February 16, 2025 • 33 mins
Hour 2: Millennials are wealthier than ever, but they don't feel like it. Also, you might be paying too much for home internet service.
Ask HTM: Shane wants to finish his basement out. How to fund it!?
A new survey shows that most folks are willing to pay more tax to keep social security around. The truth is, they might have to in order to keep the system solvent in the future!
Is it frugal or cheap to buy a used pair of shoes?
Ask HTM: Shane wants to finish his basement out. How to fund it!?
A new survey shows that most folks are willing to pay more tax to keep social security around. The truth is, they might have to in order to keep the system solvent in the future!
Is it frugal or cheap to buy a used pair of shoes?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is Matt Altmix and joelars Guard and you are
listening to KFI AM six forty how to Money on
demand on the iHeartRadio app.
Speaker 2 (00:10):
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 Larsguard and Matt Altmix.
Speaker 3 (00:26):
KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 1 (00:30):
This is how to Money. I'm your host, Joelarsguard and
I am the other host, Matt Altmix. And if you
have a money question, we'll send it our way. All
you have to do is record your question on the
voice memo app there on your phone and send it
over via email. You can find the simple instructions at
howdomoney dot com, forward slash ask. It is now time
for the ludicrous headline of the week, which this week
(00:51):
is from Fast Company. Headline reads Millennials are plagued by
phantom wealth. Why the generation doesn't feel rich despite their
net worth? Coq quadrupling? Did you know that millennials networth
is quadruple? Jowl has yours quadrupled map? Yes, it has
out of tupled. I will say millennials as a co
ort have outlasted the tremors of the Great Recession, right,
(01:12):
like that was the big It's like, oh man, you've
got this generation going into adulthood, leaving college. They got
their degrees, now they can't get jobs.
Speaker 3 (01:20):
All those headlines early on were about how millennials were
never going to recover, and.
Speaker 1 (01:23):
They have things. We're looking pretty dour. We've seen our
network skyrocket especially, i would say over the past six years,
but the millennial crowd has hit their stride. From a
work and from an income perspective, networks have increased, but
a lot of folks around our age they don't actually
feel wealthy. That's typically because their money is tied up
(01:44):
in liquid assets like their home all right, Like you've
seen your home equity increase, but it tough. It's tough
to pull that money out of that tangible or like
you're four to one K. A lot of listeners, especially
millennial listeners, have had hopefully if it wasn't automatic, it's
something that they did themselves. But a lot of employers
now or auto enrolling their new employees.
Speaker 3 (02:02):
It's like they got the message. They stuck more than
their for a one k and they're happy about seeing
their net worth balloon. But they also can't touch.
Speaker 1 (02:08):
That money either, But that's also kind of a part
of it, right, Like part of building wealth is not
touching the majority of it. For quiet a while, makes
me think of Charlie Munger, Warren Buffett's late partner, where
he said, like the number one rule of compounding is
to not interrupt it unnecessarily, which is so true. So
the fact is you're doing it right. This is how
(02:28):
you build wealth. This is how you're going to be
able to retire in your later years. But that being said,
if you're investing so much that you feel poor where
you can't even enjoy a craft beer equivalent, I would say,
maybe you're doing it wrong, Like maybe you've cut back
in every single area of your life. It's a part
of why that's something that we always talk about, Joel
craft beer, or maybe in your case now it's craft meat.
(02:49):
By the ability to spend. In some ways it seem
kind of silly, but it's something that lights you up.
That's important as well to live life in the here now,
or especially early on when you might be aggressively.
Speaker 3 (03:00):
Saving, don't forego some of those things that matter right
while you're trying to save up and invest for the future,
because if you do, you are going to have those
negative feelings. And I do think that's ultimately harmful, and
it causes a lot of people to say, why am
I investing for this thing forty years down the road?
Why don't I just yobo? And Yeah, that's why you
have to have balance in your approach. And Matt, if
(03:21):
you want to boost your savings, right, there's new evidence
that you should be more optimistic. A new study from
the American Psychological Association finds that being optimistic about the
future may help people save more money. And people who
described themselves as more optimistic they ended up saving a
higher percentage of their income. And that applies across the
(03:41):
income spectrum, whether you were bringing home six figures or
whether you're bringing home half that and so, as the
study said, optimism appears to exert a slightly stronger influence
on savings behavior than financial literacy and risk tolerance. Which
is kind of crazy to think that, like, just be
more optimistic matters more than learning more about money. So
(04:04):
maybe people can turn this off and just go like
tap into their inner optimism. Maybe that's going to be
more beneficial I don't know, but your mindset is I
think more powerful than most people give it credit for.
And I don't think this is necessarily like manifesting something
into existence, which maybe some gurus would encourage you to do.
I think it's more believing that good things are coming
down the pike that gets you excited for the future.
(04:27):
And the truth is, I mean, optimists tend to live
longer as well. There's evidence about that. So it's a
good idea for us all to work on seeing the
good because we will save more and hard money, be
the more thoughtful about our future, and we'll have a
longer future.
Speaker 1 (04:40):
That's right, man. Let's talk about utilities Internet specifically because
c neet they recently published an article about overpaying for
their internet, and I think with more folks working from home,
I think there's even more of an attraction to maybe
pay premium rates for fast internet. But it turns out
too many folks are paying for speeds they don't really
(05:01):
actually use, or speeds that they don't actually need, and
so opting to go from like a more premium speed
of like three hundred megabits per second down to one
hundred megabits per second that might be a brilliant financial move.
So much of this depends on what you're using your
internet connection for, how often you're using it. So like
you're let's say you do like you're uploading massive files, Okay,
(05:24):
maybe you do need to pay pay an engineers or
output speed. That's probably critical for you to be able
to do your job efficiently. If you've got multiple folks
or family members whatever, streaming on different devices at the
same time, maybe you want to pay more as well.
But you know, I think similar to buying the unlimited
data cell phone plan, when you're on Wi Fi most
of the time at home, I think you might be
(05:46):
paying too much. This might be an instance where it's
just money going to waste. Man. And this also makes
me think about let's say you're at home, you're watching
a movie and it like glitches or it kind of
times out or whatever. It's like, dang it, it's got
a load kind of ruins the ruins the flow a
little bit. And so folks think they're like, oh, you
know what we need to do. We need to pay
more for our internet. We should upgrade it to one
of those premium speed plans, when in reality, what I
(06:08):
think a lot of folks need to do, and I'm
saying this from personal experience. What they need to do
is get take their WiFi router out of the cabinet
because like it's that's a wood positioning matter. So yeah,
that's a wooden coffin, and it's really hard for the
Wi Fi signal to get from the wireless router to
your device, to your phone to your TV in a
coffin in the backyard. And now I'm like, where in
(06:29):
my speedy I don't have internet anymore? What I would
do it? But I'm still paying for it, so truly,
and I get why people don't want to do that
because typically they're not pretty, you know, like they're typically unsightly,
like there's it can be a jumble of cords and
so you're thinking, let me just put that in the
cabin let me stick that in the bottom of the closet.
But that impacts your speeds. You want to have a
clear line of sight. That is really important. I think folks, uh,
(06:51):
they're doing it wrong, right, Like they think just by
paying more that that's going to increase their speeds, when
in reality, it's just Okay, your methodology, your technique, make
sure you're paying that attention as well.
Speaker 3 (07:01):
Yeah, I couldn't agree more. All right, we've got more
to get to on today's show.
Speaker 1 (07:05):
Bye Bye, AM six forty Live everywhere on the iHeartRadio app.
This is how to Money. I'm Joe Larsgard 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.
Speaker 3 (07:22):
Now, we got a question about putting making an investment
in your home. What's the best way to go about it?
Speaker 4 (07:27):
Hey guys, this is Shane from Madison, Wisconsin, somewhat new
listener and a first time caller, and I have a
question about finishing a basement and doing a home renovation.
My wife and I are expecting our first child in
a few months, so we're looking at ways to add
space to our current home. We did buy our home
in twenty twenty when rates were low, and therefore it
(07:48):
doesn't really make sense for us to move or to
a cash out refinance. Rather, we're going to try to
finish the unfinished basements in this utilize the space that's
already there. We have about seven hundred square feet looking
to add space, bedroom and a bathroom. My question then,
is what are some of the best ways to fund this?
From my research, I feel like a helock is a
good option. However, rates are still somewhat high on that.
(08:11):
Do you anticipate rates continue to fall? Any insight into
a helock might be helpful. We do have some money
saved up, but not enough to fund the entire project.
It's probably about sixty thousand, maybe a little bit more.
Any advice on this would be appreciated. And my beer
recommendation is a Spotted Cow from Nuclarius Brewing Company, very
fitting for Wisconsin. Thank you really enjoy the show, have
(08:33):
a good beginning start to twenty twenty five?
