April 13, 2025 • 33 mins
A new article touts 'investing' your emergency fund. But that's a terrible idea!
Ask HTM: Mary from MI wants to cultivate a secondary source of income.
A new list of top grocery stores was just released. Trader Joes took the top spot!
Ask HTM: Megan wants to know if the Costco credit card is worth getting.
Ask HTM: Mary from MI wants to cultivate a secondary source of income.
A new list of top grocery stores was just released. Trader Joes took the top spot!
Ask HTM: Megan wants to know if the Costco credit card is worth getting.
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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
Do Money with Joel Lar's Guard and Matt aultmixf I.
Speaker 2 (01:17):
Am six forty live everywhere on the iHeartRadio app. This
is how to Money.
Speaker 4 (01:22):
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.
Speaker 2 (01:38):
All right, Matt, now it's time for the ludicrous headline
of the week. This one comes from a website called
The Morning Call, and the headline reads how to set
and Invest your Emergency fund. I prickled when I saw
the headline. Row you know how I feel about investing
emergency funds. Those two words should never go hand in hand.
They shouldn't be in the same headline. I clicked through
(02:01):
so I could hate whatever words were written inside of that,
and then I was like, wait a second, the byeline
is by friend of the show, Christine Ben's over for
Morning Star. I was like, I know Christine is not
advocating investing your e fund, and she wasn't. Fortunately, she
agrees that emergency funds need to be liquid. But I
was just like, I know that the person who writes,
(02:23):
they don't always write the headline.
Speaker 4 (02:24):
It's the editor or a terrible headline.
Speaker 2 (02:26):
And because it's the ludicrous headline of the week email,
the content inside of the article is good. I can
still add this in and say I hate it, it sucks.
Speaker 4 (02:34):
We'll give Christine, though, We'll give her a buy actually
one of the things, so if you actually dig into
the article, I will say one of the things she
missed was that you need to have your money in
the right receptacle, which I don't know if we've ever
used that specific term before, but I love that, and
I think I love it because I spent last week.
I used my time and built this storage bin rack
(02:55):
shelf system in one of our new closets, okay, and
in order to house the you know, like the big
twenty seven gallon totes or bins that you can buy
from oh yeah, home depot. In order to house those,
I can put like four across five tall. You do
the math, that's twenty bins, Joe. But I've been thinking
a lot about bins and storage and different things like that,
and so maybe that's why that's that word stood out
(03:16):
to me because I guess what I'm not going to
put in those storage bins. I'm not going to put
an underwear, Yeah, my underwear or my socks because guess
what broccoli? I need that on a daily basis. I
was thinking, Yeah, I was thinking in the kitchen, like
I'm not going to put a lemon squeezer or a
cocktail shaker or a blender things like that in there.
You know why, Well, I guess I make cocktails more often,
(03:36):
but when it comes on like making smoothies, like we
never we rarely make smoothies maybe once every couple of months.
We're smoothie people, y'all. Y'all do it a lot. But like,
even still, I don't want it to be kind of
way off upstairs in a room, in a closet, in
a bin. It needs to be down there in the kitchen. Sure,
you kind of put it to the back of the cabinet,
perhaps in the lemon squeezer. I mean, we're using that
(03:56):
thing fairly often. So where do you keep that Oh,
you keep it right at hand. In a similar way,
the act of investing your dollars means that that money
is tied up for a long, much longer period of time,
and that is not how you want to approach your
emergency fund specifically. Yeah, but Vanguard they actually highlighted how
four one K hardship withdrawals are becoming more common, to
our chagrin, it's getting easier to access four one K
(04:17):
dollars that are supposed to be locked up for retirement.
For a while now, we've had the one thousand dollars
no questions asked rule thanks to the Secure Act two
point zero back in twenty twenty two, which means that
folks are turning there for cash in a pinch to
their four one ks. And it's still relatively rare that
folks are doing this. Almost five percent of folks with
(04:39):
a four to one K tapped at last year, but
it is a record high. So, like what I'm pointing out,
has substantially increasing. Yes, the trend is not going in
a direction that I like it's like, I see five percent.
I'm like, that's not a huge deal. But I hate
the fact that that is a new record high because
it has never been easier to grab that money. And
if you need cash or just here to let you
(04:59):
know that grabbing it from your retirement account is a
bad way to solve that problem. It's going to create
more problems, and it's going to lead to less wealth
down the road. You've unnecessarily interrupted that compounding growth. Just
because you can doesn't mean you should. And you're right, yeah,
we have a lot of negative consequences. Speaking of blenders
and smoothies makes me think about when I decided to
make a sandwich smoothie in college show just because I could. Yeah,
(05:23):
I quickly learned that did not mean I should. It
was terrible, man.
Speaker 2 (05:26):
I think we've talked about this before, maybe not on
the show, but when my little sister had jaw surgery
growing up and we had to blend everything up for
her for a few months.
Speaker 4 (05:34):
That's rough. Ooh, that's right. I just remember having to
like walk out of a kitchen. I'll say, I cannot
even smell this right now? All right, Matt Chase is
going to block Zell payments made on social media in
an attempt to reduce fraud. Half apparently of all Zel
scams originate on social media. I believe it.
Speaker 2 (05:52):
So, I mean social media it's got yeah, it's right
for that kind of stuff, and Zell has come under
fire for not protecting users in any meaningful way.
Speaker 4 (06:00):
This might cause I.
Speaker 2 (06:01):
Think some annoyance for some Zel users who buy stuff
via social media, but it's going to protect a whole
lot more.
Speaker 3 (06:07):
You know.
Speaker 2 (06:08):
This is I think a good reminder to be incredibly
careful using P two P apps like Zell, Venmo cash app,
because just more consumer protections are coming, but they're thin
and they're certainly not coming from the oversight of government agencies.
So use two factor authentication and only send money to
people you know or to verified folks.
Speaker 4 (06:27):
Matt. One of the things this makes me think of,
send that test payment across That's right.
Speaker 2 (06:31):
My neighbor across the street had random people showing up
to his house this week to pick up things that
they said they bought on Facebook, Marketplace way, and it
turns out someone gave them a fake address to pick
up the goods. They had already paid the person for
the goods they were buying. Never pay somebody ahead of
time until you're actually in full possession of that item
(06:52):
and go to a well lit public place to pick
up that item. So they were showing up and they
were mad at him, and he's.
Speaker 4 (06:58):
Like, you were not talking to me. Sorry, right, Yes,
He's like, that's not me and sell yourself to blame.
Police had to show up. It was a thing.
Speaker 2 (07:06):
It was a bummer and I hate that happened to
those people. But just you cannot pay for something side unseen.
Speaker 4 (07:11):
Yeah, that's true. Man.
Speaker 5 (07:13):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (07:20):
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. Joel, let's hear from our next listener.
This is a listener who is looking to cultivate a
secondary source of income for herself.
Speaker 1 (07:37):
Hey, Matt and Joel. My name is Mary and I'm
from Southeast Michigan. I've been listening to your show for
years now and I've learned so so much from the
both of you and Joel. I used to listen to
The Clark Howard Show when you were on it as well,
and so I learned a ton from you back then too.
Speaker 4 (07:52):
Thank you both and keep up the good work.
Speaker 1 (07:55):
My question for you today is about cultivating a secondary
or supplemental income source. I have a W two job,
and I would like to start up, essentially a side
gig that will supply me with a secondary source of
income in addition to that W two job. I would
like for that secondary income source to in ten years time,
(08:16):
provide me at least sixty thousand dollars a year. So
achieving that sixty thousand dollars a year in ten years
or so, I originally planned to use rental properties to
get there, but I'd also like to get your take
on other options. Would using rates or dividend yielding ETFs
be comparable and for your information for this question, I
(08:38):
plan to use a property management company when it comes
to the rental properties to deal with the typical day
to day activities, but I'd love to get your take
on what I might need to consider if the income
that I'll get from dividends and ETFs will be similar
to that of a rental property and for your knowledge
(08:59):
as well. For rental properties, I would be looking at
properties that provide a six to ten percent cap rate.
Love to get your thoughts.
Speaker 2 (09:06):
Thanks guys, Oh Matt, Mary, she mentioned my work with
Clark back in the day and.
Speaker 4 (09:12):
Worked with Was that the Clark that you mentioned earlier too?
It was as far as you like to extend his razors? Yep.
Speaker 2 (09:19):
So I worked with Clark Howard for fourteen plus years.
It was glorious. Still stay in touch with those folks.
My little sister still works on the crew over there.
