March 2, 2025 • 31 mins
If you want to snag cheaper airfare, HTM offers a few tips to help you save the most.
Ask HTM: Austin wants to know if he should be using cash back or travel rewards credit cards.
A CNET article talks about the secondary benefits of credit cards. Don't forget about the other ways choosing the right card can be financially beneficial! Also, are health sharing plans good or bad? The answer is somewhere in the middle.
Ask HTM: David invested a lump sum. Should he start taking some out to pay off the mortgage?
Ask HTM: Austin wants to know if he should be using cash back or travel rewards credit cards.
A CNET article talks about the secondary benefits of credit cards. Don't forget about the other ways choosing the right card can be financially beneficial! Also, are health sharing plans good or bad? The answer is somewhere in the middle.
Ask HTM: David invested a lump sum. Should he start taking some out to pay off the mortgage?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Kf I AM six forty. You're listening to how to
Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is How Too
Money with Joel Larsguard and Matt.
Speaker 3 (00:18):
Almes KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 4 (00:38):
This is how to Money.
Speaker 1 (00:39):
I am one of your hosts, Joel Larsgard.
Speaker 4 (00:41):
And I am Matt all mixed. By the way.
Speaker 5 (00:44):
You can always find more money saving information over at
howtomoney dot com.
Speaker 1 (00:48):
Let's kick it off. Let's talk about travel. If you
want to fly for less money, it's not all about
finding the right discount airline or snagging a sweet sale
price like wait, I think uh. Southwest had a thirty
percent and off sale on certain flights this week. I
saw that, which is awesome. Yeah, you might be able
to fly for less right if you find one of
those sales. But it would also be smart to fly
(01:11):
or to attempt to fly from the airports that offer
the least expensive fares most regularly. So to help us
out here, the Bureau of Transportation Statistics, they listed the
lowest cost airports to embark from, and Matt, I think
we should name them right, because if you know, let's
do the airports that traditionally offer the lowest prices. Hey,
you might want to like start looking to see whether
(01:32):
you can find a flight from there as opposed to
maybe the airport that's closest to your house. So Fort Lauderdale, Orlando.
So we got two Florida airports first off, but then Vegas,
Chicago and LaGuardia. Those are going to nab you the
lowest domestic fares on average. Dolls in Washington, d C.
That's the most expensive airport to fly from. And the
(01:52):
average price difference Matt between flights from Fort Lauderdale and
from the Washington Dolles Airport it's more than two hundred
dollars a take.
Speaker 4 (02:00):
That's pretty steep.
Speaker 1 (02:00):
So if you live in Washington, DC, it's not like
you're driving down to Fort Lauderdale right to save money
on your ticket. But I think this just goes to
show that if you only shop at the airport that's
nearest to you, you might be leaving out other potential
options to reduce the cost of your travel. So shop around,
set fair alerts, but also look to cheaper airports that
(02:22):
you might be able to reasonably fly from. Yeah, I
noticed you said LaGuardia. Does everyone say La Guardia or
LaGuardia Guardia?
Speaker 6 (02:30):
Is it?
Speaker 4 (02:30):
Why is it Guardia because it's spelled just the last name?
Speaker 2 (02:33):
Oh?
Speaker 4 (02:33):
Is that?
Speaker 7 (02:34):
Yah?
Speaker 4 (02:34):
I don't know who that based after?
Speaker 5 (02:35):
A former New York City mayor Charles Well because like
the like the way you spell guard like you don't
pronounce it like guard to the base you say guard Okay,
small tangent over. So regarding the different regarding the different airports,
what's so fascinating too, is the fact that one of
the biggest differences, or one of the biggest reasons for
(02:58):
the price discrepancy, is because of competition. Yeah, and so
specifically Dalls Like I was really fascinating. I'm like, why
is it so much more expensive? Is it because that's
where all the politicians fly into and they are priced
and sensitive? Perhaps, But it also has a lot to
do with the different airlines that service that airport, and
there's a lot of competition there. But specifically United Airlines
has over seventy percent market share. They basically have a stranglehold,
(03:21):
which means they can set the prices high, and you
don't have many other options to get around that, as
opposed to do you think Atlanta wasn't on that list?
Speaker 4 (03:28):
Yeah, there's got tons of different options.
Speaker 1 (03:30):
So no, no, no, no, it wasn't on the list because
Delta probably runs sixty plus percent of the flights out.
Speaker 5 (03:35):
Of which I thought you make compared to the most
expensive list, we do have a lot of options. But
I was going to say, guess the market share of
United at Fort Lauderdale. So at Dallas it's seventy percent
at Fort Lauderdale, and you guesses, I'm I guess fifteen
eight okay, eight percent, so and that's much lower compared
to I think the top three were Spirit, Jet Blue,
(03:57):
and Southwest, which, like the low cost affordable airlines, provides
that competition and that's a huge driving factor behind why
there's such a price discrepancy as well.
Speaker 1 (04:06):
And so when there is a major airline based out
of that city who runs, they kind of run the show.
They're going to have a lot more pricing power and
they can kind of keep some people out. I mean,
Southwest came to Atlanta a few years back, but they're
even talking about reducing flights, so I'm guessing the situation,
the pricing situation in coming to and from the Atlanta Airport.
Speaker 4 (04:26):
It's only going to get worse. I get a little
siffer in the coming years.
Speaker 1 (04:29):
Okay, let's keep talking about travel, matt As more airline
frequent flyer programs have put the emphasis on how much
you spend versus how often do you travel. It's all
about spending more money on tickets instead of just flying regularly.
Folks are opting to play the field in attempts to
save money. They're saying, ah, I don't think I'm going
to book with the airline. And normally I go with
a particular airline because I'm used to flying them. But
(04:52):
people are saying I'm gonna be a little less loyal
moving forward. And we've always said that being loyal to
one brand or one airline it's a bad idea because
it's gonna cost you money. Right, But even for normal
people who only travel a few times a year, some
of those loyalty perks, like when combined with let's say
a proprietary credit card, they could result in some pretty
(05:12):
sweet benefits for travelers, potentially enough to justify a higher
ticket price. But I think those days are coming to
an end, and we are all for loyalty in some
areas of life, right, like friendship and love. Like Matt,
you and I were loyal to each other. We're gonna
be best friends, yeah, boy forever.
Speaker 4 (05:28):
But move over, Zach Braf and Donald Faso. We're better
than that. They were real friends. We're real, real friends.
Speaker 1 (05:35):
They're real friends too, right evidently. Yeah, we haven't gotten
that T mobile commercial yet though.
Speaker 5 (05:40):
You know, kin I I've debated watching Scrubs with the
kids because it was one of our favorite shows back
in college, and every time those T mobile commercials come on,
they just totally crack up. They think that they are
so funny, and they are, and Kate and I looked
at each other, We're just like, oh my gosh, they
would so enjoy Scrubs. I'm not totally sure how appropriate
that would be for a six year old, seven year old.
Speaker 1 (06:00):
That's a good question, Okay, So loyalty it's great in
some areas, not great in others, specifically when we're talking
about airlines for most people, right, So, yeah, if you're
in the position, if you find that that your perks
have diminished from the airline that you typically fly with,
but the price of your ticket hasn't and the airfares
are going up, Folks, look elsewhere. Google flights is like
(06:22):
the proper place to start searching. Oh yeah, be more
interested in paying the least amount of money for the
fair as opposed to going with the airline you're used
to flying.
Speaker 4 (06:31):
Yeah, shopping around is going to pay off.
Speaker 2 (06:33):
Man, you're listening to how To Money with Joel Larsgard
on demand from KFI AM six forty.
Speaker 5 (06:41):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter.
Speaker 1 (06:46):
Now, let's take a question now about credit cards and
how to know which one might be most appropriate for you.
Speaker 6 (06:53):
Hey guys, it's Austin from Alabama. I have a question
that I've been trying to figure out on my own,
but have been unable to come to a clearance to
stact answer on. I have a two percent cash back
credit card with no annual fee. We use it and
like it with no problems. Many travel cards offer two
x miles for every dollar spent. What is the difference
between these two kinds of rewards the two percent cash
(07:14):
back and two x miles or is there one. I
know some of the travel cards with more rewards like
airport lounge access and free check bags.
Speaker 4 (07:22):
Will come with an annual fee.
