May 25, 2025 • 33 mins
More gas stations are charging extra if you pay with a credit card. Beware!
Ask HTM: What should you do if you overfund a Roth IRA!?
Americans believe that real estate and gold are the best investments in existence. But the numbers reveal that there's an even better way to invest.
Ask HTM: Rebecca wants to know if she should buy an extended warranty with her new car. It's expensive!
Ask HTM: What should you do if you overfund a Roth IRA!?
Americans believe that real estate and gold are the best investments in existence. But the numbers reveal that there's an even better way to invest.
Ask HTM: Rebecca wants to know if she should buy an extended warranty with her new car. It's expensive!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Kay.
Speaker 2 (00:01):
If I am six forty you're listening to how to
Money on demand on the iHeartRadio app.
Speaker 3 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel Lar's Guard and Matt Aultmix.
Speaker 2 (01:19):
F I am six live everywhere on the iHeart Radio app.
This is how to Money.
Speaker 4 (01:24):
I'm your host, Joe Larsgard, and I am the other host,
Matt Altmix. And if you have a money question, we'll
send it our way. All you have to do is
record your question on the voice memo app there on
your phone and send it over via email. You can
find the simple instructions at howdomoney dot com. Forward slash ask. Now,
it is time for the ludicrous headline of the week,
and you know what, I think you are a little
(01:45):
more enraged about this headline than I am, because I
don't know if I can officially call it gallaging, But okay,
I feel you feel a little more in that direction.
Speaker 1 (01:55):
Well, let's go ahead. Let's go ahead.
Speaker 2 (01:56):
And so the headline comes from Yaho Finance and it reads,
I can make it any number I want. Gas stations
are charging customers a dollar more a gallon for using
credit cards, and I so I was frustrated by reading this.
The gas stations are I would be frustrated going to
charge that much if I rolled up to that gas
station and I was like, waves, second, gas is two
(02:18):
eighty five a gallon with three eighty five a gallon
if I use my credit card. If I had rotten
fruit in the car, Matt, I would throw it at
the at the gas not the person, but at the
gas station itself because that's assault.
Speaker 4 (02:30):
Brother, Yeah, I know, because that's messed up. That it
was a Billy Madison life for all the oldies out there.
Speaker 1 (02:35):
Classic movie, classic movie.
Speaker 2 (02:37):
But then Kiplinger, alongside this article documented the rise of
gas stations charging outrageous fees for credit card usage at
the gas pump too.
Speaker 4 (02:46):
And we seems like it's becoming more of a widespread
It's not like just the Florida man or the Florida
man gas station owner.
Speaker 2 (02:53):
Right, which apparently this is largely happening in Florida. And
you and I we've documented this on this. We know
that taking credit cards eats into the profit of a
small business or a gas station operator, which is why
many small businesses are saying there's a cash discount, or
there's a price you have to pay to use a
credit card, and it's why more gas stations are charging
(03:13):
ten cents a gallon, but a dollar a gallon. That
to me seemed pretty ludicrous. And so I think this
is just a heads up for you. If you're the
kind of person tap fill up, you don't even realize,
you're not even thinking about it, you're kind of thoughtlessly
filling up at whatever gas station you come across. Just
know that they might be charging this significant amount extra
for using your gas, for using your credit card at
(03:35):
the pump. And I just I also kind of don't
see the financial incentive for gas stations to charge this
much more, far beyond the cost that they incur for
taking credit cards. Because if I was a customer who
found out that I got, you know, kind of the hoodwinked,
paying more than I thought I was going to for
the gas I was putting in my car, I wouldn't
come back there.
Speaker 4 (03:55):
So I just see that a yeah, really stupid move.
It does seem like a stupid it's a short term.
It seems like it's a short term, a short sided,
near sighted like cash grabeah and I would not even
go back to that gas station, I think, even after
they lower the prices, because it's like, wait a minute, wait,
was that an error? And maybe they're counting on folks
thinking that. But the fact that at least in this
in the one report that the guy's like, no, I can,
(04:17):
I can just make it whatever. One it's like, yeah,
you can run yourself out of business too, and he
might actually end up doing that. But the reason I
don't think this is gouging, of course, is because are
there other options?
Speaker 1 (04:26):
Do you have the ability to leave?
Speaker 4 (04:28):
And man, there are a ton of gas stations all
over the place unless you happen to live somewhere or yeah,
it is your only gas station option. Right, your town
is an intersection in the radiator spring, there's like one
flashing red light.
Speaker 1 (04:40):
If that's the case, well maybe it's.
Speaker 4 (04:41):
Tign for a town hall and there's there should be
some social pressure, yeah that station owner. So that's the
difference between like two eighty five versus like three eighty
five a gallon or something like that. But like, for instance,
a ten cent per gallon difference is typically worth it
if you're using the right credit card. Of course, costco visa.
It gives you four percent and five percent with no
(05:02):
fee at Costco, which is also a very superior form
of gas. Joel, speaking of gas, there's another gas station
that I've been to and I won't go back to
you because, like the check engine.
Speaker 1 (05:13):
Light came on after we filled up at this text.
Speaker 4 (05:16):
I don't know what you want to say it because
like you did, I'm sure it's a particular gastation owner
who maybe isn't doing a great job, or maybe it
was just a bad batch of gas. But I'm like,
I'm not going to risk my wonderfully old engine in
our our odyssey, uh going on the fritz.
Speaker 2 (05:32):
Yeah, I mean we've talked about this before too. But
there is a type of gas called top tier gas.
So you're not just saying here.
Speaker 1 (05:37):
Babe, no, it seems like it's better at Costco, but
it really is.
Speaker 2 (05:40):
It's really formulated better to keep your engine clean. And
so yeah, they sell the stuff at the AutoZone or
whatever you can dump in your dump in your engine
to try to clean your engine. Well, if you're filling
up top tier gas with regularity, your engine and components
are going to be cleaner.
Speaker 1 (05:54):
Maybe you don't need to even do that at all.
And by the way, it.
Speaker 2 (05:57):
Doesn't cost more to get top tier gas, but they're
just I got so certain stations that provide it, so
make sure you know.
Speaker 1 (06:03):
Where you can get it.
Speaker 4 (06:04):
So as we're talking about competition, there's actually an interesting
white paper recently about competition at the gas pump and
how it spurs price reductions. They maybe think of like
when an Audi moves into the neighborhood, Well, the prices
at the other grocery stores, of course are going to
come down. Or maybe like when Southwest when they start
operating out of a certain airport, all the other airlines,
they got to get a bit more competitive, although maybe
that's declined with the Southwest draw spirit the.
Speaker 2 (06:25):
Frontier when they jump in like Delta's like, all right,
we got to lower our prices for a little while.
Speaker 4 (06:30):
At least, so the price per gallon at existing gas
stations gets reduced immediately because now they gotta work harder.
Speaker 1 (06:35):
To get you to fill up there.
Speaker 4 (06:37):
The study said that the effects are immediate and persistent.
Competition works man because prices create important signals to shoppers.
If gas stations try to gouge you make sure to
peace out. You can vote with your dollars.
Speaker 2 (06:50):
Prices are signals, and we react accordingly when a price
goes up somewhere and make my little antennas pick up Matt.
Speaker 4 (06:56):
We might get honorary economic degrees from some college out
there who might be willing, probably for some if you
keep saying signals, Joel, some.
Speaker 2 (07:04):
Fly by Night University. Yeah, we'll see University of Phoenix.
We're getting our honorary decrease from there.
Speaker 1 (07:11):
I don't know.
Speaker 2 (07:12):
Is that a good I don't know. If I'm not
trying to cast shade. If they've got great programs over there,
I don't know. Well, the price of home internet has
been on the rise. C net found that two thirds
of folks are paying more for Internet than they were
last year, and not just not just by a little bit.
I was kind of shocked to see this, by almost
two hundred dollars more over the course of a year.