What a great, formidable period of my life. And Mary,
I love this goal that you've got, by the way,
attempting to build up another source of income to replace
your W two income. It's brilliant, right. The emergency fund,
it's basically short term insurance to help you if you
(09:40):
were to lose your job. But you're thinking about cultivating
some long term insurance too, which we think everyone should
be doing to one extent or another. And often, as
you alluded to, that takes a while to develop, right.
It doesn't happen overnight, whether we're talking about doing it
through the stock market or we're talking about building a
business on the side. While you're working full time to
(10:01):
generate more revenue, or we're talking about owning rental properties.
Speaker 4 (10:04):
It's going to take time to hit.
Speaker 2 (10:06):
That critical mass of sixty thousand dollars of income a
year that you're shooting for. Yeah, but you're giving yourself
I think a long enough runway here. We really think
that you can meet this goal in a decade. But Matt,
some people want to turn on that's speaking immediately. They're like,
how can I get this in a year? And it's like, well,
not going to happen probably, Yeah, but ten years maybe
that's long enough.
Speaker 4 (10:26):
Yeah, it depends on a few things. Like this makes
me think of We recently interviewed Shun and she actually
had a similar goal. We talked to her last week.
Even though she had a fancy job, she had that
fancy consultant gig, she still started a side hustle as
a photographer in order to bring in extra money to
accelerate that goal. And so the first suggestion that we'd
make is to at least consider starting a side business
(10:47):
as part of the answer here, Like, you don't have
to work over ninety hours a week like Shun did,
but building up a small stream of side revenue is
going to help you to get closer to that income goal,
and it can increase your ability to invest at the
same time because you're gonna have more dollars flowing in.
So so much of this comes down to how much
personal time you're willing to give it. And that's my
(11:08):
biggest concern is that she named a lot of passive
sort of avenues to you know, have an additional stream
of income, and like, you can do that, but that's
going to take an incredibly ambitious amount of investing over
the next ten years. If you're looking to draw down
sixty thousand dollars annually, I'm assuming that she's expecting to
continue that stream going for the rest of her life. Basically,
(11:29):
you know, I don't know, let's late, we don't need
to dive into the details yet, but bottom line, like
that is some seriously aggressive investing that she would have
to do in order to pull something like that off.
Speaker 2 (11:37):
Agreed, So, yeah, I think what you're what you're hinting
at here is Matt is probably going to take pulling
a bunch of different level levers, one of which will
be reducing expenses, another which could be increasing your income,
and a side hustle might be a big part of that.
Speaker 4 (11:52):
Yeah, And well, the I think the biggest difference here
is is like how much sweat equity are you willing
to put into it? Because if you're thinking, like, well, no,
I just want this to be this addit mad thing
like you said, it definitely can't be pulled off in
one year, but even ten years is a pretty tall ask. However,
you can change the equation, You can change the factors
that go into this cake that you're baking. If you're
(12:13):
willing to give it a little bit of sweat equity,
like that changes the game. And she specifically was asking
about real estate. I mean, I think that's one of
the reasons that makes that so attractive, is that you're
combining capital but then also your ability to dive in
there and like mess with it. That's exactly right.
Speaker 2 (12:28):
Yeah, I mean I think I do lean towards real
estate as the answer for this. I think that that's
for a couple of different reasons. You know, if done
wisely with the long term mindset, leverage can be your
friend on the real estate front, right, you can buy
a property that has positive cash flow with a twenty
to twenty five percent down payment, and on top of that,
actually you might be able to get incredibly creative by
house hacking, with a guide to that on our website.
(12:50):
So if you're looking and willing to think outside the
box a little bit, I think that can accelerate your
returns and accelerate your cash flow. And by being a
more flexible homeowner slash investor, you might be able to
either decrease your timeline or increase your cash logal too.
It just all depends on kind of what you're highlighting
here about how uncomfortable you're willing to get, how much
(13:10):
elbow grease you're willing to put in, how much of
the suck are you willing to embrace right, and how
much dedication are you willing to put into kind of
amassing a small real estate portfolio. You know, local real
estate markets they're less efficient than the overall stock market,
which means smart investors can find deals that are harder
to find in let's say the publicly traded stock market.
(13:31):
Space you mentioned though, using a property management company that
would make the numbers harder to pull off. We always
suggest for newbe landlords to do self management for a
couple of years at least to learn the ropes, to
know the questions to ask, and you get pretty familiar
with the whole process by doing that. So I don't know,
maybe that's another place where you could use some of
(13:51):
that elbow grease to manage the property yourself, make sure
those numbers are better, and then at some point down
the line you can.
Speaker 4 (13:59):
Offload that to a pretty manager. Totally. Yeah, This is
why I think this is sort of like a secret
early retirement question, because there's not a whole lot of
her saying that, like, I'm looking to start a whole
new side business, a whole new gig. And that's when
it gets challenging because she did mention investing in dividend
producing stocks, and I think this is at the truly
at the heart of her question. I don't think that
there is any particular magic in going that direction right,
(14:21):
or opting for reas that are shedding dividends, that kind
of thing where you are earning money that way. Instead
of focusing on dividends, just focus on creating a diverse
portfolio of investments that's going to grow meaningfully over time.
When you look at the data, stocks that pay higher dividends,
they actually underperform the S and P five hundred and
so maybe instead just invest in VU something as simple
(14:44):
as Vanguard's S and P five hundred ETF and abiding
by something like the four percent rule, you could tap
those funds down the road even if you aren't fully retired.
I think there's there's sort of like this mental hurdle,
like people don't want to sell their positions, they don't
want to sell their securities, but like that's what they're
there for. Yeah, folks, A lot there's like the oh,
how do I get income generating assets? That's what stocks are.
(15:06):
And so once you get past that mental hurdle of
knowing that, like, Okay, if I need those funds, I
then sell some shares. I'd rather grow that's your income.
Speaker 2 (15:13):
I'd rather grow the pot bigger than have a smaller
pot that throws off dividends. Right, That's kind of what
you're getting at, And when you look at the numbers,
growing the bigger pot is typically done through investing directly
in something like an S and P or total stock
market index fund. It's better than prioritizing companies who pay
higher dividends totally.
Speaker 4 (15:30):
So again kind of speaking to the early retirement part
of her question. I mean assuming like it sounds like
she's got some money, but let's just assume that she's
starting from zero. If she's looking to be able to
draw down sixty thousand dollars a year ten years from now,
so a full decade from now, that means she needs
at least seven hundred and fifteen thousand dollars on hand.
(15:50):
And that's something with like a I think I put
in like a forty year runway before that turns into
a negative number, which means investing fifty thousand dollars a
year starting now. Again, assuming that she has zero dollars
set aside, let's just say that you woke up and
you're like, oh, this is a new goal of mine.
I've not prepared at all for this. This is what
it would take. It's something it's like setting aside like
(16:12):
a little over four thousand dollars every single month, which
is really that's really tough to take your throwing cold
water on this one. Now, I'm just saying, like I
want to be realistic, like you have to. You're gonna
need to have at least seven hundred and fifty thousand dollars,
if not more, on like that, I was gonna say,
that would be I assumes a perfect market. That assumes
a perfect eight percent. So I figured, you know, on average,
you're looking at ten percent eight percent with inflation, so
(16:34):
that assumes a perfect eight percent every single year of compounding,
and then that it assumes inflation calms down a little bit. Exactly.
There's a lot, a lot of assumptions here.
Speaker 2 (16:44):
For a lot of people would say you need to
save have invested at least a millionaire.
Speaker 4 (16:47):
Even more than that, in order to be able to
pull this at a minimum, to be able to pull
this off, You're still looking at a pretty large sum
of money, which is totally doable. But I'm just I'm
just trying to be realistic here when you actually crush
the numbers to see what does it take to be
able to pull this thing off.
Speaker 2 (17:02):
Yeah, I couldn't agree more. All Right, We've got more
to get to on today's show.
Speaker 5 (17:07):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (17:14):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 2 (17:19):
Now, let's talk about grocery stores. Kiplinger detailed the best
and worst grocery store chains in the country. What they
did was they used Google reviews from across the country
to try and spot trends, and so Trader Joe's took
the top spot in their analysis, Costco and Wegmans took
second and third, Legal Andaldi still take a respectable eighth.
Speaker 4 (17:39):
To ninth, which just makes you think that it's still
first in my heart.
Speaker 2 (17:42):
Yeah, we have so many grocery stores in this country,
by the way, and so let's talk about the worst ones.
