October 26, 2025 • 31 mins
Joel just ran his first marathon, but it's amazing how much money people are spending on what has been such a simple hobby! HTM listener Katie has a question about how to calculate her savings rate.
Plus, the more money you have, the harder it gets to manage.
Also, a HTM listener wants to use a recent settlement to boost his retirement savings.
Plus, the more money you have, the harder it gets to manage.
Also, a HTM listener wants to use a recent settlement to boost his retirement savings.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
You're listening to KFI AM six forty on demand, Joel
Larscard and I in that alt mix. By the way,
you can always find more money saving information over at
howtomoney dot com.
Speaker 2 (00:15):
Let's talk about running for a second. Can we talk
about so I will mention I did run a marathon
this past weekend. It was my first marathon of all time.
You did great, I did well. I guess you keep
your goal that you're going for, so I was happy
with that.
Speaker 3 (00:29):
That's a win.
Speaker 2 (00:30):
Big thanks to listener Greg by the way, who ran
the same marathon. This was his one hundred and fourth marathon.
Because Greg is I did not know that an absolutely beast,
Oh my god, and he helped me. I don't think
I would have done nearly as well if it wasn't
for like Greg. It almost felt like I had like
the you know, he lets you pick you back. Yeah,
it was almost felt like one of those monkey backpacks
where I'm holding onto the tail and he was dragging
(00:52):
me all the way. But it was more of like
verbal kindness that dragged me along so and just his
like persistent spirits. So but yes, it's a painful endeavor,
but it made me think too Matt Like. Upon this accomplishment,
I was reflecting on it. There was an article about
the running industrial complex, and I was like, this is
kind of something I'm actively trying to fight as someone
(01:13):
who's gotten kind of deep into the running space.
Speaker 1 (01:15):
Good luck fighting it. It's gonna be tough.
Speaker 2 (01:18):
It's tough, man, It's tough. But the Business Insider had
this article that kind of spoke to me, as someone
who has finally gotten around to enjoying running over the
past two years. Hated it beforehand, but man, running is
this sport in its essence, it's like the purest, one
of the purest things you can do as a human,
like walking and running, right, They're like some of our
most basic instincts. But it feels like running is starting
(01:41):
to get hijacked by this American consumer mentality. It feels
like everything pure starts to starts to go in that direction,
because all you really need is a decent pair of
shoes and a even just like a Kirkland signature disposable
water bottle that costs like a quarter when you buy
him in the big packs, or maybe even less. But
now we've got super shoes, we've got high end gels,
(02:03):
We've got fancy watches, recovery tools, like all this kind
of stuff in the running space, and so many people
are turning like the simplest human action into this overly
expensive hobby.
Speaker 3 (02:14):
And I think this is partly.
Speaker 2 (02:16):
Because of tailored ads seeking you out on the social
Media's like I've been getting these ads for and I
don't everything running.
Speaker 3 (02:23):
Huh yeah, everything running? There we go. That's why I said,
good luck.
Speaker 2 (02:26):
Even these even these like gummies that have THHC in
them they've been feeding I'm like, I don't partake, but
they've been inundating me with these gummies, Like.
Speaker 1 (02:35):
This is what's gonna make you run awesome? Is the
idea that you don't feel any of the pain. I
totally blessed out and you're setting prs I guess.
Speaker 2 (02:42):
I mean, if that's actually the case, I'm not sure
you consider, but like these tailored ads, and then I
think that I think there's also the pressure you feel
as other people are nerding out on on like getting
stuff for running. But I think it's eminently possible to
enjoy the activity you're doing without overdoing it on the
stuff thing. It just makes me think of our friend
(03:04):
of the show Michael Easter. He talks about gear versus stuff.
There's certain gear that you might that might be like
helpful to you as a runner, but then don't let
it turn into just like buying stuff and accumulating more stuff.
Speaker 3 (03:16):
Yeah.
Speaker 1 (03:17):
Well, some people like the stuff, you know, and that's
the thing. They're doing it because they enjoy it. But
it's not necessary. And I think that's what you're getting
out that you can literally you don't need a new
pair of shoes even you just you can put on
a pair of walking shoes or running shoes that you
already own and go.
Speaker 3 (03:29):
For a jog. That's how you get to start to
be a runner.
Speaker 2 (03:32):
I do feel a special satisfaction when I'm passing someone
in their two hundred and something dollars super shoes in
my thirty dollars Adida shoes, like I just like all
decked out. Yeah, maybe I love it passing them in
my eBay running shoes that I just actually purchased. Did
we talk about this the brand new you didn't know
eBay was still Oh, I think you're talking about east Bay.
That was that kind of Yeah, we've talked about the
(03:54):
sports shoes. No, my eBay shoes my US shoes. Okay,
oh of course, well they were.
Speaker 3 (03:59):
Used, but they were like new, I mean.
Speaker 1 (04:01):
And you can always tell a good shoe seller on
eBay will put a picture, a closer picture of the tread.
And when you can see not only the tread still there,
but even the slight texture that they'll put on the
bottom of the tread, sometimes that's when you know, oh
my gosh, this shoe is worn like once or twice,
it's an excellent condition. And those are the shoes that
war this morning when I went for my run. But
(04:22):
going beyond gear, the Times detailed how runners are actually
paying a large amount of money for these race tours
in order to be able to compete in the most
dearly races. So, for instance, the almost impossible to get
into London Marathon, will you pay a quote unquote tour
operator four thousand dollars and that ensures that you will
(04:42):
get a bib although it only actually calls you. Costs
you two hundred dollars in race fees, and they include
other stuff.
Speaker 3 (04:48):
Too, like meals, and they kind of paying for you.
Speaker 2 (04:50):
And yeah, it's again it's the tour, so it's it's party,
it's the package between paying for the package and just
going through. Oh yeah, it's hard to get into so
which means you're in this lottery and almost nobody it's accepted.
But if you do the race, fees are pretty minimal,
they're reasonable, but the only way to actually get in
is to pay the really really really high tour fee.
Speaker 3 (05:08):
Well yeah, so what do you think about that? Are you?
Are you split?
Speaker 1 (05:11):
Because if you had a life goal to run them,
like if you're hitting all the majors, and then they
kind of.
Speaker 2 (05:15):
Highlight what of my friend is doing, friends is doing? Yeah,
he just like went down to Australia to run Yeah,
the new the Worse six.
Speaker 3 (05:21):
Now there's nine.
Speaker 1 (05:22):
But do they do they update the medal like the
instead of the six the six stars Metal question? I
don't like, do you have to go and rerun all
of the majors? I'll have to ask him. But if
that is a life goal of years, this is how
you can guarantee entry. And one of the persons who
has profiled in the in the article talked about how, well,
what if I could get hit by a bus tomorrow,
I could have a quote unquote career running, career ending
(05:45):
sort of injury. And if you've got the money. I
think I'm all for folks taking this around because.
Speaker 3 (05:52):
Gepping the line, but you pay a ton of money
to skip.
Speaker 1 (05:54):
Yeah, it does cost a lot of money and there
are other perks, but if you have the money to
do it, I'm not am I personally going to do that?
Speaker 3 (06:01):
No, because I don't care. Like this totally needs to
be your splurge.
Speaker 1 (06:05):
This needs to be your craft beer equivalent, and you
of course need to have the money on hand. But again,
you can spend very very little money on this activity,
this hobby, the sport, something that causes you to live
a healthier lifestyle, or you can spend a ton of
money and that guarantees your ability to visit London.
Speaker 2 (06:22):
I guess I just I hate seeing like something that
is so pure overrun in some ways, with like people
grabbing for your dollars, and I don't know, it makes
me think too. There are other ways to get into
some of those elite races. I have a friend who's
gonna run the New York City Marathon, which I think
is next weekend, and he I think the way he
got in was raising money for charity. And this is
(06:43):
a common way to get into some of those premium
races too, and maybe it's a better way, right like
than just me and I don't like it. The easy
thing to do is to fork over four thousand dollars
to the race tour. Sure that maybe slightly harder way
but less costly way is to raise money for charity
and also the ultimate best way to proceed totally all right,
We've got actually more to get to. On today's show.
Speaker 1 (07:05):
You're listening to KFI AM six forty on demand how
to Money. I am Matt Altmix.
Speaker 3 (07:12):
And I'm Joel Larsguard.