(07:32):
And they also said that service has not improved with
the with their Wi Fi, which makes the cost increase
even more frustrating. If I'm paying more because I'm getting
something superior, I might be willing to look past the
price increase, but if the service is degrading at the
same time. I mean, that makes me frustrated, but it
makes sense that this is happening because, first off, home
(07:54):
internet it's not a competitive industry in many locations around
the country. You're looking at a duopoly, which means your
options are paltry, like one of two places you can go. Yeah,
and then price competitiveness, it's not really a thing, and
it's still worth monitoring your bill for price increases and
calling your service provider to ask about a reduction, or
(08:14):
I've talked about this before, you're reaching out to them
on Twitter, because sometimes those are the people who are
most empowered to help you get a better price, as
opposed to call them the one eight hundred number other options
we've talked about this in the past. Two or to
choose slower speeds, or to stop renting equipment. Buying your
own equipment can reduce that monthly cost. Oh yeah, but yeah,
I think it's just important to note this. That's slow
(08:35):
creep up of your internet price. You may be like, yeah,
I'm paying seventy bucks a month for an internet or
something like that. That is probably more than you should
be paying, and there are a lot of ways to
reduce that bill. Just don't pay the increased bill price
because that's what came in the mail, and not do
a lick. Doesn't not to a lick about it, because
you really could save a couple hundred bucks a year. Yeah,
pretty easily with maybe a couple hours of your time.
Speaker 3 (08:56):
Heck, yeah, you're listening to how To Money with Old
Larsgard on demand from KFI AM six forty.
Speaker 4 (09:04):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight, please go ahead and join the how
to Money Facebook group. All right, let's hear from another listener.
This is someone who has a question about one of
our absolute favorite retirement accounts.
Speaker 5 (09:20):
Hey, Matt and Joel fellow Maryetta in here. At the
beginning of the year, both my wife and I fully
funded our wroth IRA. However, over the course of the
year we've had significant capital gains from our investments. I'm
pretty sure this has pushed us out of the limit
to be able to contribute to the wroth IRA, assuming
we're no longer eligible. How do you all recommend we
(09:40):
proceed prior to the end of the year. Thanks you guys,
best friends out well.
Speaker 1 (09:44):
Matt Thomas listen our Neck of the Woods. He's also
an honorary bestie, he said, best friends out. Yeah, so
you count, you count, We include you, We include you.
Thank you.
Speaker 2 (09:54):
And by the way, Matt, we think it's typically a
smart move to fully fund your wroth IRA beginning of
the year. This is something you have emphasized a lot
because we talked about I'm the Big Fan.
Speaker 1 (10:03):
We talked about dollar cost averaging.
Speaker 2 (10:05):
Regularly on the show, which is essentially putting money in
every time you get paid, so you get paid every
two weeks, you're sticking money into that four one K
if you've got that through your employer. And if you
have a roth IRA, like you're just letting it auto
draft out of your account every single month or every
couple of weeks, so you fully fund it by the
end of the year. But if you have the money
(10:26):
to fully fund the roth IRA at the beginning of
the year, which we know not everybody does, but if
you do stick it in, because one, it just kind
of gets it out of the way like you've done
the thing well, and then you're actually going to be
better off the majority of the time too as an investor,
because what the data shows right, what three out of
(10:46):
four years the market goes up something like that exactly,
So you're more likely to have a larger sum, larger
balance at the end of an investing lifetime, or you
to have invested at the beginning of every single year
as opposed to the end of everything. I know most
folks off for dollar cost averaging because they just don't
have seven thousand dollars in January first to toss it in.
Speaker 1 (11:05):
But it's a good goal to work towards, though.
Speaker 4 (11:07):
I think that if that's something that over the course
of a few years, if that's something that you can
work towards, where you've got enough set aside that you
can every year, maybe you dump a little bit more
at the very beginning of the year. And in a
similar way, I think it does a similar behavioral trick
where I think what's great about dollar cost averaging is
that it just takes the guesswork out of when it
(11:28):
is that you want to buy into the market.
Speaker 1 (11:30):
You're essentially doing the same.
Speaker 4 (11:31):
Thing though when you do the a lumpsum investment at
the beginning of every single year, you're just like, well,
that's just what I do. Come January first, every single year.
It's not something where we're having a conversation about a
baby like this is just we are investors. This is
what we do.
Speaker 2 (11:44):
We're going to be better for it, and it's basically
dollar cost averaging on just a far less frequent timeline past.
You're like, you're still doing the same thing. Like you're
not like, well maybe i'll wait till like July and
see if the market's up then or something like that.
You're still doing it like clockwork on the same you know,
the same season, same date, hopefully every year.
Speaker 4 (11:59):
Yeah, And you're also not saying like, Okay, I'm only
gonna invest in even years or something, or you know,
I'm just gonna wait and slom forty and I think
it's gonna be better then, Like you're not timing the
market at all in that way, of course, But there
is that occasional situation that Thomas has found himself in
where you end up regretting it, and not because the
market goes down, but because you find yourself ineligible to
(12:22):
contribute to that wroth. It's a good thing on one hand, right,
because it means that you've made too much money and
that is worth celebrating. In Thomas's case, it's great to
have maybe capital gains that he was not expecting.
Speaker 2 (12:35):
Some people like when they talk about capital gains, they
make it sound like it's like the worst thing ever, Like, dude,
I got the second and.
Speaker 1 (12:43):
I get it emotionally. My tax bill the big picture, well,
that means you made money. Let's zoom out a little bit.
You're doing well. We are happy for you.
Speaker 4 (12:50):
But the current income limits are one hundred and fifty
thousand dollars for single folks to be able to contribute
to a wroth, and it is two hundred and thirty
six thousand dollars if you are married filing jointly, so
Thomas or and.
Speaker 1 (13:02):
Others out there.
Speaker 4 (13:03):
If you're going to be close to that line, it
might be worth prioritizing some other tax advantage moves, like
contributing more to a traditional four to one k or
maybe even bashing your giving so that you still meet
the adjusted gross income requirements. Maybe typically you take the
standard deduction, but you're like, you know what, let's hold
off on giving. We'll give all of our money at
(13:26):
the beginning of next year and then essentially pre fund
your giving at the end of that next year for
the following year. That way, you're getting credit for all
of that charitable giving on one year.
Speaker 1 (13:36):
It allows you to itemize and take more of a deduction.
Speaker 2 (13:39):
Makes sense for a lot of people where it's like
standard deduction one year, don't take the standard the next
because you've just batched some of those tax oriented tax
saving choices into one given year and then you back
off the next year, and that can make you a
small dent in your ability to save on taxes, but
also in your ability to then contribute to a ROTH.
Speaker 4 (13:58):
Yeah, exactly, and Ross truly are what are our favorite accounts,
in large part because of the flexibility and the options
that the GIF folks. That being said, man the ability
to contribute a little more to a traditional four onin
K for instance, even if there isn't a match. Well, okay,
you are still investing, but then you are also bringing
down your adjusted press income, which then in fact allows
you to be able to sock maybe fewer dollars towards
(14:20):
your WROTH, but at least you're eligible fores right out
of the gate as well.
Speaker 1 (14:23):
Agreed.
Speaker 2 (14:24):
So okay, what do you do though, if you've contributed
to a ROTH and you find out that your income
was over and above the limit for twenty twenty five. Well,
there are a few moves you can make. You're not
going to face any penalties if you actually just choose
to withdraw your excess contribution plus any income that it's
earned by the due date for your tax return. So
(14:45):
you will have to include the taxable earnings portion in
your taxable income. So like, let's say the money you
stuck into the ROTH, well, it made money because it
was invested in the market. Well, that you will have
to include in sort of your figure with the IRS
form number is Matt, But there's a form you have
to fill out to report that on your taxes. But
because of the way roth irays are taxed, you can
(15:07):
take your contribution out at any time, Like you don't
need to wait until you're fifty nine and a half
because you're paying the tax up front. So because of that,
you can just like literally plow back that contribution, no harm,
no foul. Another option is to recharacterize that contribution and
move it into a traditional IRA. And I do believe
this is something that you've done, right.
Speaker 4 (15:28):
Matt, I have, But that's also before the larger brokerages
out there. So like Fidelity and Vanguard before they were
offering this like a withdrawal of excess contributions, that's what
they're calling it now. And so the recharacterization, I mean
even just the term right, it sounds like it was
something that was invented by a bunch of accountants or
the irs, where it's like, oh, you need to recharacterize
(15:50):
your contribution for sure, and there are times when you're
going to want to do that. But I truly think
that this is a new thing because this was not
available when I did this a number of years ago,
when when we had to recharacterize contributions. But truly the
ability to go on to a brokerage like Fidelity or
Vanguard and initiate and excess contributions withdrawal, like, I love it.
(16:13):
It makes so much sense, and it's oriented towards everyday
retail investors as opposed to feeling like you have to
hire an accountant to make sure that you're handling this
thing correctly. And so I know that there are certain
situations where someone is going to want to recharacterize.
Speaker 1 (16:27):
It's pretty easy as well. There are forms.