King Soopers, save a lot, Kroger and Walmart, those were
the worst for according to Kiplinger. And so you know,
price obviously is in the only consideration, because Leo Lenaldi
would have been like top three for sure if that.
Speaker 4 (18:01):
Were the case.
Speaker 2 (18:02):
And we're just so fortunate to live in a country
where we have so much competition in the grocery store space.
I know we've experienced a lot of inflation in grocery
prices over the last few years, and nobody likes to
see that, but we all benefit from this increased competition.
And it's just important to note you're likely to have
a better experience at some of the top spots. Some
of the places that are ranked more highly, and a
(18:24):
lot of those are gonna pay less too.
Speaker 3 (18:25):
Matt.
Speaker 4 (18:25):
Yeah, I do hate the fact though that it was
based on Google reviews, because you know that somebody was
in there, let's say, at Aldi, and they had just
a sour interaction with an employee who was standing there
stocking the shelves, or maybe they're like, he's never had
a bad interaction with an employee at Aldi, Matt. Some people,
it depends on your store, man, It depends on the store,
the manager, the folks that they've hired. Sometimes, especially with Aldie.
(18:47):
I'm just coming to all these offense here. If they've
never stuck a quarter in a shopping cart before, they're
just kind of like, I couldn't get a cart, they're
locked up. How does that does that even work?
Speaker 2 (18:58):
Because it's it feels weird, you got it takes him
getting used to Yeah, a little tip.
Speaker 4 (19:01):
You can go to the cashier and ask them for
a quarter, and they're allowed to give out a certain
number of quarters per shift, so well, that's one way
around that. It also, specifically to me, it made an
intuitive sense to see some of these stores at the
top and yeah, specifically because of course they know how
to sing and entertain like bring bells. It's like a
party when you go into a trading Joe's. Man, I'm like,
are y'all making like rum cocktails or something that were?
(19:22):
I feel like I want to be a part of
the island scene here.
Speaker 2 (19:24):
It's not like they're charging ridiculous amounts more either, Like
Trader Jones has pre solid costs on a lot of
what they offer, So Vibe makes sense that they're the
top spot. And let's talk about senior citizen discounts. Matt, like,
when you go to the grocery store. Certain grocery stores
incentivized seniors to come on certain days with a discount.
So Public's is a grocery store chain in the in
(19:46):
the Southeast. They give folks who are sixty and older
five percent off every Wednesday. Fred Meyer offers ten percent
off on the first Tuesday of every month. And that's
not all. There are more discounts at other grocery stores too.
But the New York Time Times had an interesting article
about whether or not senior discounts should just go away altogether.
And the article was based on a reader who was
(20:08):
questioning the ethical nature of age based benefits. But the
author I was glad the author kind of defended our
senior citizens here, Matt. They basically pointed out that this
not only helped seniors who might be financially vulnerable, which
which is a lot of senior citizens, especially if you're
living on a fixed income. The grocery store, though, isn't
(20:28):
terribly crowded during those incentivized times. It's kind of like
incentivizing people to come to see a matine movie. Yeah,
there's a real It's like, hey, who's free at like
one o'clock on a Thursday.
Speaker 4 (20:38):
Not many people. We're still paying rent, right, So if
we get sun butts in the city, to me, that's
a form of dynamic pricing.
Speaker 2 (20:45):
And so exactly seniors and the rest of us, we
should all be price sensitive and we should let those
incentives sway us. If I'm Matt once i'm fully retired,
if I want to go do my grocery shopping on
a Wednesday morning to get that extra five or ten
percent off, I'm going to do it.
Speaker 4 (20:59):
Yeah, has been nice lately. Windows have been open. You
you love this time of year, don't you. Man. You
don't have to run your AC or your heat. You're
kind of like in this in between sort of. It's
like instead of it being like a purgatory as in
like a bad thing, it's kind of like a good thing. Yeah,
oh it's the best. I agree.
Speaker 2 (21:15):
I think it's It's one of my favorite things to
see how long I can go without running either the
heat or the AC at all, just.
Speaker 4 (21:23):
Like get the fans cranking. Yeah, well we have to
do man. I realized last week that my sleep was suffering,
and I'm like, oh, it's because we still have like
the winter blanket on because we let the let the
temperature dropt so much in the winter. But it means
I'm like not sleeping as well. So we had a
like also because you're not saunaing before bed, like I am.
My sleep has improved, yet, have you seen your sleep
scores sleepskips go up. Well. Something that's gonna help folks
(21:46):
to keep their utility bills low, to keep from having
a turn on their AC or their heat next fall
or next winter, is to make sure that you have
enough insulation. Seeing that, they had an article about getting
a free home energy audit, which it turns out a
lot of different electricity providers offer to their customers, and
the author he found that he had almost no insulation
(22:06):
in his walls, costing him massive amounts of money. And
there are often incentives for making energy upgrades as well,
and that's before you even like buy the electricity provider,
and that's before considering any of the different.
Speaker 2 (22:18):
Federal tax benefits as well. Those two things combined can
really bring.
Speaker 4 (22:22):
Down the cost. Heck, yeah, he was specifically in Massachusetts
and it was going to be completely free for in
his case, the landlord to get insulation put in the walls,
which not only does it make it more comfortable from
a temperature standpoint, but it acoustically is nicer as well,
especially if you've got roommates. You don't yeah, you know,
you don't hear your roommate in the room next door,
Like you know, you want like a little bit more privacy,
(22:43):
And all of a sudden you're like, WHOA, I thought
I needed a bigger place. Turns out all we needed
was to not be able to hear each other all
the time.
Speaker 2 (22:50):
We made a similar move in our little clubhouse here
where we work and record the podcast.
Speaker 4 (22:56):
Our landlord, we.
Speaker 2 (22:57):
Were like, hey, do you know about these discounts, because
it'd be awesome if you made some of these improvements
and we'll sign a lease, we'll stay longer. Yeah, And
it was a win win where so much more comfortab Yeah,
so much more comfortable up here now. So he put
the installation in, did a couple of other little things
and reaped some substant substantial tax savings and electricity bill
savings thirty percent off. Yeah yeah, and those those federal benefits.
(23:19):
And then they might not have done it. I don't
think if we if we had not made the suggestion.
Speaker 3 (23:22):
Sure.
Speaker 4 (23:22):
Yeah, and the different utility providers they've got those rebates
as well. Georgia Power is offering it's like seventy five
percent off smart thermostats, and so we're gonna get a
couple Google nests. Normally these things are one hundred and
thirty bucks. Man, we're paying like thirty two dollars a pop.
You're limited to two. So we're gonna go ahead and
replace one of the other ones that isn't so smart.
Speaker 3 (23:40):
Yeah.
Speaker 4 (23:41):
Yeah, they look good as well, and they're gonna help
us to save a ton of money. So it's yeah, win, we.
Speaker 2 (23:44):
Got more money saving information to get to.
Speaker 5 (23:47):
You're listening to how to Money with Joel Larsgard on
Demand from kfi am six forty.
Speaker 2 (23:53):
We're glad to have you along for the show today.
By the way, if you're looking for the right credit
card for your wallet, well you want to be able
to use responsibly. But if you do that, if you
pay your credit card on time and in full every
single month, well check on our credit card tool. You
can find that up on the website at howtomoney dot com.
Speaker 4 (24:10):
Let's now take the Facebook question of the week, which
is from Megan. She asks, does anyone have the Costco
credit card? I'm a new Costco member. Welcome to the fold, Meghan,
and I would love to hear about your experience with
their credit card. Thank you, Joel. Do you like the
Costco credit card? Are you a fan? Yeah? I am.
I By the way, are you only a fan of
the big box retailer? I still of itself.
Speaker 2 (24:31):
I still remember the day I joined the club, and
not not really, but you get your picture taken.
Speaker 4 (24:38):
A lot of us do remember it, because it's not
often that you stand there in front of the screen
and you know, they tell you to smile at the camera,
do whatever else.
Speaker 2 (24:45):
It wasn't life changing in the way I thought it
would be. But I'm so glad it did, because being
a Costco member has given me a lot of benefits.
Speaker 4 (24:52):
I actually do recall as well, because it was only
a couple of years ago or two years ago. Gosh,
let me hold, let me pull up, Mike. I was
not even Costco credit card right here, busted out and me.
Speaker 2 (24:59):
We look at that because it tells you how long
you've been a member, since since February twenty fourteen, so
I've been.
Speaker 4 (25:04):
A member nineteen. Okay. I was not willing to join
because it was so far from where we used to live.