Speaker 6 (07:23):
My family doesn't travel a ton, which is why I
haven't pursued a travel card up to this point. But
if we were to travel more as our kids get older,
I may want to venture pun intended and to travel cards.
I should add that we pay our balances off in
full and on time every month and have never carried
a balance on credit cards.
Speaker 1 (07:40):
Thanks, well, now we got a venture pun thrown in there.
Nicely done, Austin, Great dad, Joe's of the ilk that
I would tell.
Speaker 5 (07:48):
So I want to address something that Austin mentioned, the
two percent cash back cards. I think everyone should basically
have one of those in their wallet, in their credit
card arsenal.
Speaker 4 (07:57):
Even if you implement a travel credit card as well. Well.
Speaker 5 (08:00):
I think there are times when you're just not going
to get as much of return using those cards, just
in your day to day spending, where by default you
should always be getting two percent percent. No, no, no,
that was so nineteen ninety eight.
Speaker 4 (08:12):
Or I think of as like the floor, it's the basement. Yeah,
it's the minimum, don't ever.
Speaker 1 (08:16):
Get less than that on rewards for when when you
buy stuff with a credit card.
Speaker 4 (08:20):
Yeah, there's no need to.
Speaker 5 (08:21):
And if you are getting into travel, absolutely consider some
of these travel cards that like we're going to get
into but at a minimum, by default, have a two
percent card and specifically the So I've never actually had
this card, but don't you have the Fidelity I have
the Fidelity two percent card and it deposited, deposits it
into your Fidelity account. That's right, I've had that account
that credit card for that's that's I think that's the
(08:43):
first credit card ever got.
Speaker 4 (08:44):
So I've had that card for a long time. Look
at you. Yeah, very loyalty.
Speaker 5 (08:47):
That seems like a very like goody two shoes sort
of answered. It's like my first credit card was the
Fidelity Investment card. But then the other one is the
City double Cash where you earn two percent no matter what.
Speaker 4 (08:58):
Right, not solid.
Speaker 1 (08:59):
And I think it's also to mention here Mathot that
not everyone or listeners don't need to have dozens of cards, right,
They don't need just a slew of credit cards in
their arsenal, especially if they're not into optimizing their credit
card game all the way, which a lot of people aren't.
Some people don't want to play the game to that degree.
They're not like our buddy Chris Hutchins, who goes so
(09:22):
hard with credit cards, and I think it's awesome and
I love hearing how he does it, and I love
kind of divulging that information to our listeners who are
interested in going crazy with credit cards, because it's amazing
how much you can accomplish. I was literally texting with
him the other day, and we should talk about this
on the show at some point. But he bought tons
of gift cards at a discount to resell, and the
(09:43):
whole goal for him was to do just a mass
ridiculous amounts of points. So he's playing the game, and
he's playing harder than almost anybody I know, frugal or cheap.
Speaker 4 (09:52):
Joal to go to those links.
Speaker 1 (09:54):
It depends what you're into, man, But like especially when
if you.
Speaker 5 (09:57):
Love it, if you find satisfaction and life fulfillment, I
guess from doing that, then more power to unit.
Speaker 4 (10:03):
For him.
Speaker 1 (10:03):
It's going to mean a lot of free travel, but
it's also going to bean content for his podcast, so
he's doing it for the pod. That's right, that's right.
So how valuable are travel rewards. Let's get to the
heart of Austin's question and does two X points, let's say,
which you're gonna hear on the commercials some of those
travel cards, does that equal two percent cash back? It's
kind of a scorely thing, But the quick answer is
(10:27):
not necessarily. Points are typically worth one cent, so two
X points and two percent cash back are roughly equivalent
in value. But how much more or less valuable those
travel miles are than the cash back rewards that you're
going to get revolves around how.
Speaker 4 (10:41):
Well you know and play the system.
Speaker 1 (10:44):
For instance, accumulating points with a two X travel card
and then transferring them to a hotel partner so you
can pay less for your stay. That increases the value
of those points, and it could allow those points to
be worth far more than a two percent cash back
card can get you essentially more than two cents on
the dollar. But if you use those points unwisely or
(11:04):
you attempt to turn those travel points into cash, you're
losing out and you would have been better off using
a two percent card. So part of it is just
kind of knowing the system and using it in the
way to its fullest.
Speaker 4 (11:15):
Extent totally.
Speaker 5 (11:16):
Yeah, miles can be more rewarding, especially for folks who
like to travel, who have the ability to be super
flexible as well in how it is that they travel
when they book, and the signum bonus is because of that,
I guess, because like the credit card companies are offering,
they're dangling like a fat or juicier carrot, but it's
harder to catch, right, But if you do catch it,
the U in particular, the sigment bonuses for those travel
(11:36):
cards are vastly superior.
Speaker 4 (11:39):
Yeah.
Speaker 1 (11:39):
The cash back cards, the sign up bonus typically non existent.
Speaker 5 (11:43):
They're pretty meager or paltry, right, yeah, yeah, and so
they offer an outsized advantage for folks out there who
are optimizing. By the way, Chris Hession's episode we talked
to episode eight ninety nine where we actually dove into
some of that you got to know yourself, But some
of the best cash back cars out there come with
bigger perks in certain spending categories, and that actually it
(12:03):
tends to be a little bit easier to optimize. So,
for instance, you can get five percent cash back eating
out if you use the Chase Custom cash card like
I do. So it's literally a credit card I keep
on my person and often in which a lot of times,
a lot of cards I don't keep on my person.
But that's one card because and I go out for
date nights, they bring you the check, they take it off.
You know, it's not like I'm standing there at the
(12:23):
register like you Europe Matt, Yeah, exactly. They don't bring
you the terminal, you know, to the whatever, to the table.
Why don't we do that? But that's a car to
keep it on my person because when it comes to
paying for our date nights, I use that card one
hundred percent of the time. Five percent cash back or
even like a six percent cash back at grocery stores
with the Amex Blue Cash Preferred card. That's another one
(12:45):
that I love and we take full advantage of. Uh,
you don't that's one that you you downgrade me.
Speaker 4 (12:51):
A little bit. Yeah, just shop at Costco too. You
don't like that that annual fee. Well, speaking of Costco,
what is it?
Speaker 5 (12:56):
Five percent cash back on gas at Costco and then
for four percent at other gas stations? And so I
mentioned this because there are ways to get a higher
percentage of cash back and you're thinking, WHOA, that's like
that's got to be at least four x five x
six x miles.
Speaker 4 (13:11):
Well, yeah, but there are caps, there are limits, and
it's only within you know, narrow spending windows.
Speaker 1 (13:17):
So and the thing is too there's typically no annual
fees except for on that MX Blue cash preferred, no
hoops to jump through premium six percent, Yeah, pay a
little bit, I think you just there's less due diligence required, right,
so you could cash back to optimize just a few categories,
used to two percent card for everything else, and you
do quite well for yourself.
Speaker 4 (13:34):
It's it's sort of like I set it and forget
it sort of mentality.
Speaker 5 (13:36):
And if that's what you're looking for, Austin, if you're
looking to kind of figure out the system and then
always know that, okay for going out to eat, I
use this card. For groceries, I use this card, and
then to the ability to never have to think about
it again. That's what's so great about these cash back
cards as opposed to the points game. If it's like
having to keep up with the news, it's always ever
evolving and changing, hopefully not as quickly as the news
(13:59):
has been in recent cycles, but it is something that
you have to keep up with a little bit more
because of the fact that the credit card companies are
looking to keep you on your toes and they're trying
to like out maneuver you, essentially because if they're changing
the rules a little bit, it's tougher to know.
Speaker 1 (14:13):
What it is that you should be doing with us. Yeah,
I think that's one of the pros of cash back.
Speaker 7 (14:17):
Right.
Speaker 1 (14:17):
It's easy to redeem travel awards less so. Right, so
you might have to go through the credit card company's
booking portal, or if you want the best deal, you
might have to transfer them to one of the partners.
And it can obviously be done, but there are just
steps involved, and some people just don't want to figure
out the proprietary system of Chase or Capital One or
something like that. Right, And the other potential problem with
(14:39):
travel rewards is that they can diminish in value over
time if you don't use them. This is inflation, particularly,
it's points inflation, and so hey, you get these points
and you're like, all, right, eighty thousand points. Well, if
you don't use them for a year or two, those
eighty thousand points instead of buying you like two plane tickets,
might get you a plane ticket and a half or
(15:00):
something like that, and.