Speaker 1 (08:35):
Oh right, how do Shane fund that basement? Before we
get nerdy with the money, let's talk about beer because
he mentioned new Glaris. Why does spot Cow have such
a cult following? That's a good question.
Speaker 3 (08:46):
It is a great beer, and Neuclaris makes some really
good It's a solid beer, but it's not like I
feel like it carries people your mind, it carries more
cultural clout than the beer itself.
Speaker 1 (08:56):
Does you know what I'm saying?
Speaker 3 (08:57):
I think my favorite beers that Nuclaris makes are actual
like some of the fruited beers that yeah, really delicious.
But yeah, spotted Cow, I guess it's just.
Speaker 1 (09:05):
We had like a blue like a wild blueberry, something
about a lake that was that was a Nuclarius one
Maybee that one maybe new Uh, I don't I can't
remember specifically. We haven't had Spotted Cow. We have had
it on the show, but it was back in twenty twenty,
back when Shane was buying his house. We actually enjoyed
it on the show. I think you were up there
for some reason and you came back with them. Maybe. Well,
it's I feel like you're the Michelle you're oh, could
(09:27):
have been your tenant at the time. She's she's from Wisconsin,
that's right, that's right. Her dad brought them down or
she brought some back for me. Yeah, yeah, that was fun.
Speaker 2 (09:34):
Well.
Speaker 3 (09:34):
I think Nuclarius too is one of the original independent
breweries from that region of the US and in Wisconsin.
And I've never made it out to the Bruppub, but
apparently like the their actual brewing system I believe came
over from Germany. It's super legit and it's like a
beautiful grouphub so loved visits someday. Yeah, that to the
list of places to visit while in Wisconsin for real, Right,
(09:55):
But let's give to Shane's question. Congrats on the baby
coming soon, by the way, and Matt Shane asked about
rates are headed. Where rates going in the near future
might make you feel better about taking out that he lot, because.
Speaker 1 (10:07):
You're like, yeah, rates are going to go down.
Speaker 3 (10:08):
If rates are going to go down, then hey, the
hel like does look less less bad, right, like a
solid option. But really it's anyone's guess. I mean, a
lot of folks were pretty certain that we were in
for dramatic rate declines in twenty twenty four and in
twenty twenty five, but all signs at least the Tea
leaves I'm reading Matt a point to rates remaining a
lot more sticky for the time being, which is great
(10:29):
news for savers, not so great for folks who want
to borrow big chunks of money. Though still, I don't
think it means that Shane should not borrow any money
for this renovation. But I guess just know that kind
of predicting rate patterns where they're going, what's going to happen. Like,
I can tell you what I think, and it certainly
looks less likely the rates are going to go down
(10:50):
in the near term. But it's been really fascinating to
watch people be so wrong in their predictions on rates
and what it would do at housing prices, and people
have been wrong on those economic predictions a lot in
recent years.
Speaker 1 (11:02):
Yeah, Man, the last four years, there's been a whole
lot of unprecedented territory that we've entered into, and I
feel like, if there's anything that we've learned or should
have learned, is that it's really tough to predict anything
after a pandemic, after the world shuts down, little humility
goes a long way totally. But the basement. I love basements, man,
I'm so jelly of Shane. I feel like out in
the Midwest, basements are they're a little more dim a
(11:24):
dozen like I think, like, I've got family in Missouri
and Illinois. They've all got basements. They're amazing. They do
all sorts of awesome stuff down there, start businesses, extra
space for kids, and by doing that, Shane, you're talking
about increasing the value of your home and potentially being
able to use that space to increase your cash flow.
I though you didn't see that specifically all without having
to add any additional square footage. It doesn't sound like
(11:46):
you're planning on on running it out. You're likely going
to need it for the baby, but that is often
a part of the appeal for a lot of folks.
Because you got the walls, the roof, they already exist.
Might have to do a little waterproofing. I'm not exactly
sure how it works. Yeah, but a much more affordable
endeavor than to, let's say, build an adu from scratch,
if that's even something that your city, that your community allows.
(12:09):
Basements are or where it's at, Man, I love them.
I mean, think about Matt, you're actually adding square footage
to your house right now. How much cheaper is it
if the square footage exists? Beave you have to finish
it up, right. I so wish that there was an
unfinished basement that we would have had. This is Yes,
it's painful, this is why you're jelly.
Speaker 3 (12:24):
Yes, yeah, so, I mean I think it makes sense
if you have the unfinished space. It's just so much
cheaper than the alternatives that Shane mentioned, in particular that
he's got the lockedown low rate, Like, why go and
find another way to get the space you need? This
is going to be easily the most fiscally responsible way
of doing that.
Speaker 1 (12:41):
Shean's probably got a thirty year locked in at three percent, right,
He's not going anywhere exactly.
Speaker 3 (12:45):
So what about borrowing to fund this renovation? Well, ideally,
you know, always we'd like to see folks save up
and pay cash, but that's a tall order. When we're
talking about a sixty thousand dollars renovation, you are likely
going to have to borrow at least for the renovation
at rates that are nowhere near what you saw in
twenty twenty. You might be a little shocked when you
start looking around at local borrowing options. You might be
(13:09):
looking at paying in the neighborhood of like, I don't know,
eight to nine percent, probably on a helock right now. Yeah,
part of it depends on your credit score. Hopefully you
got a high credit score. And that's particularly I would
say from a local credit union. That is, from all
the data Matt and I have seen over the years,
the best place shop at a couple of local credit
unions because they have better borrowing terms than you're going
(13:30):
to get at most banks that is just a majority
of the time sort of thing. And I don't think
though eight to nine percent rate should scare you off completely,
should cause you to avoid borrowing for this renovation. But
I do think it should cause you to keep expenses
as low as possible and then also make sure you
have a reasonable payoff timeframe that so you're going to
eradicate it and not keep it around for like, you know, eight, nine,
(13:53):
ten years to come, more like three years or less.
Speaker 1 (13:56):
I think. I mean, well, I just want you to
be super careful about this.
Speaker 4 (13:59):
I will.
Speaker 1 (14:00):
I'll say that the nice thing about going with a
helock is that if rates do end up dropping, well,
you're going to pay less on that debt moving forward,
which is great. Helocks they oftentimes, especially from local credit unions,
come with no closing costs, so that's nice. So just
shop around and see if you can find yourself the
best deal, and hopefully you don't even have to take
out a full sixty thousand dollars helock. Since it sounds
(14:22):
like you do have some cash on hand, I wouldn't
completely obliterate your emergency fund to pull us off, but
also don't be afraid to use some of that cash
to help minimize what it is that you're going to
borrow in order to pull this project off, and maybe
spend some time playing with a helock calculator as well,
because I think that might be able to open your
eyes as to what it is that you are signing
(14:42):
up for, because, like, let's say you are because I
played with the numbers a little bit before we hit
record and on a sixty thousand dollars loan at like
let's say eight and a half percent, you're looking at
it's like, okay, five hundred dollars minimum payment. That doesn't
seem too bad, but that's for the minimum payment. If
you were looking to eliminate this thing in like three years, look,
can that put in somewhere close to an extra two
thousand dollars towards that thing every single month? Which that's
(15:05):
that's a lot of money hard to scrounge up for us. Yeah. Yeah,
And I mean, I just I want I'm not saying
this to scare you, but this is a part of
your due diligence and making sure that you know what
it is that you're getting into by going I don't
just want you to think about well, no, this is
important to us, and this is what we're going to do.
We'll find a way to make it work. And while
that might be true, if you do it, you will
find a way to make this work. I want you
(15:27):
to be able to know what you're getting into, to
be able to boldly make that decision. Your eyes are
wide open, and then man, go for it, go after it.
As long as you have taken those steps and you've
crunched the numbers.
Speaker 3 (15:37):
It makes me think too, that I don't know if
this basement or no should cost sixty grand. I mean,
I guess it depends on what's going into it, But
I say, like a living a bed, and a bath.
Speaker 1 (15:47):
Yeah as well, So I mean that sounds reasonable.
Speaker 3 (15:49):
Yeah, reasons, But also think about, well, I don't know
if I'm going to get some some of the materials
at like the Habitat for a Humanity restore.
Speaker 1 (15:58):
Think about this, it's just the extra bedroom.
Speaker 3 (16:01):
Think about the ways that you can cut a couple
grand off the cost here and there, and heck, maybe
you get the sixty thousand dollars reno down to forty
eight thousand dollars and you've saved up ten grands. So
all you're borrowing is thirty eight. Then I don't know
anything you can do to reduce the amount of money
that you're paying nine percent interest rate for for years
to come the better. So just maybe leave no stone
(16:23):
unturned on that so in order to reduce the cost.
And you're right, Matt, the basement, it's like, it's not
like you're renovating the half bath on the main floor
that every guest uses, and you're like, yeah, I want
the finest tile something like that, or a really nice sink.