We used to live in town and maybe you had
to drive out to the burbs. And I realized, at
least for us at that point in time, it was
not going to be worth it.
Speaker 2 (25:18):
Spoken like a true pleab, but now I don't even
know what that means. I hear the kids say, no,
I love it. Yeah, okay, let's talk about specifically the
Costco credit card. It is great, like Costco membership is fantastic,
but so is the Costco credit card. I think if
you're a Costco member, it's a no brainer. Like, I
don't know why you would be a Costco member and
not have the Costco credit card. Sometimes madam at the
(25:38):
gas station filling up, obviously using my Costco credit card,
and I see people using a different credit card and
I'm like, huh, I like scratched my head. I don't
understand it.
Speaker 4 (25:46):
What kind of spine you did on other people? Look
at that? What? Yeah, I don't look at anybody. I'm like,
head down. Oh well, it's not head down, it's just
I have like I want to spend as little time
in the gas line as possible. I'm quick and while
it's pumping, what else are you doing? I'm people watching?
Oh are you Yeah, I'm cleaning out the car. Oh
there's a there's free trash can right there that I
(26:06):
don't have to like empty the bag every single time.
You don't clean out the car while usually just stand
there and stare at people.
Speaker 2 (26:12):
Usually my kids are like running around in there, and
I'm you know, I'm like just standing there for I
like do a little bit stretching maybe, And then I'm like,
what credit card do they use?
Speaker 4 (26:21):
No? Man, I go. I opened the door, pull all
the trash out of the side compart, you know, like
you've got all the different pockets and there's all these
gum wrappers and oh, sure, like coffee cup whatever, just
all sorts of trash. That is the at least for us,
the clean out the van. Let's get this thing to
look at half decent time. Okay, yeah that's smart. No
look at other people's credit card. But I love that
you do. Yeah.
Speaker 2 (26:39):
Well, I mean when I look and I see people
using something else, it makes no sense to me.
Speaker 4 (26:44):
You go there and try to explain to them that, hey,
what why are you doing this? You should get this
car because of the.
Speaker 2 (26:49):
Specifically because the gas cash back, right, So, so it's
four percent at gas stations, it's five percent now only
recently when you're buying gas at costcodes.
Speaker 4 (26:59):
So you get five percent cash back on Costco gaess,
which is also the most affordable, highest quality of grass
that you can purchase.
Speaker 2 (27:05):
So it's a no brainer. Yes, if it's nearby and
in your in your schedule. So and you have to
pay with the visa. By the way, at Costco used
to be an AMEX. I just don't think there's any
reason to use a different visa card when you're checking out, like,
get the Costco card, especially if.
Speaker 4 (27:19):
There's no annual fee attached. Totally. Yeah, and on top
of that, you get three percent cash back on travel,
including if you purchase like one of those Costco travel bundles,
which I personally have never done, but one of these
days I'm gonna get around to doing it, Joel. But
you can't use one of the cards where you're earning
five percent, like the custom Cash card is what I'm
specifically thinking of. You have to use a visa card.
(27:40):
The Warehouse clubs also don't qualify as a grocery store,
so you can It's not like you can get a
Blue Cash preferred six percent back because it's not a
grocery store. On top of that, you can't use the
AMX and so like, and you can't use the City
Double Cash either, like you got to get the Costco card,
like cash back on all Costco purchases with the Costco
credit card.
Speaker 2 (27:59):
So again, why would you use anything else? I could
see if there was an annual fe attached, like you
might have to run the numbers, do some math. But
there's no harm, no foul on having an additional credit card.
Even if let's say you only use this credit card
for Costo purchases and for gas, then I would say
this card, having this card in your arsenal makes sense.
Speaker 4 (28:18):
It makes sense, all right. Another quick question from this
is actually a different Megan on the Facebook group, but
she wrote, anyone know of a spreadsheet that analyzes a
home purchase from an investment perspective? We know that we're
only going to be there for five years, so we
want to be more strategic about what we buy. Joel,
what do you think.
Speaker 2 (28:35):
I'm going to say, don't buy the home? Probably that's
a TLDR, that's the quick answer. But you know, Matt,
you and I we always talk about the importance of
timeline when it comes to home ownership, yep. And whether
or not it makes sense, or it's going to pay off,
or it's going to be a better financial move for you.
The expense of buying and selling can be significant. So
there are significant costs associated with both of those endeavors,
(28:57):
and so if you're bumping them close together within a
five year timeframe, the cost could be prohibitive.
Speaker 4 (29:04):
Right.
Speaker 2 (29:04):
So, if you own a home, let's say, for a
couple of years, even if you see some equity growth,
this seller in this case often has to come to
the closing table with cash to cover closing fees and
agents costs, and stuff like that. I think big ups
by the way to Megan for asking this question before
she buys the house. I've heard way too many focks
Matt who buy the house. They've heard home ownership is smart,
(29:24):
they haven't thought through the details, and it ends up
costing them because let's say they live in the home
for three years or something like that. Well, their own
home ownership timeline wasn't long enough and they ended up
losing in the process. They would have been better off
renting totally.
Speaker 4 (29:37):
Yeah, And Megan also said she's looking at this from
an investment perspective, but I don't think that she wants
to own this as a rental property. I think what
she's asking about is whether the financial benefit will be
superior when you are considering owning a home versus renting
a home, given those transaction costs that you just mentioned
their Joel, and when you look at what home prices
(29:57):
have done over the past fifteen years or so, that
you know, the typical reaction for most folks, especially realtors,
folks in the real estate space, they're going to tell
you to buy every single time instead of rents. They
would say that you'd be you'd be an idiot to
not purchase a home. You're going to come out ahead.
And in one sense, they have a vested interest in
telling you that, Matt, of course you've got that. But
(30:18):
like like yeah, like if you look at history, yeah,
you're homeowners. They have made out like bandits in recent years.
But you also can't count on these recent trends continuing
far off into the future, or even for the next
five years specifically, right, I mean, the truth is it's
highly unlikely that the housing market is going to experience similar,
ongoing significant price increases over the coming fifteen years. I
(30:40):
would be shocked if the coming fifteen years looked a
lot like the last fifteen years in terms of home
price acceleration. That's because price increases can't out place inflation.
They can't outpace wages forever. Right, We're already seeing prices
stalling and predictions of price declines in the near term
from some outlets. The truth is, if you look back,
(31:00):
you bought in twenty thirteen, you sold in twenty eighteen,
or if you'd bought in twenty eighteen and sold in
twenty twenty three, those are both five year timelines, you
would have done quite well for yourself. But those might
be the exception, not the rule. And so if you
look just a recent history instead of a longer stretch
of history, you might be doing yourself a disservice assuming
that something's going to be true that likely isn't going
to be when you zoom out. The five year ownership timeline,
(31:22):
it's really the minimum to avoid potentially losing real money
in that transaction, at least when we're talking about a
longer perspective. And I'm just I'm worried, Matt, about someone
sticking to a five year ownership time. So we always
say five to seven, and typically we prefer seven. Five
years just might not be long enough. Yeah, well, especially
given the massive disparity between rent prices right now and
(31:42):
then the typical mortgage payment these days in most cities,
and specifically because she said that she knows she's only
going to be there for five years, like maybe they're
moving to a college town and they're there for like
a graduate degree or something. I don't know, especially given
that I would suggest renting. It's what I would do
if I were in your shoes given a similar timeline,
And we don't have a so because of that, we
(32:04):
don't have a spreadsheet recommendation when it comes to something
like this, but do check out the New York Times
rent versus by calculator, which is totally great. And the
only other way that this that I would change from
my mind were I in your situation is if the
what it is that the NRA is like, if the
industry gets a massive shake up, basically when it comes
to commission's fees paid towards realtors, because we haven't seen that.
(32:26):
But we haven't seen that, like there's been talking not
the NRA. I always say that very different organization, National
Association of Realtors. They've had a stranglehold where you're paying
six percent, and if that completely gets up ended, well,
my answer is also going to change because all of
a sudden, the vast majority of the transaction costs gets eliminated. Yeah,
(32:46):
Housing prices for the most part are fairly stable over time.
We see them typically go up into the right, cross
your fingers. We don't see another massive decline like we
saw in No. Seven eight with a great recession, but
that that's like a once in a lifetime thing in
my opinion, you eliminate these massive transaction costs, I think
we do see people purchasing at homes living there for
(33:07):
two or three years. Maybe they see a little bit appreciation,
maybe they don't, but it's not even that big of
a deal because the transaction costs, the known expense that
comes with selling a home is no longer there.