Speaker 4 (15:01):
So you just have to be wary of that as well.
Speaker 1 (15:04):
On the cash back front, you can typically sign into
the back end of your account and choose automatic redemptions
right so that you're quickly getting the benefit you signed
up for. That money isn't necessarily sitting there for a
long period of time getting eaten away by inflation.
Speaker 4 (15:18):
And so I don't know.
Speaker 1 (15:19):
I think there are a lot of folks Matt who
let their eyes get as big as saucers win accruing rewards,
but they fail to use them in a timely manner,
and then when they do use them, they're not great
at optimizing that that spend of points, and it just
devalues your purchase. And so maybe for a lot of people,
not for everyone, that's for sure. Some people optimize this
quite well, But for a lot of people who go
(15:40):
into the travel points game, I think maybe they're not
doing it as well as they thought they were going
to it, so they're not quite getting the benefit that
they thought they were exactly.
Speaker 5 (15:48):
They thought they had that big juicy carrot within their grass,
but then it gets yanked up. And I also like
the sort of picture that you painted about the points
getting devalued and how the flights don't get you quite
as far. And I like the idea carried out further. Yeah,
I like the idea of a narrowland saying or I
kind of don't like it obviously, but it's kind of
funny to think, Hey, you're wanting to go to California. Sorry,
your points didn't quite.
Speaker 4 (16:09):
Get you there. Looks like you're in South Dakota. You
gotta get out in Nevada. No, no shade thrown at
in battery anything like that.
Speaker 1 (16:15):
All right, Hey, we got more money saving information to
get to.
Speaker 2 (16:19):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (16:26):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Matt, let's talk about credit cards a scene
that article discussed the secondary benefits of credit cards, and
that's something that we sing the praises of that. It's
it's not just the two percent cash back or the
travel rewards, although those are great, there are other benefits
of credit cards as well, you know, and some of
(16:48):
them don't get touted all that much, really, but they
can be incredibly rewarding. And so this author has seen
that they got a new battery for their iPhone without
having and paying for Apple Care, and that was thanks
to the Chase Freedom Flex card saved them ninety bucks
because that's what it would have cost otherwise.
Speaker 4 (17:06):
I think this is I just.
Speaker 1 (17:07):
Wanted to use this as a reminder to tell people
not to sleep on the secondary benefits of the credit
cards have to offer, Like you can snag cell phone
insurance or no foreign transaction fees, or trip cancelation coverage
or baggage delay insurance, or purchase production or a longer
extended warranty.
Speaker 4 (17:23):
There are just so.
Speaker 1 (17:25):
Many things that are under the surface oftentimes that most
people don't realize. They're like, oh, I get the two
percent cash back, or I'm getting the five percent back
when I pay for gas and those things.
Speaker 4 (17:34):
That's awesome, Like I'm all for those rewards.
Speaker 1 (17:37):
But then there are these other ones that most people,
I think they just forget or they neglect to think about,
and they can be pretty rewarding too. I'll forget about
the CDW man the collision damage waiver, get that primary
benefit that's stuff when you travel, and that's so it's
a massive if you travel at least a week a year,
you want that benefit that you would use regularly as
well as opposed to just when things go poorly. Yeah, yeah,
(17:59):
but I guess if you get in direct things have
gone poorly, but it's paying for the insurance to make
sure that you are covered in case something like that
were to happen. And one of the other benefits too,
is that those credit card credit card rewards they don't
get taxed, which of course.
Speaker 4 (18:12):
We're thankful for.
Speaker 5 (18:12):
It's one of the only ways that we can avoid
the tax man. The Thrifty Traveler they had an article
about this particular subject, and it's worth mentioning that some
kinds of credit card rewards actually will result in taxation.
You don't have to worry about your sign up bonus
that doesn't get taxed. It's treated as a like a
rebate essentially for your spending your two percent cash back,
(18:35):
your travel points. They're not going to get taxed either.
But and this is news to me, man referral bonuses,
they do get taxed.
Speaker 4 (18:42):
I didn't know this.
Speaker 5 (18:43):
And so if you send your friend a link to
sign up for one of your favorite cards. If you
are one of those credit card optimizers out there and
you're trying to get everyone on board just credit card
pusher slash, you're.
Speaker 4 (18:53):
Also trying to like earner your own rewards.
Speaker 5 (18:55):
You're gonna get it to ninety nine for the bonus
that you receive if they sign up, And even if
the bonus came in the form of miles, you are
supposed to pay tax.
Speaker 4 (19:05):
So you know, I'm not.
Speaker 5 (19:07):
Totally sure what the follow through rate is when it
comes to some of the different banks, but don't be
surprised if you receive a ten ninety nine in the
mail for that.
Speaker 1 (19:14):
Yeah, heads up, All right, Matt, let's talk about getting
paid from your employer and I gets paid. Yeah, sometimes
pay comes in the form of non monetary compensation, right.
We always talk about looking at your total compensation package
when you're looking for a job, or you're trying to
assess the benefits of a job offer you have, or
even just like kind of thinking, well, how competitive is
(19:36):
the pay that I'm earning currently where I'm at versus
what maybe a friend or what other people in the
industry are earning somewhere else somewhere down the Street. Well,
the Wall Street Journal just wrote about why one perk
that looks great it really isn't, and that's unlimited vacation time.
This is something like that. I feel like I've seen
popping up more and more as companies offering Hey, no, no, no,
(19:59):
it's not just it's two weeks of PTO. You can
take as much time off as you want. And that's
kind of the pitch. That's the cell from the company
that you can travel as frequently as you desire. But
everyone I've talked to, I don't know about you, Matt,
who has this benefit, they don't feel okay using it.
So this sounds like a great perk, but in reality
(20:21):
maybe doesn't play out so well. That kind of the
unspoken rules dictate that you're not supposed to abuse your
newfound freedom, like the ability to travel as much as
you want, which I think actually causes people from what
I can from what I can tell, to take even
less time off than they're allowed. It's a sad reality.
But I would say make sure to look this gift
(20:42):
horse in the mouth and ask about how this benefit
functions in reality. If you're applying for a job and
the employer says, hey, this is one of the perks
we offer. I would want to know more about how
that actually works and whether people actually take a significant
amount of time off, because we're always talking about how
Americans don't taken off their vacation time. If they have
like a specific amount allotted, they never take the full amount.
(21:02):
We should all be taking our vacation man, Like, it's
one of those perks that we've earned that we deserve
and all work and no play makes us pretty dull too.
Speaker 4 (21:10):
Yeah, I totally agree.
Speaker 5 (21:12):
It feels like one of those things where it's a
benefit that like I don't even know if this exists,
but like it makes me think if you go to
like an arcade and it's just like if you get
this wristband, it's unlimited coke refills, or like if you
buy the special cup at a gas station, it's like
anytime you come in with your cup, you just drink
whatever you want.
Speaker 4 (21:28):
But the reality is is how.
Speaker 5 (21:30):
Much are you actually how much soda are you actually
going to drink? And do you want to drink an
unlimited amount of coke? Like every time.
Speaker 4 (21:36):
I'm gonna drink till kidney fails.
Speaker 5 (21:38):
It feels like something where it's just like on paper,
it seems appealing until you actually start thinking through it,
and it's just like, well, what's the actual reality of
me taking full advantage of this? And when it comes
to time off, it's like, Okay, are we talking about
how great it would be to take unlimited time off
or maybe we just need to actually take the time
off based on a normal amount of vacation days. And
certainly it probably should be higher in the US because
(21:59):
we're such a work performance, productivity driven culture. But I
think that's something else to keep in mind as well.
Another typical perk that we not we joel, but that
most folks often get from their employer, our employers is
health insurance. But as we're seeing a rise in small
business formation entrepreneurs, they got to figure out how to
get coverage without bankrupting themselves, which is like the whole
(22:21):
point of starting a business is maybe for this to succeed.
Vox they detailed the rise of health sharing companies, not
health care companies, but they are growing quickly. These health
sharing companies, almost two million Americans find themselves on one
of these plans that look like health insurance, but they
have meaningful differences and it's basically, the number of folks
(22:44):
that are on these plants have doubled in the past
several in the past few years. So look into them
because they like there's significant savings to be had, but
do be careful, know the fine print, know the exclusions.
