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 - Home renovation: what factors did Matt consider when deciding to add on to his existing house?
2 - Credit cards: I want to cancel my oldest credit card, but how concerned should I be about dinging my credit score?
3 - Student loans: should I pay off my student loans or wait for forgiveness if I have the cash on hand to eliminate them?
4 - Medical expenses: could I fully subsidize my healthcare costs were I to aggressively invest my HSA dollars?
Want more How To Money in your life? Here are some additional ways to get ahead with your personal finances:
- Converting your primary into an investment property is one of the easiest ways to create some semi-passive income.
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- Massively reduce your cell phone bill each month by switching to a discount provider like Mint Mobile.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to How the Money. I'm Joel, I'm Matt. Today
we're answering your listener questions. There are so many flies
(00:24):
in our office today. Do you think they're gonna get
picked up on the microphone?
Speaker 2 (00:27):
I don't really hope not if listeners are wondering what
they hear buzzing past our microphones.
Speaker 1 (00:32):
I want to thro attracted to the food from uh
that we had during lunch today. It was me eating
the Korean food today, not yet I know.
Speaker 2 (00:38):
I think it's like the sweet Yeah, like the you
uh reheated it on the cast iron. This sweet mixed
with the soy, it gets It's aromatic, gets in the air.
Everybody wants a piece, including me. Quite the weird intro
for today's episode. This is I ask How to Money episode.
We're gonna hear from some listeners today, Joel. A listener
is considering a home or an he wants.
Speaker 1 (01:01):
To he might add on is I guess where he's
at and wants to hear how we have thought about
it in the past.
Speaker 2 (01:07):
But the listener has a problem with his Discover card
and he's not getting treated well by them, as well
by the customer service. So we'll talk about that, and
another listener is considering a lump sum to pay off
for student loans or whether or not she should stretch
that thing out stretch as bad boys out some. We'll
get to that plus more during our episode today.
Speaker 1 (01:28):
No Doubt Chuck full of good stuff today. First off,
I love getting listener emails. Love it when people reach
out and they read them. All want to tell us
about their lives or tell us about something like, Hey,
I heard your episode on this, but here's why we
do it slightly differently, or here's why you're right. I
prefer the ones where they tell us why we write
the affirmative affirmation email. Here's why you guys are awesome.
(01:49):
You can send those emails anytime you want.
Speaker 3 (01:51):
Well.
Speaker 1 (01:52):
Lee emailed and he after the interview that we had
with Pam from Wealth Ramp, he to weigh in on
why he chooses to hire a financial advisor, and his
main thing came down to relational stability and happiness and
he I.
Speaker 2 (02:11):
Love that He's he said basically, if things went south,
his wife was gonna be tempted to blame him. Yea
is like, I think he said that she told him that,
and she's like, just so you know, if things don't
work out, this is gonna be on you. It's gonna
be really hard for me to not blame you.
Speaker 1 (02:25):
Yeah, so even if the market is down fifteen percent,
which you know, you could try to show your spouse
statistics about how frequently this happens, and hey, guess what,
this isn't abnormal. But if your spouse is gonna freak
out and they're not going to listen to you in
the heat of the moment, you know, you could harm
your relationship. I guess if you hadn't planned ahead properly.
And it makes me, it makes me think that one
I think, yeah, I know your relationship and if it's
(02:47):
if hiring someone to be able to point the finger
at that, if that's part of what's going to lead
to long lasting relational success, go for it. I'm totally
fine with that. It makes me think. I had a
recent conversation with a friend and he's kind of been
in charge of the finances, but his wife's like, man,
you know what, I really want to pay off some
of this tet that we have lingering, and he's like,
(03:08):
I'm more of like a let's keep investing, man, let's
grow the net worth and they can have a discussion
about it. But he's like, you know what, she deserves
more input, and so I'm going to lean more in
her direction for a little while. And so much of
I think handling finance as well together as a couple
is not just letting one person take the reins and
listening to the other person's concerns if they have them totally.
Speaker 2 (03:27):
Yeah, because you could say, hey, how about you just
get informed, get educated, look at what the market does
over time, right, like to actually fully understand it and
save the one percent Because for him, I mean, you're
looking at probably like a one percent fee that's getting
taken out of his nest egg every year. I would
rather understand it and not pay the one percent. But
uh yeah, it doesn't really matter though if when the
(03:49):
relationships on the line and the dynamics are at play,
and you got to yeah, you certainly have to take
that into account. He didn't say this specifically, but I
do want to address the fact that he kind of
hinted or intimated at the fact that maybe she was
thinking that underperformance might be due to the fact that
he wasn't like making the right choices as far as
(04:10):
like their investments, And I do want to make clear
that we don't recommend hiring a professional and paying out
the nose for outperformance. That is not something that we recommend.
I think it's absolutely worth it to pay for expertise, right,
especially when it comes to minimizing your tax bill and
making sure that you are under that you are drawing
from the right accounts, that you're making the right sales,
that you're hanging on to certain things for the right
(04:32):
amount of time. That's totally worth paying for. But like,
we never recommend to pay to to pay higher fees
that to pay the Kathy Woods there, whatever it is
that she.
Speaker 1 (04:42):
I don't know what's her fund three quarters show on
her fund. Yeah, yeah, don't do that. No, Yeah, I
think that's a that's a good point.
Speaker 2 (04:49):
If he didn't say that directly. But there's a part
of me that was picking up on that a little
bit of like, well, no, we pay somebody and then
it's just all going to be better because of that.
Speaker 1 (04:58):
But that's not always the case. The average money manager is, yeah,
you're you're paying what they're worth, what the value they
bring is. Things that are not stock picking out performance
because all the statistics show that individual money managers don't
do a great job at that, especially over the longer
the time horising gets so uh but but Lee, if
(05:18):
that's helpful to you to have somebody in your corner
where they're like they're the third party.
Speaker 2 (05:22):
It's it's kind of like trying to do like a mediator. Yes,
like someone just to sit there in the middle just
to help. Honestly, it's not someone that there in the middle.
It's someone for you, both you and your wife to
get together on and like yell at because he doesn't
want he does the one hurt yelling at him. It's
just like, oh yeah, babe, let's we should give him
a piece of our piece of our mind.
Speaker 1 (05:42):
And I think, like the you know, the same is
true for marriage counseling. Right to have a third party
in the room can be super helpful. And I think, yeah,
that's a part of the reason people hire uh someone
to help and facilitate some of those be able to
bounce off money questions that they have too together as
a couple.
Speaker 2 (06:00):
You're seeing my day marriage counseling isn't gonna be isn't
gonna pan out?
Speaker 1 (06:03):
Well, girl, it's okay to have discussion but like you know,
there's times where it gets too intense to heat and
it's so be contested. Yeah, it's hard to go along
to pulling a pro. Yeah. And if you are thinking,
oh man, maybe we should talk to an advisor, you
can find a great one that had the money dot
com slash advisor.
Speaker 2 (06:18):
That's right, the beer that you and I are going
to enjoy today. And I am already enjoying this beer. Man,
this is a good one. It's called Jeremy's Changed, which
is a funny name for a beer, but it is
by for the better or not. I think for the
better based on what I'm enjoying right here. Maybe maybe
Jeremy like picked up some healthy habits. Is that a
(06:39):
flower or is that like a jellyfish and jellyfish to me?
Speaker 1 (06:41):
But it's font of Flora, and jellyfish don't have that
many tentacles, do they? Yeah? Or do they? I don't know.
It's cool art, so that's cool. Yeah.
Speaker 2 (06:49):
Fonts of Flora is the brewery which I've actually been to.
Speaker 1 (06:52):
I don't think you've been there yet now I haven't.
It's a rad spot.
Speaker 2 (06:55):
Like just it's got the vibes going on that we
actually talked about that pastoral. Right yeah. Back on episode
one thousand, when we did the AMA episode, somebody asked, Hey,
if you could open a brewery, what kind of beers,
what kind of vibes.
Speaker 1 (07:08):
Would you be going for?
Speaker 2 (07:09):
And I specifically called out Fonta Flora because I love
what they got going on over there up in North Carolina.
Not surprisingly, but.
Speaker 1 (07:16):
One of these days I'll make it up. Well, let's
go together, all right, I'm in. Let's get to some
listener questions. If you've got a question we'd love to
hear from you, how toomoney dot com slash ask so
where you can find the simple instructions basically recording the
voice memo on the app on your phone, emailing it
over to us. Hopefully we can take it next week
on the show. Matt, let's get to one specifically, let's
get to a question about how to think about renovating
(07:38):
a house.
Speaker 4 (07:38):
Hey, Matt and Joel, this is Tim from Mount Prospect Again.
I snuck a second question into my email with the
first voice memo, and Matt responded he was like, no, no, no,
that's going to cost you another voice memo.
Speaker 1 (07:49):
So here we are.
Speaker 4 (07:51):
My question is more of a request from Matt regarding
the addition he put onto his home. You guys have
briefly talked about this project in the past, but I'd
love to hear about the decision making process that Matt
and his family went through when deciding whether they should
sell or rent the current house and go buy a
new house versus.
Speaker 1 (08:06):
Putting the addition onto the home.
Speaker 4 (08:08):
There's of course a lot of financial considerations here, but
some of the deciding factors with this type of decision
can be more important than what the numbers are telling you.
And then my follow up to that is, once you
decide to go with the edition route, what were some
of the steps that you took to kind of complete
that project and would you do anything differently? Knowing what
you know now, I look forward to hearing about your journey.
Speaker 1 (08:27):
Thank you. Ooh the journey. It was indeed a journey, Joel,
Kate and I were just actually reminiscing because a year ago.
Speaker 2 (08:36):
I love photos that pop up in your phone and
it tells you like, here's what you were doing this
day last year, and we hadn't even broken ground, or
when Kate and I had this conversation, we had not
even broken ground for our home renovation on the palatial
east wing, which is not the east wing, but we
hadn't even broken ground. And to think that we are
so used to the fact like it being there, like
it feels like it has always been there, it's a
(08:58):
part of our life, like it has been fully integrated
into how it is that we that we live.
Speaker 1 (09:02):
I think that it's just kind of mind blowing. Again,
it's probably a good tip just ahead of time to
count the cost, right, and not not just the financial cost,
but like that, do I want to live through this
renovation cost because you're bizarre?
Speaker 2 (09:15):
Yeah, because in the moment it seems like it seems crazy.
You're like what are we doing? Like why do we
what are we subjecting ourselves to? And I think part
of it depends on how many rooms in the house
that's going to touch, Like you were able to kind
of keep that for the most part, cordon off from
the way you guys live in your home.
Speaker 1 (09:34):
Literal Yeah, putting funeral plastic tape to the floor and see.
But if you're redoing the kitchens and bathrooms that you
currently use, you have to change your whole way of
living for a while. And so you have to really
think like, how big is this upgrade? It's like, are
we really wanting to go through with this? Are we
willing to be inconvenienced to a massive in a massive way.
(09:54):
That's like something Emily and I have discussed as we're
even considering minor brew mister bathrooms or we're like, yeah,
I don't man, do we want to Is it that bad?
Maybe we just leave it as is?
Speaker 2 (10:04):
So Tim asked specifically about, well, why didn't you choose
to sell that house and go with something different? Why
didn't you choose to even hang on to that place,
you know, rents hit and look at a different property.
The fact is we did look for another property. We
did that for like close to two years. I don't
know if you remember, Like we would drive it, we'd
go around and like, can.
Speaker 1 (10:21):
So maybe we'll go look over here, and oh, I
don't know.
Speaker 2 (10:24):
But we actually did seriously consider that, and after all
that searching, we decided that, you know what, even when
we like picture our quote unquote dream house and whatever
that entails, you know, for the individual out there, but
we bottom line, it did not matter because what we found.
What we discovered was that our specific location had everything
we're looking for. It may not have been like the
(10:45):
perfect quote unquote dream house, but because of where it was,
it meant that Kate and I like we are able
to walk to date nights. We are able, like we're
close to y'all, we're close to work. Because we're close
to work, I'm like, we are still able to be
a one car family.