Speaker 2 (07:13):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group. Let's get to what I would say
is an entertaining question, Matt about the nuance of saving traits.
Speaker 4 (07:28):
Hi Ellas, this is Katie thirty nine from Maryland, and
I had a twist on how to calculate saving percentages.
So everywhere you look, everybody kind of has a different
idea on how much you should be saving for retirement
compared to your income. But I receive a non insignificant
(07:51):
amount each month from my VA disability, and I was
just wondering how I would take that into account. Should
I add that amount in with my anual income when
I do my percentage or since that will that entire
amount will continue through my retirement until I die, do
I completely exclude that amount?
Speaker 3 (08:10):
What would you guys do?
Speaker 4 (08:11):
All right?
Speaker 3 (08:12):
Thanks?
Speaker 1 (08:12):
All right, Katie, great question. And first off, you mentioned
your VIA disability, so that means you were somehow injured
or had a condition maybe that was made worse during
your service. So thank you for your service to our country.
Speaker 3 (08:26):
Thank you too.
Speaker 1 (08:27):
But let's dive back into the old savings rate discussion, Joel,
I do.
Speaker 2 (08:31):
I do love these discussions. I know sometimes they get
a little longier nerd.
Speaker 3 (08:35):
Sometimes I like one. Sometimes I like them, but I
don't know.
Speaker 1 (08:38):
If you are a personal finance nerd, it's fun to
crunch the numbers, calculate your percentages, which tells me something
you would do they get this guy, you know. Let's yeah, okay,
I don't want to get off track too soon. Let's
let's specifically answer kating his question because like what she
is doing here by like she's asking should I include that?
She's highlighting how slippery this argument around savings rate can
be because you can aculate it in so many different ways.
(09:01):
You can base it on. You can base your savings
rate on just your gross income. You'll, let's narrow it
down to even to your net income after taxes. You
can even incorporate your net worth growth into your savings rate,
basically the fact that your money is now working for
you so well lash you account now too, shouldn't it right?
Some folks do that. I wouldn't recommend for you to
do that one personally. That's not really what savings rate
(09:22):
is getting after.
Speaker 3 (09:23):
And I get that.
Speaker 2 (09:23):
There are a few different ways that you can You
can think about your savings right and like, for instance, yeah,
that last one you mentioned is reflective of your wealth
building efforts. But savings rate and net worth are just
two different things and they should be measured differently. I
think they're both worth tracking and growing, but you don't
want to necessarily like blur the lines and include your
(09:43):
net worth information into your savings rate, like they're just
different things. There are also perpetual arguments about whether to
include investment dollars and savings dollars in your savings rate.
I say yes, cause you know you're putting money into
to a high insure savings account, you're also putting money
into roth IRA or a four to one K.
Speaker 3 (10:05):
Yeah.
Speaker 2 (10:05):
I like the idea of all the above going into
the amount of money you're actually putting towards savings culture.
You're not using that money to spend. Same with paying
down principle on debt. I also think that should be
included in your savings right. Not everyone agrees with that,
but you're not spending those dollars, and then once that
debt's paid off, hopefully you continue to allocate the money
(10:26):
that you were using towards savings towards investments moving forward.
This just goes to show there's a lot of nuance
inside of it and teach each of their own. Really,
as long as you're sticking to the same metric and
you're not maneuvering it to make it seem like you're
doing more than you are, and you're holding yourself to
the standard that you've set for what you want to
accomplish with.
Speaker 3 (10:46):
General financial goals.
Speaker 1 (10:47):
Generally speaking, I think it's about consistency because, like to
the paying off debt argument, it's like, well, you're not
spending that money. Yeah, well you had spent that money,
So it's like old you, previous you had spent that money.
Speaker 3 (10:58):
But what if you're continually racking up debts that you
can pay off the debt and now you know that.
Speaker 2 (11:01):
You could get into this like circular reasoning logic where
then it doesn't really count a savings rate.
Speaker 1 (11:05):
Yeah, yeah, we're talking about her disability payment. In a
similar way. You could even think of an employer match
as being part of your your savings rate, but we
don't include that because it is subject to change, whereas
your disability payment is not. This is sticking with you
for forever, and were you to start considering your employee
(11:26):
match as well, it takes the onus off you to
be ramping up your savings efforts. That's where looking at
your savings rate is just a good measure of your
behavior as opposed to like a specific dollar amount. But
generally speaking, we believe that the minimum savings rate goal
should be around fifteen percent of your gross income. But
(11:46):
it is really hard to make meaningful progress if you
are saving like let's say you're fellow American, which is
less than five percent of your overall income.
Speaker 2 (11:55):
You're just trudging along in making a financial progress, it's
like one step forward, one step back. It feels like
if your savings rate is that low, right, like five
percent is just kind of insignificant, it's not going to
move the needle. But you're not going to get peace
out money. You're not going to reach much financial independence,
or it's going to take so long you're going to
be working until you die.
Speaker 1 (12:14):
But again, it also depends on how soon you start saving, right, like,
if this is something you started doing as a sixteen
year old, you started not only socking away money for
that first car and for that phone and for college,
but if you also had a designated no, this is
my retirement dollars. I literally have a friend she started
doing that when she was fifteen years old. She started contributing.
Her dad's a CPA, and so it's not surprising that
(12:36):
they knew about the wrathhire.
Speaker 3 (12:37):
They knew about the glories of the wrathire rate.
Speaker 1 (12:39):
But literally, at that young of an age, she started
contributing to her wrath and you know, she's doing pretty
well because of compounding.
Speaker 3 (12:47):
I think it so many factors, many factors.
Speaker 2 (12:50):
If you frontload the sacrifice and you have a higher
savings rate in those early years. You can maybe a
five percent savings rate in your forties and fifties.
Speaker 3 (12:58):
It's totally fine. Like your friend is a fifteen.
Speaker 2 (13:00):
Hey, I've been doing this for twenty five years and
I've been saving a big chunk of my money. Well,
do I need to always have a thirty percent savings right?
Speaker 3 (13:07):
No?
Speaker 2 (13:08):
That's what like coast fire is all about. Right, It's like, Hey, No,
I've put in a lot of the effort. I don't
need to be saving it the same rate because I
put all that effort in early on. And I just
think too, the reason savings rate is so powerful is
because there are other things you can try to focus
on in your finances, like, oh, I'm going to try
to get higher returns than the average person. Well, you
don't have as much control over that, right, and you
(13:29):
actually might fall flat on your face, and an attempt
to pull that off. So much of your success really
hinges upon your savings, right. So I do think that
is one of those key personal finance metrics you want
to be considerate of and to continue to look at.
And then so yeah, when you're talking about the VA
disability payment and including in your savings, right, I think yes,
like we would of course include this in the income
(13:52):
section and the numerator of your calculation. If you make
let's say seventy five thousand bucks a year, but your
VA disability check is something like twenty five thousand dollars
a year for an overall amount of one hundred k,
and you save twenty five thousand dollars a year, your
effective savings rate is twenty five percent. And so while
you have more money at your disposal because of this
(14:14):
via disability benefit, you've got more money to save. This also, though,
raises the stakes on how much you should be setting
aside to hit the metric that you want to hit
to hit the savings rate the year you're going after.
And it's not like a more money, more promised thing,
but it is just the fact that more money coming
in the greater necessity to save, which is why I
Matt every single year, as we're getting raises, right as
(14:36):
we're seeing our income go up, we have to be
thoughtful about how much we're contributing to savings and investments
because if we keep it the same, then we're not
actually hitting saving that same savings rate. And over the
course of a decade, let's say if we're still saving
the same amount but not the same percentage, we're making
less progress.
Speaker 1 (14:55):
Yeah, and I kind of touch on this in a
second ago. But the reason we would count your VA
disability check, uh is because of the permanent nature of
that disability payment.
Speaker 3 (15:04):
Right, So unlike a match, this is going to be recurring.
Speaker 1 (15:07):
This is going to be a reliable stream of income
and perpetuity. And like as opposed to a match, I
keep going back to a match because I feel like
it's just a great counter example because like we've seen
many employers not offer a match, or we've seen them
reduce a match that they offer.
Speaker 3 (15:21):
If you change jobs, the match it might not be
the same.
Speaker 1 (15:24):
But within your case here, you've got this payment coming
in from the federal government every month, and so because
of that, I think including it in those calculations it
just gives you an accurate reflection of what you're doing
with the total amount of money that you have coming in.