Speaker 4 (22:57):
Joel and I, we are.
Speaker 5 (22:58):
Both on metashare specifically they've worked well for us, but
we also haven't tested the limits, although some friends of
ours have. I think about some some good friends, and
I think it was literally the year after they joined on,
she ruptured or tore her achilles, and they were also like, well,
we were thinking about getting tunsils removed and adenoids as
well from like one of the whatever that is. I
(23:19):
don't know, I think it's in your mouth somewhere, your throat.
But they did all of that within a year because
they were gonna they knew that they're going to hit
their what's called the annual household portion, and it worked
incredibly well for them, which was really encouraging because I'm like,
all right, I'm pretty sure this is going to work out.
And I think we'd even kind of steered them in
like that direction because they were paying an inordinate amount
(23:40):
of it was a little nervous. I'm just like, oh man,
how this works out. It worked out great for them.
I love the fact that more people are getting on this.
I was talking to a nurse friend a few days ago.
She so, she's a nurse, she works within the health
care industry, and I don't know how. We got to
talking about healthcare and I was I kind of sheepishly
was like, yeah, I don't know. I rarely rarely go
to the doctor. And got to talking about health sharing.
(24:02):
And you would expect with her that she'd be on
some sort of Cadillac Premium Primo Healthcare plus health Care
Prime health account job, but all the healthcare you can eat,
she is on a health sharing playing Wow, because she's like, yeah,
so s thinking expensive, Like we don't even pay for
the kind of coverage that we often take at the hospital.
Blew my mind. But it's just evidence of the fact
(24:25):
that that's an area an industry that needs.
Speaker 4 (24:28):
A little bit of a reform, and I'm glad that.
Speaker 1 (24:30):
There's competition and not everyone can choose to go this
routelet right. We were like literally talking to a friend
last night who has a young daughter who has had
cancer for many, many years. They have a lot of
employments they have to go to. It gets really expensive,
and so their employment decisions are largely based around healthcare,
which makes total sense for them. But for other families,
(24:51):
like we have been pretty fortunate on the healthcare front,
and so we're able to go opt for something like
this in order to reduce her out of on a
monthly basis, and figures crossed that it saves us money
over time because we're just not shelling out as much
for healthcare overall. But again, this is a personal decision,
and more Americans are choosing some of these health sharing
(25:14):
options because they are saving the money, but the trade
offs are a crucial thing to take into account.
Speaker 2 (25:21):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (25:27):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group.
Speaker 5 (25:36):
Let's now hear from a listener who took a lump
sum and invested it, but he's trying to figure out
what to do next.
Speaker 7 (25:43):
Hello, this is David, California, longtime listener. Thank you Joel
and Matt for all the episodes. A few years back,
my wife and I were fortunate to receive a lump
sum of money that we put into a joint brokerage account,
investing in an S and P fift. We were planning
on letting it grow a few years and then taking
(26:06):
some out each year to help pay our mortgage. I'm
wondering now if it would be better to stick with
that plan and pay fifteen percent capital gains on a
growth each year when we take money out. The alternative
is to contribute less money into our roth IRA accounts
each year and let the money in the joint brokerage
(26:28):
account grow. Two things seem to make this a tough choice.
Number One, the money in the joint brokerage account is
already post tax dollars. Number Two, if we retire early,
as we are planning, before we claim Social Security, we
should be able to deduct most, possibly all, of the
(26:50):
money out of our joint brokerage account while in the
zero percent bracket for capital gains. With California taxing to
grow roughly two or three per at the state level,
I would like to prioritize the WROTH until I am
comfortable that we will have enough money combined with Social
Security in a couple of other sources to fund our
(27:13):
lives age seventy and on. But once we reach that target,
I am thinking of prioritizing maintaining the joint brokerage account
over continuing to fund the wrath. Is this a crazy idea?
Speaker 4 (27:29):
Thank you? Oh, Matt.
Speaker 1 (27:30):
I like this question. And first things first, I think
we have to just say that David made a really
good move investing the lump sum that is. That's another
question we get sometimes is like do I dollar cost
average or do I.
Speaker 5 (27:42):
Geeze into the shallow way? Yeah, like one step at
a time, kind of got to get past that one part.
Speaker 4 (27:47):
Where it's extra. Or do I just like dive dive
in head first, yeah?
Speaker 1 (27:51):
Or do I instead of investing it, do I pay
off the debt immediately?
Speaker 4 (27:56):
Where?
Speaker 1 (27:56):
And it seems like David made the right decision because
think about how much better he's done by investing that
money versus paying off the debt. And it's not like
we want debt to linger forever that we're big fans
of debt or anything like that. And we know that
some folks are incredibly debt averse, and I think everyone
kind of has to decide based on their own individual constitution,
(28:17):
what they should do in a situation like that. But
the truth is a three percent mortgage, in our estimation,
should be a very low priority for all listeners who want.
Speaker 4 (28:25):
To build wealth.
Speaker 1 (28:25):
There's just there just isn't a great argument for rushing
to pay that off ahead of some of those other
financial goals.
Speaker 5 (28:31):
Yeah, and that's true even if you end up having
to pay capital gains tax. But it sounds like you
are planning on reducing your income to such an extent
that you can tap your browadge account and not owe
in the federal.
Speaker 1 (28:43):
Tax at all, which most people don't even realize that's
a possibility.
Speaker 2 (28:46):
No.
Speaker 5 (28:46):
Yeah, So we typically refer to the long term capital
gains tax rate as being fifteen percent, and that is
true for the vast majority of folks.
Speaker 4 (28:53):
But on one end, I.
Speaker 5 (28:54):
Will say, folks who sell a ton of appreciated securities
are is actually going to pay more than fifteen percent.
They're gonna pay twenty percent if you have an adjusted
gross income of over five hundred and eighty three thousand
dollars if you are married finally jointly. And then others
who can keep their total taxable income below ninety four
thousand again married finally jointly, Well, you can pay a
(29:15):
long term capital gain tax rate of zero percent.
Speaker 4 (29:18):
Yeah.
Speaker 1 (29:19):
The fifteen percent number gets thrown around so frequently and
less typical most people don't realize that there are two
other potential rates for capital gains.
Speaker 5 (29:28):
Yeah, and you know, going from fifteen to twenty percent
not the end of the world, not ideal, but going
from twenty percent to zero that's pretty huge. And for
smart folks in the fire camp financial independence retire early.
This is a way to maintain access to funds where
you have added flexibility without paying extra tax for that perk.
Speaker 4 (29:48):
Yeah.
Speaker 1 (29:48):
Typically when we're talking about avoiding tax, we're talking about
the accounts that you're that you're choosing, and the taxable
brokerage account it offers that additional flexibility, but hey, you're
gonna pay the tax man. That extra pound of flesh
is garnered, Matt from the taxable broker's account. Unless unless
you are incredibly super duper strategic, like David is trying
(30:09):
to be here, and he mentioned.
Speaker 4 (30:11):
You know, I don't even know if you have to
be that strategic, you just have.
Speaker 5 (30:13):
It's this is a vote in favor of frugality because
if you can get your.
Speaker 4 (30:17):
Low income or low yeah, or lower income both because.
Speaker 5 (30:20):
You're going to need both, which can be natural as
you enter into your more you know, more chill retirement years.
Speaker 2 (30:24):
Yeah.
Speaker 1 (30:25):
And what makes it difficult to pull this off typically
is if you are earning a meaningful salary and then
you also sell some of your appreciated security, some of
your the stocks or ETFs that you've purchased, you're going
to push yourself above that threshold and you're going to
pay the fifteen percent. So you have to be careful
about when you make that sale and what your income
(30:46):
is likely going to be in that given year to
kind of get yourself with below and into that zero
percent capital gains tax rate threshold. And so normally what
we would tell you, David, as we prioritize the roth Ira.
We we love roth iras, we'd hate to see you
abandon that account given how good it is, how flexible
it can be for early retirees too, because of the
fact that you can take those contributions back out at
(31:08):
any point in time in the future. It's just not
as flexible as a brokerage account. And if you really
can jump through those taxable income hoops. It's actually gonna
be treated pretty similarly from a tax perspective, which is
kind of crazy. So, in a very rare admission, this
is not widely dispensed advice. I think I think I'm
(31:29):
willing to concede on this one, Matt, that a brokerage
account might slightly edge out, Yeah, the wroth for them,
So I think reducing roth contributions in favor of keeping
that money in the taxable brokerage account makes sense to me.