Speaker 4 (16:30):
When I initiated that for us with Vanguard, it was
just an online form that you filled out. In particular,
it is easy because I was recharacterizing those contributions, those
dollars from a roth ira that was held there at
Vanguard to a traditional ira that was also held there
at Vanguard. It's a little more complicated if you are
(16:51):
sending that to a different brokerage. There's a little more
handholding that needs to take place. But especially if you're
doing an in house recharacterization like that, pretty simple. But again,
this withdrawal of excess contributions option makes this even easier.
Speaker 1 (17:06):
Yeah, so we got more money saving information to get to.
Speaker 3 (17:10):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 2 (17:17):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Let's talk about investing, and as we know Americans,
you know, when it comes to investing and being informed
about the best ways to invest, maybe they're not as
informed as you and I would love. That's part of
the reason the show exists. But there's this new report
(17:37):
from Gallup and it finds that's similar to last year,
people assume that real estate and gold are the top notch,
absolute best investments that you could be for taking in and.
Speaker 1 (17:49):
So it's a sticky myth.
Speaker 2 (17:50):
That's right, sticky myth because it perpetuates people continue to
think this. You and I we talked about gold a
little bit last week, so we won't, like, you know,
brate that topic and keep going at it. And it
hasn't been a bad investment recently. We documented that over
the past twenty years. It's actually it's actually been an
awesome investment. But it doesn't hold a candle to investing
in stocks over many decades, and you and I were
(18:10):
real estate investors, but we would still, I think, hesitate
to tell folks that real estate is the best long
term investment. There's a lot of just nuance and specifics
that come into play there. If it can be if
you buy at the right time and you know what
you're doing right, or if you bought a property that
was pretty inexpensive and you use leverage to buy it
and you've seen what returns have done over the past
fifteen years, it's no wonder the recency bias inside of
(18:33):
you would say real estate crushes stocks no matter what,
even though stocks have done well too, But just to
assume that gold and real estate are better than investing
in the stock market. I don't think the numbers over
an extended period of time bear that out.
Speaker 4 (18:47):
I was sad to see that only sixteen percent of
folks who were surveying thought that the stocks were the
best long term investment. It's worth mentioning that it is
just so much easier to invest in the market right
like it can be worth working hard. It's maybe it's
worth you spending some time on the weekend putting in
some sweat equity, putting in some elbow grease in order
to increase your returns as you are forcing equity into
(19:08):
that property. But many folks are gonna find it hard
to make the numbers work investing in real estate specifically
right now. Plus it's just hard to save up enough
liquid cash to get you in the game.
Speaker 1 (19:16):
And there's also the part time job aspect of it.
You do have to do all that Like this.
Speaker 4 (19:20):
Yeah, exactly, Like I'm not trying to shatter your landlord
dreams if you've got them, But just simply dollar cost
averaging into the market is still the best way for
the vast majority of folks. Despite what it is that
they think. I think a lot of individuals lash onto
the different anecdote. They lash onto the outliers. They've heard
stories of Oh, he made all this money in real estate,
and well it.
Speaker 2 (19:39):
Feels more approachable too. Then like I built a business
around AI and I sold it for billions or something.
Speaker 4 (19:45):
It seems like something that they can do. But even still,
like the average American, they've got a nine to five. Yeah,
and then after that, you've got a family who you
want to see, or you've got friends, You've got interest,
you've got other hobbies. And I think there are some
things in life that are hard to do and it's
worth putting in. Like you wrote, you want to run
a marathon, That's gonna take a whole lot of work.
It's not an easy thing to do. You want to
(20:06):
be able to snatch two times your body weight, That's
a hard thing to do. It's gonna take a whole
lot of grit to make this thing happen. And unfortunately,
I think people they take that principle and they apply
it to their investments. When truly, when it comes to
building wealth, it pays to be average, like it pays
to be able to literally dollar cost average into the market,
paying low fees and just doing that over the course
(20:29):
of decades, like you are going to be able to
retire comfortably and with a whole lot of wealth by
doing that.
Speaker 1 (20:35):
It doesn't have to be.
Speaker 2 (20:36):
Hard without going as hard as you can, right, which, yeah,
that's typically when we're talking about real estate and buying
physical properties. Yeah, it could certainly work out to your advantage,
and you could be wealthier because of it, but there
are so many factors at play just to knee jerk
assume that real estate is the best investment. I think
that's what kind of irks me about this study, that
(20:57):
people just continue to assume that real estate and gold
are better than stocks. And it's like that doesn't bear
out in the numbers, and it doesn't bear out for
a lot of people's personal experience. And yes, there are
some people who massively crush at real estate, but it, yeah,
it takes and we talk to some of those people,
and you and I are real estate investors ourselves, But
just be careful before thinking that real estate is the
(21:17):
golden ticket to building wealth, because stocks can certainly be
that for you too, and they can be a much
easier way to get there. Another tried and true way
to get wealthy in the US is to build a business.
And the journal had an awesome profile of small to
medium sized business owners across the country this week, and
they called the folks who built those businesses the stealthy wealthy.
Speaker 1 (21:38):
And the people that they.
Speaker 2 (21:40):
Highlighted here make their living manufacturing flooring or having an
auto dealership, or they distribute beverages, stuff like that, Like
these kind of run of the mill businesses you don't
think about. And I think the gist of the article
was that it doesn't have to be sexy to make money, right,
makes me think of when you interview kids these days, Matt, Like,
(22:01):
so many of them say they want to be influencers,
Like that's what they want to grow up to be.
Speaker 1 (22:05):
It's the hot career.
Speaker 2 (22:06):
Wouldn't it be nice to be mister Beasts right, to
follow in his footsteps? And it's kind of like when
you would have interviewed kids my age and me in particular,
probably all I want to be Michael Jordan, Like that's
how cool would it be to play basketball every day
and earn a living and earn millions of dollars? But
I think it's it's important to highlight to not neglect
the boring ways of being able to make a living
(22:26):
and in fact how successful those people can be. And
in fact, boomers are selling their boring businesses these days.
You can you can buy their business as they're ready
to retire. True they they might let it fold otherwise.
I mean, this is a this is the kind of
thing where could a boring business be your path to
success potentially? And I love reading that article just how Yeah.
(22:46):
I just think those things get neglected so often because
they're not snazzy, they're not fancy. Uh, but I mean
that's what you're going for with your life and if
you want to if you want to build wealth without.
Speaker 1 (22:58):
And you don't want to be famous, this could be
a great way to go. Yeah, Honestly, like going back
to investing in the stock market is a similar thing,
like take the boring path. Yeah, it also comes with
a whole lot less drama as well.
Speaker 3 (23:09):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:15):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 2 (23:20):
It's time now for the Facebook Question of the Week.
This one comes from Becca, she says, got a car
warranty question here. We just bought a VW Volkswagen ID
four with thirteen thousand miles. It's an electric vehicle. They
pushed a warranty on us that we have thirty days
to back out on. It's sixty one hundred dollars and
it includes most drive train issues, tire alignments and rotation,
(23:42):
as well as scheduled maintenance. The car comes with a
no cost one hundred thousand mile battery warranty. I did
not want to spend that much on a warranty, and
I was wondering about trying to find a different warranty
or just kind of saving that money as a buffer.
Speaker 4 (23:56):
The old car warranty is what Becca's dealing with here, Joel,
and she's said that they pushed it on me. You
are not alone, because warranties are such a big money
maker for car dealerships. It's no wonder that they made
the heart sell on you.
Speaker 2 (24:10):
Many people have been pushed over, bowled over by those salespeople.
Speaker 4 (24:13):
And you know why I think that a lot of
folks accept it is because of the fact that oftentimes
we finance our cars, and so when you take if
you if you you know, if someone's just like, hey,
pay up six thousand dollars for this thing, you're thinking,
I'm not going to be able to afford that a B.
Speaker 1 (24:28):
I don't know if it's worth it.
Speaker 4 (24:29):
But when you roll it into a payments like that,
it makes it a much more pleasant pill to.
Speaker 2 (24:34):
Swallow at that point, Like it'll be an extra forty
two dollars a month, but it's also going to be
peace of mind, don't you know exactly.
Speaker 1 (24:39):
Don't you know the peace of mind that that's going
to give you.
Speaker 2 (24:41):
It's going to protect you and your car against anything
that could come its way.
Speaker 1 (24:44):
Yeah.
Speaker 4 (24:45):
Typically we are not fans of extended warranties, especially like
on technology on electronics like tech gadgets. Instead, take care
of your stuff self ensure, and you're going to come
out ahead, Like the vast majority of the time, if
you bought one of those every single time you made
a purchase, like even of on like appliances, you're going
to be spending all of your money all electronics. But
(25:08):
car warranties are a little bit different, but still they
can provide that piece of mind, but they are rarely
worth the money that they actually cost.