Speaker 2 (33:16):
Yeah, totally okay. Thank you as always for listening to
the show. We appreciate your time and attention. You can
always find more money saving information up on our website
at howtomoney dot com. 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
(33:37):
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
Do Money with Joel Lar's Guard and Matt aultmixf I.
Speaker 2 (01:17):
Am six forty live everywhere on the iHeartRadio app. This
is how to Money.
Speaker 4 (01:22):
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.
Speaker 2 (01:38):
All right, Matt, now it's time for the ludicrous headline
of the week. This one comes from a website called
The Morning Call, and the headline reads how to set
and Invest your Emergency fund. I prickled when I saw
the headline. Row you know how I feel about investing
emergency funds. Those two words should never go hand in hand.
They shouldn't be in the same headline. I clicked through
(02:01):
so I could hate whatever words were written inside of that,
and then I was like, wait a second, the byeline
is by friend of the show, Christine Ben's over for
Morning Star. I was like, I know Christine is not
advocating investing your e fund, and she wasn't. Fortunately, she
agrees that emergency funds need to be liquid. But I
was just like, I know that the person who writes,
(02:23):
they don't always write the headline.
Speaker 4 (02:24):
It's the editor or a terrible headline.
Speaker 2 (02:26):
And because it's the ludicrous headline of the week email,
the content inside of the article is good. I can
still add this in and say I hate it, it sucks.
Speaker 4 (02:34):
We'll give Christine, though, We'll give her a buy actually
one of the things, so if you actually dig into
the article, I will say one of the things she
missed was that you need to have your money in
the right receptacle, which I don't know if we've ever
used that specific term before, but I love that, and
I think I love it because I spent last week.
I used my time and built this storage bin rack
(02:55):
shelf system in one of our new closets, okay, and
in order to house the you know, like the big
twenty seven gallon totes or bins that you can buy
from oh yeah, home depot. In order to house those,
I can put like four across five tall. You do
the math, that's twenty bins, Joe. But I've been thinking
a lot about bins and storage and different things like that,
and so maybe that's why that's that word stood out
(03:16):
to me because I guess what I'm not going to
put in those storage bins. I'm not going to put
an underwear, Yeah, my underwear or my socks because guess
what broccoli? I need that on a daily basis. I
was thinking, Yeah, I was thinking in the kitchen, like
I'm not going to put a lemon squeezer or a
cocktail shaker or a blender things like that in there.
You know why, Well, I guess I make cocktails more often,
(03:36):
but when it comes on like making smoothies, like we
never we rarely make smoothies maybe once every couple of months.
We're smoothie people, y'all. Y'all do it a lot. But like,
even still, I don't want it to be kind of
way off upstairs in a room, in a closet, in
a bin. It needs to be down there in the kitchen. Sure,
you kind of put it to the back of the cabinet,
perhaps in the lemon squeezer. I mean, we're using that
(03:56):
thing fairly often. So where do you keep that Oh,
you keep it right at hand. In a similar way,
the act of investing your dollars means that that money
is tied up for a long, much longer period of time,
and that is not how you want to approach your
emergency fund specifically. Yeah, but Vanguard they actually highlighted how
four one K hardship withdrawals are becoming more common, to
our chagrin, it's getting easier to access four one K
(04:17):
dollars that are supposed to be locked up for retirement.
For a while now, we've had the one thousand dollars
no questions asked rule thanks to the Secure Act two
point zero back in twenty twenty two, which means that
folks are turning there for cash in a pinch to
their four one ks. And it's still relatively rare that
folks are doing this. Almost five percent of folks with
(04:39):
a four to one K tapped at last year, but
it is a record high. So, like what I'm pointing out,
has substantially increasing. Yes, the trend is not going in
a direction that I like it's like, I see five percent.
I'm like, that's not a huge deal. But I hate
the fact that that is a new record high because
it has never been easier to grab that money. And
if you need cash or just here to let you
(04:59):
know that grabbing it from your retirement account is a
bad way to solve that problem. It's going to create
more problems, and it's going to lead to less wealth
down the road. You've unnecessarily interrupted that compounding growth. Just
because you can doesn't mean you should. And you're right, yeah,
we have a lot of negative consequences. Speaking of blenders
and smoothies makes me think about when I decided to
make a sandwich smoothie in college show just because I could. Yeah,
(05:23):
I quickly learned that did not mean I should. It
was terrible, man.
Speaker 2 (05:26):
I think we've talked about this before, maybe not on
the show, but when my little sister had jaw surgery
growing up and we had to blend everything up for
her for a few months.
Speaker 4 (05:34):
That's rough. Ooh, that's right. I just remember having to
like walk out of a kitchen. I'll say, I cannot
even smell this right now? All right, Matt Chase is
going to block Zell payments made on social media in
an attempt to reduce fraud. Half apparently of all Zel
scams originate on social media. I believe it.
Speaker 2 (05:52):
So, I mean social media it's got yeah, it's right
for that kind of stuff, and Zell has come under
fire for not protecting users in any meaningful way.
Speaker 4 (06:00):
This might cause I.
Speaker 2 (06:01):
Think some annoyance for some Zel users who buy stuff
via social media, but it's going to protect a whole
lot more.
Speaker 3 (06:07):
You know.
Speaker 2 (06:08):
This is I think a good reminder to be incredibly
careful using P two P apps like Zell, Venmo cash app,
because just more consumer protections are coming, but they're thin
and they're certainly not coming from the oversight of government agencies.
So use two factor authentication and only send money to
people you know or to verified folks.
Speaker 4 (06:27):
Matt. One of the things this makes me think of,
send that test payment across That's right.
Speaker 2 (06:31):
My neighbor across the street had random people showing up
to his house this week to pick up things that
they said they bought on Facebook, Marketplace way, and it
turns out someone gave them a fake address to pick
up the goods. They had already paid the person for
the goods they were buying. Never pay somebody ahead of
time until you're actually in full possession of that item
(06:52):
and go to a well lit public place to pick
up that item. So they were showing up and they
were mad at him, and he's.
Speaker 4 (06:58):
Like, you were not talking to me. Sorry, right, Yes,
He's like, that's not me and sell yourself to blame.
Police had to show up. It was a thing.
Speaker 2 (07:06):
It was a bummer and I hate that happened to
those people. But just you cannot pay for something side unseen.
Speaker 4 (07:11):
Yeah, that's true. Man.
Speaker 5 (07:13):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (07:20):
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. Joel, let's hear from our next listener.
This is a listener who is looking to cultivate a
secondary source of income for herself.
Speaker 1 (07:37):
Hey, Matt and Joel. My name is Mary and I'm
from Southeast Michigan. I've been listening to your show for
years now and I've learned so so much from the
both of you and Joel. I used to listen to
The Clark Howard Show when you were on it as well,
and so I learned a ton from you back then too.
Speaker 4 (07:52):
Thank you both and keep up the good work.
Speaker 1 (07:55):
My question for you today is about cultivating a secondary
or supplemental income source. I have a W two job,
and I would like to start up, essentially a side
gig that will supply me with a secondary source of
income in addition to that W two job. I would
like for that secondary income source to in ten years time,
(08:16):
provide me at least sixty thousand dollars a year. So
achieving that sixty thousand dollars a year in ten years
or so, I originally planned to use rental properties to
get there, but I'd also like to get your take
on other options. Would using rates or dividend yielding ETFs
be comparable and for your information for this question, I
(08:38):
plan to use a property management company when it comes
to the rental properties to deal with the typical day
to day activities, but I'd love to get your take
on what I might need to consider if the income
that I'll get from dividends and ETFs will be similar
to that of a rental property and for your knowledge
(08:59):
as well. For rental properties, I would be looking at
properties that provide a six to ten percent cap rate.
Love to get your thoughts.
Speaker 2 (09:06):
Thanks guys, Oh Matt, Mary, she mentioned my work with
Clark back in the day and.
Speaker 4 (09:12):
Worked with Was that the Clark that you mentioned earlier too?
It was as far as you like to extend his razors? Yep.
Speaker 2 (09:19):
So I worked with Clark Howard for fourteen plus years.
It was glorious. Still stay in touch with those folks.
My little sister still works on the crew over there.
What a great, formidable period of my life. And Mary,
I love this goal that you've got, by the way,
attempting to build up another source of income to replace
your W two income. It's brilliant, right. The emergency fund,
it's basically short term insurance to help you if you
(09:40):
were to lose your job. But you're thinking about cultivating
some long term insurance too, which we think everyone should
be doing to one extent or another. And often, as
you alluded to, that takes a while to develop, right.
