November 9, 2025 • 33 mins
How To Money Hour 2 (11/09) - Eating out for lunch is expensive! Eat leftovers instead, folks.
Ask HTM: A Facebook poster wants to know if paying off his mortgage will harm his credit score.
Ads are everywhere these days! They're getting incredibly annoying. Matt has a tip for avoiding ads on social media. Kelsey wants to know if she should stop investing for a bit in order to pay off debt.
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Speaker 1 (00:00):
You're listening to KFI AM six forty on demand. All
Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel lars Guard and Matt.
Speaker 2 (00:20):
Altmics KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 3 (00:32):
This is how to Money. I'm Joel lars Guard and
I am Matt Altmix. 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. It is
now time for the ludicrous headline of the week, and
we have a selection this week from MarketWatch. Headline reads
(00:53):
We're spending over one a week on lunch. How did
ordering food at work become a luxury? Which? Man, this
article rubs me so the wrong way. I hate it.
I propably you don't have like a tattoo of left
over somewhere on your body because you love leftovers more
than anyone. With my little deli container take out plastic, yeah,
is it the small, the medium or the large? Most
(01:16):
of my leftovers are in the medium. That would be
a cool tattoo. You should get with it. Yeah, somewhere
that's just way too committed to the whole the leftover game.
Speaker 4 (01:26):
Man.
Speaker 3 (01:26):
No, this just rubs me the wrong way because of
the like, honestly, the expectation that this should be something
that someone should be able to afford. Right, Like, there's
like this lifestyle entitlement that I so highly dislike. And
it's totally fine if you want to go out there
and spend that kind of money on lunch, but you
gotta be okay with it. You got to be able
to afford it. You got to know that you're not
(01:47):
going to be able to funnel those dollars towards some
other financial goal in your life. But to think that
it's this basic human rights so that that someone should
have seems preposterous. I think that's the thing that hit
me with this too, was like, how did ordering food
to work become a luxury? And it's like eating out
for lunch every day of the week has always been
the luxury. Yeah, of course that's a luxury. That's the
(02:08):
very definition of a luxury. Yeah, it's not a coach
handbag or something like that or whatever. It's a fancy
air maze scarf, but it is totally a luxury to
think that you can eat out every single day and
not feel a massive impact on your budget. And one
hundred bucks a week, Yeah, that's you're talking about like
four hundred plus dollars a month on food for lunch.
(02:31):
I can't imagine. I would love to run the numbers
on how much you and I spend on our lunches.
Like It's be hard to factor out because most of
the time it is leftovers from the dinner the night before,
where most folks, unfortunately, they're just like, yeah, that's not
worth keeping and they just like scrape it off into
the trash can as opposed to sticking it. It's like, okay, no,
that's a that's a medium deli container size leftover that
(02:51):
plus a couple eggs. You fry it up. You got
a nuke the leftovers, fry up a couple of eggs.
I mean, that's like the definition of decade eating right there,
with a yolk running over the leftover breakast beef that
you oh my gosh, Like, I'm getting hungry. We haven't
eaten lunch yet. I'm getting hungry even thinking about that. Yeah,
I think leftovers are the answer here, and I think
it's just also putting yourself in the frame of mind
(03:15):
to realize what is a luxury and what isn't. I
think if you and maybe the only way you could
go out to eat lunch every day, Matt and not
break the bank is to go to the Costco food court.
If you're doing that. If you're doing that, you can
probably ford to eat out, but then you might not
be the healthiest. You may not be. Oh my gosh.
I was just talking Kate and now we're looking at
pictures of like us, me specifically back in the day,
like before Kate and I got married and I was
(03:36):
poor man, like I was broke, and I'm thinking through
what did I eat because I could tell from looking
at the pictures that I'm skinned. Didn't look at I'm
really skinny, And I told her I was just like
I didn't really cook at home. I think I was
just eating bowls of cereal and like once a week
I might go out to McDonald's because back then they
had like the value menu. I get a cheeseburger, a
(03:56):
side so expensive now I know, a side salad, and
then I'll get parfait and those three items. Thinking that
that was like a well balanced meal, but in a
similar way. You would also be feeling yourself if you
were going to the Costco food court thinking that you're
getting something similar but any just that, I think that's
a really important thing to mention though. It's just fast
food is so crazy expensive now too. You think you're
(04:17):
going to save money by going, Okay, at least I'm
going to get fast food for lunch instead. Sorry, no,
that's expensive. Now. A big mac meal is probably eleven
or twelve dollars, and so you can. Yeah, leftovers are
way checker than that. By the way, I did crush
the numbers. I thought you were going to say we
should run the numbers on knowing what our lunch costs. Yeah,
I'll tell you what it costs. What is costing you?
Were you to go out to lunch every day at
(04:39):
work instead of taking that one hundred dollars and investing
it over a forty year career, you are looking at
over one million dollars in the bank over a typical
forty year career. That oh my gosh, I don't know
what is And that's yeah, it was almost over a
million dollars even with the seven percent return. But way
Seve hundred dollars. If one hundred dollars a week four
hundred a month, invest those returns compounded in forty years,
(05:03):
you're gonna have I forget what the number was. That's crazy.
At eight percent is like one point something, and at
seven it was nine thirty four ninev thirty four thousand
or something like that. So seven and a half percent
got you just over that one mil mark? Dude, are
we too frugal? So impressive? Sometimes I wonder are we
too frugal now? Because we've got other goals. There's other
things that we want to pursue. And oh, actually there's
(05:24):
an article. Okay, so the frugal Habits article. You want
to talk about that one. Yeah. So folks who are
like watering down their dish soap, their toothpaste, even I
think right stretch, I don't. I'm all cutting the toothpaste
tube open. I know our friend Maggie does that. I've
never done that. I've never done that either. I mean
to each their own, you know, like you need to
be able to spend your money where it counts. But
(05:45):
I'm all for folks assessing their spending, figuring out what
moves the needle for them, and in the areas where
it's not to be able to cut back ruthlessly. Man,
And it's hard not to judge other people spending, But like,
I love it when the profile people because it gives
you an insight into how it is that people are
spending their money. And there's like a they talk about
a lady She's like, yeah, we've had to cut back
(06:06):
on our dogs toy subscription. I know that was the thing.
And I'm not gonna hat on the pets, you know,
I don't even know if people know that I used
to have a great Dane way back in the day,
and that great Dane ate a lot of food. I'm
all four pets, but a toy subscription where like toys
are getting delivered to this house on the rag for
(06:28):
the pet. That just seems so insane. Man. Well, I
think this article too. It was highlighting people who are
going like kind of super hard in the frugal direction,
almost to like an insane degree that most people would
not do. And I feel two ways about that because
in one way, I'm like, I mean, I'm not going
to do that. I'm not going to water down my soap.
That's probably one step too far, or cut up with
my toothpaste tube. But I think in the other vein,
(06:50):
when you're paying that close attention to the resources that
you're using and how much you're spending on even everyday
basics and necessities, you're just gonna make a lot more
progress on the money goals that you have. So I'd
be curious to know from How to money listeners, like
how far they're willing to go in the frugal the
most extreme things done baffle me. Send us an email
how to money pot at gmail dot com. Let us
(07:11):
know how frugal you're getting, because yeah, I think in
some ways, I'm like, ah, it's a little weird, it's
a little off putting. I'm not one of those super
cupon our types. But I do think some people really
get into it and they can save a lot of money,
and then, you know what, it allows them to spend
money in the ways that they care about while they're
still able to save and invest. And the other people
out there are just lamenting why does it cost so
much to eat out? Now? While they're still eating out
(07:32):
every day, they're not really questioning their choices. Yeah, you
got to question that. So while we're talking about soap.
You know, the real way to save when it comes
to close detergent is to make your own. Have I
told you that we do that. So this is an
effort that was fearheaded not by me, but by my
wife because she was so sick of because it's really
expensive when you buy like this, even the big ones
from Costco's, it costs a lot of money and you
(07:54):
just it's like what forty cents a load or thirty
I don't know. She felt that we were ripping through
those so like too quickly. So now I don't know
exactly what. I'll have to ask her over the weekend.