Speaker 1 (16:37):
It probably is. It can be a little more utilitarian
down on the basement. Totally agree. You are listening to
how to Money. KFI AM six forty. You're listening to
how to Money on demand on the iHeartRadio app KFI
AM six forty live everywhere on the iHeartRadio app. This
is how to Money. I am Matt Altmix and I'm
(16:59):
Joe Larsgar.
Speaker 3 (17:00):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group.
Speaker 1 (17:08):
Okay, so we talked about the need for higher taxes
as well as reduced government spending on Wednesday with economist
Noah Smith and man, there's no way around the both
and approach, and get this. It turns out that most
Americans are willing to be taxed more in order to
keep their favorite government benefits, like social Security. Isn't that crazy?
(17:28):
Eighty five percent of folks surveyed would like to see
Social Security benefits enhanced. I feel like there's a CSI
joke enhanced, but they wouldn't mind a bigger tax bill
for that perk. Is only something like fifteen percent of
folks who said that they'd be willing to take a
reduced benefit in order to prevent tax increases. And found
(17:50):
that really fascinating. There's not much political will to even
touch taxes or Social Security payouts, and in fact, the
current administration they're talking about stopping taxing Social Security benefits overall.
But given the state of Social Security, man like, we've
got to make some real changes if we want it
to stick around for future generations. It seems like some degree,
(18:11):
it seems like some degree of austerity is going to
be necessary. But then I was after talking with Noah,
I was thinking about it, and I wonder if that's
not true anymore? Not in the sense of like the
modern monetary theory or anything like that. But so states
obviously have to reconcile their budgets, but the federal government doesn't.
And so so much of it comes down to what
the alternatives are. And as long as the US system,
(18:31):
in our economy as a whole, continues to thrive, why
would you change something even if we are running a deficit,
because so much of it is in relation to what
other countries are doing. And guess what other countries run
deficits as well Asian countries, European countries, They're all running deficits,
and so it's kind of relative, which is crazy to say,
because you know, what would your mom say if, like,
if everybody else is running jumping off the bridge, aal
would you do well in this case? Like there is
(18:53):
a limited number of people who are jumping off the bridge,
And truly, if everyone is jumping off the bridge and
things are and money continues to be invested, say in
the in the US, there is no viable alternative when
I'm thinking about investing specifically here when it comes to
investing in markets that are also like blowing up and
doing really well. So I don't know, just an idea.
(19:15):
It's almost like no one's willing to say, oh, we
don't need to eliminate the deficit, but that's how they're acting. Like,
that's how administrations over the past several, I mean years
and decades have acted that this is something that doesn't
in fact need to be addressed. And maybe it doesn't
because other countries are are doing something highly similar.
Speaker 3 (19:35):
Yeah, but what Noah was saying is essentially the higher
the deficit and the debt grow, and the more of
the government budget that has to go to pay interest,
like it will inhibit dynamism at some point.
Speaker 1 (19:46):
So I do think this is one of the best
relation to what other countries. Other countries are also are
also doing that.
Speaker 3 (19:52):
Don't we want to be way more by dynamic than
Oh actually I would think so.
Speaker 1 (19:56):
But as long as we are, as long as we
have less of our over budget going towards interest payments
than other countries, then maybe we can kind of have
our cake and be able to eat it too. Maybe
I don't know.
Speaker 3 (20:06):
Maybe Okay, But speaking of like paying more taxes on purpose,
which is what a lot of those people in that
Social Security survey we're signing up for. The Wall Street
Journal had an article on that topic too this week,
and it makes you think, why would we want to
pay more taxes on purpose? Well, there are some reasons
that you might want to purposely pay more in tax
and what she highlighted in this article is that more
(20:28):
Americans could benefit from what she calls strategically accelerating your income. Basically,
if you're can afford to pay more taxes today, well
it might lead to overall tax reduction. And this is
something we've talked about on the show before two. You know,
we're talking about essentially being able and willing to pay
more taxes in twenty twenty five on purpose in order
to reduce your future tax burden. And I think it's
(20:50):
a smart suggestion. It's more of a holistic tax planning
approach totally than just trying to, hey, how low can
I cram my current year Techill just it's a very
myopic approach saying like, how can I limit taxes in
this one given year instead of thinking about, well, how
much tax am I going to pay over the course.
Speaker 1 (21:08):
Of my life, which is like it makes sense though,
because I think there's a lot of folks who might
be thinking, uh, well, especially maybe folks who are going
to a tax professional and they're paying money, and so
the tax professional kind of steers them in that direction too,
because they're trying to justify what it is that they're charging.
And if they're the one saying, well, actually you should
probably pay I know you just paid me, but you
also need to pay more in taxes. Yeah, Like, it
feels like a double way to me.
Speaker 3 (21:28):
It's also the tax pro win is to say I
got you the biggest refund, yes, and you're like, you brock,
I'm going to keep coming back to you, yes, because
that feels the best in the short term exactly, but
it could lead to the most you know, long term
financial pain.
Speaker 1 (21:42):
That's right.
Speaker 3 (21:42):
Yeah, So more retirees are starting to find themselves in
higher than his anticipated tax brackets thanks to R and
d's required minimum distributions. So let's learn maybe from some
of the issues they're facing. Guess why we typically talk
about having more WROTH accounts and balancing out your tax exposure,
classic example, as you're contributing right two those retirement accounts,
(22:05):
because you don't want to end up in that position
where it's like, man, I mean, it's not the worst
thing in the world to have a massive traditional form
one k. But when you think about it from a
tax perspective, there are things you could have done along
the way to mitigate future taxation by bringing a little
more of the pain into the present.
Speaker 1 (22:21):
Yeah, and just facing the reality. It makes me think
about like, if you're hiring somebody to paint your house,
it's just like they're thinking, Okay, I gotta get a
competitive price so that they hire me, and then once
we're doing it, I just need to make this house
look good, like it just needs to be painted, it
needs to be shiny or whatever. It needs to be fresh.
And if they come across some rot, you know, if
they're only thinking about the here and now, it's like, oh,
(22:43):
is we're just gonna slap some pain on that thing. Yeah,
as opposed to being the bearer of bad news. And
I think oftentimes that's what it feels like when you
say to somebody that, hey, yeah, it's probably gonna behoove
you to pay a little more in tax right now,
Like you feel like the bear of bad news, but.
Speaker 3 (22:57):
The painter is like, hey, we're going to replace a
few boards because ultimately it's gonna save you money in
the long run.
Speaker 1 (23:01):
Yeah, but if you can have a conversation about that
and kind of point to the bigger, overall picture, well,
of course that's what we want to do. We don't
You don't just want to slap some pain on it
and not have to think about it now because it's
gonna turn into a bigger headache down the road.
Speaker 3 (23:12):
So's right, that's what we're trying to get you all
to do with those roth IRA's So I think, for
if you are hiring someone to do your taxes, those
are good questions to ask, like, hey, I don't I'm
not concerned with only lowering my taxes right now this
given year. How can I think about smart tax planning
moving forward? And that's like thinking about conversations we've had
(23:32):
on the show with Sean Mulaney. Those are really important
conversations to have because, again, the stakes are high when
we're talking about taxation, and you might be able to
save a couple grand this year, but what if you
could save a heck of a lot more than that
over the course of the next ten or fifteen years
because you paid a little bit more now.
Speaker 1 (23:50):
Heck yeah, actually I just looked it up. That's episode
seven fifty eight that we last talked about that with
Sean mullaney. So look that one up. Yeah, you are
listening to how to Money. I am six forty live
everywhere on the iHeartRadio app. This is how to Money.
I am one of your hosts Joe, Larscard and I
in that all mix. By the way, you can always
find more money saving information over at howtomoney dot com.
(24:14):
Quick frugler chief for you though you know I love
frugler chiefs.
Speaker 3 (24:16):
No, you do so, and I think I know where
you stand on this actually because I was trying to
convince my wife that she wants some new tennis shoes
at but so issues are expensive and occasionally I'll wait
for a sale to pop up, but she was like,
I need them soon. Can you help me find a
good deal. We're any good.
Speaker 1 (24:30):
Deals to be had on the new version?
Speaker 4 (24:32):
Yeah?
Speaker 1 (24:33):
Is that what she was saying? Whereas me typically I
load up when there's a sale. I literally have like three.
Speaker 3 (24:38):
Boxes in my closet here really for the next pair
of shoes to come down the pike when they're on sale.
Speaker 1 (24:43):
I get them and they're fresh and you've never worn,
ever worn? Oh my god? Yeah, just ready, you're like
a borderline tissue order.
Speaker 3 (24:50):
So are you talking about this when I get a
pair of running shoes for like twenty five bucks, that
that's pretty solid, that they're normally one hundred bucks.