And I think if you only included earned income doesn't
seem quite as thorough because it doesn't paint the whole
(15:45):
just like a full robust picture of what's going on
with your right with your finances. So you are listening
to how Some Money. You're listening to KFI AM six
forty on demand stroll Lars Guard and I am the
other host Matt a mix 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
(16:06):
app there on your phone and send it over via email.
You can find the simple instructions at howdomoney dot com,
forward slash ask all.
Speaker 2 (16:13):
Right, big question here? Do you get worse at managing
money if you have more of it? There was an
interesting article about this. I believe he's in the Wall
Street Journal. All signs Matt, I think points a yes,
and understandably so.
Speaker 3 (16:26):
Because your magic Eateball says.
Speaker 2 (16:29):
There is something about having limited means and kind of
having to focus.
Speaker 3 (16:34):
Really in order to make money progress.
Speaker 2 (16:36):
Right, Like when you don't make much, budgeting is a necessity,
it's not really a luxury, and so it's easier to
have like harder lines about eating out and then just
kind of spending in general. It's easier to hold the
line and to not make changes. But what this article
was talking about was is, like your income rises, it
becomes easier to abandon some of those sound financial habits
(16:59):
that maybe helped you there in the first place. People
become more adept at like guestimating or assuming things about
their finances than they are at paying attention to the specifics.
And there was research from the University of Chicago, almost
like a decade ago that they referred to in this article,
and it found that people living on less have the
(17:20):
ability to see their financial decisions more clearly. Things do,
I think get hazier as you make more progress, And
part of it is just literally the complexity ramps up
as you're making more as your financial decisions do have
greater ramifications, greater tax ramifications. But I think this is
a call that no matter where you fall on the
(17:41):
income spectrum, tracking your spending and discussing your goals, those
remain crucial things. I think I just don't want people,
as they're making progress along the way, they just kind
of like, Hey, I'm not going to listen to personal
finance podcasts anymore. I'm not going to care about track
my spending anymore. I'm not going to be thoughtful about
what subscriptions I have in my life anymore. I think
those habits still matter. I'm beyond that, Yeah, exactly, this.
(18:03):
You are not beyond that. I mean, it's up to you.
I guess it depends on how you want to spend
your time, how you want to spend.
Speaker 3 (18:08):
Your your energy.
Speaker 1 (18:09):
But that can reverse it, yes, And that's what we're
pointing to here, is that the kind of progress that
you were able to make that got you to this
point is not guaranteed to continue as you pay less
attention to it. And it's one of the reasons I
still literally do my Excel spreadsheet and track every single
purchase that we make, every single pennon that enters into
our household.
Speaker 3 (18:28):
I know where those pennies are.
Speaker 1 (18:29):
On that note, a recent Bloomberg article documented the rise
in cash straft millionaires.
Speaker 2 (18:34):
Which sto things seem like an oxymoron, like, wait, cashtrapp
Millionaire's a difference, Oh don't.
Speaker 3 (18:39):
I'm shooting lots of two years for you. Yeah.
Speaker 1 (18:42):
So this is the moneyless millionaires that you refer to
in the title, but the number of folks who have
a net worth of one million dollars plus it has
grown dramatically in recent years, and we've seen more people
participating in the stock market. We've seen a dramatic rise
in different assets homes, but more of those millionaires have very.
Speaker 3 (19:02):
Little access to that wealth.
Speaker 1 (19:05):
It is those dollars are tied up in retirement accounts,
it's tied up in home equity, and and.
Speaker 2 (19:09):
Those things are you don't just sell for your money,
is stock from referral one k right or like or
a portion of your home.
Speaker 1 (19:17):
But what I was going to say is, in some
ways I think this is great, Like, just build that wealth,
do not touch it while you are while you're working.
But and it's also interesting to note too that beyond
the one to two million dollar mark, and as you
sort of advance into the upper I don't know what
you call these folks, the upper elite, the upper crust,
folks with millions upon millions. Uh, you see the level
(19:40):
of wealth that is tied up in these liquid assets decrease,
which makes sense, right, There's only so specifically like your home.
There's only so much of a so much home you
can buy before you're just like, you know what, let's
just invest it.
Speaker 3 (19:51):
Let's think.
Speaker 1 (19:52):
I hear, well, there are certainly the Hamptons are calling.
There are certainly very big and nice homes. It's just
that not everybody wants to live in the gigantic mansion
where they're dumping a ton of their wealth into that.
But for most folks out there who are in a
stage of life where they are trying to build their wealth,
it's important to know your timeline.
Speaker 3 (20:10):
And I want to make.
Speaker 1 (20:11):
Sure that there are folks out there who have access
to money for some of the different short term and
for some of the different medium term goals that they
might have. We often focus on building your wealth, and
the vast majority I think, especially of our generation of
wealth that is being built is within the four and K. Yeah,
there's a lock on it. And the only key to
that lock, well aside from a ten percent penalty, is
(20:31):
hitting a certain age. And so it's like a time
it's like on a time schedule. Yeah, right, And you
know what, there are oftentimes going to be goals that
we have in life that where we are going to
need more liquid, readily available cash.
Speaker 2 (20:43):
And actually, one of the other things maybe that might
be worth mentioning here is this is why I like
roth high Ray's why we like roth Hirays so much, Matt,
is because the Rothiray contributions, if you are a regular
maximizer of that Rothiray over a long period of time.
Those contributions can be tapped penalty and tax free, and
we don't typically recommend it. It's not like, oh, you're
(21:04):
thirty eight and you've been maxing out your WROTH for
ten years, pull all those contributions out. Great, But at
least it is there is the possibility to access those
fun since I do see that as a plus if
you're handling your money well and you do need access
for let's say, a down payment on a house or
something like that, or a more short term money goal
(21:26):
that you have. I was talking to somebody the other
day and he didn't even realize that WROTH contributions we
were accessible, and so I was like, oh, man.
Speaker 3 (21:35):
Was that a good thing? Let me tell you about
the bad thing?
Speaker 2 (21:37):
You think for him, I always couch it right, And
I'm like, yeah, yeah, you might not want to go
grab them all right now, but.
Speaker 3 (21:43):
At least they all just know that it's there. Yeah.
Speaker 2 (21:45):
So if you feel like you crash cash strapped millionaire,
your WROTH contributions might at least make you feel less.
Speaker 3 (21:50):
So that's right, buddy.
Speaker 1 (21:51):
And you are listening to how to Money, You're listening
to KFI AM six forty on demand.
Speaker 3 (22:03):
Is out of money.
Speaker 1 (22:03):
I'm Joe Larsgard and I am Matt Altmis. 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.
Speaker 2 (22:15):
Let's take a question from listener Lance, who did not
say his name, so I'm saying his name, Lance, who
wants to know what he should be doing with a
big chunk of money.
Speaker 5 (22:25):
Hello, had to money team. I recently came into some
money a settlement. It's about three hundred thousand, and I
am fifty six years old, so I'm trying to look
forward to retirement and I do have a couple retirement
accounts with my prior jobs. I am a renter and
(22:45):
always have been, and I have no bills or anything,
so I'm clear on that side, except a car insurance
and regular notes like that. But if you can aid
me down the path on where I probably should invest
this to help me with retirement and in the next
couple of years.
Speaker 3 (23:06):
Thanks.
Speaker 1 (23:07):
So. The first thing I want to point out is
the fact that Lance said he's a proud I don't
think he said he was a proudrunner, but he said
it like I'm a renter, I always have been get
up off me. Yeah, dude, don't criticize me. I'm all
for that, that's what.
Speaker 2 (23:20):
Yeah, that's one of those personal finance myths that just
won't die. And I don't know if it's just the
National Association of Realtors putting something in the water in
every municipality like water source or anything like that. I'm
not accusing them of super nefarious tactics like that.
Speaker 1 (23:36):
But like, I didn't know you've gotten into the it's
like fluorid Matt, the conspiracy theories. But I really do
think where you getting your health advice?
Speaker 2 (23:44):
Bro, there's like all there's like this cultural mythology around
home ownership and how that's like the best personal finance
move you can make. You and I both know when
you look further into the data, yeah, it can make sense.