Speaker 2 (25:15):
You, And it sounds like the basic warranty that comes
with the car provides a heck of a lot of
peace of mind in and of itself, because that what
is the number one potential problem with an electric vehicle.
It's that the battery craps out ahead of time. And
when you have she's at thirteen thousand miles, when you
have eighty seven thousand miles in front of you, that
where the battery is covered, that's a long time, and
(25:37):
that in and of it self should provide a lot
of peace of mind. Sixty one hundred bucks is so
much money, and if you already have kind of that
warranty that gives you that much coverage, I mean that
could be many, many, many years of coverage on that battery.
To me, that's the biggest thing I would feel taken
care of by that. And it sounds like, yeah, you're
(25:58):
extended warranty includes some extra, but I would also say,
this scheduled maintenance on an electric vehicle is minimal, and
so I think the initial manufacturer's warranty should be ample.
It should assuaged your concerns, and you just really don't
need to add this extended service contract. Also think about
what fine print and exclusions it might come with, Like
(26:20):
you'd be wise to know what's covered first.
Speaker 1 (26:23):
There is a.
Speaker 2 (26:24):
Small chance that you come out ahead by buying this thing,
but the gamble just doesn't pay off for most folks,
and so if you opt. Also, one last thing on
this extended warranty that I want to mention is if
you do opt to go for it, make sure it
is from Volkswagen directly, because third party warranties are the
worst possible kind that the company might not be there
(26:44):
when you need it. There's typically more fine print. They're
just a lot of third party warranties that aren't direct
from the manufacturer that I think are worth a pittance
to almost nothing, and so I would be completely unwilling
to pay for that, that's for sure.
Speaker 1 (27:00):
Do you say warranty or warranty because I swore I
was hearing you say both interchangey like guarantee when I'm like,
I don't think I've ever said warranty like warranty.
Speaker 4 (27:11):
I always say warranty like thirty year warranty, yeah, drive
train warranty, Yes, say it differently, but towards the end
of see Tomato, I say to me that sound like
it was.
Speaker 1 (27:19):
I don't know.
Speaker 4 (27:21):
Aside from self ensuring, I think a better thing to
do is just simply buy a vehicle that rates high
and reliability. I have a looked at your specific car,
So I'm not being critical here. We're talking to the
public at large here, because if we're playing the odds
hoping that our repair bills are going to come in
lower than the price of the extended warranty, we'll buying
a car making model that consistently rates well from different
(27:43):
sites like Consumer Reports.
Speaker 1 (27:44):
That would be wise.
Speaker 4 (27:46):
An extended warranty is rarely an awesome idea, but it
just makes more sense if you buy a car that's,
you know, prone to experiencing the problems when it comes
to some of the different mechanicals in that land Rover, you.
Speaker 2 (27:57):
Might want to consider the extended warranty the Jaguar, right, Yeah,
just a little more, I would.
Speaker 1 (28:02):
I would think about it for a second longer.
Speaker 4 (28:04):
Okay, So to that, to the defense of that, there's
a survey of Consumer Reports readers that finds so after
a decade, they find that the vast majority of Honda, Toyota,
and Subaru extended warranty buyers would never ever buy one again.
They ended up paying a lot of money didn't have
to use it, And I think that that's just it's
(28:24):
not anecdotal, it's a survey, but it just points to
the fact that it's not necessary when you purchase the.
Speaker 2 (28:30):
Right which is interesting, like you might hear that at
first pass and say, oh, then why are Hanta, Toyota
and Subaru's selling these things that people don't like. Well,
because that makes the money, well, because it makes the money.
But also interestingly enough, like when you opt for cars
that are more reliable historically, it just means that the
people were most displeased because they didn't need to use it.
But the ideal would be to buy a car that's
(28:53):
not going to need and you can never fully one
assure yourself even a new car isn't going to have
problems that you're going to need to pay for, just
especially if it happens just outside that warranty period. And like, man,
I should have got the extended warranty. Matt and Joel
were so wrong. At one hundred and two thousand miles
the battery crapped out on this feed up and man,
(29:13):
they're idiots. And the truth is those kind of anecdotal
stories happen too. But if we're playing the odds here,
keeping that sixty one hundred dollars in your bank account
and relying on the warranty that already comes with the
vehicle should provide plenty of peace of mind and plenty
of financial ammunition in your bank account to pay for
something that might or might not happen in this car
(29:34):
in the future.
Speaker 1 (29:34):
That's true. Okay, let's take a quick email from Ryan.
Speaker 4 (29:37):
I've been looking to switch after tax brokeages from Schwab
to Fidelity or Vanguard. As Schwab pays big bank interest
rates on uninvested cash like zero point five percent. You
can go higher, but it'll take three days to invest it,
while Fidelity and Vanguard pay small.
Speaker 1 (29:53):
Bank rates five percent last I checked.
Speaker 4 (29:55):
And no time waiting. So I was wondering what the
best way to do that would be. Should I slow
sell and Schwab and buying the other, or would it
be possible to do a trustee to trustee swap similar
to pre tax retirement accounts, which I thinks.
Speaker 1 (30:08):
A good question.
Speaker 2 (30:08):
I would be frustrated if I was with a brokerage
firm and like those sweep accounts where your cash is
kept before you make investments. If that was earning next
to nothing, I would.
Speaker 1 (30:20):
Be like, what gives?
Speaker 2 (30:21):
Because there are other brokerage firms that don't treat their
customers like that, and Schwap is a great, low cost
brokerage firm. So I was like, wait a second, is
is this for real? To Schwap pay nothing to cash customers? Well,
I would just encourage Ryan to check your money market
funds again. Check what Schwab is offering. There are likely
multiple money market funds that they offer. You might be
(30:44):
in an inferior one because it looks like the one
I checked out is returning more than four percent right now,
which is pretty close to what other money market funds
are offering at some of our other favorite white I
think he.
Speaker 4 (30:56):
Saw that, but what he wrote was that it'll take
three days to invest it, So I think maybe he's
seen those. But the big question then then if that's
the case, then the big question is what's the rub
with the three days? Why does it take three Yeah? Well,
I mean it shouldn't make that long. Well, I mean
it takes time for transactions to go through. And maybe
I don't know he's talking about transferring the money and
then placing the purchase order and then.
Speaker 1 (31:16):
Just the fact that it's in the ether for Yeah.
Speaker 4 (31:18):
Yeah, So I don't know, like it's maybe it's more
of a principled sort of decision that's driving.
Speaker 1 (31:24):
Him to want to change brokerages.
Speaker 4 (31:25):
But that being said, if it was, I mean, I
personally wouldn't let the three days rub me the wrong way.
Speaker 1 (31:31):
Yeah, but maybe he also is a way to question differently.
Speaker 2 (31:34):
I guess I think I heard him saying that, Hey,
money that's sitting there ready to be invested, I can't
earn any meaningful return on it while I'm waiting to invest.
And if that's the case, then I would just say
look to swv x X, which is their savings equivalent
money market fund. That might be the only move you
need to make. But if if you're if Ma's right here,
(31:56):
then I think this might be an issue that you
encounter at other brokerages.
Speaker 1 (32:00):
Too, not your SWAB. But it's not take some time,
probably not lazy. It's just to move money around.
Speaker 2 (32:05):
Yeah that those money moves don't happen instantly. It's like
a Venmo transfer from your Venmo account into your bank
account that typically takes a couple of days unless you
hit the instant thing where you have to pay extra right, which.
Speaker 1 (32:17):
You don't want to do.
Speaker 4 (32:17):
You also, I mean, even if you did, let's say
you did want to switch over, maybe there's other reasons,
Like I wouldn't say that this is the only reason
to switch switch brokerages. Fidelity is great. So let's say
you wanted to do that. But if you were to
sell your assets there in a brokerage account and then
buy them again at another brokerage, that would also trigger
tax consequences and that's something that you certainly want to avoid.
(32:38):
Don't pay these capital gains when you don't need to.
So if you decided that you're going to be better
off at Vanguard, you just do what's known as an
act transfer. You call the new brokerage firm you want
to start doing business with, and they should help you
to be able to do this. Essentially, you're just changing
custodians of the funds that you already own. It's like
slapping a new label on them. Essentially, you're not selling
(33:01):
and then rebuying, which is how you're gonna If you
were you to do that, you're gonna be paying a
ton of money. Well, it just depends on how much
I how much you got you're selling, but you are
most definitely gonna be paying capital gains tax.