But like you, it's borax. It's like washing soda. You
put like a drop of whatever essential ols you want.
And we've been doing that for like months now. Okay,
I will ask her and see what the actual breakdown
(08:17):
is per load. But she's like, it's weird we are sitting.
According to her, we're saving a ton of money by
making our own clothed detergent. You gotta share this kind
of stuff with the world. That's what I'm doing. Let's
know the recipe, Yeah we'll post it or something. Yeah,
we'll post it. And you are listening to how to Money.
Speaker 1 (08:33):
You're listening to KFI AM six forty on demand.
Speaker 3 (08:39):
I am Matt Altmix and I'm Joel Larscard. Don't forget
to sign up for the how to Money newsletter. You
can find that up at how tomoney dot com slash newsletter.
It is now time for the Facebook Question of the Week,
which is from an anonymous poster who writes the guys
that would be you'd me Jel. The guys have mentioned
multiple times, I'll closing a credit card can cause a
dip in your credit score, especially if that is your
(09:00):
longest active credit line. I have an opportunity to pay
off my mortgage only current outstanding debts, and I use
my credit card more like a debit card and pay
it off weekly. With paying off my mortgage and essentially
closing out that line of credit hurt my credit score,
particularly if I am looking at investing in other real
estate in the next two years. Yeah, which you think
(09:21):
she'll That's a great question. Help this poster to understand.
And this is one of those non basic personal finance
questions where you're getting a little bit further into the
weeds about how your credit score is constructed. But I'm
glad people are asking this question because all this stuff matters, right,
And yeah, paying that close of attention to your credit score,
how the credit scoring system works, shows a high level
(09:43):
of personal finance acuity. And it's typically, by the way,
why we don't recommend people close a credit card accounts,
because if if you can avoid it, it's actually going
to help boost your credit scord if you keep that
credit card active in your credit mix, if it doesn't
have an annual fee, just use it less. And if
it does have an annual fee, maybe ask your credit
card company if you can downgrade to a card that
(10:05):
doesn't have one. That way you kind of get the
best of both worlds. But I just want to maybe
highlight the credit card thing map before we get to
this mortgaging, because that's a question that gets asked even
more frequently, and it's why we typically recommend people, Hey,
we want you to keep your credit score robust. Closing
the card could do the opposite. It's a more more
typical example. But you can't do that with your mortgage.
And so if your mortgage is winding down, which is
(10:27):
a great thing, you can't really stop that process. No,
nor would you want to right. So, yeah, paying off
your mortgage, it will ding your credit score, which sounds
kind of ridiculous, but it's true. The fact that you
now completely outright own this home. Yeah, that's actually gonna
hurt your credit score. That's one of those counterintuitive realities
of the credit scoring system that people are just like, I,
(10:47):
what in the world you pay off debt and it
takes your score down a peg like that. It's so counterintuitive,
and it's kind of frustrating as an individual consumer, to
be honest. Yeah, and in part not only because this
is the longest line essentially a line of credit where
you've you know, you have the history here of making payments,
but also because of the type. Right, So this is
(11:08):
an installment loan that you're paying off, and I'm guessing
based on the way this person is posting that they
don't have any other installment loans. Well, they said, they said,
they don't have any other debt, So it's not like
they have student loans or it's not like they have
a car payment where they're paying that on a regular basis, which,
by the way, are great things from a personal finance standpoint,
but from a perfect credit score standpoint, not the best,
(11:29):
not ideal. I do want to highlight here though, that
they wrote I have an opportunity to pay off my mortgage,
which tells me that it's optional. Like I wonder if
they came in they got a bonus at work, or
maybe they inherited some money and they're thinking, Oh, I
want to do something smart with this money. I'm going
to pay off the house. I have the opportunity to
pay this thing off ten years early. I should be
(11:50):
jumping at this opportunity. And I would say, let an
opportunity continue to knock, and don't answer that door, because
I'm as if you've had this loan for this mortgage
for a while, or if you like, let's see you
refinanced ten fifteen years ago, you've got this thing locked in.
I'm guessing at a really low rate. And again, there
are just better things, more optimal things that you can
(12:12):
do with those dollars than eliminate a three percent mortgage. Yeah, agreed,
saving and investing and you used to saving would not
outpace your mortgage rate, but it still does right now.
Until the Fed lowers inustrates even more and savers get
dinged even harder. The chances are if you're in a
highild savings account with one of our favorite online banks,
that you're outpacing your mortgage rate. By the way, if
(12:34):
you do decide to pay off this mortgage, it shouldn't
negatively impact your ability to invest in more in real
estate and to get the best rates in the coming years.
Typically that Yeah, getting rid of that line of credit
from your credit mix not ideal from a credit score perspective.
But if you have a great score, yeah, you'll see
a ding for a while, maybe for a few months,
(12:55):
but without the primary mortgage, you're gonna have tons of
cash flow to save up for a down payment for
those investment properties. And your credit score is going to
have a more of like a short lived impact, negative impact,
and I think it'll bounce back pretty quickly. I doubt
it'll still be dinged after a couple of years. Yeah, agreed.
And even if it, even if it is still down
ten to fifteen points, if you have a really high
(13:15):
credit score to begin with, it doesn't matter. You're still
going to be able to qualify for the best rates
in terms. All right, you know what, Let's do another
one here real quick. Another anonymous poster HEI trying to
learn here, I keep seeing that people should be investing
at least fifteen percent of their earnings. I think this
is the last money wheel. Does this include or not
include money you already put into your four oh one
(13:36):
k money wheel? Obviously we're a maan, we're doing a
bad branding job. Money gears, the money gears, money money gears.
And the reason we call it the money gears is
because we like biking and we're like just thinking about
oh seven gears. When you're first getting started, you start
off on year one and then before you got to
gain some speed before you ramp it up. That's right
(13:57):
before you shift gears. So, yeah, does this include four
dollars though? Joel the fifteen percent? Well, the answer, the
answer is simple. Here, we're all about your savings rate
being a minimum of fifteen percent of your gross income.
Gross income includes your four one k, right, So yes, yes,
and so we count investing and we count debt payoff
in your savings rate. So whether you're paying off credit
(14:18):
card debt or you are putting more money towards four
on k Rothie, right, those are all included. We would
say in your your savings right, what's known at your
savings right. Part of the reason is because you're not
spending that money the others because if you had to
go into liquid savings at some point in the not
so distant future, you'd have way too much allocated to cash.
You'd be really imbalanced, right if like all of your
(14:38):
savings rate went straight into to a savings account. But
isn't that that's an investing question though, right, Well, versus
a percentage your savings rate should go to saving investing,
paying down debt, that's another question, and it's highly specific.
But you like diving into these details more than I do.
Like some of some of this, Like it makes me
think about like when you weigh yourself, Like some people
(14:59):
are like, no, no, you got to wear yourself first
thing in the morning. And some folks were like, no,
I like to do at night before I get before
I jump in the shower. Or some folks they strip
down and they're totally naked, and some folks are like, ah,
I just wear my clothes. Joel always wears his cutoff
jeene shorts, though he never takes those off. Yeah, like
Tobias Chunky, I mean the way I think about it,
as long as you are consistent with like however it
(15:20):
is you are calculating your savings rate over time. As
long as you stick with that, I think that's the
biggest thing, especially if early retirement is a goal of
yours to you know, slowly but surely ratchet that thing up.
I guess I just worry that some of the basic
personal finance advice to the years has really told people, yeah,
save ten percent of your income, and we've and we've
set the bar so low. Granted a lot of Americans
(15:43):
not even hitting that savings rate. Yeah, but if you
set the bar so low and you don't really help
people understand how much a higher savings rate can impact
their ability to attain financial freedom, then maybe we're letting people.