Speaker 4 (31:42):
Yeah, that's true. Man.
Speaker 1 (31:43):
You've been listening to How to Money with Joel Larsgard.
You can always hear us live on KFI AM six
forty twelve pm to two pm on Sunday and anytime
on demand on the iHeartRadio app
Kf I AM six forty. You're listening to how to
Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is How Too
Money with Joel Larsguard and Matt.
Speaker 3 (00:18):
Almes KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 4 (00:38):
This is how to Money.
Speaker 1 (00:39):
I am one of your hosts, Joel Larsgard.
Speaker 4 (00:41):
And I am Matt all mixed. By the way.
Speaker 5 (00:44):
You can always find more money saving information over at
howtomoney dot com.
Speaker 1 (00:48):
Let's kick it off. Let's talk about travel. If you
want to fly for less money, it's not all about
finding the right discount airline or snagging a sweet sale
price like wait, I think uh. Southwest had a thirty
percent and off sale on certain flights this week. I
saw that, which is awesome. Yeah, you might be able
to fly for less right if you find one of
those sales. But it would also be smart to fly
(01:11):
or to attempt to fly from the airports that offer
the least expensive fares most regularly. So to help us
out here, the Bureau of Transportation Statistics, they listed the
lowest cost airports to embark from, and Matt, I think
we should name them right, because if you know, let's
do the airports that traditionally offer the lowest prices. Hey,
you might want to like start looking to see whether
(01:32):
you can find a flight from there as opposed to
maybe the airport that's closest to your house. So Fort Lauderdale, Orlando.
So we got two Florida airports first off, but then Vegas,
Chicago and LaGuardia. Those are going to nab you the
lowest domestic fares on average. Dolls in Washington, d C.
That's the most expensive airport to fly from. And the
(01:52):
average price difference Matt between flights from Fort Lauderdale and
from the Washington Dolles Airport it's more than two hundred
dollars a take.
Speaker 4 (02:00):
That's pretty steep.
Speaker 1 (02:00):
So if you live in Washington, DC, it's not like
you're driving down to Fort Lauderdale right to save money
on your ticket. But I think this just goes to
show that if you only shop at the airport that's
nearest to you, you might be leaving out other potential
options to reduce the cost of your travel. So shop around,
set fair alerts, but also look to cheaper airports that
(02:22):
you might be able to reasonably fly from. Yeah, I
noticed you said LaGuardia. Does everyone say La Guardia or
LaGuardia Guardia?
Speaker 6 (02:30):
Is it?
Speaker 4 (02:30):
Why is it Guardia because it's spelled just the last name?
Speaker 2 (02:33):
Oh?
Speaker 4 (02:33):
Is that?
Speaker 7 (02:34):
Yah?
Speaker 4 (02:34):
I don't know who that based after?
Speaker 5 (02:35):
A former New York City mayor Charles Well because like
the like the way you spell guard like you don't
pronounce it like guard to the base you say guard Okay,
small tangent over. So regarding the different regarding the different airports,
what's so fascinating too, is the fact that one of
the biggest differences, or one of the biggest reasons for
(02:58):
the price discrepancy, is because of competition. Yeah, and so
specifically Dalls Like I was really fascinating. I'm like, why
is it so much more expensive? Is it because that's
where all the politicians fly into and they are priced
and sensitive? Perhaps, But it also has a lot to
do with the different airlines that service that airport, and
there's a lot of competition there. But specifically United Airlines
has over seventy percent market share. They basically have a stranglehold,
(03:21):
which means they can set the prices high, and you
don't have many other options to get around that, as
opposed to do you think Atlanta wasn't on that list?
Speaker 4 (03:28):
Yeah, there's got tons of different options.
Speaker 1 (03:30):
So no, no, no, no, it wasn't on the list because
Delta probably runs sixty plus percent of the flights out.
Speaker 5 (03:35):
Of which I thought you make compared to the most
expensive list, we do have a lot of options. But
I was going to say, guess the market share of
United at Fort Lauderdale. So at Dallas it's seventy percent
at Fort Lauderdale, and you guesses, I'm I guess fifteen
eight okay, eight percent, so and that's much lower compared
to I think the top three were Spirit, Jet Blue,
(03:57):
and Southwest, which, like the low cost affordable airlines, provides
that competition and that's a huge driving factor behind why
there's such a price discrepancy as well.
Speaker 1 (04:06):
And so when there is a major airline based out
of that city who runs, they kind of run the show.
They're going to have a lot more pricing power and
they can kind of keep some people out. I mean,
Southwest came to Atlanta a few years back, but they're
even talking about reducing flights, so I'm guessing the situation,
the pricing situation in coming to and from the Atlanta Airport.
Speaker 4 (04:26):
It's only going to get worse. I get a little
siffer in the coming years.
Speaker 1 (04:29):
Okay, let's keep talking about travel, matt As more airline
frequent flyer programs have put the emphasis on how much
you spend versus how often do you travel. It's all
about spending more money on tickets instead of just flying regularly.
Folks are opting to play the field in attempts to
save money. They're saying, ah, I don't think I'm going
to book with the airline. And normally I go with
a particular airline because I'm used to flying them. But
(04:52):
people are saying I'm gonna be a little less loyal
moving forward. And we've always said that being loyal to
one brand or one airline it's a bad idea because
it's gonna cost you money. Right, But even for normal
people who only travel a few times a year, some
of those loyalty perks, like when combined with let's say
a proprietary credit card, they could result in some pretty
(05:12):
sweet benefits for travelers, potentially enough to justify a higher
ticket price. But I think those days are coming to
an end, and we are all for loyalty in some
areas of life, right, like friendship and love. Like Matt,
you and I were loyal to each other. We're gonna
be best friends, yeah, boy forever.
Speaker 4 (05:28):
But move over, Zach Braf and Donald Faso. We're better
than that. They were real friends. We're real, real friends.
Speaker 1 (05:35):
They're real friends too, right evidently. Yeah, we haven't gotten
that T mobile commercial yet though.
Speaker 5 (05:40):
You know, kin I I've debated watching Scrubs with the
kids because it was one of our favorite shows back
in college, and every time those T mobile commercials come on,
they just totally crack up. They think that they are
so funny, and they are, and Kate and I looked
at each other, We're just like, oh my gosh, they
would so enjoy Scrubs. I'm not totally sure how appropriate
that would be for a six year old, seven year old.
Speaker 1 (06:00):
That's a good question, Okay, So loyalty it's great in
some areas, not great in others, specifically when we're talking
about airlines for most people, right, So, yeah, if you're
in the position, if you find that that your perks
have diminished from the airline that you typically fly with,
but the price of your ticket hasn't and the airfares
are going up, Folks, look elsewhere. Google flights is like
(06:22):
the proper place to start searching. Oh yeah, be more
interested in paying the least amount of money for the
fair as opposed to going with the airline you're used
to flying.
Speaker 4 (06:31):
Yeah, shopping around is going to pay off.
Speaker 2 (06:33):
Man, you're listening to how To Money with Joel Larsgard
on demand from KFI AM six forty.
Speaker 5 (06:41):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter.
Speaker 1 (06:46):
Now, let's take a question now about credit cards and
how to know which one might be most appropriate for you.
Speaker 6 (06:53):
Hey guys, it's Austin from Alabama. I have a question
that I've been trying to figure out on my own,
but have been unable to come to a clearance to
stact answer on. I have a two percent cash back
credit card with no annual fee. We use it and
like it with no problems. Many travel cards offer two
x miles for every dollar spent. What is the difference
between these two kinds of rewards the two percent cash
(07:14):
back and two x miles or is there one. I
know some of the travel cards with more rewards like
airport lounge access and free check bags.
Speaker 4 (07:22):
Will come with an annual fee.
Speaker 6 (07:23):
My family doesn't travel a ton, which is why I
haven't pursued a travel card up to this point. But
if we were to travel more as our kids get older,
I may want to venture pun intended and to travel cards.
I should add that we pay our balances off in
full and on time every month and have never carried
a balance on credit cards.
Speaker 1 (07:40):
Thanks, well, now we got a venture pun thrown in there.
Nicely done, Austin, Great dad, Joe's of the ilk that
I would tell.