Speaker 2 (33:10):
That would be an inefficient way to do it. No
B And that is going to do it for today.
Thank you for listening. We appreciate your time and attention.
We'll see you back here next week. 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
Kay.
Speaker 2 (00:01):
If I am six forty you're listening to how to
Money on demand on the iHeartRadio app.
Speaker 3 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel Lar's Guard and Matt Aultmix.
Speaker 2 (01:19):
F I am six live everywhere on the iHeart Radio app.
This is how to Money.
Speaker 4 (01:24):
I'm your host, Joe Larsgard, and I am the other host,
Matt Altmix. And if you have a money question, we'll
send it our way. All you have to do is
record your question on the voice memo app there on
your phone and send it over via email. You can
find the simple instructions at howdomoney dot com. Forward slash ask. Now,
it is time for the ludicrous headline of the week,
and you know what, I think you are a little
(01:45):
more enraged about this headline than I am, because I
don't know if I can officially call it gallaging, But okay,
I feel you feel a little more in that direction.
Speaker 1 (01:55):
Well, let's go ahead. Let's go ahead.
Speaker 2 (01:56):
And so the headline comes from Yaho Finance and it reads,
I can make it any number I want. Gas stations
are charging customers a dollar more a gallon for using
credit cards, and I so I was frustrated by reading this.
The gas stations are I would be frustrated going to
charge that much if I rolled up to that gas
station and I was like, waves, second, gas is two
(02:18):
eighty five a gallon with three eighty five a gallon
if I use my credit card. If I had rotten
fruit in the car, Matt, I would throw it at
the at the gas not the person, but at the
gas station itself because that's assault.
Speaker 4 (02:30):
Brother, Yeah, I know, because that's messed up. That it
was a Billy Madison life for all the oldies out there.
Speaker 1 (02:35):
Classic movie, classic movie.
Speaker 2 (02:37):
But then Kiplinger, alongside this article documented the rise of
gas stations charging outrageous fees for credit card usage at
the gas pump too.
Speaker 4 (02:46):
And we seems like it's becoming more of a widespread
It's not like just the Florida man or the Florida
man gas station owner.
Speaker 2 (02:53):
Right, which apparently this is largely happening in Florida. And
you and I we've documented this on this. We know
that taking credit cards eats into the profit of a
small business or a gas station operator, which is why
many small businesses are saying there's a cash discount, or
there's a price you have to pay to use a
credit card, and it's why more gas stations are charging
(03:13):
ten cents a gallon, but a dollar a gallon. That
to me seemed pretty ludicrous. And so I think this
is just a heads up for you. If you're the
kind of person tap fill up, you don't even realize,
you're not even thinking about it, you're kind of thoughtlessly
filling up at whatever gas station you come across. Just
know that they might be charging this significant amount extra
for using your gas, for using your credit card at
(03:35):
the pump. And I just I also kind of don't
see the financial incentive for gas stations to charge this
much more, far beyond the cost that they incur for
taking credit cards. Because if I was a customer who
found out that I got, you know, kind of the hoodwinked,
paying more than I thought I was going to for
the gas I was putting in my car, I wouldn't
come back there.
Speaker 4 (03:55):
So I just see that a yeah, really stupid move.
It does seem like a stupid it's a short term.
It seems like it's a short term, a short sided,
near sighted like cash grabeah and I would not even
go back to that gas station, I think, even after
they lower the prices, because it's like, wait a minute, wait,
was that an error? And maybe they're counting on folks
thinking that. But the fact that at least in this
in the one report that the guy's like, no, I can,
(04:17):
I can just make it whatever. One it's like, yeah,
you can run yourself out of business too, and he
might actually end up doing that. But the reason I
don't think this is gouging, of course, is because are
there other options?
Speaker 1 (04:26):
Do you have the ability to leave?
Speaker 4 (04:28):
And man, there are a ton of gas stations all
over the place unless you happen to live somewhere or yeah,
it is your only gas station option. Right, your town
is an intersection in the radiator spring, there's like one
flashing red light.
Speaker 1 (04:40):
If that's the case, well maybe it's.
Speaker 4 (04:41):
Tign for a town hall and there's there should be
some social pressure, yeah that station owner. So that's the
difference between like two eighty five versus like three eighty
five a gallon or something like that. But like, for instance,
a ten cent per gallon difference is typically worth it
if you're using the right credit card. Of course, costco visa.
It gives you four percent and five percent with no
(05:02):
fee at Costco, which is also a very superior form
of gas. Joel, speaking of gas, there's another gas station
that I've been to and I won't go back to
you because, like the check engine.
Speaker 1 (05:13):
Light came on after we filled up at this text.
Speaker 4 (05:16):
I don't know what you want to say it because
like you did, I'm sure it's a particular gastation owner
who maybe isn't doing a great job, or maybe it
was just a bad batch of gas. But I'm like,
I'm not going to risk my wonderfully old engine in
our our odyssey, uh going on the fritz.
Speaker 2 (05:32):
Yeah, I mean we've talked about this before too. But
there is a type of gas called top tier gas.
So you're not just saying here.
Speaker 1 (05:37):
Babe, no, it seems like it's better at Costco, but
it really is.
Speaker 2 (05:40):
It's really formulated better to keep your engine clean. And
so yeah, they sell the stuff at the AutoZone or
whatever you can dump in your dump in your engine
to try to clean your engine. Well, if you're filling
up top tier gas with regularity, your engine and components
are going to be cleaner.
Speaker 1 (05:54):
Maybe you don't need to even do that at all.
And by the way, it.
Speaker 2 (05:57):
Doesn't cost more to get top tier gas, but they're
just I got so certain stations that provide it, so
make sure you know.
Speaker 1 (06:03):
Where you can get it.
Speaker 4 (06:04):
So as we're talking about competition, there's actually an interesting
white paper recently about competition at the gas pump and
how it spurs price reductions. They maybe think of like
when an Audi moves into the neighborhood, Well, the prices
at the other grocery stores, of course are going to
come down. Or maybe like when Southwest when they start
operating out of a certain airport, all the other airlines,
they got to get a bit more competitive, although maybe
that's declined with the Southwest draw spirit the.
Speaker 2 (06:25):
Frontier when they jump in like Delta's like, all right,
we got to lower our prices for a little while.
Speaker 4 (06:30):
At least, so the price per gallon at existing gas
stations gets reduced immediately because now they gotta work harder.
Speaker 1 (06:35):
To get you to fill up there.
Speaker 4 (06:37):
The study said that the effects are immediate and persistent.
Competition works man because prices create important signals to shoppers.
If gas stations try to gouge you make sure to
peace out. You can vote with your dollars.
Speaker 2 (06:50):
Prices are signals, and we react accordingly when a price
goes up somewhere and make my little antennas pick up Matt.
Speaker 4 (06:56):
We might get honorary economic degrees from some college out
there who might be willing, probably for some if you
keep saying signals, Joel, some.
Speaker 2 (07:04):
Fly by Night University. Yeah, we'll see University of Phoenix.
We're getting our honorary decrease from there.
Speaker 1 (07:11):
I don't know.
Speaker 2 (07:12):
Is that a good I don't know. If I'm not
trying to cast shade. If they've got great programs over there,
I don't know. Well, the price of home internet has
been on the rise. C net found that two thirds
of folks are paying more for Internet than they were
last year, and not just not just by a little bit.
I was kind of shocked to see this, by almost
two hundred dollars more over the course of a year.
(07:32):
And they also said that service has not improved with
the with their Wi Fi, which makes the cost increase
even more frustrating. If I'm paying more because I'm getting
something superior, I might be willing to look past the
price increase, but if the service is degrading at the
same time. I mean, that makes me frustrated, but it
makes sense that this is happening because, first off, home
(07:54):
internet it's not a competitive industry in many locations around
the country. You're looking at a duopoly, which means your
options are paltry, like one of two places you can go. Yeah,
and then price competitiveness, it's not really a thing, and
it's still worth monitoring your bill for price increases and
calling your service provider to ask about a reduction, or
(08:14):
I've talked about this before, you're reaching out to them
on Twitter, because sometimes those are the people who are
most empowered to help you get a better price, as
opposed to call them the one eight hundred number other options
we've talked about this in the past. Two or to
choose slower speeds, or to stop renting equipment. Buying your
own equipment can reduce that monthly cost. Oh yeah, but yeah,
I think it's just important to note this. That's slow
(08:35):
creep up of your internet price. You may be like, yeah,
I'm paying seventy bucks a month for an internet or
something like that. That is probably more than you should
be paying, and there are a lot of ways to
reduce that bill. Just don't pay the increased bill price
because that's what came in the mail, and not do
a lick. Doesn't not to a lick about it, because
you really could save a couple hundred bucks a year. Yeah,
pretty easily with maybe a couple hours of your time.