We're not helping people realize what they can build for themselves,
the piece out money they can amass, and the optionality
they're able to find in the not so distant future
(16:04):
if we say, you know, if we keep the savings
very ideal too low, or we make it sound like
it's not as important. So yeah, I guess that's where
I think it is important. But I think you're probably
right too, Matt. People obsessed over kind of as far
as the semantics libit find. Yeah, I'm less interested in that,
and I think maybe what they're saying too is like, hey,
my gross income and with that's what you address there, right,
Does it include the four win k dollars? It's not
(16:25):
just your take home pay and you investing on your
own within an IRA and within a brokerage account. The
four K totally counts. There are going to be so
many four one k millionaires in the next ten twenty
thirty years because of the fact that folks have been
auto enrolled. They're going to be doing that like clockwork.
The behavioral aspect of it is just firing on all
cylinders and yeah, they're going to be hopefully set up
(16:46):
quite well for retirement. Yeah. I think this poster will
too if they maintain it at least fifteen percent savings, right,
which I think is the floor that most people.
Speaker 1 (16:54):
Should be striving for. You are listening to How to Money.
You're listening to KFI AM six forty on demand.
Speaker 3 (17:02):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter. Joe.
Let's talk about advertisements, and this is given the caveat
that our show is of course at supported, so you know,
we'll discuss the story with that acknowledgment. But advertisements, ads,
they're popping up in places that you wouldn't have found
them in the past. How do you say, so, Ted,
(17:24):
he writes a substack Joya, I believe is is it? Joya?
I always always I see it's a weird gee. I
always want to say Geo because I always read his stuff,
but I never hear his name being said. But all right,
he's got one of the best substacks out there. He's
really smart, really thoughtful. But he he wrote about this recently.
Ads they're popping up on the screen of your car.
(17:44):
This is on Jeep specifically. There it's highlighting the extended warranty. Well,
those warranties are thousands and thousands. They're so expensive they're
hardly ever worth it. But also Samsung has these really
expensive fridges now where ads are popping up there, so
you're you know, you're dropping thirty five hundred dollars and
then you've got to displaying ads. Yeah to you, you
(18:05):
got a screen on your fridge because you thought it
was cool, and now it's just serving you ads all
the time. Yeah, yeah, I think this is an argument
for going low tech, writing things down on a sheet
of paper maybe instead of having the I don't know
the day's agenda projected onto the front of your your
fancy fridge. And this is no, this is not a
knock against Samsung. I think they're a fantastic company. We've
got a lot of Samsung products. But I will not
(18:26):
be myself paying for that really fancy Samsung fridge. And
I think the problem the rub is when you pay
full price for something and it still comes with ads.
I don't mind having the trade off, like the streaming services, right, Yeah,
you pay more for something so you don't have to
see the ads, right, And this is like the yeah,
and I love that the opposite, Hey, there's that trade
off and you have to decide for yourself. It makes
(18:47):
me think of remember when we talked about Telly, which
was this fifty five inch television with like ads at
the bottom. I signed up where they never sent me one.
I don't know what happened to the company at this point,
but that I was willing. That's like an informed trade
off where you're like, you're giving me the TV for free,
and yes, I'm subjecting myself to more ads because of it,
(19:07):
but I didn't pay. I'd be really upset if I
paid full price for a nice TV and then they
start popping up ads while I'm not watching something like
that would be incredibly frustrating. But if they're going to
give me the TV for free and say, hey, ads
are going to be on whenever you're not watching your show,
I think I would be far more okay with that.
That'd be kosher to me. You're making that informed decision, yeah, right, Yeah,
(19:29):
And like we just end up paying with our attention
so much of the time now when these endless ads
are served our way. When it comes to social media,
something estimates show that four and ten posts are now ads,
which makes me question why we still use these services. Matt, Well, Yeah,
when you're thumbing through scrolling through Facebook or Instagram, yeah,
maybe you see a little bit of like your friend's contents,
(19:50):
but so much of it is like influencers you don't
actually care about, or it's ads that you are not
thrilled to see something. It feels like half of the
content isn't the content you actually came there for. I
totally agree, And do you want to know a solution
for that? Aside from just deleting completely. Oh man, I
totally saw this is the kind of stuff that's fed
(20:10):
to me. This guy created like this five pound phone
case and it's basically like a weight that you stick
your phone in, and this makes it look like the
giant Zach from the Save by the Bell phone essentially
except for your iPhone. So that's one way you can
do it. Another well, specifically on Instagram's I've basically been
off of it for a solid year, and I think
(20:31):
I've been much happier because of that. But I've been
on there recently helping Kate because she's launching some ceramic
arts stuff on there, and we've been talking more about
social media and I came across the same thing. I
was like, oh my gosh, I'm scrolling through my feed.
I'm like, I don't follow this person. Why is this
showing up? Yeah, here's another ad, here's another sponsored post.
You want to know the secret? Wow, this is going
(20:52):
to be great for everyone out there who is on Instagram.
Go to the top of your app where it says Instagram. Right,
it's like written in the script at the top middle
of your score. Tap it and it'll drop down and
you can change it to your followers, like who it
is that you are following, I'm sorry who you're following,
and it'll change the feed to just those actual folks,
(21:12):
no ads, no suggested posts. Does this seem illegal? And
like I even hasn't seem illegal? I just shock, why
would that be there? Yeah, because no one touches that.
I guess, I don't know. It's crazy like it it's
something like it's either your your star or favorite posts
or people or something like that. But then it's literally
just Also, one of the other options is following, so
(21:33):
only the people that you're following don't serve ads. So
I literally did this last night. That's why I was
excited to share it, because I was looking into it
because I was getting so fed up with why I
was I'm like, is there a way to see less
of this other crap? And that's evidently a way that
you can do it. Now that I've like spoken the system,
spoken it into the universe, I'm afraid that it's going
to be disappearing soon. But for all the how to
(21:53):
money listeners out there, for the time being, try it
out there. You go, You're welcome, all right, We've got
actually more to get to on today's show.
Speaker 1 (22:01):
You're listening to KFI AM six forty on demand.
Speaker 3 (22:09):
I am Matt Altmixed and I'm Joel Larsgard. 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 hear from a listener who is trying
to right her former wrongs.
Speaker 4 (22:24):
I met Joel. This is Kelsey from Colorado Springs. Love
your podcast, and I have a question regarding investing for
four to one k rath ira and brokerage accounts, first
paid op debt and saving. So for context, my first job,
I wasn't making a bunch was my first job, and
(22:45):
so I was investing fifteen to twenty percent of that
though still in my four oh one K and putting
five hundred fives a month into max out my roth
ira as well. I was young and naive and strap
for money, took out some loans trying to pay those off,
(23:07):
still in there about eighteen percent wracked up credit card debt.
Have since been paying those off, but just curious your
thoughts on whether I continue putting into my four one
K and rob Verst, maybe pausing those for a little bit,
just so that I can get my auto and other
(23:30):
signature loans paid off for contacts. I have about ninety
thousand dollars in my raw diray, about eight thousand dollars
in savings, but have about twenty five thousand dollars in debt.
Speaker 3 (23:47):
So just trying to figure out how.
Speaker 4 (23:49):
I can navigate this thought I was doing the right thing,
but now in a little bit of a financial pickle,
which ironically feels like it came from investing so much
so any insight is super helpful. Looking to buy a
house within the next two years or so, and just
wanting to make sure I'm handling my money here on
out in the right way. Love your podcast, Love what
(24:11):
you guys are doing.
Speaker 3 (24:12):
Thanks, Oh man, I'm so glad Kelsey said this question,
and largely because it's like one of those quintessential personal
finance questions that people will have, the investing first, debt
payoff question, And there's never just like a right or
wrong yes or no answer to this either. It's never
completely straightforward, and the answer really depends on a number
(24:34):
of factors. Despite the credit card debt and the loans
that Kelsey has taken out which aren't our fave. I
think we should also just say congrats to her for
all she's been able to do saving for her future.