And so much of it depends on when you're buying,
what rates or how much housing prices cost, how long
you are going to stay in the house, Like renting
is not for dummies, And in fact, renters especially now
(24:07):
can do better Oh yeah, saving investing for their future
than a lot of homeowners. Absolutely, Yeah, home ownership the
cost of hoone ownership. We also often underdiscuss how bad
those can be, how expensive.
Speaker 3 (24:18):
The additional costs. Yeah, but it does well.
Speaker 1 (24:20):
First of all, too, he mentioned a settlement, So Lance,
hope you are doing okay and that whatever happened isn't
keeping you from being able to live your best life.
But it also sounds like you've been investing along the way,
which is great. You mentioned it sounded like multiple retirement
accounts with employers with.
Speaker 3 (24:35):
Jobs you've had over the years.
Speaker 1 (24:37):
But maybe you don't have as much set aside over
there as you wish you did, or that you maybe
you're just not quite as comfortable as you perhaps envisioned
you being at this point in life.
Speaker 2 (24:48):
And this is the kind of realization that often happens
when you're in your mid fifties.
Speaker 3 (24:52):
You're like, wait a second, how much have I been doing?
Do I need to ramp it up?
Speaker 1 (24:55):
She kind of like knows to the grindstone, and you
look up and realize, oh, man, I actually you know
I want to retire some soon. And for him specifically,
I think the settlement can be just a nice breeze
to the sales as he's cruising along here towards the
end of his his working career.
Speaker 2 (25:09):
Kind of maybe something you didn't plan on, but it
could be a way to make up for lost time.
Financially speaking, I also love that you don't have any debt, right,
which means you don't need to use this money to
pay off like student loans or credit card debt or
anything like that personal loans that are hanging out in
your past. That's nice, right, the fact that you've been debtiverse,
(25:30):
so you basically you can funnel all this money into
positive action for your medium term future, for your retirement needs.
Speaker 3 (25:37):
Yeah that's awesome. Yeah, that's awesome.
Speaker 1 (25:39):
It is great to not have to worry about using
some like some of this or most of it or
a lot of it towards like kind of cleaning up
previous mistakes that you write. You know, like agreed, you're
not sitting there kicking yourself and wishing that old Lance
would have done something smarter with his money.
Speaker 2 (25:54):
And if you have like tons of debt, you're like, man,
I wish I could get three hundred k and one
fell soup to get rid of that and do positive stuff.
But still it's nice to be like I can do
only positive stuff with this, which rocks.
Speaker 3 (26:05):
I love it.
Speaker 2 (26:05):
So let's talk about where this money should go, man.
I mean, I think first, make sure you keep enough
cash for short and medium term needs. That is just
the you know, three to six months emergency fund expenses. Next,
I would say a roth IRA if you're income eligible,
and if you're making bank then you need to reconsider that.
But I think you should be maxing that out every
(26:26):
year moving forward. It's just one of the best and
most flexible retirement accounts in existence. And if you can
max that out for a decade, you could have six
figures in a roth IRA that you wouldn't have had otherwise.
And that's tax free money essentially that you can tap
in retirement, which is it's a nice thing to have.
And I'm not sure where you're working or if you
(26:47):
have a workplace retirement account anymore. You didn't mention that
in the question, but don't sleep on that either. And
that's just a way of course, especially your age, with
ketchup contributions, to be able to toss a ton of
money in every single year to really max out your
retirement saving these efforts.
Speaker 1 (27:02):
Yeah, there are closing windows of time where you only
have the option to put money in those retirement accounts. Now,
you can't go back in time, but beyond that taxbile
brokerage accounts that'll often make the most sense.
Speaker 2 (27:14):
Is that a share song though, if I could turn
back time, pretty sure.
Speaker 1 (27:18):
Or Fleetwood Mac Maybe I don't know all those folks
that I never listened to, I couldn't tell you any
of they'll kind of blend together. Yeah, but make sure
you've got your brokerage with one of our low cost
favorite providers like Fidelity, Vanguard or Chuck Charles Schwab.
Speaker 3 (27:33):
But if you.
Speaker 1 (27:34):
Invest most of this money, you will likely see it
double by the time you reach age sixty five, which
is pretty cool, right, Like you're turning that three hundred
thousand dollars into six hundred thousand dollars.
Speaker 3 (27:46):
It's kind of like alchemy, but it's not compounding.
Speaker 1 (27:50):
But that in addition to what you have in those
other retirement accounts, it's going to make a big difference
in you being able to live the life you want
once you're able to or once you're ready to stop
working completely. You also said in the next couple of years,
like literally you said that, and I think it might
be like if you literally mean that you are planning
to retire in a couple of years.
Speaker 2 (28:09):
A couple is such an ethereal term. You're like, does
that mean two or eight? I don't know.
Speaker 3 (28:13):
Couple, No, couple's two. Two is usually what people mean.
My couple.
Speaker 1 (28:16):
Few is three. But I think many is beyond what's many.
That's the thing for plus.
Speaker 2 (28:22):
But I think sometimes people use couple and they mean
it in a more generic sense. And so it's I'm
trying to read the read into this, yere.
Speaker 1 (28:29):
I'm going to take him out his word because like, so,
like literally, what if he's saying I'm retiring in two years.
If that's the case, I would say that it might
be worth taking some of that cash and not investing it.
He's he directed us, right, he said, where can I
invest this money as I prepare for retirement in a
couple of years? And so we I think maybe we
latch onto the first part. Oh, okay, we're talking about
(28:49):
investing here, But if literally you're talking about maybe you know,
kicking work to the curb in a couple of years,
like a little bit earlier than when most folks are
looking to retire, Like you actually don't want to invest
those dollars then.
Speaker 2 (29:01):
Again, and then again, you're talking about needing access and
needing to grow this money not just for boom that
retirement age, but for many many years in retirement.
Speaker 3 (29:10):
So maybe like he's got to do the math make
sure target date.
Speaker 2 (29:13):
Fund could make sense for him that is kind of
honed into his specific retirement date.
Speaker 1 (29:21):
And again I'm not I'm personally not sticking money. If
I want money that I want to touch, that's like
in a couple of years, I'm not investing that money.
Speaker 2 (29:28):
No, But that's the thing, he's not going to touch
all this money, Like a lot of this money, even
though he's retiring, he's still going to be invested for
many decades from now.
Speaker 3 (29:33):
Yeah, I think just something to consider.
Speaker 2 (29:36):
Because like you're not once you hit sixty five and
you're retired, you're not catching everything out of.
Speaker 1 (29:40):
Not all it was, but also three hundred thousand, I mean,
I don't know what is what his annual living expenses are,
But if you want to have we've already i mean
you already touched on like the fully funded emergency emergency fund,
and so that's going to take up a big chunk
of that. But then you've got some like you're so
boom you are siphoning up like I don't know, you know,
a third of that could maybe exact just to an
(30:01):
emergency fund. But then beyond that you're looking at maybe
I don't know, a year's worth of actual living expenses
to have liquid to be able to deploy, So you
might be looking at sticking. What I'm saying is all
three hundred of that in say a high yield savings
account where you're pretty much guaranteed by pretty dann close
to four percent. Like if it was me, I'm not
sure if I would take any risk knowing that I
(30:23):
would be that I would want to tap that money
early and maybe actually with rates declining, maybe do CDs
to guarantee like a higher rate for for a longer
period of time. But I guess it comes down to
how dependent you are going to be on that money.
Speaker 3 (30:37):
Yah, I think what you're getting that retirement.
Speaker 1 (30:39):
But if he's willing to work a little bit and
supplement his income, there's a whole lot more options available
on prom and then I would totally be willing to invest.
Speaker 2 (30:48):
What you're getting at is like how crucial timeline is right,
And that's why for most listeners, we talk about wealth building,
talk about wealth preservation, and Lance is just getting much
closer to wealth preservation. But I will say this too,
wealth preservation doesn't mean cash like only cash. There's still
a need to watch your portfolio grow over the many
(31:10):
decades that hopefully you're going to live in retirement. So
you have to be thoughtful about that balance of not
being too risky. Probab don't want to be one hundred
percent s and P five hundred fund or total stock
market fund. That would be insane if you're retiring in
two years. But you also want to be thoughtful about
not allowing not outliving your money and giving it a
chance to grow for your future as well. Like I
(31:31):
know some people who have retired and they're like they think,
oh great, my retirement money, cash out, use it, And
it's like no, no, no, this is money that you built
up is supposed to last you for decades. That's the
goal of it.