Speaker 1 (24:56):
Or why whatever, I'm going to load up and twenty
five dollars? Really? Yeah sheep? Yeah, what kind of like
I can log into my what kind of keads are
you running around it? I can log into the back
end of the data sites and show you mighty cow
recent orders. That's an affordable shoes. So are you referring
to the conversation we had at pizza movie night? Yeah
last week?
Speaker 3 (25:13):
Okay, so okay, so you you actually I think helps
convince Emily that used pair of shoes gently use pair
of shoes on ebaby the cause?
Speaker 1 (25:22):
Yeah? Did she say yes? Yeah, oh that's great. So
what do you think? Well, she was, so she was
pushing back against the idea of getting a pair of
used shoes. And this is something I've done multiple times.
Kate's done it as well, And I wonder if it
was more Kate being able to sort of sway her
opinion because as opposed, she looks at me and she
sees you to a certain extent when it comes to cheapness,
(25:42):
but like far less attractive version of me, a little
bit shorter, half Asian as opposed to half Norwegian. But
now I think it's a fair question worth asking, you know,
like why is it that we feel so comfortable with
buying used homes or used cars. Of course, we're all
about buying used cars, but when it comes to clothing
or you know, let alone shoes, there's a little bit
of a negative connotation there. Folks are less willing to
(26:05):
go to the thrift store. Personally, I love you, love
used underwear, definitely wouldn't do that. Of course. Well, I
think that's the line somewhere. This might be a helpful framework,
and so maybe that's it. I think there, let's introduce
an intimate scale, like there's this gradient, and the less
intimate an item is, I think the more willing we
are to buy used for it to have been something
(26:27):
that someone else, Because like you go into your home,
lots of people come through your house, you have guests over,
you have friends over. There's no part of your house
that's like up.
Speaker 3 (26:34):
Against your body, right, They're not like coming into my
bed right exactly.
Speaker 1 (26:39):
But when it comes to clothing, especially something like shoes
or you know, the more extreme case that's literally called
intimates is underwear. So I understand the pushback on that,
but man the ability to snag a deal.
Speaker 3 (26:53):
I think the one question that's really important to ask
is how much usable life is left in this product,
Because if it is incredibly gently used and you're getting
a fifty percent discount essentially because someone worred a few
times and didn't love it or didn't fit quite right
and that's why they're selling it, then you're getting a
great deal. But if it has been let's say, through
half of its usable life and you're getting a sixty
(27:14):
five percent discount, I'm probably not willing to make that
trade off. I would rather get the new thing and
get most of the usual or all the usable life
myself out of it. Totally agree there, Yeah, Like I'm
not buying shoes that look like they've been used, Like
these are quote unquote use shoes and maybe they were
worn for like a week or something like that, or
maybe they're I don't like a department store that unloads
a whole lot of open box shoes and so they've
(27:35):
been worn around the store as people have tried them
on or something like that so they can't sell them.
Speaker 1 (27:39):
I'm totally fine with those kind of shoes. I'm not
looking for a pair of shoes that look like they've
been through the ringer already and like the color is
starting to fade, or there's like a lot of tread missing. Nah,
that's like was it last week? That's that's more along
the lines of like you buying your used tires where
it's just like where did you get these? Die? That
was a bad idea, as opposed to like a mismatched
(27:59):
set of tires. They're brand new perhaps Okay, that feels
a little bit different, or a pair that was out
on the showroom maybe because of that has got like
kid fingerprints all over it, or I don't know, I'd
be totally fine with, uh, but in those tires on
my cars. In a similar way, when it comes to shoes,
I'm not looking for a pair of shoes that are
completely worn out or.
Speaker 3 (28:18):
Yeah, this competition is making me think that I need
to go to the Thirst store again soon. It's been
it's been too long. The Thirst was great, especially with kids.
Speaker 1 (28:25):
King was just there, and especially when it comes to
shoes for kids, Oh my gosh, they're not usually getting
all the usable life out of it because there's so much.
I mean, like, we buy almost what looks like brand
new shoes, and in a lot of cases and a
lot of instances, they are pretty much brand new, and
they're just shoes that the kids never wore. That's how
my five year old got a pair of Adidas Sambas,
like the indoor soccer shoe that looks super dope. Yeah,
(28:47):
I'm not gonna go out and buy those, but I'll
certainly pick up a pair for three bucks. Sure.
Speaker 3 (28:51):
Yeah, that's a good point. I think all for it,
in particular for kids stuff. You just gonna save you
a lot of money. Those guys they girl like weeds,
you know, when they're young.
Speaker 1 (28:59):
It's true.
Speaker 3 (29:00):
Let's get to another question from listener Andre. He says,
does anyone know of a one year investment I can
make that would guarantee more than a three to four
percent return? I know CDs had offered three to four percent,
but I thought i'd ask if there are better options.
Keyword here being guarantee is what Andre said. Nope, doesn't exists.
Speaker 1 (29:20):
That's the TLDR, at least not in action, like a
quote unquote investment because if you have, let's you know,
if you've got a high to medium interest rate debt,
well paying that off, I would say that would generate
a quote unquote guaranteed return. But short term guaranteed investments
that like, they just are not a thing. And so
the choices that you have here, they're really just finding
the best rates for storing cash. High old savings accounts
(29:42):
they're great, but they're also not guaranteed. We see we've
seen rates going down for savers as the Fed has
lowered interest rates slowly CD rates. They are guaranteed for
a period of time, but then the starting rate of
those can be a little bit less than what the
highild savings acoun are currently paying. Bottom line, you should
be able to get like a four ish percent rate
(30:06):
without needing to actually investor or take any real risk.
Speaker 3 (30:09):
Yeah, and we're talking about a timeline that's that short,
a single year. Sorry, there just isn't any investment that
is worth par taking in because the risk is just
too high. When we're talking about investing money. Could the
returns be significantly higher than that? Sure of course they
could be. Think about the stock market in twenty twenty four,
if you had stuck your the money in the stock
(30:29):
market on January first and then taking it out on
December thirty first.
Speaker 1 (30:34):
You would have forgive four percent twenty five percent.
Speaker 3 (30:36):
Yeah, you would have done much better than sticking in
a savings account, but that's not guaranteed. You could have
experienced you hear, like twenty twenty two. And I think
the choice too, between a high yield savings account or
a CD is actually kind of a tough one right now,
because if you want to guarantee you go with a CD,
you know.
Speaker 1 (30:51):
But here's the thing.
Speaker 3 (30:51):
You and I we don't expect yields to fall meaningfully
for savers, but they could, and so much of that
depends on the FED. It depends on the current administration.
And the best CD rates they're in that nine to
thirteen month range right now.
Speaker 1 (31:04):
So right out a year time, which is perfect for
andre Ran.
Speaker 3 (31:07):
I would check out a site like Investipedia, bank rate,
Doctor of Credit. They typically list the best offers, and
the best that I saw Matt as I was preparing
for this question was Marcus and Synchrony. They seem to
be paying top rates, but then you know CI's high
old savings account rate. It's just as good, if not
better than what those guys are offering on a CD.
But that's a savings account and that rate is subject
(31:27):
to change. If the FED lowers rates by half a
point or something like that, guess what the rate you're
earning on savings is going down. So it's not guarantee
you'd see a drop. Yeah, so yeah, I don't know
if you feel comfortable with no guarantee. The high old
savings account I think can make a lot of sense.
If you want the set and stone, the contractually oblicated
guarantee that you get with a certificate of deposit, then
(31:50):
I think that can make a lot of sense. To
just make sure you're not going down to your local
financial institution brick and mortar and opening it up because
the trade off that, yeah, you might get like they
were like, oh hey we got two percent rates on
CDs right now, and that's just not competitive with what
you're able.
Speaker 1 (32:06):
To find if you just do you know a little
bit of sick standard, Yeah, solid one online and all that. Note,
I will say, don't go chasing returns. Don't go with
like some sort of neobank that's promising. Ay, we are
offering a four and three quarter money market account because
there's no free lunch. And if there's anything that we've
learned about the neobanks, like nobody suspected that there might
(32:26):
be a small regional bank that could collapse, but ever
since Silicon Valley Bank, it's like, oh, I mean that
was always a risk, but now it feels a little
more tangible, like a little bit more real of a risk.
But then like, yes, you might get a slightly higher
rate with some of these online banks, but there's other
things that you're giving up as well, like actual customer
service if you need to get a hold of them,
(32:47):
or transfers that are happening in any sort of timely manner.
I mean, so all I had to say, if it
was me, I would not be looking to completely juice
my returns by going with some of these new neobanks
that you've never heard us talk about it as opposed
to the banks you hear us talking about all the time,
like Discover ally C and even Marcus and Synchronillos are buntioned.
Speaker 3 (33:09):
Legit online banks too. Totally Okay, thank you as always
for listening to the show. We appreciate your time and attention.