She's got ninety thousand dollars in a roth I ray. Yeah,
that in particular, that's pretty solid. That's solid, man, And
that's going to grow to be a much larger amount
(24:54):
over time thanks to compounding returns. And those are they'll
never be taxed, which is one of our favorite things
about the roth iray. That's all your money tax free
in the future, which is a beautiful thing. Also, Matt,
do you want to highlight how you did something Oh,
very similar to what Kelsey did by investing. I heard
I heard too early. I heard in Kelsey's voice, She's
just like, then this happened. Don't feel bad about it,
(25:17):
Like I mean, I don't know. Is it like a
rite of passage that there are there's a certain subset
of us make this mistake. But like you, I heard
the glories of compounding. I had some friends who were
a little bit older, and I was like, oh man,
they're already investing.
Speaker 4 (25:30):
I need to.
Speaker 3 (25:30):
I got to get investing as well. You were o
old twenty three okay, yeah, which is twenty two very young,
because the average person doesn't start investing till like what
like like thirties on. I don't even know, but I
just knew that I wanted to invest. I hadn't been
and so I had I had ground to makeup Droel.
That's basically where I saw myself. But what I didn't
do was have money in the bank, and so I
was investing. Again. I didn't have nearly as much as Kelsey,
(25:54):
but I found myself in a tight spot, and instead
of relying on debt, I actually pulled the those contributions out,
which probably ended up costing me more money because the
mark was down a little bit and I was investing
in mutual funds that were very expensive, and so it
was like a double waymy I learned that lesson there
early on. Nice to learn it early though, Yeah, yeah,
(26:16):
oh yeah, you learned the lessons with like one or
two zeros at the end of it, as opposed to
like three or four. Yeah. But we're gonna talk about
the money gears here, Kelsey, because when you go through
the money gears, which by the way, you can find
up on the website at how to Money dot com
forward slash start here, but you will see that paying
off high interest debt that is gear number three. It's
(26:36):
just after getting your four one K match. It's just
after saving up the basic emergency fund. But then after
that credit card debt or other debts with double digit
interest rates, that should be your top focus. And that
is because you are unlikely to see higher returns from
the market were you to invest those dollars. And so
(26:56):
the thinking goes like, why not get the guaranteed return
along with the peace of mind of not having that
debt in your life anymore. Yeah, yeah, yeah, And I'm
with you on that. I mean, I think for a
little while, probably the best way for Kelsey to proceed
is to suspend any contributions she might be making to
her wroth IRA. Yeah, and normally, Matt, we're not telling
(27:17):
people don't contribute to your roth ira. But the truth is,
if you're doing it out of order, yeah, for a
little while, you do need to stop that. We say,
keep getting them four one K match at work if
you have one, but don't contribute beyond that either. And
this if you do both those things, stop contribute to
your roth. Contribute less to your four one k only
up to the match that allows you to claw back
(27:38):
more cash flow to work towards debt, payoff a heck
of a lot more quickly. Every other dollar basically that
you can afford to part with each month it should
be funneled then towards the credit card debt and the
eighteen percent loan that you mentioned. You know, hopefully, hopefully
that hyper focus is going to allow you to eradicate
those debts more quickly, get them completely out of your life,
because after that, that's when you can resume for your
(28:00):
future and you'll have even more money for that purpose
with less debt lingering in your life. But sometimes Matt, like,
trying to do all those things at once feels like
spending a bunch of plates, and it can feel like
it's so easy to lose one, and then you lose
them all. They all come crashing down to the ground
and drop them plates. Yeah, that's where the hyper focus
comes in, especially when you have higher interest rate debt.
It's like, just let's go all in on that. Put
(28:22):
the other stuff to the side for now. You can
get back to it soon. Yeah. Well, aside from like
that eighteen percent loan that she mentioned, which so she
mentioned her car loan, and I'm guessing that that car
loan is not as offensive as maybe some of her
credit card debt or that eight percent loan that she
took out. So and hope so on imagine You're right,
medium or even low interest rate debt is worth addressing here,
(28:43):
and that is money gear number six. It is further
on down the line, and that's because there are just
more productive things that you can be doing with your money.
You don't have to forsake investing until you are completely
debt free. We ideally want all the how to money
listeners out there to not have a car loan. But
if if you've already got one in your life and
you're making this a binary choice, I would love to
(29:04):
see you paying off a bit more slowly while also investing,
like I think about too over like the most recent years,
like this isn't the best decision right for her to
be investing aggressively while keeping some of the really high
rate debt around like the credit cards as as well.
But it's also not the worst outcome because of what
the market has done over the past few years. But
the thing is is that is not guaranteed to continue yeah,
(29:27):
you looked the last year and you're looking at twenty
five percent returns. But in the year before that too,
But you go one more year Joel to twenty twenty two,
and things weren't looking so great, sure, and so you
can't count on that continuing, even though you're not in
the most terrible position, given what you have done over
the past few years, which are playing with fire right
when you yes, it is to keep it as risky,
(29:48):
you know, eighteen to twenty something percent interest rate debt
around in your life for longer than you need to. Matt,
I always I hear people sometimes talk to me about
credit card debt as though so it's not a big deal.
I've got six eight ten thousand dollars hanging out and okay,
I have the cash to pay it off. But you know,
I'm just I'll get around to it, and like, nothing
(30:11):
bothers me more than that. I you know, I don't
like to give unsolicited advice. We give advice here because
it's solicited. People are asking questions, but it's not financial advice.
By the way, This is just for fun. But when
those people like come up and say that to me,
I mean it bothers me so much, even though I
don't want to offer my advice, but like, but what
you want to say is what are you doing with
your life right exactly? What do you think? It is
(30:33):
a big problem, and there aren't many better things you
could be doing with your money than paying that bet
down as quickly as possible. Is it just interesting though, too,
that Kelsey did invest so aggressively though, because that's the
thing I think most folks who are kind of like,
I don't know, I'll take care of that at the
whole point. They're also, I'm guessing not typically the folks
who are funneling dollars like it's their like it's their
job into the wroth, which it sounds like Kelsey has. Yeah,
(30:56):
she's got way more in her wrath, by the way,
than I did when I had to tap my My
contribution is when I found myself in that cash pinch,
we should out for up. Maybe a last little piece
of advice here for Kelsey, and I just want to
note that she's got money in savings, She's also gotten
money in wroth contributions that are accessible, and she could
use either one of those or both to pay down
(31:17):
her debt more quickly. But I would say in all likelihood,
she shouldn't, and that's because you know, while WROTH contributions
they are accessible without paying tax or penalty, you can
never get those dollars back into the WROTH right because
of annual contribution limits, and you're interrupting the compounding of
those dollars. But it can also, I think, create this
unhealthy relationship with your retirement accounts that we want to
(31:39):
prevent where we're seeing more and more Americans feeling like
they can take money out of their retirement account because
of changes to the law and just wanting it to
make it easy and not pinch their lifestyle. They're taking
money from their four to one case, and that to
me is a red flag. We see people going back
to the well multiple times to their retirement accounts when
(31:59):
they shouldn't. It would also be much better to invest less,
to be more frugal, and to pay down those debts
quickly with cash flow that you have. I think that's
the proper relationship. You want to this debt like, get
rid of it quickly, but don't necessarily pull money from
your investments to do so well. And she also doesn't
want to completely deplete her liquid savings on hand in
(32:19):
case she finds herself again cash strapped off in the
future to where she feels forced to draw on retirement contributions.
And specifically, she said, eight thousand dollars is what she
has on hand in cash, and that's not a ton.
I mean, it's great, it's a great start, but after
you pay off that high interest rate debt again, just
heading cruising down down those money gears, I'd be looking
(32:41):
to beef that up to three to six months worth
of living expenses, and I'm guessing that's probably for you.
It sounds like she might be single. She didn't mention
the family, but I'm guessing for her that's probably like
a couple months worth of living expenses. But then beyond that,
I would even want to want to see something even
a bit more robust than what she's currently got. Agreed,
but we see you got this one step at a time.