Speaker 3 (08:56):
Heck, yeah, you're listening to how To Money with Old
Larsgard on demand from KFI AM six forty.
Speaker 4 (09:04):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight, please go ahead and join the how
to Money Facebook group. All right, let's hear from another listener.
This is someone who has a question about one of
our absolute favorite retirement accounts.
Speaker 5 (09:20):
Hey, Matt and Joel fellow Maryetta in here. At the
beginning of the year, both my wife and I fully
funded our wroth IRA. However, over the course of the
year we've had significant capital gains from our investments. I'm
pretty sure this has pushed us out of the limit
to be able to contribute to the wroth IRA, assuming
we're no longer eligible. How do you all recommend we
(09:40):
proceed prior to the end of the year. Thanks you guys,
best friends out well.
Speaker 1 (09:44):
Matt Thomas listen our Neck of the Woods. He's also
an honorary bestie, he said, best friends out. Yeah, so
you count, you count, We include you, We include you.
Thank you.
Speaker 2 (09:54):
And by the way, Matt, we think it's typically a
smart move to fully fund your wroth IRA beginning of
the year. This is something you have emphasized a lot
because we talked about I'm the Big Fan.
Speaker 1 (10:03):
We talked about dollar cost averaging.
Speaker 2 (10:05):
Regularly on the show, which is essentially putting money in
every time you get paid, so you get paid every
two weeks, you're sticking money into that four one K
if you've got that through your employer. And if you
have a roth IRA, like you're just letting it auto
draft out of your account every single month or every
couple of weeks, so you fully fund it by the
end of the year. But if you have the money
(10:26):
to fully fund the roth IRA at the beginning of
the year, which we know not everybody does, but if
you do stick it in, because one, it just kind
of gets it out of the way like you've done
the thing well, and then you're actually going to be
better off the majority of the time too as an investor,
because what the data shows right, what three out of
(10:46):
four years the market goes up something like that exactly,
So you're more likely to have a larger sum, larger
balance at the end of an investing lifetime, or you
to have invested at the beginning of every single year
as opposed to the end of everything. I know most
folks off for dollar cost averaging because they just don't
have seven thousand dollars in January first to toss it in.
Speaker 1 (11:05):
But it's a good goal to work towards, though.
Speaker 4 (11:07):
I think that if that's something that over the course
of a few years, if that's something that you can
work towards, where you've got enough set aside that you
can every year, maybe you dump a little bit more
at the very beginning of the year. And in a
similar way, I think it does a similar behavioral trick
where I think what's great about dollar cost averaging is
that it just takes the guesswork out of when it
(11:28):
is that you want to buy into the market.
Speaker 1 (11:30):
You're essentially doing the same.
Speaker 4 (11:31):
Thing though when you do the a lumpsum investment at
the beginning of every single year, you're just like, well,
that's just what I do. Come January first, every single year.
It's not something where we're having a conversation about a
baby like this is just we are investors. This is
what we do.
Speaker 2 (11:44):
We're going to be better for it, and it's basically
dollar cost averaging on just a far less frequent timeline past.
You're like, you're still doing the same thing. Like you're
not like, well maybe i'll wait till like July and
see if the market's up then or something like that.
You're still doing it like clockwork on the same you know,
the same season, same date, hopefully every year.
Speaker 4 (11:59):
Yeah, And you're also not saying like, Okay, I'm only
gonna invest in even years or something, or you know,
I'm just gonna wait and slom forty and I think
it's gonna be better then, Like you're not timing the
market at all in that way, of course, But there
is that occasional situation that Thomas has found himself in
where you end up regretting it, and not because the
market goes down, but because you find yourself ineligible to
(12:22):
contribute to that wroth. It's a good thing on one hand, right,
because it means that you've made too much money and
that is worth celebrating. In Thomas's case, it's great to
have maybe capital gains that he was not expecting.
Speaker 2 (12:35):
Some people like when they talk about capital gains, they
make it sound like it's like the worst thing ever, Like, dude,
I got the second and.
Speaker 1 (12:43):
I get it emotionally. My tax bill the big picture, well,
that means you made money. Let's zoom out a little bit.
You're doing well. We are happy for you.
Speaker 4 (12:50):
But the current income limits are one hundred and fifty
thousand dollars for single folks to be able to contribute
to a wroth, and it is two hundred and thirty
six thousand dollars if you are married filing jointly, so
Thomas or and.
Speaker 1 (13:02):
Others out there.
Speaker 4 (13:03):
If you're going to be close to that line, it
might be worth prioritizing some other tax advantage moves, like
contributing more to a traditional four to one k or
maybe even bashing your giving so that you still meet
the adjusted gross income requirements. Maybe typically you take the
standard deduction, but you're like, you know what, let's hold
off on giving. We'll give all of our money at
(13:26):
the beginning of next year and then essentially pre fund
your giving at the end of that next year for
the following year. That way, you're getting credit for all
of that charitable giving on one year.
Speaker 1 (13:36):
It allows you to itemize and take more of a deduction.
Speaker 2 (13:39):
Makes sense for a lot of people where it's like
standard deduction one year, don't take the standard the next
because you've just batched some of those tax oriented tax
saving choices into one given year and then you back
off the next year, and that can make you a
small dent in your ability to save on taxes, but
also in your ability to then contribute to a ROTH.
Speaker 4 (13:58):
Yeah, exactly, and Ross truly are what are our favorite accounts,
in large part because of the flexibility and the options
that the GIF folks. That being said, man the ability
to contribute a little more to a traditional four onin
K for instance, even if there isn't a match. Well, okay,
you are still investing, but then you are also bringing
down your adjusted press income, which then in fact allows
you to be able to sock maybe fewer dollars towards
(14:20):
your WROTH, but at least you're eligible fores right out
of the gate as well.
Speaker 1 (14:23):
Agreed.
Speaker 2 (14:24):
So okay, what do you do though, if you've contributed
to a ROTH and you find out that your income
was over and above the limit for twenty twenty five. Well,
there are a few moves you can make. You're not
going to face any penalties if you actually just choose
to withdraw your excess contribution plus any income that it's
earned by the due date for your tax return. So
(14:45):
you will have to include the taxable earnings portion in
your taxable income. So like, let's say the money you
stuck into the ROTH, well, it made money because it
was invested in the market. Well, that you will have
to include in sort of your figure with the IRS
form number is Matt, But there's a form you have
to fill out to report that on your taxes. But
because of the way roth irays are taxed, you can
(15:07):
take your contribution out at any time, Like you don't
need to wait until you're fifty nine and a half
because you're paying the tax up front. So because of that,
you can just like literally plow back that contribution, no harm,
no foul. Another option is to recharacterize that contribution and
move it into a traditional IRA. And I do believe
this is something that you've done, right.
Speaker 4 (15:28):
Matt, I have, But that's also before the larger brokerages
out there. So like Fidelity and Vanguard before they were
offering this like a withdrawal of excess contributions, that's what
they're calling it now. And so the recharacterization, I mean
even just the term right, it sounds like it was
something that was invented by a bunch of accountants or
the irs, where it's like, oh, you need to recharacterize
(15:50):
your contribution for sure, and there are times when you're
going to want to do that. But I truly think
that this is a new thing because this was not
available when I did this a number of years ago,
when when we had to recharacterize contributions. But truly the
ability to go on to a brokerage like Fidelity or
Vanguard and initiate and excess contributions withdrawal, like, I love it.
(16:13):
It makes so much sense, and it's oriented towards everyday
retail investors as opposed to feeling like you have to
hire an accountant to make sure that you're handling this
thing correctly. And so I know that there are certain
situations where someone is going to want to recharacterize.
Speaker 1 (16:27):
It's pretty easy as well. There are forms.
Speaker 4 (16:30):
When I initiated that for us with Vanguard, it was
just an online form that you filled out. In particular,
it is easy because I was recharacterizing those contributions, those
dollars from a roth ira that was held there at
Vanguard to a traditional ira that was also held there
at Vanguard. It's a little more complicated if you are
(16:51):
sending that to a different brokerage. There's a little more
handholding that needs to take place. But especially if you're
doing an in house recharacterization like that, pretty simple. But again,
this withdrawal of excess contributions option makes this even easier.