Speaker 3 (31:40):
I love it.
Speaker 1 (31:41):
Okay, you are listening to How to Money on KFI
AM six forty KFI AM six forty on demand
You're listening to KFI AM six forty on demand, Joel
Larscard and I in that alt mix. By the way,
you can always find more money saving information over at
howtomoney dot com.
Speaker 2 (00:15):
Let's talk about running for a second. Can we talk
about so I will mention I did run a marathon
this past weekend. It was my first marathon of all time.
You did great, I did well. I guess you keep
your goal that you're going for, so I was happy
with that.
Speaker 3 (00:29):
That's a win.
Speaker 2 (00:30):
Big thanks to listener Greg by the way, who ran
the same marathon. This was his one hundred and fourth marathon.
Because Greg is I did not know that an absolutely beast,
Oh my god, and he helped me. I don't think
I would have done nearly as well if it wasn't
for like Greg. It almost felt like I had like
the you know, he lets you pick you back. Yeah,
it was almost felt like one of those monkey backpacks
where I'm holding onto the tail and he was dragging
(00:52):
me all the way. But it was more of like
verbal kindness that dragged me along so and just his
like persistent spirits. So but yes, it's a painful endeavor,
but it made me think too Matt Like. Upon this accomplishment,
I was reflecting on it. There was an article about
the running industrial complex, and I was like, this is
kind of something I'm actively trying to fight as someone
(01:13):
who's gotten kind of deep into the running space.
Speaker 1 (01:15):
Good luck fighting it. It's gonna be tough.
Speaker 2 (01:18):
It's tough, man, It's tough. But the Business Insider had
this article that kind of spoke to me, as someone
who has finally gotten around to enjoying running over the
past two years. Hated it beforehand, but man, running is
this sport in its essence, it's like the purest, one
of the purest things you can do as a human,
like walking and running, right, They're like some of our
most basic instincts. But it feels like running is starting
(01:41):
to get hijacked by this American consumer mentality. It feels
like everything pure starts to starts to go in that direction,
because all you really need is a decent pair of
shoes and a even just like a Kirkland signature disposable
water bottle that costs like a quarter when you buy
him in the big packs, or maybe even less. But
now we've got super shoes, we've got high end gels,
(02:03):
We've got fancy watches, recovery tools, like all this kind
of stuff in the running space, and so many people
are turning like the simplest human action into this overly
expensive hobby.
Speaker 3 (02:14):
And I think this is partly.
Speaker 2 (02:16):
Because of tailored ads seeking you out on the social
Media's like I've been getting these ads for and I
don't everything running.
Speaker 3 (02:23):
Huh yeah, everything running? There we go. That's why I said,
good luck.
Speaker 2 (02:26):
Even these even these like gummies that have THHC in
them they've been feeding I'm like, I don't partake, but
they've been inundating me with these gummies, Like.
Speaker 1 (02:35):
This is what's gonna make you run awesome? Is the
idea that you don't feel any of the pain. I
totally blessed out and you're setting prs I guess.
Speaker 2 (02:42):
I mean, if that's actually the case, I'm not sure
you consider, but like these tailored ads, and then I
think that I think there's also the pressure you feel
as other people are nerding out on on like getting
stuff for running. But I think it's eminently possible to
enjoy the activity you're doing without overdoing it on the
stuff thing. It just makes me think of our friend
(03:04):
of the show Michael Easter. He talks about gear versus stuff.
There's certain gear that you might that might be like
helpful to you as a runner, but then don't let
it turn into just like buying stuff and accumulating more stuff.
Speaker 3 (03:16):
Yeah.
Speaker 1 (03:17):
Well, some people like the stuff, you know, and that's
the thing. They're doing it because they enjoy it. But
it's not necessary. And I think that's what you're getting
out that you can literally you don't need a new
pair of shoes even you just you can put on
a pair of walking shoes or running shoes that you
already own and go.
Speaker 3 (03:29):
For a jog. That's how you get to start to
be a runner.
Speaker 2 (03:32):
I do feel a special satisfaction when I'm passing someone
in their two hundred and something dollars super shoes in
my thirty dollars Adida shoes, like I just like all
decked out. Yeah, maybe I love it passing them in
my eBay running shoes that I just actually purchased. Did
we talk about this the brand new you didn't know
eBay was still Oh, I think you're talking about east Bay.
That was that kind of Yeah, we've talked about the
(03:54):
sports shoes. No, my eBay shoes my US shoes. Okay,
oh of course, well they were.
Speaker 3 (03:59):
Used, but they were like new, I mean.
Speaker 1 (04:01):
And you can always tell a good shoe seller on
eBay will put a picture, a closer picture of the tread.
And when you can see not only the tread still there,
but even the slight texture that they'll put on the
bottom of the tread, sometimes that's when you know, oh
my gosh, this shoe is worn like once or twice,
it's an excellent condition. And those are the shoes that
war this morning when I went for my run. But
(04:22):
going beyond gear, the Times detailed how runners are actually
paying a large amount of money for these race tours
in order to be able to compete in the most
dearly races. So, for instance, the almost impossible to get
into London Marathon, will you pay a quote unquote tour
operator four thousand dollars and that ensures that you will
(04:42):
get a bib although it only actually calls you. Costs
you two hundred dollars in race fees, and they include
other stuff.
Speaker 3 (04:48):
Too, like meals, and they kind of paying for you.
Speaker 2 (04:50):
And yeah, it's again it's the tour, so it's it's party,
it's the package between paying for the package and just
going through. Oh yeah, it's hard to get into so
which means you're in this lottery and almost nobody it's accepted.
But if you do the race, fees are pretty minimal,
they're reasonable, but the only way to actually get in
is to pay the really really really high tour fee.
Speaker 3 (05:08):
Well yeah, so what do you think about that? Are you?
Are you split?
Speaker 1 (05:11):
Because if you had a life goal to run them,
like if you're hitting all the majors, and then they
kind of.
Speaker 2 (05:15):
Highlight what of my friend is doing, friends is doing? Yeah,
he just like went down to Australia to run Yeah,
the new the Worse six.
Speaker 3 (05:21):
Now there's nine.
Speaker 1 (05:22):
But do they do they update the medal like the
instead of the six the six stars Metal question? I
don't like, do you have to go and rerun all
of the majors? I'll have to ask him. But if
that is a life goal of years, this is how
you can guarantee entry. And one of the persons who
has profiled in the in the article talked about how, well,
what if I could get hit by a bus tomorrow,
I could have a quote unquote career running, career ending
(05:45):
sort of injury. And if you've got the money. I
think I'm all for folks taking this around because.
Speaker 3 (05:52):
Gepping the line, but you pay a ton of money
to skip.
Speaker 1 (05:54):
Yeah, it does cost a lot of money and there
are other perks, but if you have the money to
do it, I'm not am I personally going to do that?
Speaker 3 (06:01):
No, because I don't care. Like this totally needs to
be your splurge.
Speaker 1 (06:05):
This needs to be your craft beer equivalent, and you
of course need to have the money on hand. But again,
you can spend very very little money on this activity,
this hobby, the sport, something that causes you to live
a healthier lifestyle, or you can spend a ton of
money and that guarantees your ability to visit London.
Speaker 2 (06:22):
I guess I just I hate seeing like something that
is so pure overrun in some ways, with like people
grabbing for your dollars, and I don't know, it makes
me think too. There are other ways to get into
some of those elite races. I have a friend who's
gonna run the New York City Marathon, which I think
is next weekend, and he I think the way he
got in was raising money for charity. And this is
(06:43):
a common way to get into some of those premium
races too, and maybe it's a better way, right like
than just me and I don't like it. The easy
thing to do is to fork over four thousand dollars
to the race tour. Sure that maybe slightly harder way
but less costly way is to raise money for charity
and also the ultimate best way to proceed totally all right,
We've got actually more to get to. On today's show.
Speaker 1 (07:05):
You're listening to KFI AM six forty on demand how
to Money. I am Matt Altmix.
Speaker 3 (07:12):
And I'm Joel Larsguard.
Speaker 2 (07:13):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group. Let's get to what I would say
is an entertaining question, Matt about the nuance of saving traits.
Speaker 4 (07:28):
Hi Ellas, this is Katie thirty nine from Maryland, and
I had a twist on how to calculate saving percentages.