(33:02):
We know, get rid of that debt and you'll get
back to investing in no time. 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're listening to How to
Money on kf I AM six forty kf I Am
six forty on demand
You're listening to KFI AM six forty on demand. All
Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel lars Guard and Matt.
Speaker 2 (00:20):
Altmics KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 3 (00:32):
This is how to Money. I'm Joel lars Guard and
I am Matt Altmix. 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. It is
now time for the ludicrous headline of the week, and
we have a selection this week from MarketWatch. Headline reads
(00:53):
We're spending over one a week on lunch. How did
ordering food at work become a luxury? Which? Man, this
article rubs me so the wrong way. I hate it.
I propably you don't have like a tattoo of left
over somewhere on your body because you love leftovers more
than anyone. With my little deli container take out plastic, yeah,
is it the small, the medium or the large? Most
(01:16):
of my leftovers are in the medium. That would be
a cool tattoo. You should get with it. Yeah, somewhere
that's just way too committed to the whole the leftover game.
Speaker 4 (01:26):
Man.
Speaker 3 (01:26):
No, this just rubs me the wrong way because of
the like, honestly, the expectation that this should be something
that someone should be able to afford. Right, Like, there's
like this lifestyle entitlement that I so highly dislike. And
it's totally fine if you want to go out there
and spend that kind of money on lunch, but you
gotta be okay with it. You got to be able
to afford it. You got to know that you're not
(01:47):
going to be able to funnel those dollars towards some
other financial goal in your life. But to think that
it's this basic human rights so that that someone should
have seems preposterous. I think that's the thing that hit
me with this too, was like, how did ordering food
to work become a luxury? And it's like eating out
for lunch every day of the week has always been
the luxury. Yeah, of course that's a luxury. That's the
(02:08):
very definition of a luxury. Yeah, it's not a coach
handbag or something like that or whatever. It's a fancy
air maze scarf, but it is totally a luxury to
think that you can eat out every single day and
not feel a massive impact on your budget. And one
hundred bucks a week, Yeah, that's you're talking about like
four hundred plus dollars a month on food for lunch.
(02:31):
I can't imagine. I would love to run the numbers
on how much you and I spend on our lunches.
Like It's be hard to factor out because most of
the time it is leftovers from the dinner the night before,
where most folks, unfortunately, they're just like, yeah, that's not
worth keeping and they just like scrape it off into
the trash can as opposed to sticking it. It's like, okay, no,
that's a that's a medium deli container size leftover that
(02:51):
plus a couple eggs. You fry it up. You got
a nuke the leftovers, fry up a couple of eggs.
I mean, that's like the definition of decade eating right there,
with a yolk running over the leftover breakast beef that
you oh my gosh, Like, I'm getting hungry. We haven't
eaten lunch yet. I'm getting hungry even thinking about that. Yeah,
I think leftovers are the answer here, and I think
it's just also putting yourself in the frame of mind
(03:15):
to realize what is a luxury and what isn't. I
think if you and maybe the only way you could
go out to eat lunch every day, Matt and not
break the bank is to go to the Costco food court.
If you're doing that. If you're doing that, you can
probably ford to eat out, but then you might not
be the healthiest. You may not be. Oh my gosh.
I was just talking Kate and now we're looking at
pictures of like us, me specifically back in the day,
like before Kate and I got married and I was
(03:36):
poor man, like I was broke, and I'm thinking through
what did I eat because I could tell from looking
at the pictures that I'm skinned. Didn't look at I'm
really skinny, And I told her I was just like
I didn't really cook at home. I think I was
just eating bowls of cereal and like once a week
I might go out to McDonald's because back then they
had like the value menu. I get a cheeseburger, a
(03:56):
side so expensive now I know, a side salad, and
then I'll get parfait and those three items. Thinking that
that was like a well balanced meal, but in a
similar way. You would also be feeling yourself if you
were going to the Costco food court thinking that you're
getting something similar but any just that, I think that's
a really important thing to mention though. It's just fast
food is so crazy expensive now too. You think you're
(04:17):
going to save money by going, Okay, at least I'm
going to get fast food for lunch instead. Sorry, no,
that's expensive. Now. A big mac meal is probably eleven
or twelve dollars, and so you can. Yeah, leftovers are
way checker than that. By the way, I did crush
the numbers. I thought you were going to say we
should run the numbers on knowing what our lunch costs. Yeah,
I'll tell you what it costs. What is costing you?
Were you to go out to lunch every day at
(04:39):
work instead of taking that one hundred dollars and investing
it over a forty year career, you are looking at
over one million dollars in the bank over a typical
forty year career. That oh my gosh, I don't know
what is And that's yeah, it was almost over a
million dollars even with the seven percent return. But way
Seve hundred dollars. If one hundred dollars a week four
hundred a month, invest those returns compounded in forty years,
(05:03):
you're gonna have I forget what the number was. That's crazy.
At eight percent is like one point something, and at
seven it was nine thirty four ninev thirty four thousand
or something like that. So seven and a half percent
got you just over that one mil mark? Dude, are
we too frugal? So impressive? Sometimes I wonder are we
too frugal now? Because we've got other goals. There's other
things that we want to pursue. And oh, actually there's
(05:24):
an article. Okay, so the frugal Habits article. You want
to talk about that one. Yeah. So folks who are
like watering down their dish soap, their toothpaste, even I
think right stretch, I don't. I'm all cutting the toothpaste
tube open. I know our friend Maggie does that. I've
never done that. I've never done that either. I mean
to each their own, you know, like you need to
be able to spend your money where it counts. But
(05:45):
I'm all for folks assessing their spending, figuring out what
moves the needle for them, and in the areas where
it's not to be able to cut back ruthlessly. Man,
And it's hard not to judge other people spending, But like,
I love it when the profile people because it gives
you an insight into how it is that people are
spending their money. And there's like a they talk about
a lady She's like, yeah, we've had to cut back
(06:06):
on our dogs toy subscription. I know that was the thing.
And I'm not gonna hat on the pets, you know,
I don't even know if people know that I used
to have a great Dane way back in the day,
and that great Dane ate a lot of food. I'm
all four pets, but a toy subscription where like toys
are getting delivered to this house on the rag for
(06:28):
the pet. That just seems so insane. Man. Well, I
think this article too. It was highlighting people who are
going like kind of super hard in the frugal direction,
almost to like an insane degree that most people would
not do. And I feel two ways about that because
in one way, I'm like, I mean, I'm not going
to do that. I'm not going to water down my soap.
That's probably one step too far, or cut up with
my toothpaste tube. But I think in the other vein,
(06:50):
when you're paying that close attention to the resources that
you're using and how much you're spending on even everyday
basics and necessities, you're just gonna make a lot more
progress on the money goals that you have. So I'd
be curious to know from How to money listeners, like
how far they're willing to go in the frugal the
most extreme things done baffle me. Send us an email
how to money pot at gmail dot com. Let us
(07:11):
know how frugal you're getting, because yeah, I think in
some ways, I'm like, ah, it's a little weird, it's
a little off putting. I'm not one of those super
cupon our types. But I do think some people really
get into it and they can save a lot of money,
and then, you know what, it allows them to spend
money in the ways that they care about while they're
still able to save and invest. And the other people
out there are just lamenting why does it cost so
much to eat out? Now? While they're still eating out
(07:32):
every day, they're not really questioning their choices. Yeah, you
got to question that. So while we're talking about soap.
You know, the real way to save when it comes
to close detergent is to make your own. Have I
told you that we do that. So this is an
effort that was fearheaded not by me, but by my
wife because she was so sick of because it's really
expensive when you buy like this, even the big ones
from Costco's, it costs a lot of money and you
(07:54):
just it's like what forty cents a load or thirty
I don't know. She felt that we were ripping through
those so like too quickly. So now I don't know
exactly what. I'll have to ask her over the weekend.