Speaker 1 (10:58):
I bike.
Speaker 2 (10:59):
I'm able to bike in work all the time. That
would change if we moved further out. We're close to
the mountain and we're able to get outdoors and hike around.
We like we're close to the kids' school. The kids
are able to like run around the neighborhood. Like these
are all things that we realized, Oh my gosh, all
of these things are so much more important than saying, hey,
let's go find another house. And the reason I bring
(11:19):
this up is because I think Tim was alluding to
the fact that, like, hey, aside from the financial considerations, right, like,
there are so many other factors to run through, and
it's to like what it is that makes your life fulfilling,
not fulfilling, but just happy, and what it is that
you want to do on the kind of like the
day to day basis, you know, community too, that you've
built up in that space, you're kind of starting clean over.
(11:42):
You can go drive to see those friends, but it's
different when you get to interact with Like I have
a lot of like older folks my parents' age that
live close to me. I love talking with them on
my way to work. Like I'd be sad if I
didn't run into Dan, who's doing his hill sprints, you know,
on my way into I really do like try those hangs.
Speaker 1 (12:00):
And Nold is Dan. He Dan, he's probably late sixties,
early seventies. Yeah, yeah, he's getting after it man. So
but I think we'd be remiss, Matt, not to talk
about the money side of things at least a little bit.
Speaker 2 (12:10):
Right, So yeah, I wanted to start with I guess
some of the specific factors that went through our mind
that caused us to realize, wait a minute, no, no, no,
this is the house, and let's just take the steps
that we need to in order to make it work
for us for the next fifteen years. Basically because our
little dude just started just started kindergarten, we're not planning
to go anywhere for school.
Speaker 1 (12:29):
So yeah, okay, so financial considerations obviously, because you and
I discussed this were important factor as well over the
host a personal finance podcast. After all, but you had
a locked in rate on your current mortgage of what
like four percent four and a quarter and rates when
you were looking at adding on or buying a different house.
We're in the upper sixes, it was probably hard for
(12:52):
you to think about giving that up in order to
buy something bigger, too, because I think something like the
annual cost in just the interest alone could have been
tens of thousands of dollars a year by upgrading to
a new home with that higher interest rate. Yeah, so
that had to be like at least a big pro
in terms of saying totally it was.
Speaker 2 (13:09):
But honestly, even more than that, it came down to
some like the like the non financial the non monetary
consideration as you're loaded, I mean, like we were looking
at some properties that cost less money, right, and so
the ability to Yeah, we would have ended up with
a higher mortgage which hopefully at some point not promised,
not guaranteed that we would be able to refinance down
(13:30):
the road. But I think had we found had it
made sense to us from just all the maybe the
lifestyle considerations that I think Tim is asking about I
think we would have been willing to do it, but
ultimately it wasn't about the money. Ultimately we said let's
just stay here and again the make the changes and
renovations that we needed to. But but that, I mean,
obviously that is a factor.
Speaker 1 (13:50):
You do have the factor in extra tens of thousands
of dollars a year. It certainly feels like a hurd
an impediment, absolutely, because if let's say rates were the same,
let's say they were still at four and a quarter,
and then we were able to buy something like that
would have obviously expanded the scope of our search. And
then all of a sudden you're thinking, okay, well then
we could potentially do this. So yeah, certainly, even then
(14:10):
you're talking an interest rate that he's got locked in
at its current place. That's yeah, if you're sitting sitting
in the high threes or in the fours, man, that's
pretty dang attractive. And even if you're talking about moving,
you're still talking about real estate transaction fees. But that
if you're you know, making him even switch from a
four percent mortgage to a four percent mortgage, not not
that big, not nearly as a big of a deal, right, Sure,
but if you're doing paying those transaction fees but also
(14:33):
paying a higher mortgage rate, that that's going to add
Oh yeah, and he did say something about renting, like
why didn't you hang onto it and rent it because
then you got you got cash flow flowing in as well.
But also when it comes to primary residences, they don't
often make the best rentals because you've got they're over capitalized,
you've got too much money into that property as opposed
to what it is you could then take out of
that property. And what would you then do without money
(14:55):
instead of dumping it into a singular property. That Sure,
it might be an impressive rent number, but just think
about not only just how much money you have locked
up in that property, because it's uh, typically I'm going
to assume that most primary residences.
Speaker 2 (15:09):
For folks are worth a bit more than a standard
you know, two two three two rental.
Speaker 1 (15:14):
And to be a bad friend here, I will note
that your decision to add on to this house, you're
not going to get all the money back that you
put into it, and you had to be okay with that.
Speaker 2 (15:27):
You had to be z with that too. Yeah, why
is that being a bad friend?
Speaker 1 (15:29):
Well, no, I mean, I don't want to make it
sound like reving my face in it. Yeah, that not
trying to do that, but just trying to highlight that
for everybody. When you add on to a house, oftentimes
you're going to get depending on how you add on
what you're doing. Uh, you know how appealing it is
to the general home buying public. You might be getting
forty fifty sixty percent back of the money you stuck
into it. So you have to realize that on the
front end, how much use am I going to get
(15:50):
out of this? How much is this done for personal
reasons that are going to un people feeling to us
when somebody else might not appreciate it the way we
do one percent?
Speaker 2 (15:59):
I mean, and that's why I think it makes so
much sense to think about it the way that tims
start trying to think about it, right, which is which
are the non financial because it doesn't often make sense
because you're thinking, Okay, are we going to be able
to get our money back out of this counter like
you can't or this upgrade over here? You know is
somebody is somebody else going to be willing to pay
the same amount that we did When it comes to
the resail price. You can't think about it that way.
(16:19):
You have to be willing to just light light some
of that money on fire. And so because of that,
like you need to set a budget and it's got
to fit within that framework. But you have to be
okay saying, yeah, this is for us, we're going to
be here for a while. And I think that's the
biggest sticking point is if you are not going to
end up staying there for a while, because then you
don't get to experience the actual benefit, the positive lifestyle
(16:42):
change is to your family. And I think that is
the most important thing to think through, like for other
folks out there, you know, so for somebody else, they're thinking,
all right, we can afford we've got this much shaved up,
we could do a renovation, or we could add on
to this extent. But I think through the different reasons
that people tend to move in a non ideal scenario.
And I think of job right, Like if you've got
(17:05):
an opportunity to move somewhere else, you're gonna get a
sweet promotion, but you got to move to this other
city or you.
Speaker 1 (17:10):
Might get fired, I forget to tell you.
Speaker 2 (17:11):
Yeah, So that's a huge consideration schools like education, that's
a big consideration.
Speaker 1 (17:17):
That's literally why you know, that was a big.
Speaker 2 (17:20):
Reason why you and I why we both moved our
families out of our former city. We were looking for
a different type of education, and so that's something that
I think can totally throw a wrench into things. And
then sometimes family as well, right like whether it's wanting
to move somewhere where you're closer to your parents for
them to be involved with like the new grandkids, the
fresh graind kids on the scene, or if your parents
(17:41):
are older and maybe the ta the tides change in
a little bit and there's more expected out of you
to take care of them. I think you've really got
to think through those three factors before you dump a
bunch of money into our renovation or even buy a
home somewhere where you're not thinking about those factors, because
those are the kind of things that life changes fast,
(18:03):
and three years in you're thinking, oh my gosh, we
didn't even think about this. We really should have thought
looked a little bit further down the road here and
made our decisions based on the next five to fifteen years,
not like the next five to fifteen months.
Speaker 1 (18:18):
I guess yeah, I think it's I think it's a
good point. Really, it's really important and spending more than
putting more into the home and not getting the value
back out of it. It's okay, time will heal that wound.
But if you got the time, if you get the time,
and if you try to sell too quickly, you're going
to feel the immense pain of that at the closing table. Yeah,
and you're yeah, not gonna build a Like I talked
(18:39):
to so many people who are like, I want to
get back what I put into it. That's just not
how real estate works. And so if that's your goal,
then renovating is probably not for you.
Speaker 2 (18:48):
Unless you're unless you're looking at putting a new garage door,
and evidently that's the number the number one item for
the most part, you get every dollar back.
Speaker 1 (18:55):
Or if you're like DIY in your own bathroom, that's
one too. So you want to talk about maybe step
some of the steps you took finding a contractor yeah,
find find a good contract. Yeah, find a good contractor
but like that, even that, like that's so I'll say,
there's a lot of people who find somebody they think
is good and turns out they're not. So do you
have any recommendations for finding a good one? Yeah, certainly,
I mean we'll ask around.
Speaker 2 (19:17):
I mean, it's tough to escape your reputation as to
whether or not you're going to go over budget, whether
or not delays, whether or not the as far as
the timeline right, or whether or not the quality of
the work doesn't hold up. But I would say even
before that, because he was asking about like what steps
did you take or what would you change, Kate and
(19:38):
I really thought through how we wanted to use the spaces.
Like we weren't just thinking, oh, we want to make
the house bigger, let's just add a room, but we
thought very specifically about how we would arrange the furniture
within that room and how it would accommodate that what
we wanted to do in those spaces. I think thinking
very specifically about that can help you to be like, oh, no, no,
(19:59):
we actually need to extend this wall or this room
like another two feet because we think we want to
use it in this way. But that's not gonna quite flow.
It's not gonna work quite to the extent that we're
that we're winning it to. But beyond that, we hired
an architect because that helps just for you to get
the thoughts from your brain onto an actual set of
drawings that a builder can take. But then as far
as the builder goes, we got plenty of quotes. We
(20:21):
met with a lot of different builders, and you kind
of have to go with your gut aside from checking
out their people. You know, they've got references and you
can go see houses that they've worked on and things
like that.
Speaker 1 (20:30):
But when you go with your gut, I think I
could be misinterpreted. They might be like that guy's got
a good fibe or like well sometimes like their logo
sometimes because like there's a guy and you know what
where he came back great on was his numbers, and
it's just like, oh, he's saying he could do it
for that.
Speaker 2 (20:47):
But then we saw the quality of his work, We
saw how he treated we you know, we heard from
clients and it we could read between the lines a
little bit that he wasn't the most professional. And that
was sort of an instance where we could have gone
with a more affordable option, but it may have ultimately
cost us the same plus a whole lot of headache
to boot, and so we didn't go with the most
expensive contractor we didn't go with the cheapest, but I
(21:09):
think we kind of found the goldilocks right in the middle,
and it's really important quality and we were totally happy
with them.
Speaker 1 (21:14):
It's really important to note that some people will say, yeah,
I can do it for this, but can they like
are they underestimating? Are they not including all the potential costs?
And so then they come back to you once you've
signed the contract and they're like, yeah, I said it
was gonna be thirty five grand, it's gonna be forty
seven grand because I wasn't thinking about this and this,
and they just haven't really built into their quote everything
(21:35):
is necessary. So you that's part on you as a
homeowner to kind of push back and ask those questions
as well, so you know that like the quote that
looks awesome, well it might not be as awesome an
actuality either, and maybe the quote that looks higher is
spot on and that's actually what they're gonna charge you. Yea.
Speaker 2 (21:52):
But because they spent two hours there and then when
they finally sent the quote over, it was like seven
pages broken down per line on him and the guy
the company we with, that's exactly what they did, and
we were so spot on as far as the numbers go.
And granted it's not because nothing changed. Things changed, like
but there were some spots where we saved some money.
But then there's other areas where we said, ooh, you
(22:12):
know what, we're gonna make that instead of a single
we're gonna make that a double window. And so we
we totally ate the cost of that window. That was painful.
I'm just like, oh, this is it was already installed.
Speaker 1 (22:23):
Painful? Oh totally. It was.
Speaker 2 (22:26):
Sorry about that, but uh, I mean, yeah, certainly do
that ideally, Yeah, you say it up the cash. But
we always talk about how renovations are also an area
where a he lock if done prudently without going too
far off the deep end the reasonable payoff time frame.