You can always find more money saving information up on
our website at howtomoney dot com. We'll see you back
here next week. You're listening to how to Money on
KFI AM six forty. You've been listening to how to
Money with Joel, Larscart and Matt All mixed and you
(33:30):
can always hear us live on k if I AM
six forty twelve to two pm on Sunday and anytime
on the iHeartRadio app
This is Matt Altmix and joelars Guard and you are
listening to KFI AM six forty how to Money on
demand on the iHeartRadio app.
Speaker 2 (00:10):
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 Larsguard and Matt Altmix.
Speaker 3 (00:26):
KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 1 (00:30):
This is how to Money. I'm your host, Joelarsguard and
I am the other host, Matt Altmix. And if you
have a money question, we'll send it our way. All
you have to do is record your question on the
voice memo app there on your phone and send it
over via email. You can find the simple instructions at
howdomoney dot com, forward slash ask. It is now time
for the ludicrous headline of the week, which this week
(00:51):
is from Fast Company. Headline reads Millennials are plagued by
phantom wealth. Why the generation doesn't feel rich despite their
net worth? Coq quadrupling? Did you know that millennials networth
is quadruple? Jowl has yours quadrupled map? Yes, it has
out of tupled. I will say millennials as a co
ort have outlasted the tremors of the Great Recession, right,
(01:12):
like that was the big It's like, oh man, you've
got this generation going into adulthood, leaving college. They got
their degrees, now they can't get jobs.
Speaker 3 (01:20):
All those headlines early on were about how millennials were
never going to recover, and.
Speaker 1 (01:23):
They have things. We're looking pretty dour. We've seen our
network skyrocket especially, i would say over the past six years,
but the millennial crowd has hit their stride. From a
work and from an income perspective, networks have increased, but
a lot of folks around our age they don't actually
feel wealthy. That's typically because their money is tied up
(01:44):
in liquid assets like their home all right, Like you've
seen your home equity increase, but it tough. It's tough
to pull that money out of that tangible or like
you're four to one K. A lot of listeners, especially
millennial listeners, have had hopefully if it wasn't automatic, it's
something that they did themselves. But a lot of employers
now or auto enrolling their new employees.
Speaker 3 (02:02):
It's like they got the message. They stuck more than
their for a one k and they're happy about seeing
their net worth balloon. But they also can't touch.
Speaker 1 (02:08):
That money either, But that's also kind of a part
of it, right, Like part of building wealth is not
touching the majority of it. For quiet a while, makes
me think of Charlie Munger, Warren Buffett's late partner, where
he said, like the number one rule of compounding is
to not interrupt it unnecessarily, which is so true. So
the fact is you're doing it right. This is how
(02:28):
you build wealth. This is how you're going to be
able to retire in your later years. But that being said,
if you're investing so much that you feel poor where
you can't even enjoy a craft beer equivalent, I would say,
maybe you're doing it wrong, Like maybe you've cut back
in every single area of your life. It's a part
of why that's something that we always talk about, Joel
craft beer, or maybe in your case now it's craft meat.
(02:49):
By the ability to spend. In some ways it seem
kind of silly, but it's something that lights you up.
That's important as well to live life in the here now,
or especially early on when you might be aggressively.
Speaker 3 (03:00):
Saving, don't forego some of those things that matter right
while you're trying to save up and invest for the future,
because if you do, you are going to have those
negative feelings. And I do think that's ultimately harmful, and
it causes a lot of people to say, why am
I investing for this thing forty years down the road?
Why don't I just yobo? And Yeah, that's why you
have to have balance in your approach. And Matt, if
(03:21):
you want to boost your savings, right, there's new evidence
that you should be more optimistic. A new study from
the American Psychological Association finds that being optimistic about the
future may help people save more money. And people who
described themselves as more optimistic they ended up saving a
higher percentage of their income. And that applies across the
(03:41):
income spectrum, whether you were bringing home six figures or
whether you're bringing home half that and so, as the
study said, optimism appears to exert a slightly stronger influence
on savings behavior than financial literacy and risk tolerance. Which
is kind of crazy to think that, like, just be
more optimistic matters more than learning more about money. So
(04:04):
maybe people can turn this off and just go like
tap into their inner optimism. Maybe that's going to be
more beneficial I don't know, but your mindset is I
think more powerful than most people give it credit for.
And I don't think this is necessarily like manifesting something
into existence, which maybe some gurus would encourage you to do.
I think it's more believing that good things are coming
down the pike that gets you excited for the future.
(04:27):
And the truth is, I mean, optimists tend to live
longer as well. There's evidence about that. So it's a
good idea for us all to work on seeing the
good because we will save more and hard money, be
the more thoughtful about our future, and we'll have a
longer future.
Speaker 1 (04:40):
That's right, man. Let's talk about utilities Internet specifically because
c neet they recently published an article about overpaying for
their internet, and I think with more folks working from home,
I think there's even more of an attraction to maybe
pay premium rates for fast internet. But it turns out
too many folks are paying for speeds they don't really
(05:01):
actually use, or speeds that they don't actually need, and
so opting to go from like a more premium speed
of like three hundred megabits per second down to one
hundred megabits per second that might be a brilliant financial move.
So much of this depends on what you're using your
internet connection for, how often you're using it. So like
you're let's say you do like you're uploading massive files, Okay,
(05:24):
maybe you do need to pay pay an engineers or
output speed. That's probably critical for you to be able
to do your job efficiently. If you've got multiple folks
or family members whatever, streaming on different devices at the
same time, maybe you want to pay more as well.
But you know, I think similar to buying the unlimited
data cell phone plan, when you're on Wi Fi most
of the time at home, I think you might be
(05:46):
paying too much. This might be an instance where it's
just money going to waste. Man. And this also makes
me think about let's say you're at home, you're watching
a movie and it like glitches or it kind of
times out or whatever. It's like, dang it, it's got
a load kind of ruins the ruins the flow a
little bit. And so folks think they're like, oh, you
know what we need to do. We need to pay
more for our internet. We should upgrade it to one
of those premium speed plans, when in reality, what I
(06:08):
think a lot of folks need to do, and I'm
saying this from personal experience. What they need to do
is get take their WiFi router out of the cabinet
because like it's that's a wood positioning matter. So yeah,
that's a wooden coffin, and it's really hard for the
Wi Fi signal to get from the wireless router to
your device, to your phone to your TV in a
coffin in the backyard. And now I'm like, where in
(06:29):
my speedy I don't have internet anymore? What I would
do it? But I'm still paying for it, so truly,
and I get why people don't want to do that
because typically they're not pretty, you know, like they're typically unsightly,
like there's it can be a jumble of cords and
so you're thinking, let me just put that in the
cabin let me stick that in the bottom of the closet.
But that impacts your speeds. You want to have a
clear line of sight. That is really important. I think folks, uh,
(06:51):
they're doing it wrong, right, Like they think just by
paying more that that's going to increase their speeds, when
in reality, it's just Okay, your methodology, your technique, make
sure you're paying that attention as well.
Speaker 3 (07:01):
Yeah, I couldn't agree more. All right, we've got more
to get to on today's show.
Speaker 1 (07:05):
Bye Bye, AM six forty Live everywhere on the iHeartRadio app.
This is how to Money. I'm Joe Larsgard 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.
Speaker 3 (07:22):
Now, we got a question about putting making an investment
in your home. What's the best way to go about it?
Speaker 4 (07:27):
Hey guys, this is Shane from Madison, Wisconsin, somewhat new
listener and a first time caller, and I have a
question about finishing a basement and doing a home renovation.
My wife and I are expecting our first child in
a few months, so we're looking at ways to add
space to our current home. We did buy our home
in twenty twenty when rates were low, and therefore it
(07:48):
doesn't really make sense for us to move or to
a cash out refinance. Rather, we're going to try to
finish the unfinished basements in this utilize the space that's
already there. We have about seven hundred square feet looking
to add space, bedroom and a bathroom. My question then,
is what are some of the best ways to fund this?
From my research, I feel like a helock is a
good option. However, rates are still somewhat high on that.
(08:11):
Do you anticipate rates continue to fall? Any insight into
a helock might be helpful. We do have some money
saved up, but not enough to fund the entire project.
It's probably about sixty thousand, maybe a little bit more.
Any advice on this would be appreciated. And my beer
recommendation is a Spotted Cow from Nuclarius Brewing Company, very
fitting for Wisconsin. Thank you really enjoy the show, have
(08:33):
a good beginning start to twenty twenty five?
Speaker 1 (08:35):
Oh right, how do Shane fund that basement? Before we
get nerdy with the money, let's talk about beer because
he mentioned new Glaris. Why does spot Cow have such
a cult following? That's a good question.
Speaker 3 (08:46):
It is a great beer, and Neuclaris makes some really
good It's a solid beer, but it's not like I
feel like it carries people your mind, it carries more
cultural clout than the beer itself.
