May 18, 2025 • 33 mins
The trend of cutting the cord continues. But with the proliferation of streaming channels, like ESPN's new $30 a month service, you could be spending more than you used to with cable! Ask HTM: Mary wants to know about funding a Roth IRA for a kiddo. Online car-selling sites are trying to convince folks to sell their used car. Carvana, for instance, is sending emails out to a slew of its customers to ask them to sell. But you'll do better selling your car to another human instead. The dollars you could keep in your pocket are significant! Ask HTM: Hayden wants to know about the fees involved in a reverse mortgage.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
K IF I am six forty. You're listening to How
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Speaker 3 (00:11):
Joel and Matt have you covered?
Speaker 2 (00:14):
This is how to Money with Joel Lar's Guard and
Matt Ullmax.
Speaker 4 (01:00):
KF I Am six forty live everywhere on the iHeartRadio app.
Speaker 3 (01:04):
This is how Some Money. I am Matt Altmix.
Speaker 1 (01:06):
And I am Joel Larsgard and we're glad to have
you along for the show today. By the way, if
you're looking for the right credit card for your wallet,
well you want to be able to use it responsibly.
But if you do that, if you pay your credit
card on time and in full every single month, well
check out our credit card tool. You can find that
up on the website at howtomoney dot com. Matt, let's
(01:27):
start off talking about streaming. ESPN is launching its first
streaming service. The announced this week. They're trying to appeal
to cord cutters, which is most people. I don't think
I know anybody who still pays for cable every month.
I'm what about your folks?
Speaker 3 (01:42):
No, no, they're done with it too. They finally did
it because that's how I used to watch soccer. Yeah,
back in the day.
Speaker 1 (01:47):
I know, right, we log it under their stuff occasionally,
but now I swear it like and maybe I'm sure
I do know somebody who has cable, but I don't
hear them talking about it. And so every person you
talk to for the rest of this weekend, right, make
that be your first I will just ask me, like,
I gotta find somebody when that's the bane of most
people's existence. Though, is that it's been harder, Like we
got to have cable if you want Espn because Espn
(02:08):
Plus apparently was like trash. I don't know, I don't
really watch sports much anymore. But it's not gonna be cheap,
of course, because like when you're talking about the cable package,
ESPN commanded a huge percentage based on like the number
of channels that were there. Well, ESPN got a big
payout every time a cable package was sold. Well, you're
gonna pay if you want to pay Espn directly for
the privilege of streaming their content thirty bucks a month.
(02:32):
If you want to toss in Disney Plus and Hulu,
you're talking thirty six dollars a month, and maybe maybe
This is worth it for die hard sports nuts, but
it's a high price to pay if you want to
watch sports like basketball and football. And I think the
problem here too, Matt, is that there there's still a
lot of sports programming you're missing out on, even if
you sign.
Speaker 4 (02:50):
Up for the business fully encompassing of all the sports
that someone might wause, like.
Speaker 1 (02:54):
All the sports I could ever want to watch for
thirty bucks a month, I'd be like, yeah, okay, yeah,
I might be up for that. But the truth is
we're still talking about like regional sports packages for baseball.
We're still talking about MLS which is on Apple Plus,
which if you want to watch the European soccer matches,
you're talking about going with another streaming services, NFL games
now being spread around to different channels and other streaming
(03:15):
services too. So core cutting just used to be the
no brainer way to save money. But with the stratification
of streaming and more and more a proliferation of streaming services,
you have to be careful. Could you could spend more
than you used to spend for cable.
Speaker 4 (03:29):
That is very true, man, So all the opposite end
of the spectrum going irl.
Speaker 3 (03:35):
In real life.
Speaker 4 (03:35):
There to see a movie is getting cheaper, not more expensive, Joel.
The Journal, they had an article about the cult of
AMC Stubbs memberships and I hadn't even heard of this membership,
and so I read this article.
Speaker 1 (03:47):
I can't tell you the last time I went to
see a movie.
Speaker 4 (03:48):
People who have this membership evidently they love it. And
what it does is it allows them to watch four
movies a week for the monthly price of twenty six bucks,
which is actually a pretty.
Speaker 1 (03:59):
Good deal for a week, which is like sixteen a month.
Speaker 4 (04:03):
That's a lot of time in the movie theater price standpoint,
It's actually a pretty good deal given how much movie
tickets cost these days. But the problem is, like you said,
the fact that it's for what four movies are out
there that do you even want to see?
Speaker 1 (04:16):
Like all year, are there that many new movies coming
out every single.
Speaker 3 (04:19):
Actually did you hear? Derek?