Yeah that can that can make sense. But yeah, hopefully
all that will give him some some practical steps to
(22:48):
take in order to not only consider an add on
addition or renovation, but actually following through with it.
Speaker 1 (22:54):
For sure. All right, that was a lot. I feel
like we could have done more, but no, well.
Speaker 2 (22:57):
He even said, he's just like, maybe this will be
a whole episode, and it really could be.
Speaker 1 (23:00):
I don't know if we'll do that. Really, it truly could,
because there's so much to talk about here, and we
could go into more depth on every single one of
those points. So if there's follow up needed, Tim send
us another question. All right, we've got more to get to, Matt,
including we're going to talk about canceling a credit card
whether it ever makes sense. We'll get to that and
more right after this.
Speaker 2 (23:27):
All right, buddy, we are back from the break. We
are going to talk about student loans here in a minute,
but let's hear from a listener who he's looking to
make the right decision with the credit card that's not
serving him.
Speaker 1 (23:38):
Well.
Speaker 5 (23:39):
Hey, Matt and Jills Scott, I had a question about
canceling my oldest credit card.
Speaker 1 (23:44):
So my oldest credit.
Speaker 5 (23:45):
Card is a Discover from two thousand and seven, and
my next oldest is an Amex from twenty nineteen. My
current credit score is in the eight twenty to eight
forty range, so I'm curious how much drop will I
get if canceling my oldest card. The reason for wanting
to cancel is that Discover started charging me a monthly
(24:09):
charge with that for protection of some sort without asking,
and then I had fraudulent card charges. So then I
had the card replaced, froze my account, and now they've
continued to allow fraudulent charges on my account, and I
really just don't want to deal with Discover anymore. So
I'd really like to hear your take on my options.
(24:32):
If I should just keep dealing with the headache of
Discover card, or if I should just bite the bullet
and maybe lose one hundred points on my credit SCRD score.
Whatever you guys think it'll be. Thanks, love the show.
Speaker 1 (24:43):
Bye, Scott Man Bumber that Discover has treated you so poorly,
I hate to hear that. Yeah, and I totally get
wanting to cancel this card if they're not treating you well.
Would you put up with that that kind of treatment, Joe, Wow,
of course not. No, I wouldn't. And I think one
of the best abilities that we have as consumers in
a free market economy is to walk away and to
not do business with a company that's not responsive and
(25:06):
that's not treating as well.
Speaker 2 (25:07):
Yeah, I need to Discover well.
Speaker 1 (25:10):
And it's funny because I like Discover, Like I talk
about how they're one of my favorite online savings accounts.
Speaker 2 (25:16):
Like maybe now the Discover credit card division.
Speaker 1 (25:18):
Well, no, actually, I think when you look at from
a customer service perspective, they perform better the ratings than
some of the other big guys.
Speaker 2 (25:26):
So what's funny is that. Well, I'm thinking about maybe
like one of the few times I've ever had a
fraudulent charge on an actual card, and I think it
I think it was discovered like as I think back,
So maybe it's more anecdotal and less a broad survey. Yeah,
maybe with what you saw, But I think I'm with you, Scott,
and maybe we'll do our our own unofficial survey. If
there's other listeners out there and you've had a lot
(25:47):
of fraudulent charges to your Discover card, let us know
we're gonna break the scoop, you know what they say.
And even great companies, by the way they can eat,
they can have tough times or like not treat certain
customers well. Like a big, big company like that, there's
bound to be complaints from time to time. So yeah,
but I also get it, and I think it makes
(26:08):
sense if a company has consistently treated you poorly that
you say peace out and you walk away, because like,
why keep doing business with somebody who's not being.
Speaker 1 (26:18):
Good to you.
Speaker 2 (26:18):
Yeah, and on top of that, I'm sure you're probably thinking, skuy, well,
it's just me, like little ol me. How big of
a change? How big of an impact am I going
to make by myself? But you sent us a voice memo,
you sent us a listener question, So think about the
amplification that your voice is quite literally getting. But our
advice is normally to not close old credit cards. And
that's because the oldest.
Speaker 1 (26:38):
Cards that you have are typically helping you out in
multiple ways. Right, So first of all, the older that
line of credit is, the better it reflects on your
credit score.
Speaker 2 (26:47):
You typically have a higher credit limit on those older
cards as well, that you've you know where you've handled
them well, which benefits your utilization utilization ratio. But then still,
if you've been handling credit well for a while, ditching
the card so you don't have to do business with
a company who you know isn't making you the happiest,
(27:07):
it's not going to cause much harm. I would say
if this was like your app, your singular only credit card,
or if it was by far your your biggest credit line,
I would be reluctant to see you do it, because
you know, it could cause your score to drop pretty significantly.
I'm thinking in the range of like thirty points or
even more. I'm thinking of like a credit limit of
(27:28):
on this one you've got, I don't know, twenty thousand dollars,
and then on your one other credit card that also
happens to be a good bit newer. If it's only
like twelve hundred, that's a pretty significant drop.
Speaker 1 (27:38):
And I'm not a credit that's available to you. Losing
that amount of overall credit that you have access to
is going to be a problem from a credit score perspective.
But the truth is what's going to happen is your
score is likely in to drop by ten to fifteen
points if you close this card, maybe even less, and
you've got such a tremendously high score it barely matters.
I think it's worth pointing that out. We say where
(28:00):
you have these days, Joe Diino, I don't follow it
that closely. I'm probably seven eighty seven ninety something like that,
So I'm not as good as Scott. All right, Scott's
got that one on me. But like when we talk
about it, seven sixty plus that's essentially perfect from our
point of view, and getting above that, it's not really
going to add much to your life. So if you
need to rent an apartment or apply for a mortgage,
(28:21):
it makes sense to pay extra attention to your score.
And if you don't, it's always a good idea to
kind of keep a loose eye on your credit score.
But in this case, Scott has clearly paid close attention
for a long time and this is just a minor
move that's not going to do much damage at all,
So totally yeah.
Speaker 2 (28:37):
And you can also proactively take some steps to prevent
some of the harm to your credit score by let's say,
opening up a new credit card before you cancel this
old one. So I'm not sure if your AMEX is
the only other card in your possession, but if so.
Speaker 1 (28:51):
It would be ideal to have at least two from
just different credit card issuers in case that they were
to cancel your card for some reason.
Speaker 2 (28:59):
Right, So opening up a new card and then closing
a card that can both temporarily harm your score. But again,
you know you handle your credit well. You've got a
pretty high score. I'm not too worried about that. But
if you're not sure what other card to get, pretty
partial to the two percent cash back Card City Double Cash.
No matter what, you don't have to think about it.
Speaker 1 (29:18):
You're getting that two percent return every single time Fidelity Visa. Man,
it's been the same thing, longest card in my wallet
for a long time. And yeah, you can play, play
the game and sign up for more travel cards that
offer superior sign up bonuses if that's your jam. But
if you're just looking for a replacement card that does
like your average sort of you best average card to
(29:40):
use on a regular basis, not trying to maximize awards,
just maximizing everyday rewards. Yeah, City Double Cash and facility.
Speaker 2 (29:47):
It is worth It is worth the scene what bonus
offers are out there, because if you're like, you know what,
oh yeah, a few thousand dollars spend in a few
months for most people.
Speaker 1 (29:54):
That's within reason.
Speaker 2 (29:56):
That could be a good instance to take advantage of
one of those bonus offers. And I just thought too,
we're talking about him decreasing the total amount of credit
that's available to him, also request a credit limit increase
on your other card before you cancel the one card there.
That way, when you drop off that segment of credit
that's available to you, it's not as big of a ding. Again,
(30:18):
that's something that you can do every I don't know,
every quarter or every six months or so, but the
ability to get that as high as you can because
fact is so sometimes there are like these default bump ups,
and oftentimes I don't think they're nearly as generous as
how your income has increased, and they probably haven't kept
up with pricely you're spending, right, so prices have really
gone up, and so over time it's almost like your
(30:41):
credit available to you has almost decreased.
Speaker 1 (30:44):
Your utilization is getting worse. It's slightly and slowly. Yeah,
it's like the water's turning up on the pot and
the frogs just kind of like, yeah, I don't know,
this is getting a little uncomfortable, but I'm pretty used
to it. And you're right proactively asking if you've handled
your credit card well, often they'll give you a prety
significant bump up in that credit totally a R. Matt.
Let's get to another question. This one is specifically about
(31:05):
student loan debt. Wait for forgiveness or pay that sucker
off quickly?
Speaker 3 (31:08):
Hi, Matt and Joel. This is Danielle from Minnesota and
I have a student loan question I could use your
help on. I have a substantial Anoma student loan debt,
which I am happy to have. It got me a
great education at a great law school. It is about
three hundred and seventy thousand dollars. I have the savings
(31:32):
to pay it off, but I am considering paying off
two hundred and seventy thousand of it and then paying
the additional one hundred thousand dollars off in five years
with monthly payments. The issue that I'm having is that
when I run the numbers, it appears that I would
(31:55):
be better off paying the monthly payment under the pay
as you earn plans over the sixteen years that are
left in the twenty five year repayment whatever that the
current loan law is. But I'm a little uncomfortable keeping
(32:20):
the loans for sixteen more years, paying the monthly payment
and then paying the tax on the balance. My calculations
show that I wouldn't ever be paying principle just interest,
so then I would have a hefty tax bill at
the end of these sixteen years that are remaining in
the loan's life. I am leaning toward paying off the
(32:45):
loans because then I don't have to be beholden to
any legislative changes that are going to happen, or an
increase to the monthly payments. But I can't get past
that with out any interest that I would end up
better off not paying them off and paying a larger
(33:07):
amount overall on the loans. I would love your insight
on this because I have been going back and forth
on this for a very long time, and I think
I need to actually make a decision.
Speaker 1 (33:21):
Thanks so much so, Joe.
Speaker 2 (33:22):
We've never stopped a voice memo in the middle of
its delivery, but I almost did, and did, and I
was about to google like record scratch sound effect because
what she said three hundred and seventy thousand about like
fell out of my seat, that's how your neck almost
like broken was what as massive? That is a lot,
but it's it's for a good cost in the sense
(33:43):
that she got that awesome law degree, which is it's
really cool because she said she's happy to have the
student loan debt, which I think is a really healthy
outlec man. Like we've talked, it comes up all the
time we talk about Ken Honda and his book Happy Money.
But the ability to kind of happily part with money
that you've earned that's worked well for you, but that
is then going to go out into the world to
(34:04):
make other people happy, and you're going to receive a
service or a product that's then going to serve you.
That's how all the world works.
Speaker 1 (34:10):
Man, and student loans get a bad rap, and understandably so.
Right we talked about the headline amount of student loan debt,
which is overwhelming. We talk about individuals, even many older
Americans with student loan debt that it didn't used to
be the case. And you could talk about what came first,
the chicken or the egg, what came first expensive education
or hefty student loans, and the government's involvement in the
(34:31):
student loan program. Like I don't want to go down
that road, but I'm just saying tough not to. It
is it is. But like student loans, yes, are a
burden for many, but it's also true to people who
use student loans effectively to get a degree that's going
to pay off for decades of higher earnings. It's if
(34:53):
you're prudent about your use of student loans and you're
thoughtful about your course of study, it can be an
amazing way to actually get a head start right on
your financial life. And so I agree, Matt, I love
Danielle's perspective here. Student loans can be a good form
of debt. That and how else would you, as a
seventeen year old or eighteen year old, qualify right for
(35:17):
a loan based on a high school degree, like you wouldn't.
Student loans are an effort to allow people to get
that degree that's going to give higher earnings without really
having any sort of collateral to show for it.
Speaker 2 (35:30):
That's true. Uh huh, Yeah, it's that quote unquote good debt.
But let's give a little more context here because in
Danielle's email she mentioned that she and this is all
really important information.