Speaker 1 (08:56):
Does you know what I'm saying?
Speaker 3 (08:57):
I think my favorite beers that Nuclaris makes are actual
like some of the fruited beers that yeah, really delicious.
But yeah, spotted Cow, I guess it's just.
Speaker 1 (09:05):
We had like a blue like a wild blueberry, something
about a lake that was that was a Nuclarius one
Maybee that one maybe new Uh, I don't I can't
remember specifically. We haven't had Spotted Cow. We have had
it on the show, but it was back in twenty twenty,
back when Shane was buying his house. We actually enjoyed
it on the show. I think you were up there
for some reason and you came back with them. Maybe. Well,
it's I feel like you're the Michelle you're oh, could
(09:27):
have been your tenant at the time. She's she's from Wisconsin,
that's right, that's right. Her dad brought them down or
she brought some back for me. Yeah, yeah, that was fun.
Speaker 2 (09:34):
Well.
Speaker 3 (09:34):
I think Nuclarius too is one of the original independent
breweries from that region of the US and in Wisconsin.
And I've never made it out to the Bruppub, but
apparently like the their actual brewing system I believe came
over from Germany. It's super legit and it's like a
beautiful grouphub so loved visits someday. Yeah, that to the
list of places to visit while in Wisconsin for real, Right,
(09:55):
But let's give to Shane's question. Congrats on the baby
coming soon, by the way, and Matt Shane asked about
rates are headed. Where rates going in the near future
might make you feel better about taking out that he lot, because.
Speaker 1 (10:07):
You're like, yeah, rates are going to go down.
Speaker 3 (10:08):
If rates are going to go down, then hey, the
hel like does look less less bad, right, like a
solid option. But really it's anyone's guess. I mean, a
lot of folks were pretty certain that we were in
for dramatic rate declines in twenty twenty four and in
twenty twenty five, but all signs at least the Tea
leaves I'm reading Matt a point to rates remaining a
lot more sticky for the time being, which is great
(10:29):
news for savers, not so great for folks who want
to borrow big chunks of money. Though still, I don't
think it means that Shane should not borrow any money
for this renovation. But I guess just know that kind
of predicting rate patterns where they're going, what's going to happen. Like,
I can tell you what I think, and it certainly
looks less likely the rates are going to go down
(10:50):
in the near term. But it's been really fascinating to
watch people be so wrong in their predictions on rates
and what it would do at housing prices, and people
have been wrong on those economic predictions a lot in
recent years.
Speaker 1 (11:02):
Yeah, Man, the last four years, there's been a whole
lot of unprecedented territory that we've entered into, and I
feel like, if there's anything that we've learned or should
have learned, is that it's really tough to predict anything
after a pandemic, after the world shuts down, little humility
goes a long way totally. But the basement. I love basements, man,
I'm so jelly of Shane. I feel like out in
the Midwest, basements are they're a little more dim a
(11:24):
dozen like I think, like, I've got family in Missouri
and Illinois. They've all got basements. They're amazing. They do
all sorts of awesome stuff down there, start businesses, extra
space for kids, and by doing that, Shane, you're talking
about increasing the value of your home and potentially being
able to use that space to increase your cash flow.
I though you didn't see that specifically all without having
to add any additional square footage. It doesn't sound like
(11:46):
you're planning on on running it out. You're likely going
to need it for the baby, but that is often
a part of the appeal for a lot of folks.
Because you got the walls, the roof, they already exist.
Might have to do a little waterproofing. I'm not exactly
sure how it works. Yeah, but a much more affordable
endeavor than to, let's say, build an adu from scratch,
if that's even something that your city, that your community allows.
(12:09):
Basements are or where it's at, Man, I love them.
I mean, think about Matt, you're actually adding square footage
to your house right now. How much cheaper is it
if the square footage exists? Beave you have to finish
it up, right. I so wish that there was an
unfinished basement that we would have had. This is Yes,
it's painful, this is why you're jelly.
Speaker 3 (12:24):
Yes, yeah, so, I mean I think it makes sense
if you have the unfinished space. It's just so much
cheaper than the alternatives that Shane mentioned, in particular that
he's got the lockedown low rate, Like, why go and
find another way to get the space you need? This
is going to be easily the most fiscally responsible way
of doing that.
Speaker 1 (12:41):
Shean's probably got a thirty year locked in at three percent, right,
He's not going anywhere exactly.
Speaker 3 (12:45):
So what about borrowing to fund this renovation? Well, ideally,
you know, always we'd like to see folks save up
and pay cash, but that's a tall order. When we're
talking about a sixty thousand dollars renovation, you are likely
going to have to borrow at least for the renovation
at rates that are nowhere near what you saw in
twenty twenty. You might be a little shocked when you
start looking around at local borrowing options. You might be
(13:09):
looking at paying in the neighborhood of like, I don't know,
eight to nine percent, probably on a helock right now. Yeah,
part of it depends on your credit score. Hopefully you
got a high credit score. And that's particularly I would
say from a local credit union. That is, from all
the data Matt and I have seen over the years,
the best place shop at a couple of local credit
unions because they have better borrowing terms than you're going
(13:30):
to get at most banks that is just a majority
of the time sort of thing. And I don't think
though eight to nine percent rate should scare you off completely,
should cause you to avoid borrowing for this renovation. But
I do think it should cause you to keep expenses
as low as possible and then also make sure you
have a reasonable payoff timeframe that so you're going to
eradicate it and not keep it around for like, you know, eight, nine,
(13:53):
ten years to come, more like three years or less.
Speaker 1 (13:56):
I think. I mean, well, I just want you to
be super careful about this.
Speaker 4 (13:59):
I will.
Speaker 1 (14:00):
I'll say that the nice thing about going with a
helock is that if rates do end up dropping, well,
you're going to pay less on that debt moving forward,
which is great. Helocks they oftentimes, especially from local credit unions,
come with no closing costs, so that's nice. So just
shop around and see if you can find yourself the
best deal, and hopefully you don't even have to take
out a full sixty thousand dollars helock. Since it sounds
(14:22):
like you do have some cash on hand, I wouldn't
completely obliterate your emergency fund to pull us off, but
also don't be afraid to use some of that cash
to help minimize what it is that you're going to
borrow in order to pull this project off, and maybe
spend some time playing with a helock calculator as well,
because I think that might be able to open your
eyes as to what it is that you are signing
(14:42):
up for, because, like, let's say you are because I
played with the numbers a little bit before we hit
record and on a sixty thousand dollars loan at like
let's say eight and a half percent, you're looking at
it's like, okay, five hundred dollars minimum payment. That doesn't
seem too bad, but that's for the minimum payment. If
you were looking to eliminate this thing in like three years, look,
can that put in somewhere close to an extra two
thousand dollars towards that thing every single month? Which that's
(15:05):
that's a lot of money hard to scrounge up for us. Yeah. Yeah,
And I mean, I just I want I'm not saying
this to scare you, but this is a part of
your due diligence and making sure that you know what
it is that you're getting into by going I don't
just want you to think about well, no, this is
important to us, and this is what we're going to do.
We'll find a way to make it work. And while
that might be true, if you do it, you will
find a way to make this work. I want you
(15:27):
to be able to know what you're getting into, to
be able to boldly make that decision. Your eyes are
wide open, and then man, go for it, go after it.
As long as you have taken those steps and you've
crunched the numbers.
Speaker 3 (15:37):
It makes me think too, that I don't know if
this basement or no should cost sixty grand. I mean,
I guess it depends on what's going into it, But
I say, like a living a bed, and a bath.
Speaker 1 (15:47):
Yeah as well, So I mean that sounds reasonable.
Speaker 3 (15:49):
Yeah, reasons, But also think about, well, I don't know
if I'm going to get some some of the materials
at like the Habitat for a Humanity restore.
Speaker 1 (15:58):
Think about this, it's just the extra bedroom.
Speaker 3 (16:01):
Think about the ways that you can cut a couple
grand off the cost here and there, and heck, maybe
you get the sixty thousand dollars reno down to forty
eight thousand dollars and you've saved up ten grands. So
all you're borrowing is thirty eight. Then I don't know
anything you can do to reduce the amount of money
that you're paying nine percent interest rate for for years
to come the better. So just maybe leave no stone
(16:23):
unturned on that so in order to reduce the cost.
And you're right, Matt, the basement, it's like, it's not
like you're renovating the half bath on the main floor
that every guest uses, and you're like, yeah, I want
the finest tile something like that, or a really nice sink.
Speaker 1 (16:37):
It probably is. It can be a little more utilitarian
down on the basement. Totally agree. You are listening to
how to Money. KFI AM six forty. You're listening to
how to Money on demand on the iHeartRadio app KFI
AM six forty live everywhere on the iHeartRadio app. This
is how to Money. I am Matt Altmix and I'm
(16:59):
Joe Larsgar.