Speaker 4 (04:20):
Friend of the show, Derek Thompson talked with somebody that
wrote an article for The Atlantic talking about pop culture
these days?
Speaker 3 (04:25):
Did you hear?
Speaker 1 (04:26):
Did you hear that episode or read that article?
Speaker 4 (04:28):
Fascinating, super fascinating, talking about how is pop culture the
worst it's ever been? And you know, and they go
back and forth, and they're like, well, no, like artists
back in the day, when they first were on the scene,
people didn't like them and it wasn't until.
Speaker 3 (04:41):
After that, after the fact, blah blah blah.
Speaker 4 (04:43):
But you can't argue the fact, Like if you look
back at movies specifically thirty years ago, Like if you
look back at to like nineteen ninety four, guess with
the top what the top grossing box office movies were
in ninety four? There were movies like The Lion King,
like the original Lion King, Lion King, Forrest Gump. What
else was dumb and dumber was in nineteen ninety Classics,
(05:04):
All Speed, Gunnar Raves, Dude, amazing movies. These were all original.
Speaker 1 (05:09):
Movies and they're just remaking up.
Speaker 3 (05:10):
They're all remixed. So last year, so twenty twenty four.
Speaker 1 (05:13):
I haven't remade Forest Compla it's coming.
Speaker 3 (05:16):
They'll do it with his son.
Speaker 1 (05:17):
Yeah.
Speaker 4 (05:18):
But thirty years later, all of the top grossing movies
in the box office were sequels. You're indespicable me forour
Mwana to Godzilla whatever. Like it's crazy how we are
addicted to sequels that there is just so attention being.
Speaker 3 (05:36):
Given Two new ideas.
Speaker 4 (05:37):
Yes, and some of it has to We were just
talking about this how it's somewhat of a reflection of
us as a society, Like we don't have the stomach,
we don't have the patience to be able to sit
down and experience something new. We're not contemplative enough, as
opposed to being like, well i've heard of that. Just
give me the second version of that. So maybe this
is a criticism of culture at large as opposed to
AMC specific.
Speaker 1 (05:58):
So it's like, the pricing's pretty good, the pricing is great,
but is there enough worth watching that you're willing to
pay the price? I guess maybe if you want to
see fewer movies but you want to discount. The AMC
announced that this summer they're going to be doing fifty
percent off on Wednesdays. So instead of feeling like, all right,
I pay this monthly fee, now I got to go
see as many movies as a possorld. Yeah, just go,
(06:19):
I don't know, watch a movie on Wednesdays Goddays once
or twice a month.
Speaker 4 (06:22):
And that's a free membership. So it's the free tier.
Give you that discount. That's right, that's nice.
Speaker 1 (06:27):
All right, We've got actually more to get to On
today's show.
Speaker 2 (06:30):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (06:37):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (06:42):
Let's get to a real money question a conundrum here,
specifically from a listener who wants to know how or
the details about opening a wroth for a kid.
Speaker 5 (06:52):
Hey, guys, this is Mary from South Carolina. Joel recently said,
you guys need some great listener questions, and I think
I'm pretty great. Here we go. One of the reasons
that we like listening to y'all is because you're kind
of in the same ages and stages. Our oldest is twelve,
and she's starting to earn some money from babysitting and
pet sitting and stuff like that. And we went over
(07:14):
some compound interest calculators with her. She is pretty excited
about those. So wondering how detailed I need to get
with documentation. So far, I've just been putting memos in
the money I transfer into her youth account with USAA.
I don't know if I need to go all in
(07:36):
like Matt and do a spreadsheet. That sounds pretty exhausting. Also,
would you guys recommend Fidelity for a youth roth Ira,
We already have our brokerage account for them. Thank you, Joel.
Speaker 4 (07:48):
I feel called out sometimes, like you've recently documented, you
need to do the exhausting thing in order to take
get ahead with your money.
Speaker 3 (07:57):
That's true, no, but not always, not always.
Speaker 1 (08:00):
Sometimes there's a lot of low hanging fruit when it
comes to purfle tire.
Speaker 3 (08:02):
Sure. Mary, we appreciate you as a listener.
Speaker 4 (08:05):
I can certainly see why it would be fun too
to having a kid who's also in the same ages
and stages as us as well. We're you know, our
oldest daughters are going to be turning twelve this year
as well.