Speaker 1 (35:42):
I think that's why we're sharing it here. But she
owns a house, she's already saved for her kids college,
and she's also contributing as much as she can to
retirement accounts, and so like student loans are her only
major financial hurdle that she has to tackle, and she's
got the cash on hand. She's got the money to
be able toss up the whole thing now if she
wanted to, which is just incredible. So it's worth highlighting
(36:05):
the fact that you know, despite this incredibly mountain high
level of student loan debt, that you have a world
of options at your disposal because you've handled your finances
so thoughtful. I think if I were Danielle here, I
don't want to pay up that student loan debt as
soon as possible. And that's because the average interest rate
for recent graduate student loans is close to eight percent.
(36:29):
And yes, if you play your cards right, that debt
can be forgiven. But I would say this too, I
wouldn't necessarily be worried about legislative changes or a president
doing something that's going to put your student loan forgiveness
at jeopardy. When changes are made, current beneficiaries are almost
always grandfathered in right, so PSLF was not taken away,
(36:52):
for instance, once the Trump presidency ensued. That was something
people were worried about, but I think lessly so. And
still keeping that debt around for sixteen years to achieve
forgiveness when you'd still owe tax on the forgiven amount,
I think it makes it not all that appealing. Yeah,
I want to.
Speaker 2 (37:12):
Go back to I guess to the context as well,
because the first thing that came into my mind. I
think for most folks when they're hearing her say all
this is that, oh man, think about all the other
things you could potentially do with that money. And so
I think that's when like, so let's say, for instance,
she didn't have a house. Let's say she had never
saved her retirement. Let's say in same for kids college
(37:33):
that's optional. But the fact that she's also already done that,
that's icing on the cake. But when you consider the
opportunity cost and having cash on hand to be able
to get some of these other plates spinning, that's what
you have to consider. But again, in her case, she's
already done all those things, and so this is sort
of the next thing as she's looking down the list
of the things that she wants to bring into her
(37:54):
life or in this case, eliminate from her life. I
think that's one of the biggest best things that she
has going for her. It would be a completely different
conversation if she didn't have retirement, specifically that one in
place house. That's just I mean, that's more like lifestyle
lifestyle stuff right there. But because she has, I think
that's another reason to that you can start thinking through, well,
(38:14):
what do I want like what bothers me the most,
And it seems like that this is, yeah, absolutely rising
to the top of the lively.
Speaker 1 (38:21):
She's been waffling on it for a long time. I
think the pros of keeping the debt around, or that
you wouldn't have to pay off the whole balance. It's
always nice to get something for free. You'd almost assuredly
be better off from a pure ROI perspective if you
were to pay the minimums and then get forgiveness sixteen
years from now. You pay less money overall on those loans,
and that is for sure enticing, But it also I
(38:44):
don't think it means, especially in your case, Daniel, that
it's the best course of action, because the forgiveness tax
bill that you would get after the fact could be enormous,
especially if the balance is growing over time as you
make minimum payments. And yeah, I think again, and we'd
be having a different conversation if this student loan were
more of a burden to you. Yes, it's a massive number,
(39:05):
but you've also been so diligent with your finances that
you can get rid of it in a shorter or
you could actually get rid of it today based on
what you said in the voice memo, you're going to
allow some of it to linger just a bit. I'm
assuming to have cash on hand for other purposes. But
to me, it means, yeah, why not get rid of
this thing? Why drag it out for sixteen years? Totally?
And there's just something mentally freeing about getting the student
(39:27):
loan debt out of your life quickly that I think
is going to allow her to more easily crush other
financial goals and.
Speaker 2 (39:33):
Other life goals that she has for herself. And So
because of that and the emotional toll that just keeping
this around for sixty more years that that would cause, man,
I would totally say it to good. Pay that lump
sum the two seventy and then stick with that five
year payoff plan where you're going to do that final
one hundred k. And the fact that she has a plan,
(39:54):
it's just incredible, tells me that she's mapped this out right,
like she has analyzed it and with that in mind,
and I think she's more looking for our blessing. So
I give you my blessing same to do exactly what
you have planned out, because you sound very intelligent, and
I think you are. You're approaching this so strategically that like,
I've never been so happy for somebody that has three
hundred and seventy thousand dollars where there's a state loan's that.
(40:16):
But I'm really happy for her because of how she's
approached this problem.
Speaker 1 (40:19):
And I think we might have some hyperoptimizers out there
in the listening audience and they might write in and
please do and say, guys, like, what are you talking about?
She could pay the minimums and get forgiveness and blah
blah blah, Like sixteen years from now she's been able
to accomplish all these other financial goals, And there's some
truth to that, but sixteen years is also it's a
(40:39):
really long time. And if you've got the ability to
kind of get rid of it in short order, that's
what I would do. Well.
Speaker 2 (40:47):
Speaking of optimizing, we're going to hear from a listener
who's looking to make the most of his HSA.
Speaker 1 (40:53):
We'll get to that more right after this. All right, Matt,
we're back. Time to get to the Facebook question of
a week. This one comes from listener Steven, who says,
happy Open enrollment season. Yes, it's everyone's favorite time of year.
He says, more of a general question, can investing inside
(41:14):
your HSA fully subsidize your medical expenses in long term?
Like the four percent rule, but for medical expenses. I
currently have thirty six thousand dollars invested in my HSA
and plenty to fully contribute and invest in the SMP
for the next decade, assuming contribution limits don't increase. They're
currently at eighty five to fifty for a family five
fifty dollars, and the SMP increases at ten percent annually.
(41:39):
My back of the napkin math indicates I'll have over
two hundred thousand dollars by then. At that time, the
interest from the investments, assuming ten percent growth, will be
more than enough to withdraw my out of pocket maximum
and still have plenty left over to grow. This has
a bit over simplified, so let me know if I'm
not considering anything, and if this is a good plan. Dude,
I like it, Steven. I think it's a fun way
(42:01):
to think about HSA. Yeah. Well, I've thought similarly about
my Daffy account, my donor advised fund, and I'm sure
listeners have have. Have they started to hear the voices
for good challenge and the Daffy no donate to some
of our favorite nonprofits and help us defeat stacking managamins.
Speaker 2 (42:17):
And basically we've been talking about Daffy and how great
they are before they're like, you guys want to partner up,
so full disclosure there. But in a similar way, it's like, oh,
can I get enough within that donor advised fund where
essentially your giving is done off of the earnings that
are being thrown thrown off from that initial investment, and
(42:37):
that might be able to be the case here right.
It's fun to see your balance grow, which then allows
you to give.
Speaker 1 (42:42):
Even more money away.
Speaker 2 (42:43):
But for you your specific question, Stephen, if you are
paying for healthcare costs out of pocket while while you
are funding your HSA, I do think this is totally
possible to hit that metric. I'm not totally sure, like
I'm not going to count on that ten percent, but
I think this is really just it's a thought exercise.
It's a thought exercise, but it's a fun one. The
exercises are dependent on your the interest rate that you
(43:06):
are expecting, and there's a big return.
Speaker 1 (43:08):
Yeah you're I'm sorry.
Speaker 2 (43:09):
Your rate of return. There's a big difference between the
seven or eight percent rate of return and ten. If
it was ten, I would have retired a few years ago. Yeah, well,
but I'm not taking a double digits return on my
money into account when I'm looking ahead to future projections.
Speaker 1 (43:26):
Well, this is I think, though, what's so beautiful about
the AHSA if you use it properly, And it's why
we talk about it regularly and why we're so keen
on people using this account. Well, guess we're operating on
a lot of assumptions here, but the goal of the
theory is not to get specific. It's a broad question.
So there's just so many potential caveats about potentially lower
returns or higher healthcare costs that you might occur. I
(43:49):
think it's just important to put a little footnote in
there about that. Think about those things. But the money
you stick into your AHSA, if left un touched for
a decade or two, Yeah, it really could to cover
all your health care expenses. And you know you'll also
be able to withdraw that inflated some without paying any
taxes either with rocks. Yeah, if you're talking about with
those receipts, Yeah, exactly. Yeah, just document it. We've got
(44:11):
articles and information up on how to money dot Com
about how to use that HSA effectively. But unlike your
traditional four O one K or traditional IRA, where you've
got to think about paying tax paying Uncle Sam on
those withdrawals, you don't have to do that with the HSA.
So like the amount that you have in the account
is the amount that you have access to in a
super flexible way. It makes that account even more beautiful
(44:33):
not having to pay tax ever on that money.
Speaker 2 (44:35):
Heck, yeah, well, and not to mention that even if
you save quote unquote too much, well, at a certain point,
the HSA turns into a glorified IRA, specifically at age
sixty five, if you encounter overfunding that account, which isn't
a real problem. That's actually something that you don't need
to concern yourself with. So the flexibility and the tax
(44:56):
protection that your HSA offers really does make get an
account to fully fund if you have the additional funds
on hand to be able to pull that off. I
think this is a brilliant move. Yeah, so cool way
to think about it. I think, Steven, it's probably even
more motivating to invest in that HSA when you're thinking about, hey,
wait a second, one of these days the earnings are
(45:16):
gonna throw off everything I need for healthcare expenses, and
I can just continue to grow that nest egg inside
of my HSA and avoid tax the whole way through.
Speaker 1 (45:25):
That's pretty cool, thick. Yeah.
Speaker 2 (45:27):
Shall we get back to the beer that you and
I enjoyed? So you know what I realized. I kept
looking over at the can while we were talking about money,
and we both commented commented on the artwork, right, and
you know, it reminds me of what you know, when
you were in let's say second or third grade and
you drew an underwater scene with your crayons and then
(45:49):
you paint the whole thing with like a dark blue
and then the water the water color it slicks right
off of the wax and only sticks to the paper.
That's what this reminds me of. Yeah, yeah, yeah, I
can see that all right. I thought you'd be more
excited about that.
Speaker 1 (46:03):
I think it looks cool. I like art on a
black background too, like it just yeah, So have we
ever talked about the Doctor Seuss artwork that we went
and gosh, this is forever ago, key West, right, this
was so we hadn't even started the podcast, and we
were you and m Kate and I we.
Speaker 2 (46:20):
Both had our first kids. They were like three months old,
and we took a trip down to Key West during
things giving break and we went into a gallery that
had a bunch of Doctor Seuss, some of his artwork
that was not necessarily for kids.
Speaker 1 (46:35):
Yeah, it was awesome. It was awesome, but it.
Speaker 2 (46:37):
Was all very moody and all the backgrounds were black,
and I thought that was the coolest thing.
Speaker 1 (46:43):
It was so cool. Yeah, so cool. It's hard to
think about that one. What do you think about the
liquid inside of the candle so good?
Speaker 2 (46:49):
The body so it just it poured thick, it drank thick.
It had so much flavor, and I think that's one
of the things you get with an unfiltered ip A
double Was.
Speaker 1 (46:59):
It double dry?
Speaker 2 (47:00):
It was like concentrated unfiltered Yeah, double IPA dry. Hops
with Citra some other names of.
Speaker 1 (47:06):
Some hops I don't recognize, but they sound like there
was Raca, maybe Zamba. Maybe there are hops from Australia
or New Zealand, which maybe we're gonna get more of
these things. To me, those for some reason, the Australian
and New Zealand hops. When I have those in beers,
they're just instilly some of my favorites, and this what
I need to look up to see whether those hops
were actually grown there. But my goodness, this was a
(47:28):
delightful beer. Was so good. The hops were a little funkier,
and this was like piercingly juicy. It also just had
that sort of note which doesn't happen very often in IPA.
It's usually it were like pierces the back of your
throat kind of.
Speaker 2 (47:42):
It was very full flavored, yeah, and not in like
the overly harsh, bitter way for me punchy. It had
depth like sometimes like a sports drink. It's got salt
sodium in it, right, and it makes it wetter or
something like. There's something about about that that just like
quenches the thirst.
Speaker 1 (47:57):
A little more. It just feels like it like.
Speaker 2 (47:59):
It's been formulated to absorb into your tongue or something
like that, and I.
Speaker 1 (48:02):
Feel like that's what it's beautiful.
Speaker 2 (48:04):
It's actually coming one with Jeremy's changed by Fonta Flora.
I highly recommend this beer for sure.