Speaker 3 (17:00):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group.
Speaker 1 (17:08):
Okay, so we talked about the need for higher taxes
as well as reduced government spending on Wednesday with economist
Noah Smith and man, there's no way around the both
and approach, and get this. It turns out that most
Americans are willing to be taxed more in order to
keep their favorite government benefits, like social Security. Isn't that crazy?
(17:28):
Eighty five percent of folks surveyed would like to see
Social Security benefits enhanced. I feel like there's a CSI
joke enhanced, but they wouldn't mind a bigger tax bill
for that perk. Is only something like fifteen percent of
folks who said that they'd be willing to take a
reduced benefit in order to prevent tax increases. And found
(17:50):
that really fascinating. There's not much political will to even
touch taxes or Social Security payouts, and in fact, the
current administration they're talking about stopping taxing Social Security benefits overall.
But given the state of Social Security, man like, we've
got to make some real changes if we want it
to stick around for future generations. It seems like some degree,
(18:11):
it seems like some degree of austerity is going to
be necessary. But then I was after talking with Noah,
I was thinking about it, and I wonder if that's
not true anymore? Not in the sense of like the
modern monetary theory or anything like that. But so states
obviously have to reconcile their budgets, but the federal government doesn't.
And so so much of it comes down to what
the alternatives are. And as long as the US system,
(18:31):
in our economy as a whole, continues to thrive, why
would you change something even if we are running a deficit,
because so much of it is in relation to what
other countries are doing. And guess what other countries run
deficits as well Asian countries, European countries, They're all running deficits,
and so it's kind of relative, which is crazy to say,
because you know, what would your mom say if, like,
if everybody else is running jumping off the bridge, aal
would you do well in this case? Like there is
(18:53):
a limited number of people who are jumping off the bridge,
And truly, if everyone is jumping off the bridge and
things are and money continues to be invested, say in
the in the US, there is no viable alternative when
I'm thinking about investing specifically here when it comes to
investing in markets that are also like blowing up and
doing really well. So I don't know, just an idea.
(19:15):
It's almost like no one's willing to say, oh, we
don't need to eliminate the deficit, but that's how they're acting. Like,
that's how administrations over the past several, I mean years
and decades have acted that this is something that doesn't
in fact need to be addressed. And maybe it doesn't
because other countries are are doing something highly similar.
Speaker 3 (19:35):
Yeah, but what Noah was saying is essentially the higher
the deficit and the debt grow, and the more of
the government budget that has to go to pay interest,
like it will inhibit dynamism at some point.
Speaker 1 (19:46):
So I do think this is one of the best
relation to what other countries. Other countries are also are
also doing that.
Speaker 3 (19:52):
Don't we want to be way more by dynamic than
Oh actually I would think so.
Speaker 1 (19:56):
But as long as we are, as long as we
have less of our over budget going towards interest payments
than other countries, then maybe we can kind of have
our cake and be able to eat it too. Maybe
I don't know.
Speaker 3 (20:06):
Maybe Okay, But speaking of like paying more taxes on purpose,
which is what a lot of those people in that
Social Security survey we're signing up for. The Wall Street
Journal had an article on that topic too this week,
and it makes you think, why would we want to
pay more taxes on purpose? Well, there are some reasons
that you might want to purposely pay more in tax
and what she highlighted in this article is that more
(20:28):
Americans could benefit from what she calls strategically accelerating your income. Basically,
if you're can afford to pay more taxes today, well
it might lead to overall tax reduction. And this is
something we've talked about on the show before two. You know,
we're talking about essentially being able and willing to pay
more taxes in twenty twenty five on purpose in order
to reduce your future tax burden. And I think it's
(20:50):
a smart suggestion. It's more of a holistic tax planning
approach totally than just trying to, hey, how low can
I cram my current year Techill just it's a very
myopic approach saying like, how can I limit taxes in
this one given year instead of thinking about, well, how
much tax am I going to pay over the course.
Speaker 1 (21:08):
Of my life, which is like it makes sense though,
because I think there's a lot of folks who might
be thinking, uh, well, especially maybe folks who are going
to a tax professional and they're paying money, and so
the tax professional kind of steers them in that direction too,
because they're trying to justify what it is that they're charging.
And if they're the one saying, well, actually you should
probably pay I know you just paid me, but you
also need to pay more in taxes. Yeah, Like, it
feels like a double way to me.
Speaker 3 (21:28):
It's also the tax pro win is to say I
got you the biggest refund, yes, and you're like, you brock,
I'm going to keep coming back to you, yes, because
that feels the best in the short term exactly, but
it could lead to the most you know, long term
financial pain.
Speaker 1 (21:42):
That's right.
Speaker 3 (21:42):
Yeah, So more retirees are starting to find themselves in
higher than his anticipated tax brackets thanks to R and
d's required minimum distributions. So let's learn maybe from some
of the issues they're facing. Guess why we typically talk
about having more WROTH accounts and balancing out your tax exposure,
classic example, as you're contributing right two those retirement accounts,
(22:05):
because you don't want to end up in that position
where it's like, man, I mean, it's not the worst
thing in the world to have a massive traditional form
one k. But when you think about it from a
tax perspective, there are things you could have done along
the way to mitigate future taxation by bringing a little
more of the pain into the present.
Speaker 1 (22:21):
Yeah, and just facing the reality. It makes me think
about like, if you're hiring somebody to paint your house,
it's just like they're thinking, Okay, I gotta get a
competitive price so that they hire me, and then once
we're doing it, I just need to make this house
look good, like it just needs to be painted, it
needs to be shiny or whatever. It needs to be fresh.
And if they come across some rot, you know, if
they're only thinking about the here and now, it's like, oh,
(22:43):
is we're just gonna slap some pain on that thing. Yeah,
as opposed to being the bearer of bad news. And
I think oftentimes that's what it feels like when you
say to somebody that, hey, yeah, it's probably gonna behoove
you to pay a little more in tax right now,
Like you feel like the bear of bad news, but.
Speaker 3 (22:57):
The painter is like, hey, we're going to replace a
few boards because ultimately it's gonna save you money in
the long run.
Speaker 1 (23:01):
Yeah, but if you can have a conversation about that
and kind of point to the bigger, overall picture, well,
of course that's what we want to do. We don't
You don't just want to slap some pain on it
and not have to think about it now because it's
gonna turn into a bigger headache down the road.
Speaker 3 (23:12):
So's right, that's what we're trying to get you all
to do with those roth IRA's So I think, for
if you are hiring someone to do your taxes, those
are good questions to ask, like, hey, I don't I'm
not concerned with only lowering my taxes right now this
given year. How can I think about smart tax planning
moving forward? And that's like thinking about conversations we've had
(23:32):
on the show with Sean Mulaney. Those are really important
conversations to have because, again, the stakes are high when
we're talking about taxation, and you might be able to
save a couple grand this year, but what if you
could save a heck of a lot more than that
over the course of the next ten or fifteen years
because you paid a little bit more now.
Speaker 1 (23:50):
Heck yeah, actually I just looked it up. That's episode
seven fifty eight that we last talked about that with
Sean mullaney. So look that one up. Yeah, you are
listening to how to Money. I am six forty live
everywhere on the iHeartRadio app. This is how to Money.
I am one of your hosts Joe, Larscard and I
in that all mix. By the way, you can always
find more money saving information over at howtomoney dot com.
(24:14):
Quick frugler chief for you though you know I love
frugler chiefs.
Speaker 3 (24:16):
No, you do so, and I think I know where
you stand on this actually because I was trying to
convince my wife that she wants some new tennis shoes
at but so issues are expensive and occasionally I'll wait
for a sale to pop up, but she was like,
I need them soon. Can you help me find a
good deal. We're any good.
Speaker 1 (24:30):
Deals to be had on the new version?
Speaker 4 (24:32):
Yeah?
Speaker 1 (24:33):
Is that what she was saying? Whereas me typically I
load up when there's a sale. I literally have like three.
Speaker 3 (24:38):
Boxes in my closet here really for the next pair
of shoes to come down the pike when they're on sale.
Speaker 1 (24:43):
I get them and they're fresh and you've never worn,
ever worn? Oh my god? Yeah, just ready, you're like
a borderline tissue order.
Speaker 3 (24:50):
So are you talking about this when I get a
pair of running shoes for like twenty five bucks, that
that's pretty solid, that they're normally one hundred bucks.
Speaker 1 (24:56):
Or why whatever, I'm going to load up and twenty
five dollars? Really? Yeah sheep? Yeah, what kind of like
I can log into my what kind of keads are
you running around it? I can log into the back
end of the data sites and show you mighty cow
recent orders. That's an affordable shoes. So are you referring
to the conversation we had at pizza movie night? Yeah
last week?
