I
(46:42):
wouldn't want to do that with a four or five
year old because I tried that with the really young
kids and it didn't go so hot. So I think
cash is probably king, and if you're talking about interest,
I think you know, yeah, you could put it in
your high savings account or something like that, but the
interest is going to be paltry. If you want your
kids to understand how interest works, you're going to need
(47:02):
to use your own money to incentivize them, kind of
to make interest almost like, hey, we're gonna give you
a ten percent interest rate on whatever money you have
in savings, just to make it feel tangible. Because we're
talking about such small numbers. It almost doesn't. It doesn't
move the needle.
Speaker 2 (47:18):
Yeah, yeah, I will say so we I was looking
into so ally they've got saving the savings bucket feature.
Speaker 1 (47:24):
Our eldest started.
Speaker 2 (47:26):
She's a mass a decent chunk of money, and I
was curious to see how the interest was gonna work.
And I saw that we had to do was you
had to designate which bucket you wanted the interest of
your overall saving is to go to, which I was
actually kind of bummed about because I wanted the percentage
amount of money that was in that in that specific
bucket to then earn interest to go in that bucket. Right,
(47:46):
that makes sense if you're thinking about it that way.
But to your point, what you could do is you
could designate your kid's savings bucket as the interest receiving bucket,
specifically if you are with ally, and that would be
a way for you to not have to pay out
of pocket at all for dollars that they would experience
from a kind of compounding standpoint. And it would also
(48:07):
be larger than just say a couple hundred dollars here
and there. You know, let's say you've got you know,
many times more than that, let's say twenty thirty forty
thousand dollars in there, because you've got your emergency fund
set aside in there, and for them to experience the
compounding and the interest growth that that money would receive
would be obviously much more than the standard three four
percent that hiyo Savings are paying right now. That would
(48:29):
be an option in a way to kind of take
advantage of some of the different builds in features of
hiyod Savings account that already exists while keeping things simple,
because I think for me, that's what it would be
all about, is just not having to open an additional count,
you know, to teach a lesson that may or may
not be able to even be absorbed at such a
young age.
Speaker 1 (48:47):
I do think though, kind of what you're getting at
with the cash for particularly young kids, I think probably
around the age of nine is when that starts to
change and digital makes a little more sense. But probably
even more in those pre teen years is when is
when a debit card attached to a checking account can
make a little bit more sense. But I guess the
other thing I would mention too is typically we recommend
(49:09):
high oot savings accounts with online banks, but when it
comes specifically to children's accounts, credit unions can be great
at this. So we don't typically love credit unions for savings.
We like them for more borrowing products. But some local
credit unions have some of the best accounts for kids
out there these days. So if you kind of want
something local, you want them to actually go in and
deposit their money, and you want them to have that
(49:30):
experience because I remember.
Speaker 2 (49:31):
That as a kid, it's an event, yes, uh huh, And.
Speaker 1 (49:33):
So there's something about that as opposed to like, don't worry, mommy,
put the money in your account. Well, there's there's something
really cool about taking them in there and them doing
giving the money to the teller so that it's in
their account and then they get a printed out receipt
of how much money is in their account. That's an
experience too, and it leaves an imprint. So think about
that and find out if one of your local credit
unions has some of them offered like ridiculous interest rates
(49:54):
on up to three thousand.
Speaker 2 (49:55):
Dollars or something like that. Kids like three five thousand dollars.
Beyond that, they're paying nothing but for that first five thousand.
They're trying to incentivize kids to be.
Speaker 1 (50:02):
Saviors, which is awesome. That's like the kind of that stuff.
Credit unions are great at so at least look into that.
But says like you had a couple options, and just
keeping the cash in envelopes at or jars or something
like that at home and then adding to it with
mommy paid interest or something like that, that might even
be the best option here.
Speaker 2 (50:20):
You know, are you going to take us back to
the beer. This delicious, so tasty, amazing.
Speaker 1 (50:24):
Beer that you and I got to enjoy during this episode,
Ten out of ten would drink again. It was awesome
and I think I loved just without the pineapple, this
would have been a fantastic IPA. But me, it's kind
of like this tropical edge though.
Speaker 2 (50:37):
So it was aged on on pineapple and I don't
exactly know what that looks like, but like it sounds
kind of gimmicky.
Speaker 1 (50:44):
It is not gimmicky at all. It tastes so good.
And some fruited gash they taste too fruity, and this doesn't.
This tastes like real pineapple in my mouth, in my beer.
This was this beer what was it called again? A
guillotine of consciousness, A guillotine of contemplation, Oh, contempt, And
now I want to cut my head off and do
some thinking. Don't do it with this beer in my hand.
Speaker 2 (51:04):
So, like pineapple has like the sharpness to it, right, Like,
I don't know, do you enjoy eating fresh pineapple sometimes
sometimes because it'll bust up your mouth?
Speaker 1 (51:12):
Yeah, Like I don't know if it's the acid you
mentioned that one time. What is that called that it does?
Speaker 2 (51:16):
Oh, it literally starts breaking down, because that's why sometimes
you use pineapple to marinate meat. In a similar way, though,
that sharpness from the pineapple I feel like compliments the
freshness that you get with some of these hops where
it has like that hop bite that I typically refer to,
and the combination of the pineapple with the hops that
they've got going on makes us an incredibly delicious, hazy
ipa so good.
Speaker 1 (51:36):
One of the best beers from one of the best breweries,
highly recommended.
Speaker 2 (51:39):
By the way, if you see some berry on the
shelf at your local package store and you live like
on the West Coast, for instance, and you're like, oh, okay,
that's burial. I've heard, you know, heard the Fellows talk
about that Surflax. This is not okay. Surflax is like
the standard. It's a great beer, it's a fine beer.
It is not like the stuff that they're putting out
that you're able to pick up there at the brewery.
Speaker 1 (51:59):
It's a whole other level. So don't don't. I don't
want to conflate the two. As is the case with
many breweries. It's like what ends up in distribution is
their mass produce stuff. It's I and the stuff you
get at the brewery itself is yeah, the more one
off stuff. So totally agree, this is a good one.
All right, that's gonna do it for this episode. Don't
forget to send us your money questions please and go
to our website howtomoney dot com for more money saving info.
(52:21):
It's open twenty four to seven. All right, Matt, Until
next time, best friends out, Best Friends Out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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