Speaker 1 (48:10):
It was great. It was very very good. All right,
that's going to do it for this episode. You can
find show notes up on our website at howtomoney dot com,
and if you've got a money question, holler at us.
We would love to hear it.
Speaker 2 (48:21):
That's gonna be it for this one, nobody, So until
Speaker 1 (48:23):
Next time, best friends Out, Best friends Out,
Welcome to How the Money. I'm Joel, I'm Matt. Today
we're answering your listener questions. There are so many flies
(00:24):
in our office today. Do you think they're gonna get
picked up on the microphone?
Speaker 2 (00:27):
I don't really hope not if listeners are wondering what
they hear buzzing past our microphones.
Speaker 1 (00:32):
I want to thro attracted to the food from uh
that we had during lunch today. It was me eating
the Korean food today, not yet I know.
Speaker 2 (00:38):
I think it's like the sweet Yeah, like the you
uh reheated it on the cast iron. This sweet mixed
with the soy, it gets It's aromatic, gets in the air.
Everybody wants a piece, including me. Quite the weird intro
for today's episode. This is I ask How to Money episode.
We're gonna hear from some listeners today, Joel. A listener
is considering a home or an he wants.
Speaker 1 (01:01):
To he might add on is I guess where he's
at and wants to hear how we have thought about
it in the past.
Speaker 2 (01:07):
But the listener has a problem with his Discover card
and he's not getting treated well by them, as well
by the customer service. So we'll talk about that, and
another listener is considering a lump sum to pay off
for student loans or whether or not she should stretch
that thing out stretch as bad boys out some. We'll
get to that plus more during our episode today.
Speaker 1 (01:28):
No Doubt Chuck full of good stuff today. First off,
I love getting listener emails. Love it when people reach
out and they read them. All want to tell us
about their lives or tell us about something like, Hey,
I heard your episode on this, but here's why we
do it slightly differently, or here's why you're right. I
prefer the ones where they tell us why we write
the affirmative affirmation email. Here's why you guys are awesome.
(01:49):
You can send those emails anytime you want.
Speaker 3 (01:51):
Well.
Speaker 1 (01:52):
Lee emailed and he after the interview that we had
with Pam from Wealth Ramp, he to weigh in on
why he chooses to hire a financial advisor, and his
main thing came down to relational stability and happiness and
he I.
Speaker 2 (02:11):
Love that He's he said basically, if things went south,
his wife was gonna be tempted to blame him. Yea
is like, I think he said that she told him that,
and she's like, just so you know, if things don't
work out, this is gonna be on you. It's gonna
be really hard for me to not blame you.
Speaker 1 (02:25):
Yeah, so even if the market is down fifteen percent,
which you know, you could try to show your spouse
statistics about how frequently this happens, and hey, guess what,
this isn't abnormal. But if your spouse is gonna freak
out and they're not going to listen to you in
the heat of the moment, you know, you could harm
your relationship. I guess if you hadn't planned ahead properly.
And it makes me, it makes me think that one
I think, yeah, I know your relationship and if it's
(02:47):
if hiring someone to be able to point the finger
at that, if that's part of what's going to lead
to long lasting relational success, go for it. I'm totally
fine with that. It makes me think. I had a
recent conversation with a friend and he's kind of been
in charge of the finances, but his wife's like, man,
you know what, I really want to pay off some
of this tet that we have lingering, and he's like,
(03:08):
I'm more of like a let's keep investing, man, let's
grow the net worth and they can have a discussion
about it. But he's like, you know what, she deserves
more input, and so I'm going to lean more in
her direction for a little while. And so much of
I think handling finance as well together as a couple
is not just letting one person take the reins and
listening to the other person's concerns if they have them totally.
Speaker 2 (03:27):
Yeah, because you could say, hey, how about you just
get informed, get educated, look at what the market does
over time, right, like to actually fully understand it and
save the one percent Because for him, I mean, you're
looking at probably like a one percent fee that's getting
taken out of his nest egg every year. I would
rather understand it and not pay the one percent. But
uh yeah, it doesn't really matter though if when the
(03:49):
relationships on the line and the dynamics are at play,
and you got to yeah, you certainly have to take
that into account. He didn't say this specifically, but I
do want to address the fact that he kind of
hinted or intimated at the fact that maybe she was
thinking that underperformance might be due to the fact that
he wasn't like making the right choices as far as
(04:10):
like their investments, And I do want to make clear
that we don't recommend hiring a professional and paying out
the nose for outperformance. That is not something that we recommend.
I think it's absolutely worth it to pay for expertise, right,
especially when it comes to minimizing your tax bill and
making sure that you are under that you are drawing
from the right accounts, that you're making the right sales,
that you're hanging on to certain things for the right
(04:32):
amount of time. That's totally worth paying for. But like,
we never recommend to pay to to pay higher fees
that to pay the Kathy Woods there, whatever it is
that she.
Speaker 1 (04:42):
I don't know what's her fund three quarters show on
her fund. Yeah, yeah, don't do that. No, Yeah, I
think that's a that's a good point.
Speaker 2 (04:49):
If he didn't say that directly. But there's a part
of me that was picking up on that a little
bit of like, well, no, we pay somebody and then
it's just all going to be better because of that.
Speaker 1 (04:58):
But that's not always the case. The average money manager is, yeah,
you're you're paying what they're worth, what the value they
bring is. Things that are not stock picking out performance
because all the statistics show that individual money managers don't
do a great job at that, especially over the longer
the time horising gets so uh but but Lee, if
(05:18):
that's helpful to you to have somebody in your corner
where they're like they're the third party.
Speaker 2 (05:22):
It's it's kind of like trying to do like a mediator. Yes,
like someone just to sit there in the middle just
to help. Honestly, it's not someone that there in the middle.
It's someone for you, both you and your wife to
get together on and like yell at because he doesn't
want he does the one hurt yelling at him. It's
just like, oh yeah, babe, let's we should give him
a piece of our piece of our mind.
Speaker 1 (05:42):
And I think, like the you know, the same is
true for marriage counseling. Right to have a third party
in the room can be super helpful. And I think, yeah,
that's a part of the reason people hire uh someone
to help and facilitate some of those be able to
bounce off money questions that they have too together as
a couple.
Speaker 2 (06:00):
You're seeing my day marriage counseling isn't gonna be isn't
gonna pan out?
Speaker 1 (06:03):
Well, girl, it's okay to have discussion but like you know,
there's times where it gets too intense to heat and
it's so be contested. Yeah, it's hard to go along
to pulling a pro. Yeah. And if you are thinking,
oh man, maybe we should talk to an advisor, you
can find a great one that had the money dot
com slash advisor.
Speaker 2 (06:18):
That's right, the beer that you and I are going
to enjoy today. And I am already enjoying this beer. Man,
this is a good one. It's called Jeremy's Changed, which
is a funny name for a beer, but it is
by for the better or not. I think for the
better based on what I'm enjoying right here. Maybe maybe
Jeremy like picked up some healthy habits. Is that a
(06:39):
flower or is that like a jellyfish and jellyfish to me?
Speaker 1 (06:41):
But it's font of Flora, and jellyfish don't have that
many tentacles, do they? Yeah? Or do they? I don't know.
It's cool art, so that's cool. Yeah.
Speaker 2 (06:49):
Fonts of Flora is the brewery which I've actually been to.
Speaker 1 (06:52):
I don't think you've been there yet now I haven't.
It's a rad spot.
Speaker 2 (06:55):
Like just it's got the vibes going on that we
actually talked about that pastoral. Right yeah. Back on episode
one thousand, when we did the AMA episode, somebody asked, Hey,
if you could open a brewery, what kind of beers,
what kind of vibes.
Speaker 1 (07:08):
Would you be going for?
Speaker 2 (07:09):
And I specifically called out Fonta Flora because I love
what they got going on over there up in North Carolina.
Not surprisingly, but.
Speaker 1 (07:16):
One of these days I'll make it up. Well, let's
go together, all right, I'm in. Let's get to some
listener questions. If you've got a question we'd love to
hear from you, how toomoney dot com slash ask so
where you can find the simple instructions basically recording the
voice memo on the app on your phone, emailing it
over to us. Hopefully we can take it next week
on the show. Matt, let's get to one specifically, let's
get to a question about how to think about renovating
(07:38):
a house.
Speaker 4 (07:38):
Hey, Matt and Joel, this is Tim from Mount Prospect Again.
I snuck a second question into my email with the
first voice memo, and Matt responded he was like, no, no, no,
that's going to cost you another voice memo.
Speaker 1 (07:49):
So here we are.
Speaker 4 (07:51):
My question is more of a request from Matt regarding
the addition he put onto his home. You guys have
briefly talked about this project in the past, but I'd
love to hear about the decision making process that Matt
and his family went through when deciding whether they should
sell or rent the current house and go buy a
new house versus.
Speaker 1 (08:06):
Putting the addition onto the home.
Speaker 4 (08:08):
There's of course a lot of financial considerations here, but
some of the deciding factors with this type of decision
can be more important than what the numbers are telling you.
And then my follow up to that is, once you
decide to go with the edition route, what were some
of the steps that you took to kind of complete
that project and would you do anything differently? Knowing what
you know now, I look forward to hearing about your journey.
Speaker 1 (08:27):
Thank you. Ooh the journey. It was indeed a journey, Joel,
Kate and I were just actually reminiscing because a year ago.
Speaker 2 (08:36):
I love photos that pop up in your phone and
it tells you like, here's what you were doing this
day last year, and we hadn't even broken ground, or
when Kate and I had this conversation, we had not
even broken ground for our home renovation on the palatial
east wing, which is not the east wing, but we
hadn't even broken ground. And to think that we are
so used to the fact like it being there, like
it feels like it has always been there, it's a
(08:58):
part of our life, like it has been fully integrated
into how it is that we that we live.
Speaker 1 (09:02):
I think that it's just kind of mind blowing. Again,
it's probably a good tip just ahead of time to
count the cost, right, and not not just the financial cost,
but like that, do I want to live through this
renovation cost because you're bizarre?
Speaker 2 (09:15):
Yeah, because in the moment it seems like it seems crazy.
You're like what are we doing? Like why do we
what are we subjecting ourselves to? And I think part
of it depends on how many rooms in the house
that's going to touch, Like you were able to kind
of keep that for the most part, cordon off from
the way you guys live in your home.
Speaker 1 (09:34):
Literal Yeah, putting funeral plastic tape to the floor and see.
But if you're redoing the kitchens and bathrooms that you
currently use, you have to change your whole way of
living for a while. And so you have to really
think like, how big is this upgrade? It's like, are
we really wanting to go through with this? Are we
willing to be inconvenienced to a massive in a massive way.
(09:54):
That's like something Emily and I have discussed as we're
even considering minor brew mister bathrooms or we're like, yeah,
I don't man, do we want to Is it that bad?
Maybe we just leave it as is?
Speaker 2 (10:04):
So Tim asked specifically about, well, why didn't you choose
to sell that house and go with something different? Why
didn't you choose to even hang on to that place,
you know, rents hit and look at a different property.
The fact is we did look for another property. We
did that for like close to two years. I don't
know if you remember, Like we would drive it, we'd
go around and like, can.
Speaker 1 (10:21):
So maybe we'll go look over here, and oh, I
don't know.
Speaker 2 (10:24):
But we actually did seriously consider that, and after all
that searching, we decided that, you know what, even when
we like picture our quote unquote dream house and whatever
that entails, you know, for the individual out there, but
we bottom line, it did not matter because what we found.
What we discovered was that our specific location had everything
we're looking for. It may not have been like the
(10:45):
perfect quote unquote dream house, but because of where it was,
it meant that Kate and I like we are able
to walk to date nights. We are able, like we're
close to y'all, we're close to work. Because we're close
to work, I'm like, we are still able to be
a one car family.
Speaker 1 (10:58):
I bike.
Speaker 2 (10:59):
I'm able to bike in work all the time. That
would change if we moved further out. We're close to
the mountain and we're able to get outdoors and hike around.