It doesn't happen overnight, whether we're talking about doing it
through the stock market or we're talking about building a
business on the side. While you're working full time to
(10:01):
generate more revenue, or we're talking about owning rental properties.
Speaker 4 (10:04):
It's going to take time to hit.
Speaker 2 (10:06):
That critical mass of sixty thousand dollars of income a
year that you're shooting for. Yeah, but you're giving yourself
I think a long enough runway here. We really think
that you can meet this goal in a decade. But Matt,
some people want to turn on that's speaking immediately. They're like,
how can I get this in a year? And it's like, well,
not going to happen probably, Yeah, but ten years maybe
that's long enough.
Speaker 4 (10:26):
Yeah, it depends on a few things. Like this makes
me think of We recently interviewed Shun and she actually
had a similar goal. We talked to her last week.
Even though she had a fancy job, she had that
fancy consultant gig, she still started a side hustle as
a photographer in order to bring in extra money to
accelerate that goal. And so the first suggestion that we'd
make is to at least consider starting a side business
(10:47):
as part of the answer here, Like, you don't have
to work over ninety hours a week like Shun did,
but building up a small stream of side revenue is
going to help you to get closer to that income goal,
and it can increase your ability to invest at the
same time because you're gonna have more dollars flowing in.
So so much of this comes down to how much
personal time you're willing to give it. And that's my
(11:08):
biggest concern is that she named a lot of passive
sort of avenues to you know, have an additional stream
of income, and like, you can do that, but that's
going to take an incredibly ambitious amount of investing over
the next ten years. If you're looking to draw down
sixty thousand dollars annually, I'm assuming that she's expecting to
continue that stream going for the rest of her life. Basically,
(11:29):
you know, I don't know, let's late, we don't need
to dive into the details yet, but bottom line, like
that is some seriously aggressive investing that she would have
to do in order to pull something like that off.
Speaker 2 (11:37):
Agreed, So, yeah, I think what you're what you're hinting
at here is Matt is probably going to take pulling
a bunch of different level levers, one of which will
be reducing expenses, another which could be increasing your income,
and a side hustle might be a big part of that.
Speaker 4 (11:52):
Yeah, And well, the I think the biggest difference here
is is like how much sweat equity are you willing
to put into it? Because if you're thinking, like, well, no,
I just want this to be this addit mad thing
like you said, it definitely can't be pulled off in
one year, but even ten years is a pretty tall ask. However,
you can change the equation, You can change the factors
that go into this cake that you're baking. If you're
(12:13):
willing to give it a little bit of sweat equity,
like that changes the game. And she specifically was asking
about real estate. I mean, I think that's one of
the reasons that makes that so attractive, is that you're
combining capital but then also your ability to dive in
there and like mess with it. That's exactly right.
Speaker 2 (12:28):
Yeah, I mean I think I do lean towards real
estate as the answer for this. I think that that's
for a couple of different reasons. You know, if done
wisely with the long term mindset, leverage can be your
friend on the real estate front, right, you can buy
a property that has positive cash flow with a twenty
to twenty five percent down payment, and on top of that,
actually you might be able to get incredibly creative by
house hacking, with a guide to that on our website.
(12:50):
So if you're looking and willing to think outside the
box a little bit, I think that can accelerate your
returns and accelerate your cash flow. And by being a
more flexible homeowner slash investor, you might be able to
either decrease your timeline or increase your cash logal too.
It just all depends on kind of what you're highlighting
here about how uncomfortable you're willing to get, how much
(13:10):
elbow grease you're willing to put in, how much of
the suck are you willing to embrace right, and how
much dedication are you willing to put into kind of
amassing a small real estate portfolio. You know, local real
estate markets they're less efficient than the overall stock market,
which means smart investors can find deals that are harder
to find in let's say the publicly traded stock market.
(13:31):
Space you mentioned though, using a property management company that
would make the numbers harder to pull off. We always
suggest for newbe landlords to do self management for a
couple of years at least to learn the ropes, to
know the questions to ask, and you get pretty familiar
with the whole process by doing that. So I don't know,
maybe that's another place where you could use some of
(13:51):
that elbow grease to manage the property yourself, make sure
those numbers are better, and then at some point down
the line you can.
Speaker 4 (13:59):
Offload that to a pretty manager. Totally. Yeah, This is
why I think this is sort of like a secret
early retirement question, because there's not a whole lot of
her saying that, like, I'm looking to start a whole
new side business, a whole new gig. And that's when
it gets challenging because she did mention investing in dividend
producing stocks, and I think this is at the truly
at the heart of her question. I don't think that
there is any particular magic in going that direction right,
(14:21):
or opting for reas that are shedding dividends, that kind
of thing where you are earning money that way. Instead
of focusing on dividends, just focus on creating a diverse
portfolio of investments that's going to grow meaningfully over time.
When you look at the data, stocks that pay higher dividends,
they actually underperform the S and P five hundred and
so maybe instead just invest in VU something as simple
(14:44):
as Vanguard's S and P five hundred ETF and abiding
by something like the four percent rule, you could tap
those funds down the road even if you aren't fully retired.
I think there's there's sort of like this mental hurdle,
like people don't want to sell their positions, they don't
want to sell their securities, but like that's what they're
there for. Yeah, folks, A lot there's like the oh,
how do I get income generating assets? That's what stocks are.
(15:06):
And so once you get past that mental hurdle of
knowing that, like, Okay, if I need those funds, I
then sell some shares. I'd rather grow that's your income.
Speaker 2 (15:13):
I'd rather grow the pot bigger than have a smaller
pot that throws off dividends. Right, That's kind of what
you're getting at, And when you look at the numbers,
growing the bigger pot is typically done through investing directly
in something like an S and P or total stock
market index fund. It's better than prioritizing companies who pay
higher dividends totally.
Speaker 4 (15:30):
So again kind of speaking to the early retirement part
of her question. I mean assuming like it sounds like
she's got some money, but let's just assume that she's
starting from zero. If she's looking to be able to
draw down sixty thousand dollars a year ten years from now,
so a full decade from now, that means she needs
at least seven hundred and fifteen thousand dollars on hand.
(15:50):
And that's something with like a I think I put
in like a forty year runway before that turns into
a negative number, which means investing fifty thousand dollars a
year starting now. Again, assuming that she has zero dollars
set aside, let's just say that you woke up and
you're like, oh, this is a new goal of mine.
I've not prepared at all for this. This is what
it would take. It's something it's like setting aside like
(16:12):
a little over four thousand dollars every single month, which
is really that's really tough to take your throwing cold
water on this one. Now, I'm just saying, like I
want to be realistic, like you have to. You're gonna
need to have at least seven hundred and fifty thousand dollars,
if not more, on like that, I was gonna say,
that would be I assumes a perfect market. That assumes
a perfect eight percent. So I figured, you know, on average,
you're looking at ten percent eight percent with inflation, so
(16:34):
that assumes a perfect eight percent every single year of compounding,
and then that it assumes inflation calms down a little bit. Exactly.
There's a lot, a lot of assumptions here.
Speaker 2 (16:44):
For a lot of people would say you need to
save have invested at least a millionaire.
Speaker 4 (16:47):
Even more than that, in order to be able to
pull this at a minimum, to be able to pull
this off, You're still looking at a pretty large sum
of money, which is totally doable. But I'm just I'm
just trying to be realistic here when you actually crush
the numbers to see what does it take to be
able to pull this thing off.
Speaker 2 (17:02):
Yeah, I couldn't agree more. All Right, We've got more
to get to on today's show.
Speaker 5 (17:07):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (17:14):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 2 (17:19):
Now, let's talk about grocery stores. Kiplinger detailed the best
and worst grocery store chains in the country. What they
did was they used Google reviews from across the country
to try and spot trends, and so Trader Joe's took
the top spot in their analysis, Costco and Wegmans took
second and third, Legal Andaldi still take a respectable eighth.
Speaker 4 (17:39):
To ninth, which just makes you think that it's still
first in my heart.
Speaker 2 (17:42):
Yeah, we have so many grocery stores in this country,
by the way, and so let's talk about the worst ones.
King Soopers, save a lot, Kroger and Walmart, those were
the worst for according to Kiplinger. And so you know,
price obviously is in the only consideration, because Leo Lenaldi
would have been like top three for sure if that.
Speaker 4 (18:01):
Were the case.
Speaker 2 (18:02):
And we're just so fortunate to live in a country
where we have so much competition in the grocery store space.