Speaker 5 (07:48):
So I want to address something that Austin mentioned, the
two percent cash back cards. I think everyone should basically
have one of those in their wallet, in their credit
card arsenal.
Speaker 4 (07:57):
Even if you implement a travel credit card as well. Well.
Speaker 5 (08:00):
I think there are times when you're just not going
to get as much of return using those cards, just
in your day to day spending, where by default you
should always be getting two percent percent. No, no, no,
that was so nineteen ninety eight.
Speaker 4 (08:12):
Or I think of as like the floor, it's the basement. Yeah,
it's the minimum, don't ever.
Speaker 1 (08:16):
Get less than that on rewards for when when you
buy stuff with a credit card.
Speaker 4 (08:20):
Yeah, there's no need to.
Speaker 5 (08:21):
And if you are getting into travel, absolutely consider some
of these travel cards that like we're going to get
into but at a minimum, by default, have a two
percent card and specifically the So I've never actually had
this card, but don't you have the Fidelity I have
the Fidelity two percent card and it deposited, deposits it
into your Fidelity account. That's right, I've had that account
that credit card for that's that's I think that's the
(08:43):
first credit card ever got.
Speaker 4 (08:44):
So I've had that card for a long time. Look
at you. Yeah, very loyalty.
Speaker 5 (08:47):
That seems like a very like goody two shoes sort
of answered. It's like my first credit card was the
Fidelity Investment card. But then the other one is the
City double Cash where you earn two percent no matter what.
Speaker 4 (08:58):
Right, not solid.
Speaker 1 (08:59):
And I think it's also to mention here Mathot that
not everyone or listeners don't need to have dozens of cards, right,
They don't need just a slew of credit cards in
their arsenal, especially if they're not into optimizing their credit
card game all the way, which a lot of people aren't.
Some people don't want to play the game to that degree.
They're not like our buddy Chris Hutchins, who goes so
(09:22):
hard with credit cards, and I think it's awesome and
I love hearing how he does it, and I love
kind of divulging that information to our listeners who are
interested in going crazy with credit cards, because it's amazing
how much you can accomplish. I was literally texting with
him the other day, and we should talk about this
on the show at some point. But he bought tons
of gift cards at a discount to resell, and the
(09:43):
whole goal for him was to do just a mass
ridiculous amounts of points. So he's playing the game, and
he's playing harder than almost anybody I know, frugal or cheap.
Speaker 4 (09:52):
Joal to go to those links.
Speaker 1 (09:54):
It depends what you're into, man, But like especially when
if you.
Speaker 5 (09:57):
Love it, if you find satisfaction and life fulfillment, I
guess from doing that, then more power to unit.
Speaker 4 (10:03):
For him.
Speaker 1 (10:03):
It's going to mean a lot of free travel, but
it's also going to bean content for his podcast, so
he's doing it for the pod. That's right, that's right.
So how valuable are travel rewards. Let's get to the
heart of Austin's question and does two X points, let's say,
which you're gonna hear on the commercials some of those
travel cards, does that equal two percent cash back? It's
kind of a scorely thing, But the quick answer is
(10:27):
not necessarily. Points are typically worth one cent, so two
X points and two percent cash back are roughly equivalent
in value. But how much more or less valuable those
travel miles are than the cash back rewards that you're
going to get revolves around how.
Speaker 4 (10:41):
Well you know and play the system.
Speaker 1 (10:44):
For instance, accumulating points with a two X travel card
and then transferring them to a hotel partner so you
can pay less for your stay. That increases the value
of those points, and it could allow those points to
be worth far more than a two percent cash back
card can get you essentially more than two cents on
the dollar. But if you use those points unwisely or
(11:04):
you attempt to turn those travel points into cash, you're
losing out and you would have been better off using
a two percent card. So part of it is just
kind of knowing the system and using it in the
way to its fullest.
Speaker 4 (11:15):
Extent totally.
Speaker 5 (11:16):
Yeah, miles can be more rewarding, especially for folks who
like to travel, who have the ability to be super
flexible as well in how it is that they travel
when they book, and the signum bonus is because of that,
I guess, because like the credit card companies are offering,
they're dangling like a fat or juicier carrot, but it's
harder to catch, right, But if you do catch it,
the U in particular, the sigment bonuses for those travel
(11:36):
cards are vastly superior.
Speaker 4 (11:39):
Yeah.
Speaker 1 (11:39):
The cash back cards, the sign up bonus typically non existent.
Speaker 5 (11:43):
They're pretty meager or paltry, right, yeah, yeah, and so
they offer an outsized advantage for folks out there who
are optimizing. By the way, Chris Hession's episode we talked
to episode eight ninety nine where we actually dove into
some of that you got to know yourself, But some
of the best cash back cars out there come with
bigger perks in certain spending categories, and that actually it
(12:03):
tends to be a little bit easier to optimize. So,
for instance, you can get five percent cash back eating
out if you use the Chase Custom cash card like
I do. So it's literally a credit card I keep
on my person and often in which a lot of times,
a lot of cards I don't keep on my person.
But that's one card because and I go out for
date nights, they bring you the check, they take it off.
You know, it's not like I'm standing there at the
(12:23):
register like you Europe Matt, Yeah, exactly. They don't bring
you the terminal, you know, to the whatever, to the table.
Why don't we do that? But that's a car to
keep it on my person because when it comes to
paying for our date nights, I use that card one
hundred percent of the time. Five percent cash back or
even like a six percent cash back at grocery stores
with the Amex Blue Cash Preferred card. That's another one
(12:45):
that I love and we take full advantage of. Uh,
you don't that's one that you you downgrade me.
Speaker 4 (12:51):
A little bit. Yeah, just shop at Costco too. You
don't like that that annual fee. Well, speaking of Costco,
what is it?
Speaker 5 (12:56):
Five percent cash back on gas at Costco and then
for four percent at other gas stations? And so I
mentioned this because there are ways to get a higher
percentage of cash back and you're thinking, WHOA, that's like
that's got to be at least four x five x
six x miles.
Speaker 4 (13:11):
Well, yeah, but there are caps, there are limits, and
it's only within you know, narrow spending windows.
Speaker 1 (13:17):
So and the thing is too there's typically no annual
fees except for on that MX Blue cash preferred, no
hoops to jump through premium six percent, Yeah, pay a
little bit, I think you just there's less due diligence required, right,
so you could cash back to optimize just a few categories,
used to two percent card for everything else, and you
do quite well for yourself.
Speaker 4 (13:34):
It's it's sort of like I set it and forget
it sort of mentality.
Speaker 5 (13:36):
And if that's what you're looking for, Austin, if you're
looking to kind of figure out the system and then
always know that, okay for going out to eat, I
use this card. For groceries, I use this card, and
then to the ability to never have to think about
it again. That's what's so great about these cash back
cards as opposed to the points game. If it's like
having to keep up with the news, it's always ever
evolving and changing, hopefully not as quickly as the news
(13:59):
has been in recent cycles, but it is something that
you have to keep up with a little bit more
because of the fact that the credit card companies are
looking to keep you on your toes and they're trying
to like out maneuver you, essentially because if they're changing
the rules a little bit, it's tougher to know.
Speaker 1 (14:13):
What it is that you should be doing with us. Yeah,
I think that's one of the pros of cash back.
Speaker 7 (14:17):
Right.
Speaker 1 (14:17):
It's easy to redeem travel awards less so. Right, so
you might have to go through the credit card company's
booking portal, or if you want the best deal, you
might have to transfer them to one of the partners.
And it can obviously be done, but there are just
steps involved, and some people just don't want to figure
out the proprietary system of Chase or Capital One or
something like that. Right, And the other potential problem with
(14:39):
travel rewards is that they can diminish in value over
time if you don't use them. This is inflation, particularly,
it's points inflation, and so hey, you get these points
and you're like, all, right, eighty thousand points. Well, if
you don't use them for a year or two, those
eighty thousand points instead of buying you like two plane tickets,
might get you a plane ticket and a half or
(15:00):
something like that, and.
Speaker 4 (15:01):
So you just have to be wary of that as well.
Speaker 1 (15:04):
On the cash back front, you can typically sign into
the back end of your account and choose automatic redemptions
right so that you're quickly getting the benefit you signed
up for. That money isn't necessarily sitting there for a
long period of time getting eaten away by inflation.