We like we're close to the kids' school. The kids
are able to like run around the neighborhood. Like these
are all things that we realized, Oh my gosh, all
of these things are so much more important than saying, hey,
let's go find another house. And the reason I bring
(11:19):
this up is because I think Tim was alluding to
the fact that, like, hey, aside from the financial considerations, right, like,
there are so many other factors to run through, and
it's to like what it is that makes your life fulfilling,
not fulfilling, but just happy, and what it is that
you want to do on the kind of like the
day to day basis, you know, community too, that you've
built up in that space, you're kind of starting clean over.
(11:42):
You can go drive to see those friends, but it's
different when you get to interact with Like I have
a lot of like older folks my parents' age that
live close to me. I love talking with them on
my way to work. Like I'd be sad if I
didn't run into Dan, who's doing his hill sprints, you know,
on my way into I really do like try those hangs.
Speaker 1 (12:00):
And Nold is Dan. He Dan, he's probably late sixties,
early seventies. Yeah, yeah, he's getting after it man. So
but I think we'd be remiss, Matt, not to talk
about the money side of things at least a little bit.
Speaker 2 (12:10):
Right, So yeah, I wanted to start with I guess
some of the specific factors that went through our mind
that caused us to realize, wait a minute, no, no, no,
this is the house, and let's just take the steps
that we need to in order to make it work
for us for the next fifteen years. Basically because our
little dude just started just started kindergarten, we're not planning
to go anywhere for school.
Speaker 1 (12:29):
So yeah, okay, so financial considerations obviously, because you and
I discussed this were important factor as well over the
host a personal finance podcast. After all, but you had
a locked in rate on your current mortgage of what
like four percent four and a quarter and rates when
you were looking at adding on or buying a different house.
We're in the upper sixes, it was probably hard for
(12:52):
you to think about giving that up in order to
buy something bigger, too, because I think something like the
annual cost in just the interest alone could have been
tens of thousands of dollars a year by upgrading to
a new home with that higher interest rate. Yeah, so
that had to be like at least a big pro
in terms of saying totally it was.
Speaker 2 (13:09):
But honestly, even more than that, it came down to
some like the like the non financial the non monetary
consideration as you're loaded, I mean, like we were looking
at some properties that cost less money, right, and so
the ability to Yeah, we would have ended up with
a higher mortgage which hopefully at some point not promised,
not guaranteed that we would be able to refinance down
(13:30):
the road. But I think had we found had it
made sense to us from just all the maybe the
lifestyle considerations that I think Tim is asking about I
think we would have been willing to do it, but
ultimately it wasn't about the money. Ultimately we said let's
just stay here and again the make the changes and
renovations that we needed to. But but that, I mean,
obviously that is a factor.
Speaker 1 (13:50):
You do have the factor in extra tens of thousands
of dollars a year. It certainly feels like a hurd
an impediment, absolutely, because if let's say rates were the same,
let's say they were still at four and a quarter,
and then we were able to buy something like that
would have obviously expanded the scope of our search. And
then all of a sudden you're thinking, okay, well then
we could potentially do this. So yeah, certainly, even then
(14:10):
you're talking an interest rate that he's got locked in
at its current place. That's yeah, if you're sitting sitting
in the high threes or in the fours, man, that's
pretty dang attractive. And even if you're talking about moving,
you're still talking about real estate transaction fees. But that
if you're you know, making him even switch from a
four percent mortgage to a four percent mortgage, not not
that big, not nearly as a big of a deal, right, Sure,
but if you're doing paying those transaction fees but also
(14:33):
paying a higher mortgage rate, that that's going to add
Oh yeah, and he did say something about renting, like
why didn't you hang onto it and rent it because
then you got you got cash flow flowing in as well.
But also when it comes to primary residences, they don't
often make the best rentals because you've got they're over capitalized,
you've got too much money into that property as opposed
to what it is you could then take out of
that property. And what would you then do without money
(14:55):
instead of dumping it into a singular property. That Sure,
it might be an impressive rent number, but just think
about not only just how much money you have locked
up in that property, because it's uh, typically I'm going
to assume that most primary residences.
Speaker 2 (15:09):
For folks are worth a bit more than a standard
you know, two two three two rental.
Speaker 1 (15:14):
And to be a bad friend here, I will note
that your decision to add on to this house, you're
not going to get all the money back that you
put into it, and you had to be okay with that.
Speaker 2 (15:27):
You had to be z with that too. Yeah, why
is that being a bad friend?
Speaker 1 (15:29):
Well, no, I mean, I don't want to make it
sound like reving my face in it. Yeah, that not
trying to do that, but just trying to highlight that
for everybody. When you add on to a house, oftentimes
you're going to get depending on how you add on
what you're doing. Uh, you know how appealing it is
to the general home buying public. You might be getting
forty fifty sixty percent back of the money you stuck
into it. So you have to realize that on the
front end, how much use am I going to get
(15:50):
out of this? How much is this done for personal
reasons that are going to un people feeling to us
when somebody else might not appreciate it the way we
do one percent?
Speaker 2 (15:59):
I mean, and that's why I think it makes so
much sense to think about it the way that tims
start trying to think about it, right, which is which
are the non financial because it doesn't often make sense
because you're thinking, Okay, are we going to be able
to get our money back out of this counter like
you can't or this upgrade over here? You know is
somebody is somebody else going to be willing to pay
the same amount that we did When it comes to
the resail price. You can't think about it that way.
(16:19):
You have to be willing to just light light some
of that money on fire. And so because of that,
like you need to set a budget and it's got
to fit within that framework. But you have to be
okay saying, yeah, this is for us, we're going to
be here for a while. And I think that's the
biggest sticking point is if you are not going to
end up staying there for a while, because then you
don't get to experience the actual benefit, the positive lifestyle
(16:42):
change is to your family. And I think that is
the most important thing to think through, like for other
folks out there, you know, so for somebody else, they're thinking,
all right, we can afford we've got this much shaved up,
we could do a renovation, or we could add on
to this extent. But I think through the different reasons
that people tend to move in a non ideal scenario.
And I think of job right, Like if you've got
(17:05):
an opportunity to move somewhere else, you're gonna get a
sweet promotion, but you got to move to this other
city or you.
Speaker 1 (17:10):
Might get fired, I forget to tell you.
Speaker 2 (17:11):
Yeah, So that's a huge consideration schools like education, that's
a big consideration.
Speaker 1 (17:17):
That's literally why you know, that was a big.
Speaker 2 (17:20):
Reason why you and I why we both moved our
families out of our former city. We were looking for
a different type of education, and so that's something that
I think can totally throw a wrench into things. And
then sometimes family as well, right like whether it's wanting
to move somewhere where you're closer to your parents for
them to be involved with like the new grandkids, the
fresh graind kids on the scene, or if your parents
(17:41):
are older and maybe the ta the tides change in
a little bit and there's more expected out of you
to take care of them. I think you've really got
to think through those three factors before you dump a
bunch of money into our renovation or even buy a
home somewhere where you're not thinking about those factors, because
those are the kind of things that life changes fast,
(18:03):
and three years in you're thinking, oh my gosh, we
didn't even think about this. We really should have thought
looked a little bit further down the road here and
made our decisions based on the next five to fifteen years,
not like the next five to fifteen months.
Speaker 1 (18:18):
I guess yeah, I think it's I think it's a
good point. Really, it's really important and spending more than
putting more into the home and not getting the value
back out of it. It's okay, time will heal that wound.
But if you got the time, if you get the time,
and if you try to sell too quickly, you're going
to feel the immense pain of that at the closing table. Yeah,
and you're yeah, not gonna build a Like I talked
(18:39):
to so many people who are like, I want to
get back what I put into it. That's just not
how real estate works. And so if that's your goal,
then renovating is probably not for you.
Speaker 2 (18:48):
Unless you're unless you're looking at putting a new garage door,
and evidently that's the number the number one item for
the most part, you get every dollar back.
Speaker 1 (18:55):
Or if you're like DIY in your own bathroom, that's
one too. So you want to talk about maybe step
some of the steps you took finding a contractor yeah,
find find a good contract. Yeah, find a good contractor
but like that, even that, like that's so I'll say,
there's a lot of people who find somebody they think
is good and turns out they're not. So do you
have any recommendations for finding a good one? Yeah, certainly,
I mean we'll ask around.
Speaker 2 (19:17):
I mean, it's tough to escape your reputation as to
whether or not you're going to go over budget, whether
or not delays, whether or not the as far as
the timeline right, or whether or not the quality of
the work doesn't hold up. But I would say even
before that, because he was asking about like what steps
did you take or what would you change, Kate and
(19:38):
I really thought through how we wanted to use the spaces.
Like we weren't just thinking, oh, we want to make
the house bigger, let's just add a room, but we
thought very specifically about how we would arrange the furniture
within that room and how it would accommodate that what
we wanted to do in those spaces. I think thinking
very specifically about that can help you to be like, oh, no, no,
(19:59):
we actually need to extend this wall or this room
like another two feet because we think we want to
use it in this way. But that's not gonna quite flow.
It's not gonna work quite to the extent that we're
that we're winning it to. But beyond that, we hired
an architect because that helps just for you to get
the thoughts from your brain onto an actual set of
drawings that a builder can take. But then as far
as the builder goes, we got plenty of quotes. We
(20:21):
met with a lot of different builders, and you kind
of have to go with your gut aside from checking
out their people. You know, they've got references and you
can go see houses that they've worked on and things
like that.
Speaker 1 (20:30):
But when you go with your gut, I think I
could be misinterpreted. They might be like that guy's got
a good fibe or like well sometimes like their logo
sometimes because like there's a guy and you know what
where he came back great on was his numbers, and
it's just like, oh, he's saying he could do it
for that.
Speaker 2 (20:47):
But then we saw the quality of his work, We
saw how he treated we you know, we heard from
clients and it we could read between the lines a
little bit that he wasn't the most professional. And that
was sort of an instance where we could have gone
with a more affordable option, but it may have ultimately
cost us the same plus a whole lot of headache
to boot, and so we didn't go with the most
expensive contractor we didn't go with the cheapest, but I
(21:09):
think we kind of found the goldilocks right in the middle,
and it's really important quality and we were totally happy
with them.
Speaker 1 (21:14):
It's really important to note that some people will say, yeah,
I can do it for this, but can they like
are they underestimating? Are they not including all the potential costs?
And so then they come back to you once you've
signed the contract and they're like, yeah, I said it
was gonna be thirty five grand, it's gonna be forty
seven grand because I wasn't thinking about this and this,
and they just haven't really built into their quote everything
(21:35):
is necessary. So you that's part on you as a
homeowner to kind of push back and ask those questions
as well, so you know that like the quote that
looks awesome, well it might not be as awesome an
actuality either, and maybe the quote that looks higher is
spot on and that's actually what they're gonna charge you. Yea.
Speaker 2 (21:52):
But because they spent two hours there and then when
they finally sent the quote over, it was like seven
pages broken down per line on him and the guy
the company we with, that's exactly what they did, and
we were so spot on as far as the numbers go.
And granted it's not because nothing changed. Things changed, like
but there were some spots where we saved some money.
But then there's other areas where we said, ooh, you
(22:12):
know what, we're gonna make that instead of a single
we're gonna make that a double window. And so we
we totally ate the cost of that window. That was painful.
I'm just like, oh, this is it was already installed.
Speaker 1 (22:23):
Painful? Oh totally. It was.
Speaker 2 (22:26):
Sorry about that, but uh, I mean, yeah, certainly do
that ideally, Yeah, you say it up the cash. But
we always talk about how renovations are also an area
where a he lock if done prudently without going too
far off the deep end the reasonable payoff time frame.
Yeah that can that can make sense. But yeah, hopefully
all that will give him some some practical steps to
(22:48):
take in order to not only consider an add on
addition or renovation, but actually following through with it.
Speaker 1 (22:54):
For sure. All right, that was a lot. I feel
like we could have done more, but no, well.
Speaker 2 (22:57):
He even said, he's just like, maybe this will be
a whole episode, and it really could be.