Speaker 1 (17:06):
Yeah, so we got more money saving information to get to.
Speaker 3 (17:10):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 2 (17:17):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Let's talk about investing, and as we know Americans,
you know, when it comes to investing and being informed
about the best ways to invest, maybe they're not as
informed as you and I would love. That's part of
the reason the show exists. But there's this new report
(17:37):
from Gallup and it finds that's similar to last year,
people assume that real estate and gold are the top notch,
absolute best investments that you could be for taking in and.
Speaker 1 (17:49):
So it's a sticky myth.
Speaker 2 (17:50):
That's right, sticky myth because it perpetuates people continue to
think this. You and I we talked about gold a
little bit last week, so we won't, like, you know,
brate that topic and keep going at it. And it
hasn't been a bad investment recently. We documented that over
the past twenty years. It's actually it's actually been an
awesome investment. But it doesn't hold a candle to investing
in stocks over many decades, and you and I were
(18:10):
real estate investors, but we would still, I think, hesitate
to tell folks that real estate is the best long
term investment. There's a lot of just nuance and specifics
that come into play there. If it can be if
you buy at the right time and you know what
you're doing right, or if you bought a property that
was pretty inexpensive and you use leverage to buy it
and you've seen what returns have done over the past
fifteen years, it's no wonder the recency bias inside of
(18:33):
you would say real estate crushes stocks no matter what,
even though stocks have done well too, But just to
assume that gold and real estate are better than investing
in the stock market. I don't think the numbers over
an extended period of time bear that out.
Speaker 4 (18:47):
I was sad to see that only sixteen percent of
folks who were surveying thought that the stocks were the
best long term investment. It's worth mentioning that it is
just so much easier to invest in the market right
like it can be worth working hard. It's maybe it's
worth you spending some time on the weekend putting in
some sweat equity, putting in some elbow grease in order
to increase your returns as you are forcing equity into
(19:08):
that property. But many folks are gonna find it hard
to make the numbers work investing in real estate specifically
right now. Plus it's just hard to save up enough
liquid cash to get you in the game.
Speaker 1 (19:16):
And there's also the part time job aspect of it.
You do have to do all that Like this.
Speaker 4 (19:20):
Yeah, exactly, Like I'm not trying to shatter your landlord
dreams if you've got them, But just simply dollar cost
averaging into the market is still the best way for
the vast majority of folks. Despite what it is that
they think. I think a lot of individuals lash onto
the different anecdote. They lash onto the outliers. They've heard
stories of Oh, he made all this money in real estate,
and well it.
Speaker 2 (19:39):
Feels more approachable too. Then like I built a business
around AI and I sold it for billions or something.
Speaker 4 (19:45):
It seems like something that they can do. But even still,
like the average American, they've got a nine to five. Yeah,
and then after that, you've got a family who you
want to see, or you've got friends, You've got interest,
you've got other hobbies. And I think there are some
things in life that are hard to do and it's
worth putting in. Like you wrote, you want to run
a marathon, That's gonna take a whole lot of work.
It's not an easy thing to do. You want to
(20:06):
be able to snatch two times your body weight, That's
a hard thing to do. It's gonna take a whole
lot of grit to make this thing happen. And unfortunately,
I think people they take that principle and they apply
it to their investments. When truly, when it comes to
building wealth, it pays to be average, like it pays
to be able to literally dollar cost average into the market,
paying low fees and just doing that over the course
(20:29):
of decades, like you are going to be able to
retire comfortably and with a whole lot of wealth by
doing that.
Speaker 1 (20:35):
It doesn't have to be.
Speaker 2 (20:36):
Hard without going as hard as you can, right, which, yeah,
that's typically when we're talking about real estate and buying
physical properties. Yeah, it could certainly work out to your advantage,
and you could be wealthier because of it, but there
are so many factors at play just to knee jerk
assume that real estate is the best investment. I think
that's what kind of irks me about this study, that
(20:57):
people just continue to assume that real estate and gold
are better than stocks. And it's like that doesn't bear
out in the numbers, and it doesn't bear out for
a lot of people's personal experience. And yes, there are
some people who massively crush at real estate, but it, yeah,
it takes and we talk to some of those people,
and you and I are real estate investors ourselves, But
just be careful before thinking that real estate is the
(21:17):
golden ticket to building wealth, because stocks can certainly be
that for you too, and they can be a much
easier way to get there. Another tried and true way
to get wealthy in the US is to build a business.
And the journal had an awesome profile of small to
medium sized business owners across the country this week, and
they called the folks who built those businesses the stealthy wealthy.
Speaker 1 (21:38):
And the people that they.
Speaker 2 (21:40):
Highlighted here make their living manufacturing flooring or having an
auto dealership, or they distribute beverages, stuff like that, Like
these kind of run of the mill businesses you don't
think about. And I think the gist of the article
was that it doesn't have to be sexy to make money, right,
makes me think of when you interview kids these days, Matt, Like,
(22:01):
so many of them say they want to be influencers,
Like that's what they want to grow up to be.
Speaker 1 (22:05):
It's the hot career.
Speaker 2 (22:06):
Wouldn't it be nice to be mister Beasts right, to
follow in his footsteps? And it's kind of like when
you would have interviewed kids my age and me in particular,
probably all I want to be Michael Jordan, Like that's
how cool would it be to play basketball every day
and earn a living and earn millions of dollars? But
I think it's it's important to highlight to not neglect
the boring ways of being able to make a living
(22:26):
and in fact how successful those people can be. And
in fact, boomers are selling their boring businesses these days.
You can you can buy their business as they're ready
to retire. True they they might let it fold otherwise.
I mean, this is a this is the kind of
thing where could a boring business be your path to
success potentially? And I love reading that article just how Yeah.
(22:46):
I just think those things get neglected so often because
they're not snazzy, they're not fancy. Uh, but I mean
that's what you're going for with your life and if
you want to if you want to build wealth without.
Speaker 1 (22:58):
And you don't want to be famous, this could be
a great way to go. Yeah, Honestly, like going back
to investing in the stock market is a similar thing,
like take the boring path. Yeah, it also comes with
a whole lot less drama as well.
Speaker 3 (23:09):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:15):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 2 (23:20):
It's time now for the Facebook Question of the Week.
This one comes from Becca, she says, got a car
warranty question here. We just bought a VW Volkswagen ID
four with thirteen thousand miles. It's an electric vehicle. They
pushed a warranty on us that we have thirty days
to back out on. It's sixty one hundred dollars and
it includes most drive train issues, tire alignments and rotation,
(23:42):
as well as scheduled maintenance. The car comes with a
no cost one hundred thousand mile battery warranty. I did
not want to spend that much on a warranty, and
I was wondering about trying to find a different warranty
or just kind of saving that money as a buffer.
Speaker 4 (23:56):
The old car warranty is what Becca's dealing with here, Joel,
and she's said that they pushed it on me. You
are not alone, because warranties are such a big money
maker for car dealerships. It's no wonder that they made
the heart sell on you.
Speaker 2 (24:10):
Many people have been pushed over, bowled over by those salespeople.
Speaker 4 (24:13):
And you know why I think that a lot of
folks accept it is because of the fact that oftentimes
we finance our cars, and so when you take if
you if you you know, if someone's just like, hey,
pay up six thousand dollars for this thing, you're thinking,
I'm not going to be able to afford that a B.
Speaker 1 (24:28):
I don't know if it's worth it.
Speaker 4 (24:29):
But when you roll it into a payments like that,
it makes it a much more pleasant pill to.
Speaker 2 (24:34):
Swallow at that point, Like it'll be an extra forty
two dollars a month, but it's also going to be
peace of mind, don't you know exactly.
Speaker 1 (24:39):
Don't you know the peace of mind that that's going
to give you.
Speaker 2 (24:41):
It's going to protect you and your car against anything
that could come its way.
Speaker 1 (24:44):
Yeah.
Speaker 4 (24:45):
Typically we are not fans of extended warranties, especially like
on technology on electronics like tech gadgets. Instead, take care
of your stuff self ensure, and you're going to come
out ahead, Like the vast majority of the time, if
you bought one of those every single time you made
a purchase, like even of on like appliances, you're going
to be spending all of your money all electronics. But
(25:08):
car warranties are a little bit different, but still they
can provide that piece of mind, but they are rarely
worth the money that they actually cost.