But like you, it's borax. It's like washing soda. You
put like a drop of whatever essential ols you want.
And we've been doing that for like months now. Okay,
I will ask her and see what the actual breakdown
(08:17):
is per load. But she's like, it's weird we are sitting.
According to her, we're saving a ton of money by
making our own clothed detergent. You gotta share this kind
of stuff with the world. That's what I'm doing. Let's
know the recipe, Yeah we'll post it or something. Yeah,
we'll post it. And you are listening to how to Money.
Speaker 1 (08:33):
You're listening to KFI AM six forty on demand.
Speaker 3 (08:39):
I am Matt Altmix and I'm Joel Larscard. Don't forget
to sign up for the how to Money newsletter. You
can find that up at how tomoney dot com slash newsletter.
It is now time for the Facebook Question of the Week,
which is from an anonymous poster who writes the guys
that would be you'd me Jel. The guys have mentioned
multiple times, I'll closing a credit card can cause a
dip in your credit score, especially if that is your
(09:00):
longest active credit line. I have an opportunity to pay
off my mortgage only current outstanding debts, and I use
my credit card more like a debit card and pay
it off weekly. With paying off my mortgage and essentially
closing out that line of credit hurt my credit score,
particularly if I am looking at investing in other real
estate in the next two years. Yeah, which you think
(09:21):
she'll That's a great question. Help this poster to understand.
And this is one of those non basic personal finance
questions where you're getting a little bit further into the
weeds about how your credit score is constructed. But I'm
glad people are asking this question because all this stuff matters, right,
And yeah, paying that close of attention to your credit score,
how the credit scoring system works, shows a high level
(09:43):
of personal finance acuity. And it's typically, by the way,
why we don't recommend people close a credit card accounts,
because if if you can avoid it, it's actually going
to help boost your credit scord if you keep that
credit card active in your credit mix, if it doesn't
have an annual fee, just use it less. And if
it does have an annual fee, maybe ask your credit
card company if you can downgrade to a card that
(10:05):
doesn't have one. That way you kind of get the
best of both worlds. But I just want to maybe
highlight the credit card thing map before we get to
this mortgaging, because that's a question that gets asked even
more frequently, and it's why we typically recommend people, Hey,
we want you to keep your credit score robust. Closing
the card could do the opposite. It's a more more
typical example. But you can't do that with your mortgage.
And so if your mortgage is winding down, which is
(10:27):
a great thing, you can't really stop that process. No,
nor would you want to right. So, yeah, paying off
your mortgage, it will ding your credit score, which sounds
kind of ridiculous, but it's true. The fact that you
now completely outright own this home. Yeah, that's actually gonna
hurt your credit score. That's one of those counterintuitive realities
of the credit scoring system that people are just like, I,
(10:47):
what in the world you pay off debt and it
takes your score down a peg like that. It's so counterintuitive,
and it's kind of frustrating as an individual consumer, to
be honest. Yeah, and in part not only because this
is the longest line essentially a line of credit where
you've you know, you have the history here of making payments,
but also because of the type. Right, So this is
(11:08):
an installment loan that you're paying off, and I'm guessing
based on the way this person is posting that they
don't have any other installment loans. Well, they said, they said,
they don't have any other debt, So it's not like
they have student loans or it's not like they have
a car payment where they're paying that on a regular basis, which,
by the way, are great things from a personal finance standpoint,
but from a perfect credit score standpoint, not the best,
(11:29):
not ideal. I do want to highlight here though, that
they wrote I have an opportunity to pay off my mortgage,
which tells me that it's optional. Like I wonder if
they came in they got a bonus at work, or
maybe they inherited some money and they're thinking, Oh, I
want to do something smart with this money. I'm going
to pay off the house. I have the opportunity to
pay this thing off ten years early. I should be
(11:50):
jumping at this opportunity. And I would say, let an
opportunity continue to knock, and don't answer that door, because
I'm as if you've had this loan for this mortgage
for a while, or if you like, let's see you
refinanced ten fifteen years ago, you've got this thing locked in.
I'm guessing at a really low rate. And again, there
are just better things, more optimal things that you can
(12:12):
do with those dollars than eliminate a three percent mortgage. Yeah, agreed,
saving and investing and you used to saving would not
outpace your mortgage rate, but it still does right now.
Until the Fed lowers inustrates even more and savers get
dinged even harder. The chances are if you're in a
highild savings account with one of our favorite online banks,
that you're outpacing your mortgage rate. By the way, if
(12:34):
you do decide to pay off this mortgage, it shouldn't
negatively impact your ability to invest in more in real
estate and to get the best rates in the coming years.
Typically that Yeah, getting rid of that line of credit
from your credit mix not ideal from a credit score perspective.
But if you have a great score, yeah, you'll see
a ding for a while, maybe for a few months,
(12:55):
but without the primary mortgage, you're gonna have tons of
cash flow to save up for a down payment for
those investment properties. And your credit score is going to
have a more of like a short lived impact, negative impact,
and I think it'll bounce back pretty quickly. I doubt
it'll still be dinged after a couple of years. Yeah, agreed.
And even if it, even if it is still down
ten to fifteen points, if you have a really high
(13:15):
credit score to begin with, it doesn't matter. You're still
going to be able to qualify for the best rates
in terms. All right, you know what, Let's do another
one here real quick. Another anonymous poster HEI trying to
learn here, I keep seeing that people should be investing
at least fifteen percent of their earnings. I think this
is the last money wheel. Does this include or not
include money you already put into your four oh one
(13:36):
k money wheel? Obviously we're a maan, we're doing a
bad branding job. Money gears, the money gears, money money gears.
And the reason we call it the money gears is
because we like biking and we're like just thinking about
oh seven gears. When you're first getting started, you start
off on year one and then before you got to
gain some speed before you ramp it up. That's right
(13:57):
before you shift gears. So, yeah, does this include four
dollars though? Joel the fifteen percent? Well, the answer, the
answer is simple. Here, we're all about your savings rate
being a minimum of fifteen percent of your gross income.
Gross income includes your four one k, right, So yes, yes,
and so we count investing and we count debt payoff
in your savings rate. So whether you're paying off credit
(14:18):
card debt or you are putting more money towards four
on k Rothie, right, those are all included. We would
say in your your savings right, what's known at your
savings right. Part of the reason is because you're not
spending that money the others because if you had to
go into liquid savings at some point in the not
so distant future, you'd have way too much allocated to cash.
You'd be really imbalanced, right if like all of your
(14:38):
savings rate went straight into to a savings account. But
isn't that that's an investing question though, right, Well, versus
a percentage your savings rate should go to saving investing,
paying down debt, that's another question, and it's highly specific.
But you like diving into these details more than I do.
Like some of some of this, Like it makes me
think about like when you weigh yourself, Like some people
(14:59):
are like, no, no, you got to wear yourself first
thing in the morning. And some folks were like, no,
I like to do at night before I get before
I jump in the shower. Or some folks they strip
down and they're totally naked, and some folks are like, ah,
I just wear my clothes. Joel always wears his cutoff
jeene shorts, though he never takes those off. Yeah, like
Tobias Chunky, I mean the way I think about it,
as long as you are consistent with like however it
(15:20):
is you are calculating your savings rate over time. As
long as you stick with that, I think that's the
biggest thing, especially if early retirement is a goal of
yours to you know, slowly but surely ratchet that thing up.
I guess I just worry that some of the basic
personal finance advice to the years has really told people, yeah,
save ten percent of your income, and we've and we've
set the bar so low. Granted a lot of Americans
(15:43):
not even hitting that savings rate. Yeah, but if you
set the bar so low and you don't really help
people understand how much a higher savings rate can impact
their ability to attain financial freedom, then maybe we're letting people.