Speaker 1 (23:00):
I don't know if we'll do that. Really, it truly could,
because there's so much to talk about here, and we
could go into more depth on every single one of
those points. So if there's follow up needed, Tim send
us another question. All right, we've got more to get to, Matt,
including we're going to talk about canceling a credit card
whether it ever makes sense. We'll get to that and
more right after this.
Speaker 2 (23:27):
All right, buddy, we are back from the break. We
are going to talk about student loans here in a minute,
but let's hear from a listener who he's looking to
make the right decision with the credit card that's not
serving him.
Speaker 1 (23:38):
Well.
Speaker 5 (23:39):
Hey, Matt and Jills Scott, I had a question about
canceling my oldest credit card.
Speaker 1 (23:44):
So my oldest credit.
Speaker 5 (23:45):
Card is a Discover from two thousand and seven, and
my next oldest is an Amex from twenty nineteen. My
current credit score is in the eight twenty to eight
forty range, so I'm curious how much drop will I
get if canceling my oldest card. The reason for wanting
to cancel is that Discover started charging me a monthly
(24:09):
charge with that for protection of some sort without asking,
and then I had fraudulent card charges. So then I
had the card replaced, froze my account, and now they've
continued to allow fraudulent charges on my account, and I
really just don't want to deal with Discover anymore. So
I'd really like to hear your take on my options.
(24:32):
If I should just keep dealing with the headache of
Discover card, or if I should just bite the bullet
and maybe lose one hundred points on my credit SCRD score.
Whatever you guys think it'll be. Thanks, love the show.
Speaker 1 (24:43):
Bye, Scott Man Bumber that Discover has treated you so poorly,
I hate to hear that. Yeah, and I totally get
wanting to cancel this card if they're not treating you well.
Would you put up with that that kind of treatment, Joe, Wow,
of course not. No, I wouldn't. And I think one
of the best abilities that we have as consumers in
a free market economy is to walk away and to
not do business with a company that's not responsive and
(25:06):
that's not treating as well.
Speaker 2 (25:07):
Yeah, I need to Discover well.
Speaker 1 (25:10):
And it's funny because I like Discover, Like I talk
about how they're one of my favorite online savings accounts.
Speaker 2 (25:16):
Like maybe now the Discover credit card division.
Speaker 1 (25:18):
Well, no, actually, I think when you look at from
a customer service perspective, they perform better the ratings than
some of the other big guys.
Speaker 2 (25:26):
So what's funny is that. Well, I'm thinking about maybe
like one of the few times I've ever had a
fraudulent charge on an actual card, and I think it
I think it was discovered like as I think back,
So maybe it's more anecdotal and less a broad survey. Yeah,
maybe with what you saw, But I think I'm with you, Scott,
and maybe we'll do our our own unofficial survey. If
there's other listeners out there and you've had a lot
(25:47):
of fraudulent charges to your Discover card, let us know
we're gonna break the scoop, you know what they say.
And even great companies, by the way they can eat,
they can have tough times or like not treat certain
customers well. Like a big, big company like that, there's
bound to be complaints from time to time. So yeah,
but I also get it, and I think it makes
(26:08):
sense if a company has consistently treated you poorly that
you say peace out and you walk away, because like,
why keep doing business with somebody who's not being.
Speaker 1 (26:18):
Good to you.
Speaker 2 (26:18):
Yeah, and on top of that, I'm sure you're probably thinking, skuy, well,
it's just me, like little ol me. How big of
a change? How big of an impact am I going
to make by myself? But you sent us a voice memo,
you sent us a listener question, So think about the
amplification that your voice is quite literally getting. But our
advice is normally to not close old credit cards. And
that's because the oldest.
Speaker 1 (26:38):
Cards that you have are typically helping you out in
multiple ways. Right, So first of all, the older that
line of credit is, the better it reflects on your
credit score.
Speaker 2 (26:47):
You typically have a higher credit limit on those older
cards as well, that you've you know where you've handled
them well, which benefits your utilization utilization ratio. But then still,
if you've been handling credit well for a while, ditching
the card so you don't have to do business with
a company who you know isn't making you the happiest,
(27:07):
it's not going to cause much harm. I would say
if this was like your app, your singular only credit card,
or if it was by far your your biggest credit line,
I would be reluctant to see you do it, because
you know, it could cause your score to drop pretty significantly.
I'm thinking in the range of like thirty points or
even more. I'm thinking of like a credit limit of
(27:28):
on this one you've got, I don't know, twenty thousand dollars,
and then on your one other credit card that also
happens to be a good bit newer. If it's only
like twelve hundred, that's a pretty significant drop.
Speaker 1 (27:38):
And I'm not a credit that's available to you. Losing
that amount of overall credit that you have access to
is going to be a problem from a credit score perspective.
But the truth is what's going to happen is your
score is likely in to drop by ten to fifteen
points if you close this card, maybe even less, and
you've got such a tremendously high score it barely matters.
I think it's worth pointing that out. We say where
(28:00):
you have these days, Joe Diino, I don't follow it
that closely. I'm probably seven eighty seven ninety something like that,
So I'm not as good as Scott. All right, Scott's
got that one on me. But like when we talk
about it, seven sixty plus that's essentially perfect from our
point of view, and getting above that, it's not really
going to add much to your life. So if you
need to rent an apartment or apply for a mortgage,
(28:21):
it makes sense to pay extra attention to your score.
And if you don't, it's always a good idea to
kind of keep a loose eye on your credit score.
But in this case, Scott has clearly paid close attention
for a long time and this is just a minor
move that's not going to do much damage at all,
So totally yeah.
Speaker 2 (28:37):
And you can also proactively take some steps to prevent
some of the harm to your credit score by let's say,
opening up a new credit card before you cancel this
old one. So I'm not sure if your AMEX is
the only other card in your possession, but if so.
Speaker 1 (28:51):
It would be ideal to have at least two from
just different credit card issuers in case that they were
to cancel your card for some reason.
Speaker 2 (28:59):
Right, So opening up a new card and then closing
a card that can both temporarily harm your score. But again,
you know you handle your credit well. You've got a
pretty high score. I'm not too worried about that. But
if you're not sure what other card to get, pretty
partial to the two percent cash back Card City Double Cash.
No matter what, you don't have to think about it.
Speaker 1 (29:18):
You're getting that two percent return every single time Fidelity Visa. Man,
it's been the same thing, longest card in my wallet
for a long time. And yeah, you can play, play
the game and sign up for more travel cards that
offer superior sign up bonuses if that's your jam. But
if you're just looking for a replacement card that does
like your average sort of you best average card to
(29:40):
use on a regular basis, not trying to maximize awards,
just maximizing everyday rewards. Yeah, City Double Cash and facility.
Speaker 2 (29:47):
It is worth It is worth the scene what bonus
offers are out there, because if you're like, you know what,
oh yeah, a few thousand dollars spend in a few
months for most people.
Speaker 1 (29:54):
That's within reason.
Speaker 2 (29:56):
That could be a good instance to take advantage of
one of those bonus offers. And I just thought too,
we're talking about him decreasing the total amount of credit
that's available to him, also request a credit limit increase
on your other card before you cancel the one card there.
That way, when you drop off that segment of credit
that's available to you, it's not as big of a ding. Again,
(30:18):
that's something that you can do every I don't know,
every quarter or every six months or so, but the
ability to get that as high as you can because
fact is so sometimes there are like these default bump ups,
and oftentimes I don't think they're nearly as generous as
how your income has increased, and they probably haven't kept
up with pricely you're spending, right, so prices have really
gone up, and so over time it's almost like your
(30:41):
credit available to you has almost decreased.
Speaker 1 (30:44):
Your utilization is getting worse. It's slightly and slowly. Yeah,
it's like the water's turning up on the pot and
the frogs just kind of like, yeah, I don't know,
this is getting a little uncomfortable, but I'm pretty used
to it. And you're right proactively asking if you've handled
your credit card well, often they'll give you a prety
significant bump up in that credit totally a R. Matt.
Let's get to another question. This one is specifically about
(31:05):
student loan debt. Wait for forgiveness or pay that sucker
off quickly?
Speaker 3 (31:08):
Hi, Matt and Joel. This is Danielle from Minnesota and
I have a student loan question I could use your
help on. I have a substantial Anoma student loan debt,
which I am happy to have. It got me a
great education at a great law school. It is about
three hundred and seventy thousand dollars. I have the savings
(31:32):
to pay it off, but I am considering paying off
two hundred and seventy thousand of it and then paying
the additional one hundred thousand dollars off in five years
with monthly payments. The issue that I'm having is that
when I run the numbers, it appears that I would
(31:55):
be better off paying the monthly payment under the pay
as you earn plans over the sixteen years that are
left in the twenty five year repayment whatever that the
current loan law is. But I'm a little uncomfortable keeping
(32:20):
the loans for sixteen more years, paying the monthly payment
and then paying the tax on the balance. My calculations
show that I wouldn't ever be paying principle just interest,
so then I would have a hefty tax bill at
the end of these sixteen years that are remaining in
the loan's life. I am leaning toward paying off the
(32:45):
loans because then I don't have to be beholden to
any legislative changes that are going to happen, or an
increase to the monthly payments. But I can't get past
that with out any interest that I would end up
better off not paying them off and paying a larger
(33:07):
amount overall on the loans. I would love your insight
on this because I have been going back and forth
on this for a very long time, and I think
I need to actually make a decision.
Speaker 1 (33:21):
Thanks so much so, Joe.
Speaker 2 (33:22):
We've never stopped a voice memo in the middle of
its delivery, but I almost did, and did, and I
was about to google like record scratch sound effect because
what she said three hundred and seventy thousand about like
fell out of my seat, that's how your neck almost
like broken was what as massive? That is a lot,
but it's it's for a good cost in the sense
(33:43):
that she got that awesome law degree, which is it's
really cool because she said she's happy to have the
student loan debt, which I think is a really healthy
outlec man. Like we've talked, it comes up all the
time we talk about Ken Honda and his book Happy Money.
But the ability to kind of happily part with money
that you've earned that's worked well for you, but that
is then going to go out into the world to
(34:04):
make other people happy, and you're going to receive a
service or a product that's then going to serve you.
That's how all the world works.
Speaker 1 (34:10):
Man, and student loans get a bad rap, and understandably so.
Right we talked about the headline amount of student loan debt,
which is overwhelming. We talk about individuals, even many older
Americans with student loan debt that it didn't used to
be the case. And you could talk about what came first,
the chicken or the egg, what came first expensive education
or hefty student loans, and the government's involvement in the
(34:31):
student loan program. Like I don't want to go down
that road, but I'm just saying tough not to. It
is it is. But like student loans, yes, are a
burden for many, but it's also true to people who
use student loans effectively to get a degree that's going
to pay off for decades of higher earnings. It's if
(34:53):
you're prudent about your use of student loans and you're
thoughtful about your course of study, it can be an
amazing way to actually get a head start right on
your financial life. And so I agree, Matt, I love
Danielle's perspective here. Student loans can be a good form
of debt. That and how else would you, as a
seventeen year old or eighteen year old, qualify right for
(35:17):
a loan based on a high school degree, like you wouldn't.
Student loans are an effort to allow people to get
that degree that's going to give higher earnings without really
having any sort of collateral to show for it.
Speaker 2 (35:30):
That's true. Uh huh, Yeah, it's that quote unquote good debt.
But let's give a little more context here because in
Danielle's email she mentioned that she and this is all
really important information.
Speaker 1 (35:42):
I think that's why we're sharing it here. But she
owns a house, she's already saved for her kids college,
and she's also contributing as much as she can to
retirement accounts, and so like student loans are her only
major financial hurdle that she has to tackle, and she's
got the cash on hand. She's got the money to
be able toss up the whole thing now if she
wanted to, which is just incredible. So it's worth highlighting
(36:05):
the fact that you know, despite this incredibly mountain high
level of student loan debt, that you have a world
of options at your disposal because you've handled your finances
so thoughtful. I think if I were Danielle here, I
don't want to pay up that student loan debt as
soon as possible. And that's because the average interest rate
for recent graduate student loans is close to eight percent.