Speaker 2 (25:15):
You, And it sounds like the basic warranty that comes
with the car provides a heck of a lot of
peace of mind in and of itself, because that what
is the number one potential problem with an electric vehicle.
It's that the battery craps out ahead of time. And
when you have she's at thirteen thousand miles, when you
have eighty seven thousand miles in front of you, that
where the battery is covered, that's a long time, and
(25:37):
that in and of it self should provide a lot
of peace of mind. Sixty one hundred bucks is so
much money, and if you already have kind of that
warranty that gives you that much coverage, I mean that
could be many, many, many years of coverage on that battery.
To me, that's the biggest thing I would feel taken
care of by that. And it sounds like, yeah, you're
(25:58):
extended warranty includes some extra, but I would also say,
this scheduled maintenance on an electric vehicle is minimal, and
so I think the initial manufacturer's warranty should be ample.
It should assuaged your concerns, and you just really don't
need to add this extended service contract. Also think about
what fine print and exclusions it might come with, Like
(26:20):
you'd be wise to know what's covered first.
Speaker 1 (26:23):
There is a.
Speaker 2 (26:24):
Small chance that you come out ahead by buying this thing,
but the gamble just doesn't pay off for most folks,
and so if you opt. Also, one last thing on
this extended warranty that I want to mention is if
you do opt to go for it, make sure it
is from Volkswagen directly, because third party warranties are the
worst possible kind that the company might not be there
(26:44):
when you need it. There's typically more fine print. They're
just a lot of third party warranties that aren't direct
from the manufacturer that I think are worth a pittance
to almost nothing, and so I would be completely unwilling
to pay for that, that's for sure.
Speaker 1 (27:00):
Do you say warranty or warranty because I swore I
was hearing you say both interchangey like guarantee when I'm like,
I don't think I've ever said warranty like warranty.
Speaker 4 (27:11):
I always say warranty like thirty year warranty, yeah, drive
train warranty, Yes, say it differently, but towards the end
of see Tomato, I say to me that sound like
it was.
Speaker 1 (27:19):
I don't know.
Speaker 4 (27:21):
Aside from self ensuring, I think a better thing to
do is just simply buy a vehicle that rates high
and reliability. I have a looked at your specific car,
So I'm not being critical here. We're talking to the
public at large here, because if we're playing the odds
hoping that our repair bills are going to come in
lower than the price of the extended warranty, we'll buying
a car making model that consistently rates well from different
(27:43):
sites like Consumer Reports.
Speaker 1 (27:44):
That would be wise.
Speaker 4 (27:46):
An extended warranty is rarely an awesome idea, but it
just makes more sense if you buy a car that's,
you know, prone to experiencing the problems when it comes
to some of the different mechanicals in that land Rover, you.
Speaker 2 (27:57):
Might want to consider the extended warranty the Jaguar, right, Yeah,
just a little more, I would.
Speaker 1 (28:02):
I would think about it for a second longer.
Speaker 4 (28:04):
Okay, So to that, to the defense of that, there's
a survey of Consumer Reports readers that finds so after
a decade, they find that the vast majority of Honda, Toyota,
and Subaru extended warranty buyers would never ever buy one again.
They ended up paying a lot of money didn't have
to use it, And I think that that's just it's
(28:24):
not anecdotal, it's a survey, but it just points to
the fact that it's not necessary when you purchase the.
Speaker 2 (28:30):
Right which is interesting, like you might hear that at
first pass and say, oh, then why are Hanta, Toyota
and Subaru's selling these things that people don't like. Well,
because that makes the money, well, because it makes the money.
But also interestingly enough, like when you opt for cars
that are more reliable historically, it just means that the
people were most displeased because they didn't need to use it.
But the ideal would be to buy a car that's
(28:53):
not going to need and you can never fully one
assure yourself even a new car isn't going to have
problems that you're going to need to pay for, just
especially if it happens just outside that warranty period. And like, man,
I should have got the extended warranty. Matt and Joel
were so wrong. At one hundred and two thousand miles
the battery crapped out on this feed up and man,
(29:13):
they're idiots. And the truth is those kind of anecdotal
stories happen too. But if we're playing the odds here,
keeping that sixty one hundred dollars in your bank account
and relying on the warranty that already comes with the
vehicle should provide plenty of peace of mind and plenty
of financial ammunition in your bank account to pay for
something that might or might not happen in this car
(29:34):
in the future.
Speaker 1 (29:34):
That's true. Okay, let's take a quick email from Ryan.
Speaker 4 (29:37):
I've been looking to switch after tax brokeages from Schwab
to Fidelity or Vanguard. As Schwab pays big bank interest
rates on uninvested cash like zero point five percent. You
can go higher, but it'll take three days to invest it,
while Fidelity and Vanguard pay small.
Speaker 1 (29:53):
Bank rates five percent last I checked.
Speaker 4 (29:55):
And no time waiting. So I was wondering what the
best way to do that would be. Should I slow
sell and Schwab and buying the other, or would it
be possible to do a trustee to trustee swap similar
to pre tax retirement accounts, which I thinks.
Speaker 1 (30:08):
A good question.
Speaker 2 (30:08):
I would be frustrated if I was with a brokerage
firm and like those sweep accounts where your cash is
kept before you make investments. If that was earning next
to nothing, I would.
Speaker 1 (30:20):
Be like, what gives?
Speaker 2 (30:21):
Because there are other brokerage firms that don't treat their
customers like that, and Schwap is a great, low cost
brokerage firm. So I was like, wait a second, is
is this for real? To Schwap pay nothing to cash customers? Well,
I would just encourage Ryan to check your money market
funds again. Check what Schwab is offering. There are likely
multiple money market funds that they offer. You might be
(30:44):
in an inferior one because it looks like the one
I checked out is returning more than four percent right now,
which is pretty close to what other money market funds
are offering at some of our other favorite white I
think he.
Speaker 4 (30:56):
Saw that, but what he wrote was that it'll take
three days to invest it, So I think maybe he's
seen those. But the big question then then if that's
the case, then the big question is what's the rub
with the three days? Why does it take three Yeah? Well,
I mean it shouldn't make that long. Well, I mean
it takes time for transactions to go through. And maybe
I don't know he's talking about transferring the money and
then placing the purchase order and then.
Speaker 1 (31:16):
Just the fact that it's in the ether for Yeah.
Speaker 4 (31:18):
Yeah, So I don't know, like it's maybe it's more
of a principled sort of decision that's driving.
Speaker 1 (31:24):
Him to want to change brokerages.
Speaker 4 (31:25):
But that being said, if it was, I mean, I
personally wouldn't let the three days rub me the wrong way.
Speaker 1 (31:31):
Yeah, but maybe he also is a way to question differently.
Speaker 2 (31:34):
I guess I think I heard him saying that, Hey,
money that's sitting there ready to be invested, I can't
earn any meaningful return on it while I'm waiting to invest.
And if that's the case, then I would just say
look to swv x X, which is their savings equivalent
money market fund. That might be the only move you
need to make. But if if you're if Ma's right here,
(31:56):
then I think this might be an issue that you
encounter at other brokerages.
Speaker 1 (32:00):
Too, not your SWAB. But it's not take some time,
probably not lazy. It's just to move money around.
Speaker 2 (32:05):
Yeah that those money moves don't happen instantly. It's like
a Venmo transfer from your Venmo account into your bank
account that typically takes a couple of days unless you
hit the instant thing where you have to pay extra right, which.
Speaker 1 (32:17):
You don't want to do.
Speaker 4 (32:17):
You also, I mean, even if you did, let's say
you did want to switch over, maybe there's other reasons,
Like I wouldn't say that this is the only reason
to switch switch brokerages. Fidelity is great. So let's say
you wanted to do that. But if you were to
sell your assets there in a brokerage account and then
buy them again at another brokerage, that would also trigger
tax consequences and that's something that you certainly want to avoid.
(32:38):
Don't pay these capital gains when you don't need to.
So if you decided that you're going to be better
off at Vanguard, you just do what's known as an
act transfer. You call the new brokerage firm you want
to start doing business with, and they should help you
to be able to do this. Essentially, you're just changing
custodians of the funds that you already own. It's like
slapping a new label on them. Essentially, you're not selling
(33:01):
and then rebuying, which is how you're gonna If you
were you to do that, you're gonna be paying a
ton of money. Well, it just depends on how much
I how much you got you're selling, but you are
most definitely gonna be paying capital gains tax.
Speaker 2 (33:10):
That would be an inefficient way to do it. No
B And that is going to do it for today.
Thank you for listening. We appreciate your time and attention.
We'll see you back here next week. 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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