So everywhere you look, everybody kind of has a different
idea on how much you should be saving for retirement
compared to your income. But I receive a non insignificant
(07:51):
amount each month from my VA disability, and I was
just wondering how I would take that into account. Should
I add that amount in with my anual income when
I do my percentage or since that will that entire
amount will continue through my retirement until I die, do
I completely exclude that amount?
Speaker 3 (08:10):
What would you guys do?
Speaker 4 (08:11):
All right?
Speaker 3 (08:12):
Thanks?
Speaker 1 (08:12):
All right, Katie, great question. And first off, you mentioned
your VIA disability, so that means you were somehow injured
or had a condition maybe that was made worse during
your service. So thank you for your service to our country.
Speaker 3 (08:26):
Thank you too.
Speaker 1 (08:27):
But let's dive back into the old savings rate discussion, Joel,
I do.
Speaker 2 (08:31):
I do love these discussions. I know sometimes they get
a little longier nerd.
Speaker 3 (08:35):
Sometimes I like one. Sometimes I like them, but I
don't know.
Speaker 1 (08:38):
If you are a personal finance nerd, it's fun to
crunch the numbers, calculate your percentages, which tells me something
you would do they get this guy, you know. Let's yeah, okay,
I don't want to get off track too soon. Let's
let's specifically answer kating his question because like what she
is doing here by like she's asking should I include that?
She's highlighting how slippery this argument around savings rate can
be because you can aculate it in so many different ways.
(09:01):
You can base it on. You can base your savings
rate on just your gross income. You'll, let's narrow it
down to even to your net income after taxes. You
can even incorporate your net worth growth into your savings rate,
basically the fact that your money is now working for
you so well lash you account now too, shouldn't it right?
Some folks do that. I wouldn't recommend for you to
do that one personally. That's not really what savings rate
(09:22):
is getting after.
Speaker 3 (09:23):
And I get that.
Speaker 2 (09:23):
There are a few different ways that you can You
can think about your savings right and like, for instance, yeah,
that last one you mentioned is reflective of your wealth
building efforts. But savings rate and net worth are just
two different things and they should be measured differently. I
think they're both worth tracking and growing, but you don't
want to necessarily like blur the lines and include your
(09:43):
net worth information into your savings rate, like they're just
different things. There are also perpetual arguments about whether to
include investment dollars and savings dollars in your savings rate.
I say yes, cause you know you're putting money into
to a high insure savings account, you're also putting money
into roth IRA or a four to one K.
Speaker 3 (10:05):
Yeah.
Speaker 2 (10:05):
I like the idea of all the above going into
the amount of money you're actually putting towards savings culture.
You're not using that money to spend. Same with paying
down principle on debt. I also think that should be
included in your savings right. Not everyone agrees with that,
but you're not spending those dollars, and then once that
debt's paid off, hopefully you continue to allocate the money
(10:26):
that you were using towards savings towards investments moving forward.
This just goes to show there's a lot of nuance
inside of it and teach each of their own. Really,
as long as you're sticking to the same metric and
you're not maneuvering it to make it seem like you're
doing more than you are, and you're holding yourself to
the standard that you've set for what you want to
accomplish with.
Speaker 3 (10:46):
General financial goals.
Speaker 1 (10:47):
Generally speaking, I think it's about consistency because, like to
the paying off debt argument, it's like, well, you're not
spending that money. Yeah, well you had spent that money,
So it's like old you, previous you had spent that money.
Speaker 3 (10:58):
But what if you're continually racking up debts that you
can pay off the debt and now you know that.
Speaker 2 (11:01):
You could get into this like circular reasoning logic where
then it doesn't really count a savings rate.
Speaker 1 (11:05):
Yeah, yeah, we're talking about her disability payment. In a
similar way. You could even think of an employer match
as being part of your your savings rate, but we
don't include that because it is subject to change, whereas
your disability payment is not. This is sticking with you
for forever, and were you to start considering your employee
(11:26):
match as well, it takes the onus off you to
be ramping up your savings efforts. That's where looking at
your savings rate is just a good measure of your
behavior as opposed to like a specific dollar amount. But
generally speaking, we believe that the minimum savings rate goal
should be around fifteen percent of your gross income. But
(11:46):
it is really hard to make meaningful progress if you
are saving like let's say you're fellow American, which is
less than five percent of your overall income.
Speaker 2 (11:55):
You're just trudging along in making a financial progress, it's
like one step forward, one step back. It feels like
if your savings rate is that low, right, like five
percent is just kind of insignificant, it's not going to
move the needle. But you're not going to get peace
out money. You're not going to reach much financial independence,
or it's going to take so long you're going to
be working until you die.
Speaker 1 (12:14):
But again, it also depends on how soon you start saving, right, like,
if this is something you started doing as a sixteen
year old, you started not only socking away money for
that first car and for that phone and for college,
but if you also had a designated no, this is
my retirement dollars. I literally have a friend she started
doing that when she was fifteen years old. She started contributing.
Her dad's a CPA, and so it's not surprising that
(12:36):
they knew about the wrathhire.
Speaker 3 (12:37):
They knew about the glories of the wrathire rate.
Speaker 1 (12:39):
But literally, at that young of an age, she started
contributing to her wrath and you know, she's doing pretty
well because of compounding.
Speaker 3 (12:47):
I think it so many factors, many factors.
Speaker 2 (12:50):
If you frontload the sacrifice and you have a higher
savings rate in those early years. You can maybe a
five percent savings rate in your forties and fifties.
Speaker 3 (12:58):
It's totally fine. Like your friend is a fifteen.
Speaker 2 (13:00):
Hey, I've been doing this for twenty five years and
I've been saving a big chunk of my money. Well,
do I need to always have a thirty percent savings right?
Speaker 3 (13:07):
No?
Speaker 2 (13:08):
That's what like coast fire is all about. Right, It's like, Hey, No,
I've put in a lot of the effort. I don't
need to be saving it the same rate because I
put all that effort in early on. And I just
think too, the reason savings rate is so powerful is
because there are other things you can try to focus
on in your finances, like, oh, I'm going to try
to get higher returns than the average person. Well, you
don't have as much control over that, right, and you
(13:29):
actually might fall flat on your face, and an attempt
to pull that off. So much of your success really
hinges upon your savings, right. So I do think that
is one of those key personal finance metrics you want
to be considerate of and to continue to look at.
And then so yeah, when you're talking about the VA
disability payment and including in your savings, right, I think yes,
like we would of course include this in the income
(13:52):
section and the numerator of your calculation. If you make
let's say seventy five thousand bucks a year, but your
VA disability check is something like twenty five thousand dollars
a year for an overall amount of one hundred k,
and you save twenty five thousand dollars a year, your
effective savings rate is twenty five percent. And so while
you have more money at your disposal because of this
(14:14):
via disability benefit, you've got more money to save. This also, though,
raises the stakes on how much you should be setting
aside to hit the metric that you want to hit
to hit the savings rate the year you're going after.
And it's not like a more money, more promised thing,
but it is just the fact that more money coming
in the greater necessity to save, which is why I
Matt every single year, as we're getting raises, right as
(14:36):
we're seeing our income go up, we have to be
thoughtful about how much we're contributing to savings and investments
because if we keep it the same, then we're not
actually hitting saving that same savings rate. And over the
course of a decade, let's say if we're still saving
the same amount but not the same percentage, we're making
less progress.
Speaker 1 (14:55):
Yeah, and I kind of touch on this in a
second ago. But the reason we would count your VA
disability check, uh is because of the permanent nature of
that disability payment.
Speaker 3 (15:04):
Right, So unlike a match, this is going to be recurring.
Speaker 1 (15:07):
This is going to be a reliable stream of income
and perpetuity. And like as opposed to a match, I
keep going back to a match because I feel like
it's just a great counter example because like we've seen
many employers not offer a match, or we've seen them
reduce a match that they offer.
Speaker 3 (15:21):
If you change jobs, the match it might not be
the same.
Speaker 1 (15:24):
But within your case here, you've got this payment coming
in from the federal government every month, and so because
of that, I think including it in those calculations it
just gives you an accurate reflection of what you're doing
with the total amount of money that you have coming in.