(36:29):
And yes, if you play your cards right, that debt
can be forgiven. But I would say this too, I
wouldn't necessarily be worried about legislative changes or a president
doing something that's going to put your student loan forgiveness
at jeopardy. When changes are made, current beneficiaries are almost
always grandfathered in right, so PSLF was not taken away,
(36:52):
for instance, once the Trump presidency ensued. That was something
people were worried about, but I think lessly so. And
still keeping that debt around for sixteen years to achieve
forgiveness when you'd still owe tax on the forgiven amount,
I think it makes it not all that appealing. Yeah,
I want to.
Speaker 2 (37:12):
Go back to I guess to the context as well,
because the first thing that came into my mind. I
think for most folks when they're hearing her say all
this is that, oh man, think about all the other
things you could potentially do with that money. And so
I think that's when like, so let's say, for instance,
she didn't have a house. Let's say she had never
saved her retirement. Let's say in same for kids college
(37:33):
that's optional. But the fact that she's also already done that,
that's icing on the cake. But when you consider the
opportunity cost and having cash on hand to be able
to get some of these other plates spinning, that's what
you have to consider. But again, in her case, she's
already done all those things, and so this is sort
of the next thing as she's looking down the list
of the things that she wants to bring into her
(37:54):
life or in this case, eliminate from her life. I
think that's one of the biggest best things that she
has going for her. It would be a completely different
conversation if she didn't have retirement, specifically that one in
place house. That's just I mean, that's more like lifestyle
lifestyle stuff right there. But because she has, I think
that's another reason to that you can start thinking through, well,
(38:14):
what do I want like what bothers me the most,
And it seems like that this is, yeah, absolutely rising
to the top of the lively.
Speaker 1 (38:21):
She's been waffling on it for a long time. I
think the pros of keeping the debt around, or that
you wouldn't have to pay off the whole balance. It's
always nice to get something for free. You'd almost assuredly
be better off from a pure ROI perspective if you
were to pay the minimums and then get forgiveness sixteen
years from now. You pay less money overall on those loans,
and that is for sure enticing, But it also I
(38:44):
don't think it means, especially in your case, Daniel, that
it's the best course of action, because the forgiveness tax
bill that you would get after the fact could be enormous,
especially if the balance is growing over time as you
make minimum payments. And yeah, I think again, and we'd
be having a different conversation if this student loan were
more of a burden to you. Yes, it's a massive number,
(39:05):
but you've also been so diligent with your finances that
you can get rid of it in a shorter or
you could actually get rid of it today based on
what you said in the voice memo, you're going to
allow some of it to linger just a bit. I'm
assuming to have cash on hand for other purposes. But
to me, it means, yeah, why not get rid of
this thing? Why drag it out for sixteen years? Totally?
And there's just something mentally freeing about getting the student
(39:27):
loan debt out of your life quickly that I think
is going to allow her to more easily crush other
financial goals and.
Speaker 2 (39:33):
Other life goals that she has for herself. And So
because of that and the emotional toll that just keeping
this around for sixty more years that that would cause, man,
I would totally say it to good. Pay that lump
sum the two seventy and then stick with that five
year payoff plan where you're going to do that final
one hundred k. And the fact that she has a plan,
(39:54):
it's just incredible, tells me that she's mapped this out right,
like she has analyzed it and with that in mind,
and I think she's more looking for our blessing. So
I give you my blessing same to do exactly what
you have planned out, because you sound very intelligent, and
I think you are. You're approaching this so strategically that like,
I've never been so happy for somebody that has three
hundred and seventy thousand dollars where there's a state loan's that.
(40:16):
But I'm really happy for her because of how she's
approached this problem.
Speaker 1 (40:19):
And I think we might have some hyperoptimizers out there
in the listening audience and they might write in and
please do and say, guys, like, what are you talking about?
She could pay the minimums and get forgiveness and blah
blah blah, Like sixteen years from now she's been able
to accomplish all these other financial goals, And there's some
truth to that, but sixteen years is also it's a
(40:39):
really long time. And if you've got the ability to
kind of get rid of it in short order, that's
what I would do. Well.
Speaker 2 (40:47):
Speaking of optimizing, we're going to hear from a listener
who's looking to make the most of his HSA.
Speaker 1 (40:53):
We'll get to that more right after this. All right, Matt,
we're back. Time to get to the Facebook question of
a week. This one comes from listener Steven, who says,
happy Open enrollment season. Yes, it's everyone's favorite time of year.
He says, more of a general question, can investing inside
(41:14):
your HSA fully subsidize your medical expenses in long term?
Like the four percent rule, but for medical expenses. I
currently have thirty six thousand dollars invested in my HSA
and plenty to fully contribute and invest in the SMP
for the next decade, assuming contribution limits don't increase. They're
currently at eighty five to fifty for a family five
fifty dollars, and the SMP increases at ten percent annually.
(41:39):
My back of the napkin math indicates I'll have over
two hundred thousand dollars by then. At that time, the
interest from the investments, assuming ten percent growth, will be
more than enough to withdraw my out of pocket maximum
and still have plenty left over to grow. This has
a bit over simplified, so let me know if I'm
not considering anything, and if this is a good plan. Dude,
I like it, Steven. I think it's a fun way
(42:01):
to think about HSA. Yeah. Well, I've thought similarly about
my Daffy account, my donor advised fund, and I'm sure
listeners have have. Have they started to hear the voices
for good challenge and the Daffy no donate to some
of our favorite nonprofits and help us defeat stacking managamins.
Speaker 2 (42:17):
And basically we've been talking about Daffy and how great
they are before they're like, you guys want to partner up,
so full disclosure there. But in a similar way, it's like, oh,
can I get enough within that donor advised fund where
essentially your giving is done off of the earnings that
are being thrown thrown off from that initial investment, and
(42:37):
that might be able to be the case here right.
It's fun to see your balance grow, which then allows
you to give.
Speaker 1 (42:42):
Even more money away.
Speaker 2 (42:43):
But for you your specific question, Stephen, if you are
paying for healthcare costs out of pocket while while you
are funding your HSA, I do think this is totally
possible to hit that metric. I'm not totally sure, like
I'm not going to count on that ten percent, but
I think this is really just it's a thought exercise.
It's a thought exercise, but it's a fun one. The
exercises are dependent on your the interest rate that you
(43:06):
are expecting, and there's a big return.
Speaker 1 (43:08):
Yeah you're I'm sorry.
Speaker 2 (43:09):
Your rate of return. There's a big difference between the
seven or eight percent rate of return and ten. If
it was ten, I would have retired a few years ago. Yeah, well,
but I'm not taking a double digits return on my
money into account when I'm looking ahead to future projections.
Speaker 1 (43:26):
Well, this is I think, though, what's so beautiful about
the AHSA if you use it properly, And it's why
we talk about it regularly and why we're so keen
on people using this account. Well, guess we're operating on
a lot of assumptions here, but the goal of the
theory is not to get specific. It's a broad question.
So there's just so many potential caveats about potentially lower
returns or higher healthcare costs that you might occur. I
(43:49):
think it's just important to put a little footnote in
there about that. Think about those things. But the money
you stick into your AHSA, if left un touched for
a decade or two, Yeah, it really could to cover
all your health care expenses. And you know you'll also
be able to withdraw that inflated some without paying any
taxes either with rocks. Yeah, if you're talking about with
those receipts, Yeah, exactly. Yeah, just document it. We've got
(44:11):
articles and information up on how to money dot Com
about how to use that HSA effectively. But unlike your
traditional four O one K or traditional IRA, where you've
got to think about paying tax paying Uncle Sam on
those withdrawals, you don't have to do that with the HSA.
So like the amount that you have in the account
is the amount that you have access to in a
super flexible way. It makes that account even more beautiful
(44:33):
not having to pay tax ever on that money.
Speaker 2 (44:35):
Heck, yeah, well, and not to mention that even if
you save quote unquote too much, well, at a certain point,
the HSA turns into a glorified IRA, specifically at age
sixty five, if you encounter overfunding that account, which isn't
a real problem. That's actually something that you don't need
to concern yourself with. So the flexibility and the tax
(44:56):
protection that your HSA offers really does make get an
account to fully fund if you have the additional funds
on hand to be able to pull that off. I
think this is a brilliant move. Yeah, so cool way
to think about it. I think, Steven, it's probably even
more motivating to invest in that HSA when you're thinking about, hey,
wait a second, one of these days the earnings are
(45:16):
gonna throw off everything I need for healthcare expenses, and
I can just continue to grow that nest egg inside
of my HSA and avoid tax the whole way through.
Speaker 1 (45:25):
That's pretty cool, thick. Yeah.
Speaker 2 (45:27):
Shall we get back to the beer that you and
I enjoyed? So you know what I realized. I kept
looking over at the can while we were talking about money,
and we both commented commented on the artwork, right, and
you know, it reminds me of what you know, when
you were in let's say second or third grade and
you drew an underwater scene with your crayons and then
(45:49):
you paint the whole thing with like a dark blue
and then the water the water color it slicks right
off of the wax and only sticks to the paper.
That's what this reminds me of. Yeah, yeah, yeah, I
can see that all right. I thought you'd be more
excited about that.
Speaker 1 (46:03):
I think it looks cool. I like art on a
black background too, like it just yeah, So have we
ever talked about the Doctor Seuss artwork that we went
and gosh, this is forever ago, key West, right, this
was so we hadn't even started the podcast, and we
were you and m Kate and I we.
Speaker 2 (46:20):
Both had our first kids. They were like three months old,
and we took a trip down to Key West during
things giving break and we went into a gallery that
had a bunch of Doctor Seuss, some of his artwork
that was not necessarily for kids.
Speaker 1 (46:35):
Yeah, it was awesome. It was awesome, but it.
Speaker 2 (46:37):
Was all very moody and all the backgrounds were black,
and I thought that was the coolest thing.
Speaker 1 (46:43):
It was so cool. Yeah, so cool. It's hard to
think about that one. What do you think about the
liquid inside of the candle so good?
Speaker 2 (46:49):
The body so it just it poured thick, it drank thick.
It had so much flavor, and I think that's one
of the things you get with an unfiltered ip A
double Was.
Speaker 1 (46:59):
It double dry?
Speaker 2 (47:00):
It was like concentrated unfiltered Yeah, double IPA dry. Hops
with Citra some other names of.
Speaker 1 (47:06):
Some hops I don't recognize, but they sound like there
was Raca, maybe Zamba. Maybe there are hops from Australia
or New Zealand, which maybe we're gonna get more of
these things. To me, those for some reason, the Australian
and New Zealand hops. When I have those in beers,
they're just instilly some of my favorites, and this what
I need to look up to see whether those hops
were actually grown there. But my goodness, this was a
(47:28):
delightful beer. Was so good. The hops were a little funkier,
and this was like piercingly juicy. It also just had
that sort of note which doesn't happen very often in IPA.
It's usually it were like pierces the back of your
throat kind of.
Speaker 2 (47:42):
It was very full flavored, yeah, and not in like
the overly harsh, bitter way for me punchy. It had
depth like sometimes like a sports drink. It's got salt
sodium in it, right, and it makes it wetter or
something like. There's something about about that that just like
quenches the thirst.
Speaker 1 (47:57):
A little more. It just feels like it like.
Speaker 2 (47:59):
It's been formulated to absorb into your tongue or something
like that, and I.
Speaker 1 (48:02):
Feel like that's what it's beautiful.
Speaker 2 (48:04):
It's actually coming one with Jeremy's changed by Fonta Flora.
I highly recommend this beer for sure.
Speaker 1 (48:10):
It was great. It was very very good. All right,
that's going to do it for this episode. You can
find show notes up on our website at howtomoney dot com,
and if you've got a money question, holler at us.
We would love to hear it.
Speaker 2 (48:21):
That's gonna be it for this one, nobody, So until
Speaker 1 (48:23):
Next time, best friends Out, Best friends Out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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