I know we've experienced a lot of inflation in grocery
prices over the last few years, and nobody likes to
see that, but we all benefit from this increased competition.
And it's just important to note you're likely to have
a better experience at some of the top spots. Some
of the places that are ranked more highly, and a
(18:24):
lot of those are gonna pay less too.
Speaker 3 (18:25):
Matt.
Speaker 4 (18:25):
Yeah, I do hate the fact though that it was
based on Google reviews, because you know that somebody was
in there, let's say, at Aldi, and they had just
a sour interaction with an employee who was standing there
stocking the shelves, or maybe they're like, he's never had
a bad interaction with an employee at Aldi, Matt. Some people,
it depends on your store, man, It depends on the store,
the manager, the folks that they've hired. Sometimes, especially with Aldie.
(18:47):
I'm just coming to all these offense here. If they've
never stuck a quarter in a shopping cart before, they're
just kind of like, I couldn't get a cart, they're
locked up. How does that does that even work?
Speaker 2 (18:58):
Because it's it feels weird, you got it takes him
getting used to Yeah, a little tip.
Speaker 4 (19:01):
You can go to the cashier and ask them for
a quarter, and they're allowed to give out a certain
number of quarters per shift, so well, that's one way
around that. It also, specifically to me, it made an
intuitive sense to see some of these stores at the
top and yeah, specifically because of course they know how
to sing and entertain like bring bells. It's like a
party when you go into a trading Joe's. Man, I'm like,
are y'all making like rum cocktails or something that were?
(19:22):
I feel like I want to be a part of
the island scene here.
Speaker 2 (19:24):
It's not like they're charging ridiculous amounts more either, Like
Trader Jones has pre solid costs on a lot of
what they offer, So Vibe makes sense that they're the
top spot. And let's talk about senior citizen discounts. Matt, like,
when you go to the grocery store. Certain grocery stores
incentivized seniors to come on certain days with a discount.
So Public's is a grocery store chain in the in
(19:46):
the Southeast. They give folks who are sixty and older
five percent off every Wednesday. Fred Meyer offers ten percent
off on the first Tuesday of every month. And that's
not all. There are more discounts at other grocery stores too.
But the New York Time Times had an interesting article
about whether or not senior discounts should just go away altogether.
And the article was based on a reader who was
(20:08):
questioning the ethical nature of age based benefits. But the
author I was glad the author kind of defended our
senior citizens here, Matt. They basically pointed out that this
not only helped seniors who might be financially vulnerable, which
which is a lot of senior citizens, especially if you're
living on a fixed income. The grocery store, though, isn't
(20:28):
terribly crowded during those incentivized times. It's kind of like
incentivizing people to come to see a matine movie. Yeah,
there's a real It's like, hey, who's free at like
one o'clock on a Thursday.
Speaker 4 (20:38):
Not many people. We're still paying rent, right, So if
we get sun butts in the city, to me, that's
a form of dynamic pricing.
Speaker 2 (20:45):
And so exactly seniors and the rest of us, we
should all be price sensitive and we should let those
incentives sway us. If I'm Matt once i'm fully retired,
if I want to go do my grocery shopping on
a Wednesday morning to get that extra five or ten
percent off, I'm going to do it.
Speaker 4 (20:59):
Yeah, has been nice lately. Windows have been open. You
you love this time of year, don't you. Man. You
don't have to run your AC or your heat. You're
kind of like in this in between sort of. It's
like instead of it being like a purgatory as in
like a bad thing, it's kind of like a good thing. Yeah,
oh it's the best. I agree.
Speaker 2 (21:15):
I think it's It's one of my favorite things to
see how long I can go without running either the
heat or the AC at all, just.
Speaker 4 (21:23):
Like get the fans cranking. Yeah, well we have to
do man. I realized last week that my sleep was suffering,
and I'm like, oh, it's because we still have like
the winter blanket on because we let the let the
temperature dropt so much in the winter. But it means
I'm like not sleeping as well. So we had a
like also because you're not saunaing before bed, like I am.
My sleep has improved, yet, have you seen your sleep
scores sleepskips go up. Well. Something that's gonna help folks
(21:46):
to keep their utility bills low, to keep from having
a turn on their AC or their heat next fall
or next winter, is to make sure that you have
enough insulation. Seeing that, they had an article about getting
a free home energy audit, which it turns out a
lot of different electricity providers offer to their customers, and
the author he found that he had almost no insulation
(22:06):
in his walls, costing him massive amounts of money. And
there are often incentives for making energy upgrades as well,
and that's before you even like buy the electricity provider,
and that's before considering any of the different.
Speaker 2 (22:18):
Federal tax benefits as well. Those two things combined can
really bring.
Speaker 4 (22:22):
Down the cost. Heck, yeah, he was specifically in Massachusetts
and it was going to be completely free for in
his case, the landlord to get insulation put in the walls,
which not only does it make it more comfortable from
a temperature standpoint, but it acoustically is nicer as well,
especially if you've got roommates. You don't yeah, you know,
you don't hear your roommate in the room next door,
Like you know, you want like a little bit more privacy,
(22:43):
And all of a sudden you're like, WHOA, I thought
I needed a bigger place. Turns out all we needed
was to not be able to hear each other all
the time.
Speaker 2 (22:50):
We made a similar move in our little clubhouse here
where we work and record the podcast.
Speaker 4 (22:56):
Our landlord, we.
Speaker 2 (22:57):
Were like, hey, do you know about these discounts, because
it'd be awesome if you made some of these improvements
and we'll sign a lease, we'll stay longer. Yeah, And
it was a win win where so much more comfortab Yeah,
so much more comfortable up here now. So he put
the installation in, did a couple of other little things
and reaped some substant substantial tax savings and electricity bill
savings thirty percent off. Yeah yeah, and those those federal benefits.
(23:19):
And then they might not have done it. I don't
think if we if we had not made the suggestion.
Speaker 3 (23:22):
Sure.
Speaker 4 (23:22):
Yeah, and the different utility providers they've got those rebates
as well. Georgia Power is offering it's like seventy five
percent off smart thermostats, and so we're gonna get a
couple Google nests. Normally these things are one hundred and
thirty bucks. Man, we're paying like thirty two dollars a pop.
You're limited to two. So we're gonna go ahead and
replace one of the other ones that isn't so smart.
Speaker 3 (23:40):
Yeah.
Speaker 4 (23:41):
Yeah, they look good as well, and they're gonna help
us to save a ton of money. So it's yeah, win, we.
Speaker 2 (23:44):
Got more money saving information to get to.
Speaker 5 (23:47):
You're listening to how to Money with Joel Larsgard on
Demand from kfi am six forty.
Speaker 2 (23:53):
We're glad to have you along for the show today.
By the way, if you're looking for the right credit
card for your wallet, well you want to be able
to use responsibly. But if you do that, if you
pay your credit card on time and in full every
single month, well check on our credit card tool. You
can find that up on the website at howtomoney dot com.
Speaker 4 (24:10):
Let's now take the Facebook question of the week, which
is from Megan. She asks, does anyone have the Costco
credit card? I'm a new Costco member. Welcome to the fold, Meghan,
and I would love to hear about your experience with
their credit card. Thank you, Joel. Do you like the
Costco credit card? Are you a fan? Yeah? I am.
I By the way, are you only a fan of
the big box retailer? I still of itself.
Speaker 2 (24:31):
I still remember the day I joined the club, and
not not really, but you get your picture taken.
Speaker 4 (24:38):
A lot of us do remember it, because it's not
often that you stand there in front of the screen
and you know, they tell you to smile at the camera,
do whatever else.
Speaker 2 (24:45):
It wasn't life changing in the way I thought it
would be. But I'm so glad it did, because being
a Costco member has given me a lot of benefits.
Speaker 4 (24:52):
I actually do recall as well, because it was only
a couple of years ago or two years ago. Gosh,
let me hold, let me pull up, Mike. I was
not even Costco credit card right here, busted out and me.
Speaker 2 (24:59):
We look at that because it tells you how long
you've been a member, since since February twenty fourteen, so
I've been.
Speaker 4 (25:04):
A member nineteen. Okay. I was not willing to join
because it was so far from where we used to live.
We used to live in town and maybe you had
to drive out to the burbs. And I realized, at
least for us at that point in time, it was
not going to be worth it.