And I think if you only included earned income doesn't
seem quite as thorough because it doesn't paint the whole
(15:45):
just like a full robust picture of what's going on
with your right with your finances. So you are listening
to how Some Money. You're listening to KFI AM six
forty on demand stroll Lars Guard and I am the
other host Matt a mix 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
(16:06):
app there on your phone and send it over via email.
You can find the simple instructions at howdomoney dot com,
forward slash ask all.
Speaker 2 (16:13):
Right, big question here? Do you get worse at managing
money if you have more of it? There was an
interesting article about this. I believe he's in the Wall
Street Journal. All signs Matt, I think points a yes,
and understandably so.
Speaker 3 (16:26):
Because your magic Eateball says.
Speaker 2 (16:29):
There is something about having limited means and kind of
having to focus.
Speaker 3 (16:34):
Really in order to make money progress.
Speaker 2 (16:36):
Right, Like when you don't make much, budgeting is a necessity,
it's not really a luxury, and so it's easier to
have like harder lines about eating out and then just
kind of spending in general. It's easier to hold the
line and to not make changes. But what this article
was talking about was is, like your income rises, it
becomes easier to abandon some of those sound financial habits
(16:59):
that maybe helped you there in the first place. People
become more adept at like guestimating or assuming things about
their finances than they are at paying attention to the specifics.
And there was research from the University of Chicago, almost
like a decade ago that they referred to in this article,
and it found that people living on less have the
(17:20):
ability to see their financial decisions more clearly. Things do,
I think get hazier as you make more progress, And
part of it is just literally the complexity ramps up
as you're making more as your financial decisions do have
greater ramifications, greater tax ramifications. But I think this is
a call that no matter where you fall on the
(17:41):
income spectrum, tracking your spending and discussing your goals, those
remain crucial things. I think I just don't want people,
as they're making progress along the way, they just kind
of like, Hey, I'm not going to listen to personal
finance podcasts anymore. I'm not going to care about track
my spending anymore. I'm not going to be thoughtful about
what subscriptions I have in my life anymore. I think
those habits still matter. I'm beyond that, Yeah, exactly, this.
(18:03):
You are not beyond that. I mean, it's up to you.
I guess it depends on how you want to spend
your time, how you want to spend.
Speaker 3 (18:08):
Your your energy.
Speaker 1 (18:09):
But that can reverse it, yes, And that's what we're
pointing to here, is that the kind of progress that
you were able to make that got you to this
point is not guaranteed to continue as you pay less
attention to it. And it's one of the reasons I
still literally do my Excel spreadsheet and track every single
purchase that we make, every single pennon that enters into
our household.
Speaker 3 (18:28):
I know where those pennies are.
Speaker 1 (18:29):
On that note, a recent Bloomberg article documented the rise
in cash straft millionaires.
Speaker 2 (18:34):
Which sto things seem like an oxymoron, like, wait, cashtrapp
Millionaire's a difference, Oh don't.
Speaker 3 (18:39):
I'm shooting lots of two years for you. Yeah.
Speaker 1 (18:42):
So this is the moneyless millionaires that you refer to
in the title, but the number of folks who have
a net worth of one million dollars plus it has
grown dramatically in recent years, and we've seen more people
participating in the stock market. We've seen a dramatic rise
in different assets homes, but more of those millionaires have very.
Speaker 3 (19:02):
Little access to that wealth.
Speaker 1 (19:05):
It is those dollars are tied up in retirement accounts,
it's tied up in home equity, and and.
Speaker 2 (19:09):
Those things are you don't just sell for your money,
is stock from referral one k right or like or
a portion of your home.
Speaker 1 (19:17):
But what I was going to say is, in some
ways I think this is great, Like, just build that wealth,
do not touch it while you are while you're working.
But and it's also interesting to note too that beyond
the one to two million dollar mark, and as you
sort of advance into the upper I don't know what
you call these folks, the upper elite, the upper crust,
folks with millions upon millions. Uh, you see the level
(19:40):
of wealth that is tied up in these liquid assets decrease,
which makes sense, right, There's only so specifically like your home.
There's only so much of a so much home you
can buy before you're just like, you know what, let's
just invest it.
Speaker 3 (19:51):
Let's think.
Speaker 1 (19:52):
I hear, well, there are certainly the Hamptons are calling.
There are certainly very big and nice homes. It's just
that not everybody wants to live in the gigantic mansion
where they're dumping a ton of their wealth into that.
But for most folks out there who are in a
stage of life where they are trying to build their wealth,
it's important to know your timeline.
Speaker 3 (20:10):
And I want to make.
Speaker 1 (20:11):
Sure that there are folks out there who have access
to money for some of the different short term and
for some of the different medium term goals that they
might have. We often focus on building your wealth, and
the vast majority I think, especially of our generation of
wealth that is being built is within the four and K. Yeah,
there's a lock on it. And the only key to
that lock, well aside from a ten percent penalty, is
(20:31):
hitting a certain age. And so it's like a time
it's like on a time schedule. Yeah, right, And you
know what, there are oftentimes going to be goals that
we have in life that where we are going to
need more liquid, readily available cash.
Speaker 2 (20:43):
And actually, one of the other things maybe that might
be worth mentioning here is this is why I like
roth high Ray's why we like roth Hirays so much, Matt,
is because the Rothiray contributions, if you are a regular
maximizer of that Rothiray over a long period of time.
Those contributions can be tapped penalty and tax free, and
we don't typically recommend it. It's not like, oh, you're
(21:04):
thirty eight and you've been maxing out your WROTH for
ten years, pull all those contributions out. Great, But at
least it is there is the possibility to access those
fun since I do see that as a plus if
you're handling your money well and you do need access
for let's say, a down payment on a house or
something like that, or a more short term money goal
(21:26):
that you have. I was talking to somebody the other
day and he didn't even realize that WROTH contributions we
were accessible, and so I was like, oh, man.
Speaker 3 (21:35):
Was that a good thing? Let me tell you about
the bad thing?
Speaker 2 (21:37):
You think for him, I always couch it right, And
I'm like, yeah, yeah, you might not want to go
grab them all right now, but.
Speaker 3 (21:43):
At least they all just know that it's there. Yeah.
Speaker 2 (21:45):
So if you feel like you crash cash strapped millionaire,
your WROTH contributions might at least make you feel less.
Speaker 3 (21:50):
So that's right, buddy.
Speaker 1 (21:51):
And you are listening to how to Money, You're listening
to KFI AM six forty on demand.
Speaker 3 (22:03):
Is out of money.
Speaker 1 (22:03):
I'm Joe Larsgard and I am Matt Altmis. 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.
Speaker 2 (22:15):
Let's take a question from listener Lance, who did not
say his name, so I'm saying his name, Lance, who
wants to know what he should be doing with a
big chunk of money.
Speaker 5 (22:25):
Hello, had to money team. I recently came into some
money a settlement. It's about three hundred thousand, and I
am fifty six years old, so I'm trying to look
forward to retirement and I do have a couple retirement
accounts with my prior jobs. I am a renter and
(22:45):
always have been, and I have no bills or anything,
so I'm clear on that side, except a car insurance
and regular notes like that. But if you can aid
me down the path on where I probably should invest
this to help me with retirement and in the next
couple of years.
Speaker 3 (23:06):
Thanks.
Speaker 1 (23:07):
So. The first thing I want to point out is
the fact that Lance said he's a proud I don't
think he said he was a proudrunner, but he said
it like I'm a renter, I always have been get
up off me. Yeah, dude, don't criticize me. I'm all
for that, that's what.
Speaker 2 (23:20):
Yeah, that's one of those personal finance myths that just
won't die. And I don't know if it's just the
National Association of Realtors putting something in the water in
every municipality like water source or anything like that. I'm
not accusing them of super nefarious tactics like that.
Speaker 1 (23:36):
But like, I didn't know you've gotten into the it's
like fluorid Matt, the conspiracy theories. But I really do
think where you getting your health advice?
Speaker 2 (23:44):
Bro, there's like all there's like this cultural mythology around
home ownership and how that's like the best personal finance
move you can make. You and I both know when
you look further into the data, yeah, it can make sense.
And so much of it depends on when you're buying,
what rates or how much housing prices cost, how long
you are going to stay in the house, Like renting
is not for dummies, And in fact, renters especially now
(24:07):
can do better Oh yeah, saving investing for their future
than a lot of homeowners. Absolutely, Yeah, home ownership the
cost of hoone ownership. We also often underdiscuss how bad
those can be, how expensive.