Speaker 3 (25:13):
Okay, so okay, so you you actually I think helps
convince Emily that used pair of shoes gently use pair
of shoes on ebaby the cause?
Speaker 1 (25:22):
Yeah? Did she say yes? Yeah, oh that's great. So
what do you think? Well, she was, so she was
pushing back against the idea of getting a pair of
used shoes. And this is something I've done multiple times.
Kate's done it as well, And I wonder if it
was more Kate being able to sort of sway her
opinion because as opposed, she looks at me and she
sees you to a certain extent when it comes to cheapness,
(25:42):
but like far less attractive version of me, a little
bit shorter, half Asian as opposed to half Norwegian. But
now I think it's a fair question worth asking, you know,
like why is it that we feel so comfortable with
buying used homes or used cars. Of course, we're all
about buying used cars, but when it comes to clothing
or you know, let alone shoes, there's a little bit
of a negative connotation there. Folks are less willing to
(26:05):
go to the thrift store. Personally, I love you, love
used underwear, definitely wouldn't do that. Of course. Well, I
think that's the line somewhere. This might be a helpful framework,
and so maybe that's it. I think there, let's introduce
an intimate scale, like there's this gradient, and the less
intimate an item is, I think the more willing we
are to buy used for it to have been something
(26:27):
that someone else, Because like you go into your home,
lots of people come through your house, you have guests over,
you have friends over. There's no part of your house
that's like up.
Speaker 3 (26:34):
Against your body, right, They're not like coming into my
bed right exactly.
Speaker 1 (26:39):
But when it comes to clothing, especially something like shoes
or you know, the more extreme case that's literally called
intimates is underwear. So I understand the pushback on that,
but man the ability to snag a deal.
Speaker 3 (26:53):
I think the one question that's really important to ask
is how much usable life is left in this product,
Because if it is incredibly gently used and you're getting
a fifty percent discount essentially because someone worred a few
times and didn't love it or didn't fit quite right
and that's why they're selling it, then you're getting a
great deal. But if it has been let's say, through
half of its usable life and you're getting a sixty
(27:14):
five percent discount, I'm probably not willing to make that
trade off. I would rather get the new thing and
get most of the usual or all the usable life
myself out of it. Totally agree there, Yeah, Like I'm
not buying shoes that look like they've been used, Like
these are quote unquote use shoes and maybe they were
worn for like a week or something like that, or
maybe they're I don't like a department store that unloads
a whole lot of open box shoes and so they've
(27:35):
been worn around the store as people have tried them
on or something like that so they can't sell them.
Speaker 1 (27:39):
I'm totally fine with those kind of shoes. I'm not
looking for a pair of shoes that look like they've
been through the ringer already and like the color is
starting to fade, or there's like a lot of tread missing. Nah,
that's like was it last week? That's that's more along
the lines of like you buying your used tires where
it's just like where did you get these? Die? That
was a bad idea, as opposed to like a mismatched
(27:59):
set of tires. They're brand new perhaps Okay, that feels
a little bit different, or a pair that was out
on the showroom maybe because of that has got like
kid fingerprints all over it, or I don't know, I'd
be totally fine with, uh, but in those tires on
my cars. In a similar way, when it comes to shoes,
I'm not looking for a pair of shoes that are
completely worn out or.
Speaker 3 (28:18):
Yeah, this competition is making me think that I need
to go to the Thirst store again soon. It's been
it's been too long. The Thirst was great, especially with kids.
Speaker 1 (28:25):
King was just there, and especially when it comes to
shoes for kids, Oh my gosh, they're not usually getting
all the usable life out of it because there's so much.
I mean, like, we buy almost what looks like brand
new shoes, and in a lot of cases and a
lot of instances, they are pretty much brand new, and
they're just shoes that the kids never wore. That's how
my five year old got a pair of Adidas Sambas,
like the indoor soccer shoe that looks super dope. Yeah,
(28:47):
I'm not gonna go out and buy those, but I'll
certainly pick up a pair for three bucks. Sure.
Speaker 3 (28:51):
Yeah, that's a good point. I think all for it,
in particular for kids stuff. You just gonna save you
a lot of money. Those guys they girl like weeds,
you know, when they're young.
Speaker 1 (28:59):
It's true.
Speaker 3 (29:00):
Let's get to another question from listener Andre. He says,
does anyone know of a one year investment I can
make that would guarantee more than a three to four
percent return? I know CDs had offered three to four percent,
but I thought i'd ask if there are better options.
Keyword here being guarantee is what Andre said. Nope, doesn't exists.
Speaker 1 (29:20):
That's the TLDR, at least not in action, like a
quote unquote investment because if you have, let's you know,
if you've got a high to medium interest rate debt,
well paying that off, I would say that would generate
a quote unquote guaranteed return. But short term guaranteed investments
that like, they just are not a thing. And so
the choices that you have here, they're really just finding
the best rates for storing cash. High old savings accounts
(29:42):
they're great, but they're also not guaranteed. We see we've
seen rates going down for savers as the Fed has
lowered interest rates slowly CD rates. They are guaranteed for
a period of time, but then the starting rate of
those can be a little bit less than what the
highild savings acoun are currently paying. Bottom line, you should
be able to get like a four ish percent rate
(30:06):
without needing to actually investor or take any real risk.
Speaker 3 (30:09):
Yeah, and we're talking about a timeline that's that short,
a single year. Sorry, there just isn't any investment that
is worth par taking in because the risk is just
too high. When we're talking about investing money. Could the
returns be significantly higher than that? Sure of course they
could be. Think about the stock market in twenty twenty four,
if you had stuck your the money in the stock
(30:29):
market on January first and then taking it out on
December thirty first.
Speaker 1 (30:34):
You would have forgive four percent twenty five percent.
Speaker 3 (30:36):
Yeah, you would have done much better than sticking in
a savings account, but that's not guaranteed. You could have
experienced you hear, like twenty twenty two. And I think
the choice too, between a high yield savings account or
a CD is actually kind of a tough one right now,
because if you want to guarantee you go with a CD,
you know.
Speaker 1 (30:51):
But here's the thing.
Speaker 3 (30:51):
You and I we don't expect yields to fall meaningfully
for savers, but they could, and so much of that
depends on the FED. It depends on the current administration.
And the best CD rates they're in that nine to
thirteen month range right now.
Speaker 1 (31:04):
So right out a year time, which is perfect for
andre Ran.
Speaker 3 (31:07):
I would check out a site like Investipedia, bank rate,
Doctor of Credit. They typically list the best offers, and
the best that I saw Matt as I was preparing
for this question was Marcus and Synchrony. They seem to
be paying top rates, but then you know CI's high
old savings account rate. It's just as good, if not
better than what those guys are offering on a CD.
But that's a savings account and that rate is subject
(31:27):
to change. If the FED lowers rates by half a
point or something like that, guess what the rate you're
earning on savings is going down. So it's not guarantee
you'd see a drop. Yeah, so yeah, I don't know
if you feel comfortable with no guarantee. The high old
savings account I think can make a lot of sense.
If you want the set and stone, the contractually oblicated
guarantee that you get with a certificate of deposit, then
(31:50):
I think that can make a lot of sense. To
just make sure you're not going down to your local
financial institution brick and mortar and opening it up because
the trade off that, yeah, you might get like they
were like, oh hey we got two percent rates on
CDs right now, and that's just not competitive with what
you're able.
Speaker 1 (32:06):
To find if you just do you know a little
bit of sick standard, Yeah, solid one online and all that. Note,
I will say, don't go chasing returns. Don't go with
like some sort of neobank that's promising. Ay, we are
offering a four and three quarter money market account because
there's no free lunch. And if there's anything that we've
learned about the neobanks, like nobody suspected that there might
(32:26):
be a small regional bank that could collapse, but ever
since Silicon Valley Bank, it's like, oh, I mean that
was always a risk, but now it feels a little
more tangible, like a little bit more real of a risk.
But then like, yes, you might get a slightly higher
rate with some of these online banks, but there's other
things that you're giving up as well, like actual customer
service if you need to get a hold of them,
(32:47):
or transfers that are happening in any sort of timely manner.
I mean, so all I had to say, if it
was me, I would not be looking to completely juice
my returns by going with some of these new neobanks
that you've never heard us talk about it as opposed
to the banks you hear us talking about all the time,
like Discover ally C and even Marcus and Synchronillos are buntioned.
Speaker 3 (33:09):
Legit online banks too. Totally Okay, thank you as always
for listening to the show. We appreciate your time and attention.
You can always find more money saving information up on
our website at howtomoney dot com. We'll see you back
here next week. You're listening to how to Money on
KFI AM six forty. You've been listening to how to
Money with Joel, Larscart and Matt All mixed and you
(33:30):
can always hear us live on k if I AM
six forty twelve to two pm on Sunday and anytime
on the iHeartRadio app
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