Speaker 2 (25:18):
Spoken like a true pleab, but now I don't even
know what that means. I hear the kids say, no,
I love it. Yeah, okay, let's talk about specifically the
Costco credit card. It is great, like Costco membership is fantastic,
but so is the Costco credit card. I think if
you're a Costco member, it's a no brainer. Like, I
don't know why you would be a Costco member and
not have the Costco credit card. Sometimes madam at the
(25:38):
gas station filling up, obviously using my Costco credit card,
and I see people using a different credit card and
I'm like, huh, I like scratched my head. I don't
understand it.
Speaker 4 (25:46):
What kind of spine you did on other people? Look
at that? What? Yeah, I don't look at anybody. I'm like,
head down. Oh well, it's not head down, it's just
I have like I want to spend as little time
in the gas line as possible. I'm quick and while
it's pumping, what else are you doing? I'm people watching?
Oh are you Yeah, I'm cleaning out the car. Oh
there's a there's free trash can right there that I
(26:06):
don't have to like empty the bag every single time.
You don't clean out the car while usually just stand
there and stare at people.
Speaker 2 (26:12):
Usually my kids are like running around in there, and
I'm you know, I'm like just standing there for I
like do a little bit stretching maybe, And then I'm like,
what credit card do they use?
Speaker 4 (26:21):
No? Man, I go. I opened the door, pull all
the trash out of the side compart, you know, like
you've got all the different pockets and there's all these
gum wrappers and oh, sure, like coffee cup whatever, just
all sorts of trash. That is the at least for us,
the clean out the van. Let's get this thing to
look at half decent time. Okay, yeah that's smart. No
look at other people's credit card. But I love that
you do. Yeah.
Speaker 2 (26:39):
Well, I mean when I look and I see people
using something else, it makes no sense to me.
Speaker 4 (26:44):
You go there and try to explain to them that, hey,
what why are you doing this? You should get this
car because of the.
Speaker 2 (26:49):
Specifically because the gas cash back, right, So, so it's
four percent at gas stations, it's five percent now only
recently when you're buying gas at costcodes.
Speaker 4 (26:59):
So you get five percent cash back on Costco gaess,
which is also the most affordable, highest quality of grass
that you can purchase.
Speaker 2 (27:05):
So it's a no brainer. Yes, if it's nearby and
in your in your schedule. So and you have to
pay with the visa. By the way, at Costco used
to be an AMEX. I just don't think there's any
reason to use a different visa card when you're checking out, like,
get the Costco card, especially if.
Speaker 4 (27:19):
There's no annual fee attached. Totally. Yeah, and on top
of that, you get three percent cash back on travel,
including if you purchase like one of those Costco travel bundles,
which I personally have never done, but one of these
days I'm gonna get around to doing it, Joel. But
you can't use one of the cards where you're earning
five percent, like the custom Cash card is what I'm
specifically thinking of. You have to use a visa card.
(27:40):
The Warehouse clubs also don't qualify as a grocery store,
so you can It's not like you can get a
Blue Cash preferred six percent back because it's not a
grocery store. On top of that, you can't use the
AMX and so like, and you can't use the City
Double Cash either, like you got to get the Costco card,
like cash back on all Costco purchases with the Costco
credit card.
Speaker 2 (27:59):
So again, why would you use anything else? I could
see if there was an annual fe attached, like you
might have to run the numbers, do some math. But
there's no harm, no foul on having an additional credit card.
Even if let's say you only use this credit card
for Costo purchases and for gas, then I would say
this card, having this card in your arsenal makes sense.
Speaker 4 (28:18):
It makes sense, all right. Another quick question from this
is actually a different Megan on the Facebook group, but
she wrote, anyone know of a spreadsheet that analyzes a
home purchase from an investment perspective? We know that we're
only going to be there for five years, so we
want to be more strategic about what we buy. Joel,
what do you think.
Speaker 2 (28:35):
I'm going to say, don't buy the home? Probably that's
a TLDR, that's the quick answer. But you know, Matt,
you and I we always talk about the importance of
timeline when it comes to home ownership, yep. And whether
or not it makes sense, or it's going to pay off,
or it's going to be a better financial move for you.
The expense of buying and selling can be significant. So
there are significant costs associated with both of those endeavors,
(28:57):
and so if you're bumping them close together within a
five year timeframe, the cost could be prohibitive.
Speaker 4 (29:04):
Right.
Speaker 2 (29:04):
So, if you own a home, let's say, for a
couple of years, even if you see some equity growth,
this seller in this case often has to come to
the closing table with cash to cover closing fees and
agents costs, and stuff like that. I think big ups
by the way to Megan for asking this question before
she buys the house. I've heard way too many focks
Matt who buy the house. They've heard home ownership is smart,
(29:24):
they haven't thought through the details, and it ends up
costing them because let's say they live in the home
for three years or something like that. Well, their own
home ownership timeline wasn't long enough and they ended up
losing in the process. They would have been better off
renting totally.
Speaker 4 (29:37):
Yeah, And Megan also said she's looking at this from
an investment perspective, but I don't think that she wants
to own this as a rental property. I think what
she's asking about is whether the financial benefit will be
superior when you are considering owning a home versus renting
a home, given those transaction costs that you just mentioned
their Joel, and when you look at what home prices
(29:57):
have done over the past fifteen years or so, that
you know, the typical reaction for most folks, especially realtors,
folks in the real estate space, they're going to tell
you to buy every single time instead of rents. They
would say that you'd be you'd be an idiot to
not purchase a home. You're going to come out ahead.
And in one sense, they have a vested interest in
telling you that, Matt, of course you've got that. But
(30:18):
like like yeah, like if you look at history, yeah,
you're homeowners. They have made out like bandits in recent years.
But you also can't count on these recent trends continuing
far off into the future, or even for the next
five years specifically, right, I mean, the truth is it's
highly unlikely that the housing market is going to experience similar,
ongoing significant price increases over the coming fifteen years. I
(30:40):
would be shocked if the coming fifteen years looked a
lot like the last fifteen years in terms of home
price acceleration. That's because price increases can't out place inflation.
They can't outpace wages forever. Right, We're already seeing prices
stalling and predictions of price declines in the near term
from some outlets. The truth is, if you look back,
(31:00):
you bought in twenty thirteen, you sold in twenty eighteen,
or if you'd bought in twenty eighteen and sold in
twenty twenty three, those are both five year timelines, you
would have done quite well for yourself. But those might
be the exception, not the rule. And so if you
look just a recent history instead of a longer stretch
of history, you might be doing yourself a disservice assuming
that something's going to be true that likely isn't going
to be when you zoom out. The five year ownership timeline,
(31:22):
it's really the minimum to avoid potentially losing real money
in that transaction, at least when we're talking about a
longer perspective. And I'm just I'm worried, Matt, about someone
sticking to a five year ownership time. So we always
say five to seven, and typically we prefer seven. Five
years just might not be long enough. Yeah, well, especially
given the massive disparity between rent prices right now and
(31:42):
then the typical mortgage payment these days in most cities,
and specifically because she said that she knows she's only
going to be there for five years, like maybe they're
moving to a college town and they're there for like
a graduate degree or something. I don't know, especially given
that I would suggest renting. It's what I would do
if I were in your shoes given a similar timeline,
And we don't have a so because of that, we
(32:04):
don't have a spreadsheet recommendation when it comes to something
like this, but do check out the New York Times
rent versus by calculator, which is totally great. And the
only other way that this that I would change from
my mind were I in your situation is if the
what it is that the NRA is like, if the
industry gets a massive shake up, basically when it comes
to commission's fees paid towards realtors, because we haven't seen that.
(32:26):
But we haven't seen that, like there's been talking not
the NRA. I always say that very different organization, National
Association of Realtors. They've had a stranglehold where you're paying
six percent, and if that completely gets up ended, well,
my answer is also going to change because all of
a sudden, the vast majority of the transaction costs gets eliminated. Yeah,
(32:46):
Housing prices for the most part are fairly stable over time.
We see them typically go up into the right, cross
your fingers. We don't see another massive decline like we
saw in No. Seven eight with a great recession, but
that that's like a once in a lifetime thing in
my opinion, you eliminate these massive transaction costs, I think
we do see people purchasing at homes living there for
(33:07):
two or three years. Maybe they see a little bit appreciation,
maybe they don't, but it's not even that big of
a deal because the transaction costs, the known expense that
comes with selling a home is no longer there.
Speaker 2 (33:16):
Yeah, totally okay. Thank you as always for listening to
the show. We appreciate your time and attention. You can
always find more money saving information up on our website
at howtomoney dot com. 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
(33:37):
on demand on the iHeartRadio app.
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