Speaker 3 (24:18):
The additional costs. Yeah, but it does well.
Speaker 1 (24:20):
First of all, too, he mentioned a settlement, So Lance,
hope you are doing okay and that whatever happened isn't
keeping you from being able to live your best life.
But it also sounds like you've been investing along the way,
which is great. You mentioned it sounded like multiple retirement
accounts with employers with.
Speaker 3 (24:35):
Jobs you've had over the years.
Speaker 1 (24:37):
But maybe you don't have as much set aside over
there as you wish you did, or that you maybe
you're just not quite as comfortable as you perhaps envisioned
you being at this point in life.
Speaker 2 (24:48):
And this is the kind of realization that often happens
when you're in your mid fifties.
Speaker 3 (24:52):
You're like, wait a second, how much have I been doing?
Do I need to ramp it up?
Speaker 1 (24:55):
She kind of like knows to the grindstone, and you
look up and realize, oh, man, I actually you know
I want to retire some soon. And for him specifically,
I think the settlement can be just a nice breeze
to the sales as he's cruising along here towards the
end of his his working career.
Speaker 2 (25:09):
Kind of maybe something you didn't plan on, but it
could be a way to make up for lost time.
Financially speaking, I also love that you don't have any debt, right,
which means you don't need to use this money to
pay off like student loans or credit card debt or
anything like that personal loans that are hanging out in
your past. That's nice, right, the fact that you've been debtiverse,
(25:30):
so you basically you can funnel all this money into
positive action for your medium term future, for your retirement needs.
Speaker 3 (25:37):
Yeah that's awesome. Yeah, that's awesome.
Speaker 1 (25:39):
It is great to not have to worry about using
some like some of this or most of it or
a lot of it towards like kind of cleaning up
previous mistakes that you write. You know, like agreed, you're
not sitting there kicking yourself and wishing that old Lance
would have done something smarter with his money.
Speaker 2 (25:54):
And if you have like tons of debt, you're like, man,
I wish I could get three hundred k and one
fell soup to get rid of that and do positive stuff.
But still it's nice to be like I can do
only positive stuff with this, which rocks.
Speaker 3 (26:05):
I love it.
Speaker 2 (26:05):
So let's talk about where this money should go, man.
I mean, I think first, make sure you keep enough
cash for short and medium term needs. That is just
the you know, three to six months emergency fund expenses. Next,
I would say a roth IRA if you're income eligible,
and if you're making bank then you need to reconsider that.
But I think you should be maxing that out every
(26:26):
year moving forward. It's just one of the best and
most flexible retirement accounts in existence. And if you can
max that out for a decade, you could have six
figures in a roth IRA that you wouldn't have had otherwise.
And that's tax free money essentially that you can tap
in retirement, which is it's a nice thing to have.
And I'm not sure where you're working or if you
(26:47):
have a workplace retirement account anymore. You didn't mention that
in the question, but don't sleep on that either. And
that's just a way of course, especially your age, with
ketchup contributions, to be able to toss a ton of
money in every single year to really max out your
retirement saving these efforts.
Speaker 1 (27:02):
Yeah, there are closing windows of time where you only
have the option to put money in those retirement accounts. Now,
you can't go back in time, but beyond that taxbile
brokerage accounts that'll often make the most sense.
Speaker 2 (27:14):
Is that a share song though, if I could turn
back time, pretty sure.
Speaker 1 (27:18):
Or Fleetwood Mac Maybe I don't know all those folks
that I never listened to, I couldn't tell you any
of they'll kind of blend together. Yeah, but make sure
you've got your brokerage with one of our low cost
favorite providers like Fidelity, Vanguard or Chuck Charles Schwab.
Speaker 3 (27:33):
But if you.
Speaker 1 (27:34):
Invest most of this money, you will likely see it
double by the time you reach age sixty five, which
is pretty cool, right, Like you're turning that three hundred
thousand dollars into six hundred thousand dollars.
Speaker 3 (27:46):
It's kind of like alchemy, but it's not compounding.
Speaker 1 (27:50):
But that in addition to what you have in those
other retirement accounts, it's going to make a big difference
in you being able to live the life you want
once you're able to or once you're ready to stop
working completely. You also said in the next couple of years,
like literally you said that, and I think it might
be like if you literally mean that you are planning
to retire in a couple of years.
Speaker 2 (28:09):
A couple is such an ethereal term. You're like, does
that mean two or eight? I don't know.
Speaker 3 (28:13):
Couple, No, couple's two. Two is usually what people mean.
My couple.
Speaker 1 (28:16):
Few is three. But I think many is beyond what's many.
That's the thing for plus.
Speaker 2 (28:22):
But I think sometimes people use couple and they mean
it in a more generic sense. And so it's I'm
trying to read the read into this, yere.
Speaker 1 (28:29):
I'm going to take him out his word because like, so,
like literally, what if he's saying I'm retiring in two years.
If that's the case, I would say that it might
be worth taking some of that cash and not investing it.
He's he directed us, right, he said, where can I
invest this money as I prepare for retirement in a
couple of years? And so we I think maybe we
latch onto the first part. Oh, okay, we're talking about
(28:49):
investing here, But if literally you're talking about maybe you know,
kicking work to the curb in a couple of years,
like a little bit earlier than when most folks are
looking to retire, Like you actually don't want to invest
those dollars then.
Speaker 2 (29:01):
Again, and then again, you're talking about needing access and
needing to grow this money not just for boom that
retirement age, but for many many years in retirement.
Speaker 3 (29:10):
So maybe like he's got to do the math make
sure target date.
Speaker 2 (29:13):
Fund could make sense for him that is kind of
honed into his specific retirement date.
Speaker 1 (29:21):
And again I'm not I'm personally not sticking money. If
I want money that I want to touch, that's like
in a couple of years, I'm not investing that money.
Speaker 2 (29:28):
No, But that's the thing, he's not going to touch
all this money, Like a lot of this money, even
though he's retiring, he's still going to be invested for
many decades from now.
Speaker 3 (29:33):
Yeah, I think just something to consider.
Speaker 2 (29:36):
Because like you're not once you hit sixty five and
you're retired, you're not catching everything out of.
Speaker 1 (29:40):
Not all it was, but also three hundred thousand, I mean,
I don't know what is what his annual living expenses are,
But if you want to have we've already i mean
you already touched on like the fully funded emergency emergency fund,
and so that's going to take up a big chunk
of that. But then you've got some like you're so
boom you are siphoning up like I don't know, you know,
a third of that could maybe exact just to an
(30:01):
emergency fund. But then beyond that you're looking at maybe
I don't know, a year's worth of actual living expenses
to have liquid to be able to deploy, So you
might be looking at sticking. What I'm saying is all
three hundred of that in say a high yield savings
account where you're pretty much guaranteed by pretty dann close
to four percent. Like if it was me, I'm not
sure if I would take any risk knowing that I
(30:23):
would be that I would want to tap that money
early and maybe actually with rates declining, maybe do CDs
to guarantee like a higher rate for for a longer
period of time. But I guess it comes down to
how dependent you are going to be on that money.
Speaker 3 (30:37):
Yah, I think what you're getting that retirement.
Speaker 1 (30:39):
But if he's willing to work a little bit and
supplement his income, there's a whole lot more options available
on prom and then I would totally be willing to invest.
Speaker 2 (30:48):
What you're getting at is like how crucial timeline is right,
And that's why for most listeners, we talk about wealth building,
talk about wealth preservation, and Lance is just getting much
closer to wealth preservation. But I will say this too,
wealth preservation doesn't mean cash like only cash. There's still
a need to watch your portfolio grow over the many
(31:10):
decades that hopefully you're going to live in retirement. So
you have to be thoughtful about that balance of not
being too risky. Probab don't want to be one hundred
percent s and P five hundred fund or total stock
market fund. That would be insane if you're retiring in
two years. But you also want to be thoughtful about
not allowing not outliving your money and giving it a
chance to grow for your future as well. Like I
(31:31):
know some people who have retired and they're like they think,
oh great, my retirement money, cash out, use it, And
it's like no, no, no, this is money that you built
up is supposed to last you for decades. That's the
goal of it.
Speaker 3 (31:40):
I love it.
Speaker 1 (31:41):
Okay, you are listening to How to Money on KFI
AM six forty KFI AM six forty on demand
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