Speaker 4 (15:18):
And so I don't know.
Speaker 1 (15:19):
I think there are a lot of folks Matt who
let their eyes get as big as saucers win accruing rewards,
but they fail to use them in a timely manner,
and then when they do use them, they're not great
at optimizing that that spend of points, and it just
devalues your purchase. And so maybe for a lot of people,
not for everyone, that's for sure. Some people optimize this
quite well, But for a lot of people who go
(15:40):
into the travel points game, I think maybe they're not
doing it as well as they thought they were going
to it, so they're not quite getting the benefit that
they thought they were exactly.
Speaker 5 (15:48):
They thought they had that big juicy carrot within their grass,
but then it gets yanked up. And I also like
the sort of picture that you painted about the points
getting devalued and how the flights don't get you quite
as far. And I like the idea carried out further. Yeah,
I like the idea of a narrowland saying or I
kind of don't like it obviously, but it's kind of
funny to think, Hey, you're wanting to go to California. Sorry,
your points didn't quite.
Speaker 4 (16:09):
Get you there. Looks like you're in South Dakota. You
gotta get out in Nevada. No, no shade thrown at
in battery anything like that.
Speaker 1 (16:15):
All right, Hey, we got more money saving information to
get to.
Speaker 2 (16:19):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (16:26):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Matt, let's talk about credit cards a scene
that article discussed the secondary benefits of credit cards, and
that's something that we sing the praises of that. It's
it's not just the two percent cash back or the
travel rewards, although those are great, there are other benefits
of credit cards as well, you know, and some of
(16:48):
them don't get touted all that much, really, but they
can be incredibly rewarding. And so this author has seen
that they got a new battery for their iPhone without
having and paying for Apple Care, and that was thanks
to the Chase Freedom Flex card saved them ninety bucks
because that's what it would have cost otherwise.
Speaker 4 (17:06):
I think this is I just.
Speaker 1 (17:07):
Wanted to use this as a reminder to tell people
not to sleep on the secondary benefits of the credit
cards have to offer, Like you can snag cell phone
insurance or no foreign transaction fees, or trip cancelation coverage
or baggage delay insurance, or purchase production or a longer
extended warranty.
Speaker 4 (17:23):
There are just so.
Speaker 1 (17:25):
Many things that are under the surface oftentimes that most
people don't realize. They're like, oh, I get the two
percent cash back, or I'm getting the five percent back
when I pay for gas and those things.
Speaker 4 (17:34):
That's awesome, Like I'm all for those rewards.
Speaker 1 (17:37):
But then there are these other ones that most people,
I think they just forget or they neglect to think about,
and they can be pretty rewarding too. I'll forget about
the CDW man the collision damage waiver, get that primary
benefit that's stuff when you travel, and that's so it's
a massive if you travel at least a week a year,
you want that benefit that you would use regularly as
well as opposed to just when things go poorly. Yeah, yeah,
(17:59):
but I guess if you get in direct things have
gone poorly, but it's paying for the insurance to make
sure that you are covered in case something like that
were to happen. And one of the other benefits too,
is that those credit card credit card rewards they don't
get taxed, which of course.
Speaker 4 (18:12):
We're thankful for.
Speaker 5 (18:12):
It's one of the only ways that we can avoid
the tax man. The Thrifty Traveler they had an article
about this particular subject, and it's worth mentioning that some
kinds of credit card rewards actually will result in taxation.
You don't have to worry about your sign up bonus
that doesn't get taxed. It's treated as a like a
rebate essentially for your spending your two percent cash back,
(18:35):
your travel points. They're not going to get taxed either.
But and this is news to me, man referral bonuses,
they do get taxed.
Speaker 4 (18:42):
I didn't know this.
Speaker 5 (18:43):
And so if you send your friend a link to
sign up for one of your favorite cards. If you
are one of those credit card optimizers out there and
you're trying to get everyone on board just credit card
pusher slash, you're.
Speaker 4 (18:53):
Also trying to like earner your own rewards.
Speaker 5 (18:55):
You're gonna get it to ninety nine for the bonus
that you receive if they sign up, And even if
the bonus came in the form of miles, you are
supposed to pay tax.
Speaker 4 (19:05):
So you know, I'm not.
Speaker 5 (19:07):
Totally sure what the follow through rate is when it
comes to some of the different banks, but don't be
surprised if you receive a ten ninety nine in the
mail for that.
Speaker 1 (19:14):
Yeah, heads up, All right, Matt, let's talk about getting
paid from your employer and I gets paid. Yeah, sometimes
pay comes in the form of non monetary compensation, right.
We always talk about looking at your total compensation package
when you're looking for a job, or you're trying to
assess the benefits of a job offer you have, or
even just like kind of thinking, well, how competitive is
(19:36):
the pay that I'm earning currently where I'm at versus
what maybe a friend or what other people in the
industry are earning somewhere else somewhere down the Street. Well,
the Wall Street Journal just wrote about why one perk
that looks great it really isn't, and that's unlimited vacation time.
This is something like that. I feel like I've seen
popping up more and more as companies offering Hey, no, no, no,
(19:59):
it's not just it's two weeks of PTO. You can
take as much time off as you want. And that's
kind of the pitch. That's the cell from the company
that you can travel as frequently as you desire. But
everyone I've talked to, I don't know about you, Matt,
who has this benefit, they don't feel okay using it.
So this sounds like a great perk, but in reality
(20:21):
maybe doesn't play out so well. That kind of the
unspoken rules dictate that you're not supposed to abuse your
newfound freedom, like the ability to travel as much as
you want, which I think actually causes people from what
I can from what I can tell, to take even
less time off than they're allowed. It's a sad reality.
But I would say make sure to look this gift
(20:42):
horse in the mouth and ask about how this benefit
functions in reality. If you're applying for a job and
the employer says, hey, this is one of the perks
we offer. I would want to know more about how
that actually works and whether people actually take a significant
amount of time off, because we're always talking about how
Americans don't taken off their vacation time. If they have
like a specific amount allotted, they never take the full amount.
(21:02):
We should all be taking our vacation man, Like, it's
one of those perks that we've earned that we deserve
and all work and no play makes us pretty dull too.
Speaker 4 (21:10):
Yeah, I totally agree.
Speaker 5 (21:12):
It feels like one of those things where it's a
benefit that like I don't even know if this exists,
but like it makes me think if you go to
like an arcade and it's just like if you get
this wristband, it's unlimited coke refills, or like if you
buy the special cup at a gas station, it's like
anytime you come in with your cup, you just drink
whatever you want.
Speaker 4 (21:28):
But the reality is is how.
Speaker 5 (21:30):
Much are you actually how much soda are you actually
going to drink? And do you want to drink an
unlimited amount of coke? Like every time.
Speaker 4 (21:36):
I'm gonna drink till kidney fails.
Speaker 5 (21:38):
It feels like something where it's just like on paper,
it seems appealing until you actually start thinking through it,
and it's just like, well, what's the actual reality of
me taking full advantage of this? And when it comes
to time off, it's like, Okay, are we talking about
how great it would be to take unlimited time off
or maybe we just need to actually take the time
off based on a normal amount of vacation days. And
certainly it probably should be higher in the US because
(21:59):
we're such a work performance, productivity driven culture. But I
think that's something else to keep in mind as well.
Another typical perk that we not we joel, but that
most folks often get from their employer, our employers is
health insurance. But as we're seeing a rise in small
business formation entrepreneurs, they got to figure out how to
get coverage without bankrupting themselves, which is like the whole
(22:21):
point of starting a business is maybe for this to succeed.
Vox they detailed the rise of health sharing companies, not
health care companies, but they are growing quickly. These health
sharing companies, almost two million Americans find themselves on one
of these plans that look like health insurance, but they
have meaningful differences and it's basically, the number of folks
(22:44):
that are on these plants have doubled in the past
several in the past few years. So look into them
because they like there's significant savings to be had, but
do be careful, know the fine print, know the exclusions.
Speaker 4 (22:57):
Joel and I, we are.
Speaker 5 (22:58):
Both on metashare specifically they've worked well for us, but
we also haven't tested the limits, although some friends of
ours have. I think about some some good friends, and
I think it was literally the year after they joined on,
she ruptured or tore her achilles, and they were also like, well,
we were thinking about getting tunsils removed and adenoids as
well from like one of the whatever that is. I
(23:19):
don't know, I think it's in your mouth somewhere, your throat.