We're not helping people realize what they can build for themselves,
the piece out money they can amass, and the optionality
they're able to find in the not so distant future
(16:04):
if we say, you know, if we keep the savings
very ideal too low, or we make it sound like
it's not as important. So yeah, I guess that's where
I think it is important. But I think you're probably
right too, Matt. People obsessed over kind of as far
as the semantics libit find. Yeah, I'm less interested in that,
and I think maybe what they're saying too is like, hey,
my gross income and with that's what you address there, right,
Does it include the four win k dollars? It's not
(16:25):
just your take home pay and you investing on your
own within an IRA and within a brokerage account. The
four K totally counts. There are going to be so
many four one k millionaires in the next ten twenty
thirty years because of the fact that folks have been
auto enrolled. They're going to be doing that like clockwork.
The behavioral aspect of it is just firing on all
cylinders and yeah, they're going to be hopefully set up
(16:46):
quite well for retirement. Yeah. I think this poster will
too if they maintain it at least fifteen percent savings, right,
which I think is the floor that most people.
Speaker 1 (16:54):
Should be striving for. You are listening to How to Money.
You're listening to KFI AM six forty on demand.
Speaker 3 (17:02):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter. Joe.
Let's talk about advertisements, and this is given the caveat
that our show is of course at supported, so you know,
we'll discuss the story with that acknowledgment. But advertisements, ads,
they're popping up in places that you wouldn't have found
them in the past. How do you say, so, Ted,
(17:24):
he writes a substack Joya, I believe is is it? Joya?
I always always I see it's a weird gee. I
always want to say Geo because I always read his stuff,
but I never hear his name being said. But all right,
he's got one of the best substacks out there. He's
really smart, really thoughtful. But he he wrote about this recently.
Ads they're popping up on the screen of your car.
(17:44):
This is on Jeep specifically. There it's highlighting the extended warranty. Well,
those warranties are thousands and thousands. They're so expensive they're
hardly ever worth it. But also Samsung has these really
expensive fridges now where ads are popping up there, so
you're you know, you're dropping thirty five hundred dollars and
then you've got to displaying ads. Yeah to you, you
(18:05):
got a screen on your fridge because you thought it
was cool, and now it's just serving you ads all
the time. Yeah, yeah, I think this is an argument
for going low tech, writing things down on a sheet
of paper maybe instead of having the I don't know
the day's agenda projected onto the front of your your
fancy fridge. And this is no, this is not a
knock against Samsung. I think they're a fantastic company. We've
got a lot of Samsung products. But I will not
(18:26):
be myself paying for that really fancy Samsung fridge. And
I think the problem the rub is when you pay
full price for something and it still comes with ads.
I don't mind having the trade off, like the streaming services, right, Yeah,
you pay more for something so you don't have to
see the ads, right, And this is like the yeah,
and I love that the opposite, Hey, there's that trade
off and you have to decide for yourself. It makes
(18:47):
me think of remember when we talked about Telly, which
was this fifty five inch television with like ads at
the bottom. I signed up where they never sent me one.
I don't know what happened to the company at this point,
but that I was willing. That's like an informed trade
off where you're like, you're giving me the TV for free,
and yes, I'm subjecting myself to more ads because of it,
(19:07):
but I didn't pay. I'd be really upset if I
paid full price for a nice TV and then they
start popping up ads while I'm not watching something like
that would be incredibly frustrating. But if they're going to
give me the TV for free and say, hey, ads
are going to be on whenever you're not watching your show,
I think I would be far more okay with that.
That'd be kosher to me. You're making that informed decision, yeah, right, Yeah,
(19:29):
And like we just end up paying with our attention
so much of the time now when these endless ads
are served our way. When it comes to social media,
something estimates show that four and ten posts are now ads,
which makes me question why we still use these services. Matt, Well, Yeah,
when you're thumbing through scrolling through Facebook or Instagram, yeah,
maybe you see a little bit of like your friend's contents,
(19:50):
but so much of it is like influencers you don't
actually care about, or it's ads that you are not
thrilled to see something. It feels like half of the
content isn't the content you actually came there for. I
totally agree, And do you want to know a solution
for that? Aside from just deleting completely. Oh man, I
totally saw this is the kind of stuff that's fed
(20:10):
to me. This guy created like this five pound phone
case and it's basically like a weight that you stick
your phone in, and this makes it look like the
giant Zach from the Save by the Bell phone essentially
except for your iPhone. So that's one way you can
do it. Another well, specifically on Instagram's I've basically been
off of it for a solid year, and I think
(20:31):
I've been much happier because of that. But I've been
on there recently helping Kate because she's launching some ceramic
arts stuff on there, and we've been talking more about
social media and I came across the same thing. I
was like, oh my gosh, I'm scrolling through my feed.
I'm like, I don't follow this person. Why is this
showing up? Yeah, here's another ad, here's another sponsored post.
You want to know the secret? Wow, this is going
(20:52):
to be great for everyone out there who is on Instagram.
Go to the top of your app where it says Instagram. Right,
it's like written in the script at the top middle
of your score. Tap it and it'll drop down and
you can change it to your followers, like who it
is that you are following, I'm sorry who you're following,
and it'll change the feed to just those actual folks,
(21:12):
no ads, no suggested posts. Does this seem illegal? And
like I even hasn't seem illegal? I just shock, why
would that be there? Yeah, because no one touches that.
I guess, I don't know. It's crazy like it it's
something like it's either your your star or favorite posts
or people or something like that. But then it's literally
just Also, one of the other options is following, so
(21:33):
only the people that you're following don't serve ads. So
I literally did this last night. That's why I was
excited to share it, because I was looking into it
because I was getting so fed up with why I
was I'm like, is there a way to see less
of this other crap? And that's evidently a way that
you can do it. Now that I've like spoken the system,
spoken it into the universe, I'm afraid that it's going
to be disappearing soon. But for all the how to
(21:53):
money listeners out there, for the time being, try it
out there. You go, You're welcome, all right, We've got
actually more to get to on today's show.
Speaker 1 (22:01):
You're listening to KFI AM six forty on demand.
Speaker 3 (22:09):
I am Matt Altmixed and I'm Joel Larsgard. 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 hear from a listener who is trying
to right her former wrongs.
Speaker 4 (22:24):
I met Joel. This is Kelsey from Colorado Springs. Love
your podcast, and I have a question regarding investing for
four to one k rath ira and brokerage accounts, first
paid op debt and saving. So for context, my first job,
I wasn't making a bunch was my first job, and
(22:45):
so I was investing fifteen to twenty percent of that
though still in my four oh one K and putting
five hundred fives a month into max out my roth
ira as well. I was young and naive and strap
for money, took out some loans trying to pay those off,
(23:07):
still in there about eighteen percent wracked up credit card debt.
Have since been paying those off, but just curious your
thoughts on whether I continue putting into my four one
K and rob Verst, maybe pausing those for a little bit,
just so that I can get my auto and other
(23:30):
signature loans paid off for contacts. I have about ninety
thousand dollars in my raw diray, about eight thousand dollars
in savings, but have about twenty five thousand dollars in debt.
Speaker 3 (23:47):
So just trying to figure out how.
Speaker 4 (23:49):
I can navigate this thought I was doing the right thing,
but now in a little bit of a financial pickle,
which ironically feels like it came from investing so much
so any insight is super helpful. Looking to buy a
house within the next two years or so, and just
wanting to make sure I'm handling my money here on
out in the right way. Love your podcast, Love what
(24:11):
you guys are doing.
Speaker 3 (24:12):
Thanks, Oh man, I'm so glad Kelsey said this question,
and largely because it's like one of those quintessential personal
finance questions that people will have, the investing first, debt
payoff question, And there's never just like a right or
wrong yes or no answer to this either. It's never
completely straightforward, and the answer really depends on a number
(24:34):
of factors. Despite the credit card debt and the loans
that Kelsey has taken out which aren't our fave. I
think we should also just say congrats to her for
all she's been able to do saving for her future.
She's got ninety thousand dollars in a roth I ray. Yeah,
that in particular, that's pretty solid. That's solid, man, And
that's going to grow to be a much larger amount
(24:54):
over time thanks to compounding returns. And those are they'll
never be taxed, which is one of our favorite things
about the roth iray. That's all your money tax free
in the future, which is a beautiful thing. Also, Matt,
do you want to highlight how you did something Oh,
very similar to what Kelsey did by investing. I heard
I heard too early. I heard in Kelsey's voice, She's
just like, then this happened. Don't feel bad about it,
(25:17):
Like I mean, I don't know. Is it like a
rite of passage that there are there's a certain subset
of us make this mistake. But like you, I heard
the glories of compounding. I had some friends who were
a little bit older, and I was like, oh man,
they're already investing.
Speaker 4 (25:30):
I need to.
Speaker 3 (25:30):
I got to get investing as well. You were o
old twenty three okay, yeah, which is twenty two very young,
because the average person doesn't start investing till like what
like like thirties on. I don't even know, but I
just knew that I wanted to invest. I hadn't been
and so I had I had ground to makeup Droel.
That's basically where I saw myself. But what I didn't
do was have money in the bank, and so I
was investing. Again. I didn't have nearly as much as Kelsey,
(25:54):
but I found myself in a tight spot, and instead
of relying on debt, I actually pulled the those contributions out,
which probably ended up costing me more money because the
mark was down a little bit and I was investing
in mutual funds that were very expensive, and so it
was like a double waymy I learned that lesson there
early on. Nice to learn it early though, Yeah, yeah,
(26:16):
oh yeah, you learned the lessons with like one or
two zeros at the end of it, as opposed to
like three or four. Yeah. But we're gonna talk about
the money gears here, Kelsey, because when you go through
the money gears, which by the way, you can find
up on the website at how to Money dot com
forward slash start here, but you will see that paying
off high interest debt that is gear number three. It's
(26:36):
just after getting your four one K match. It's just
after saving up the basic emergency fund. But then after
that credit card debt or other debts with double digit
interest rates, that should be your top focus. And that
is because you are unlikely to see higher returns from
the market were you to invest those dollars. And so
(26:56):
the thinking goes like, why not get the guaranteed return
along with the peace of mind of not having that
debt in your life anymore. Yeah, yeah, yeah, And I'm
with you on that. I mean, I think for a
little while, probably the best way for Kelsey to proceed
is to suspend any contributions she might be making to
her wroth IRA. Yeah, and normally, Matt, we're not telling
(27:17):
people don't contribute to your roth ira. But the truth is,
if you're doing it out of order, yeah, for a
little while, you do need to stop that. We say,
keep getting them four one K match at work if
you have one, but don't contribute beyond that either. And
this if you do both those things, stop contribute to
your roth. Contribute less to your four one k only
up to the match that allows you to claw back
(27:38):
more cash flow to work towards debt, payoff a heck
of a lot more quickly. Every other dollar basically that
you can afford to part with each month it should
be funneled then towards the credit card debt and the
eighteen percent loan that you mentioned. You know, hopefully, hopefully
that hyper focus is going to allow you to eradicate
those debts more quickly, get them completely out of your life,
because after that, that's when you can resume for your
(28:00):
future and you'll have even more money for that purpose
with less debt lingering in your life. But sometimes Matt, like,
trying to do all those things at once feels like
spending a bunch of plates, and it can feel like
it's so easy to lose one, and then you lose
them all. They all come crashing down to the ground
and drop them plates. Yeah, that's where the hyper focus
comes in, especially when you have higher interest rate debt.
It's like, just let's go all in on that. Put
(28:22):
the other stuff to the side for now. You can
get back to it soon. Yeah. Well, aside from like
that eighteen percent loan that she mentioned, which so she
mentioned her car loan, and I'm guessing that that car
loan is not as offensive as maybe some of her
credit card debt or that eight percent loan that she
took out. So and hope so on imagine You're right,
medium or even low interest rate debt is worth addressing here,
(28:43):
and that is money gear number six. It is further
on down the line, and that's because there are just
more productive things that you can be doing with your money.
You don't have to forsake investing until you are completely
debt free. We ideally want all the how to money
listeners out there to not have a car loan. But
if if you've already got one in your life and
you're making this a binary choice, I would love to
(29:04):
see you paying off a bit more slowly while also investing,
like I think about too over like the most recent years,
like this isn't the best decision right for her to
be investing aggressively while keeping some of the really high
rate debt around like the credit cards as as well.
But it's also not the worst outcome because of what
the market has done over the past few years. But
the thing is is that is not guaranteed to continue yeah,
(29:27):
you looked the last year and you're looking at twenty
five percent returns. But in the year before that too,
But you go one more year Joel to twenty twenty two,
and things weren't looking so great, sure, and so you
can't count on that continuing, even though you're not in
the most terrible position, given what you have done over
the past few years, which are playing with fire right
when you yes, it is to keep it as risky,
(29:48):
you know, eighteen to twenty something percent interest rate debt
around in your life for longer than you need to. Matt,
I always I hear people sometimes talk to me about
credit card debt as though so it's not a big deal.
I've got six eight ten thousand dollars hanging out and okay,
I have the cash to pay it off. But you know,
I'm just I'll get around to it, and like, nothing
(30:11):
bothers me more than that. I you know, I don't
like to give unsolicited advice. We give advice here because
it's solicited. People are asking questions, but it's not financial advice.
By the way, This is just for fun. But when
those people like come up and say that to me,
I mean it bothers me so much, even though I
don't want to offer my advice, but like, but what
you want to say is what are you doing with
your life right exactly? What do you think? It is
(30:33):
a big problem, and there aren't many better things you
could be doing with your money than paying that bet
down as quickly as possible. Is it just interesting though, too,
that Kelsey did invest so aggressively though, because that's the
thing I think most folks who are kind of like,
I don't know, I'll take care of that at the
whole point. They're also, I'm guessing not typically the folks
who are funneling dollars like it's their like it's their
job into the wroth, which it sounds like Kelsey has. Yeah,
(30:56):
she's got way more in her wrath, by the way,
than I did when I had to tap my My
contribution is when I found myself in that cash pinch,
we should out for up. Maybe a last little piece
of advice here for Kelsey, and I just want to
note that she's got money in savings, She's also gotten
money in wroth contributions that are accessible, and she could
use either one of those or both to pay down
(31:17):
her debt more quickly. But I would say in all likelihood,
she shouldn't, and that's because you know, while WROTH contributions
they are accessible without paying tax or penalty, you can
never get those dollars back into the WROTH right because
of annual contribution limits, and you're interrupting the compounding of
those dollars. But it can also, I think, create this
unhealthy relationship with your retirement accounts that we want to
(31:39):
prevent where we're seeing more and more Americans feeling like
they can take money out of their retirement account because
of changes to the law and just wanting it to
make it easy and not pinch their lifestyle. They're taking
money from their four to one case, and that to
me is a red flag. We see people going back
to the well multiple times to their retirement accounts when
(31:59):
they shouldn't. It would also be much better to invest less,
to be more frugal, and to pay down those debts
quickly with cash flow that you have. I think that's
the proper relationship. You want to this debt like, get
rid of it quickly, but don't necessarily pull money from
your investments to do so well. And she also doesn't
want to completely deplete her liquid savings on hand in
(32:19):
case she finds herself again cash strapped off in the
future to where she feels forced to draw on retirement contributions.
And specifically, she said, eight thousand dollars is what she
has on hand in cash, and that's not a ton.
I mean, it's great, it's a great start, but after
you pay off that high interest rate debt again, just
heading cruising down down those money gears, I'd be looking
(32:41):
to beef that up to three to six months worth
of living expenses, and I'm guessing that's probably for you.
It sounds like she might be single. She didn't mention
the family, but I'm guessing for her that's probably like
a couple months worth of living expenses. But then beyond that,
I would even want to want to see something even
a bit more robust than what she's currently got. Agreed,
but we see you got this one step at a time.
(33:02):
We know, get rid of that debt and you'll get
back to investing in no time. 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're listening to How to
Money on kf I AM six forty kf I Am
six forty on demand
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