But they did all of that within a year because
they were gonna they knew that they're going to hit
their what's called the annual household portion, and it worked
incredibly well for them, which was really encouraging because I'm like,
all right, I'm pretty sure this is going to work out.
And I think we'd even kind of steered them in
like that direction because they were paying an inordinate amount
(23:40):
of it was a little nervous. I'm just like, oh man,
how this works out. It worked out great for them.
I love the fact that more people are getting on this.
I was talking to a nurse friend a few days ago.
She so, she's a nurse, she works within the health
care industry, and I don't know how. We got to
talking about healthcare and I was I kind of sheepishly
was like, yeah, I don't know. I rarely rarely go
to the doctor. And got to talking about health sharing.
(24:02):
And you would expect with her that she'd be on
some sort of Cadillac Premium Primo Healthcare plus health Care
Prime health account job, but all the healthcare you can eat,
she is on a health sharing playing Wow, because she's like, yeah,
so s thinking expensive, Like we don't even pay for
the kind of coverage that we often take at the hospital.
Blew my mind. But it's just evidence of the fact
(24:25):
that that's an area an industry that needs.
Speaker 4 (24:28):
A little bit of a reform, and I'm glad that.
Speaker 1 (24:30):
There's competition and not everyone can choose to go this
routelet right. We were like literally talking to a friend
last night who has a young daughter who has had
cancer for many, many years. They have a lot of
employments they have to go to. It gets really expensive,
and so their employment decisions are largely based around healthcare,
which makes total sense for them. But for other families,
(24:51):
like we have been pretty fortunate on the healthcare front,
and so we're able to go opt for something like
this in order to reduce her out of on a
monthly basis, and figures crossed that it saves us money
over time because we're just not shelling out as much
for healthcare overall. But again, this is a personal decision,
and more Americans are choosing some of these health sharing
(25:14):
options because they are saving the money, but the trade
offs are a crucial thing to take into account.
Speaker 2 (25:21):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (25:27):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group.
Speaker 5 (25:36):
Let's now hear from a listener who took a lump
sum and invested it, but he's trying to figure out
what to do next.
Speaker 7 (25:43):
Hello, this is David, California, longtime listener. Thank you Joel
and Matt for all the episodes. A few years back,
my wife and I were fortunate to receive a lump
sum of money that we put into a joint brokerage account,
investing in an S and P fift. We were planning
on letting it grow a few years and then taking
(26:06):
some out each year to help pay our mortgage. I'm
wondering now if it would be better to stick with
that plan and pay fifteen percent capital gains on a
growth each year when we take money out. The alternative
is to contribute less money into our roth IRA accounts
each year and let the money in the joint brokerage
(26:28):
account grow. Two things seem to make this a tough choice.
Number One, the money in the joint brokerage account is
already post tax dollars. Number Two, if we retire early,
as we are planning, before we claim Social Security, we
should be able to deduct most, possibly all, of the
(26:50):
money out of our joint brokerage account while in the
zero percent bracket for capital gains. With California taxing to
grow roughly two or three per at the state level,
I would like to prioritize the WROTH until I am
comfortable that we will have enough money combined with Social
Security in a couple of other sources to fund our
(27:13):
lives age seventy and on. But once we reach that target,
I am thinking of prioritizing maintaining the joint brokerage account
over continuing to fund the wrath. Is this a crazy idea?
Speaker 4 (27:29):
Thank you? Oh, Matt.
Speaker 1 (27:30):
I like this question. And first things first, I think
we have to just say that David made a really
good move investing the lump sum that is. That's another
question we get sometimes is like do I dollar cost
average or do I.
Speaker 5 (27:42):
Geeze into the shallow way? Yeah, like one step at
a time, kind of got to get past that one part.
Speaker 4 (27:47):
Where it's extra. Or do I just like dive dive
in head first, yeah?
Speaker 1 (27:51):
Or do I instead of investing it, do I pay
off the debt immediately?
Speaker 4 (27:56):
Where?
Speaker 1 (27:56):
And it seems like David made the right decision because
think about how much better he's done by investing that
money versus paying off the debt. And it's not like
we want debt to linger forever that we're big fans
of debt or anything like that. And we know that
some folks are incredibly debt averse, and I think everyone
kind of has to decide based on their own individual constitution,
(28:17):
what they should do in a situation like that. But
the truth is a three percent mortgage, in our estimation,
should be a very low priority for all listeners who want.
Speaker 4 (28:25):
To build wealth.
Speaker 1 (28:25):
There's just there just isn't a great argument for rushing
to pay that off ahead of some of those other
financial goals.
Speaker 5 (28:31):
Yeah, and that's true even if you end up having
to pay capital gains tax. But it sounds like you
are planning on reducing your income to such an extent
that you can tap your browadge account and not owe
in the federal.
Speaker 1 (28:43):
Tax at all, which most people don't even realize that's
a possibility.
Speaker 2 (28:46):
No.
Speaker 5 (28:46):
Yeah, So we typically refer to the long term capital
gains tax rate as being fifteen percent, and that is
true for the vast majority of folks.
Speaker 4 (28:53):
But on one end, I.
Speaker 5 (28:54):
Will say, folks who sell a ton of appreciated securities
are is actually going to pay more than fifteen percent.
They're gonna pay twenty percent if you have an adjusted
gross income of over five hundred and eighty three thousand
dollars if you are married finally jointly. And then others
who can keep their total taxable income below ninety four
thousand again married finally jointly, Well, you can pay a
(29:15):
long term capital gain tax rate of zero percent.
Speaker 4 (29:18):
Yeah.
Speaker 1 (29:19):
The fifteen percent number gets thrown around so frequently and
less typical most people don't realize that there are two
other potential rates for capital gains.
Speaker 5 (29:28):
Yeah, and you know, going from fifteen to twenty percent
not the end of the world, not ideal, but going
from twenty percent to zero that's pretty huge. And for
smart folks in the fire camp financial independence retire early.
This is a way to maintain access to funds where
you have added flexibility without paying extra tax for that perk.
Speaker 4 (29:48):
Yeah.
Speaker 1 (29:48):
Typically when we're talking about avoiding tax, we're talking about
the accounts that you're that you're choosing, and the taxable
brokerage account it offers that additional flexibility, but hey, you're
gonna pay the tax man. That extra pound of flesh
is garnered, Matt from the taxable broker's account. Unless unless
you are incredibly super duper strategic, like David is trying
(30:09):
to be here, and he mentioned.
Speaker 4 (30:11):
You know, I don't even know if you have to
be that strategic, you just have.
Speaker 5 (30:13):
It's this is a vote in favor of frugality because
if you can get your.
Speaker 4 (30:17):
Low income or low yeah, or lower income both because.
Speaker 5 (30:20):
You're going to need both, which can be natural as
you enter into your more you know, more chill retirement years.
Speaker 2 (30:24):
Yeah.
Speaker 1 (30:25):
And what makes it difficult to pull this off typically
is if you are earning a meaningful salary and then
you also sell some of your appreciated security, some of
your the stocks or ETFs that you've purchased, you're going
to push yourself above that threshold and you're going to
pay the fifteen percent. So you have to be careful
about when you make that sale and what your income
(30:46):
is likely going to be in that given year to
kind of get yourself with below and into that zero
percent capital gains tax rate threshold. And so normally what
we would tell you, David, as we prioritize the roth Ira.
We we love roth iras, we'd hate to see you
abandon that account given how good it is, how flexible
it can be for early retirees too, because of the
fact that you can take those contributions back out at
(31:08):
any point in time in the future. It's just not
as flexible as a brokerage account. And if you really
can jump through those taxable income hoops. It's actually gonna
be treated pretty similarly from a tax perspective, which is
kind of crazy. So, in a very rare admission, this
is not widely dispensed advice. I think I think I'm
(31:29):
willing to concede on this one, Matt, that a brokerage
account might slightly edge out, Yeah, the wroth for them,
So I think reducing roth contributions in favor of keeping
that money in the taxable brokerage account makes sense to me.
Speaker 4 (31:42):
Yeah, that's true. Man.
Speaker 1 (31:43):
You've been listening to How to Money with Joel Larsgard.
You can always hear us live on KFI AM six
forty twelve pm to two pm on Sunday and anytime
on demand on the iHeartRadio app
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