Speaker 1 (08:14):
That's right, yeah, this summer, and obviously Matt Mary's getting
her twelve year old started off on the right foot, right,
And it's really it's really fun to watch your kid
become kind of a micro entrepreneur. And twelve eleven, twelve
is kind of the perfect age, especially if you feel
like your kid's got some maturity, like babysitting dollars, especially
(08:35):
in today's economy, they can add up, they can add
up really quickly, Like my daughter has been babysitting the
kids across the street a little bit here and there,
and it's so exciting to her to see like money
roll in, to come back home and be like, I
was over there for like four hours. I made twenty bucks,
you know, and the parents are thrilled because babysitting costs
a heck of a lot more than that most of
the time. And so yeah, I think that if you're
(08:57):
just the mother's helper though right exactly is more like
that's exactly what it is. Yeah, Like she hasn't been
left alone with them yet, but they can get a
lot of stuff done.
Speaker 3 (09:05):
Cooking dinner for them, their laundry as well.
Speaker 1 (09:07):
It's the Cinderella story really when it comes down to it.
But I think doing that getting them excited about like
making some money, then you know that enticing that excitement
about compounding, maybe even including a parent match if you're
up for it, Mary, and if you can, those are
ways to spur your child towards becoming a lifelong investor.
Just getting them excited about like what money can do
(09:28):
for them, and you want her to be able to
enjoy some of that money now, of course, But you know,
I think also getting excited about how those unspent dollars
ten and will grow. That's pretty neat too. You kind
of want to both end.
Speaker 4 (09:40):
Yeah, that's the personal finance education that's taking place. But
at the same so you are instilling those values, which
is amazing Mary.
Speaker 3 (09:48):
But on top of.
Speaker 4 (09:49):
That, I mean, let's imagine a three thousand dollars contribution
towards a roth IRA for over fifty years.
Speaker 1 (09:54):
Let's say from age twelve to.
Speaker 4 (09:56):
Sixty two, So for fifty years there, that's going to
result in over one point two.
Speaker 3 (10:00):
Million dollars just in a roth IRA.
Speaker 1 (10:04):
Wow, tax free dollars.
Speaker 3 (10:05):
Incredible.
Speaker 4 (10:06):
And yeah, by you helping her to get the experience
by investing some of the money that she's earning, it
does both she gets that financial head start, but also
she's learning. But to your question, how detailed do you
need to be on that record keeping front? I think
having you got to have something right, no matter what,
you need to have something. You don't necessarily need a
(10:26):
super fancy spreadsheet or anything like that. And this I
think the standard is lower than it would be for
an HSA, a health savings account for instance. But because
your daughter can only contribute earned money, you want to
make sure that you are not over contributing to that account.
And so because of that, I still think it's really
you know, she Mary is missing the spreadsheet specifically. I
(10:47):
still think that that is the easiest way, because you
could create a document where you're like, Okay, let me
just write a quick summary, like she's talking about in
the memo of it. Sounds like what she's doing are
transfers with her online savings account. Perhaps she's listening out
the details within that. But I think what's easier than
that is just going into your Google sheet, which is
what I've got going on, and literally just copy and
(11:08):
pasting the previous line, changing the date, and updating the
hours so it doesn't have to be the super complex
It's been so long since I've updated my spreadsheet formula.
I'm into it, but I'm not creating these complex functions.
Speaker 1 (11:21):
If then also, you know, like all that sort of thing,
it's really two inputs. It's like the date that work
was accomplished. I've got four, like literally four, I've got
four columns.
Speaker 4 (11:28):
It's the dates, the number of hours, the rate that
she's being paid, and then the.
Speaker 1 (11:33):
Total okay, number of dollars even that you could probably
get by with a little bit less information, but super
easy though.
Speaker 4 (11:38):
But especially that's the thing, like literally the ability to
just to copy and paste and then updating that. And
it's not like I do that. I'll be honest, I
forget sometimes like I always pay her, pay my daughter.
But you're not perfect.
Speaker 3 (11:50):
I'm not perfect.
Speaker 4 (11:51):
But sometimes it'll be a few weeks before I'm like, oh, shoot,
I haven't sat down an updated that. And I'll sit
down and essentially I just kind of batch update that
sheet and what this actually looks like. We'll be a
work in progress, because again, the whole point is to
get them investing. I haven't sat down yet, but I'm
envisioning that will also down with her at the end
of the year and we'll say, all right, this is
how much you officially earned over the course of the year.
(12:12):
You can invest every single one of those dollars in
the account and tall you know, run some compound interest
calculators calculations Mary like you are, and hopefully she will
want to invest a lot. But then making it clear
that hey, I'm willing to provide a parent match. It
doesn't have to be this extraordinarily onerous, heavy exhausting task
that you need to do every single time she earned
that buck.
Speaker 1 (12:32):
I think what you're trying to do by creating the spreadsheet,
and what Mary's probably trying to do too, or should
be trying to do, is to avoid putting money into
a ROTH I rate that wasn't earned income. So for instance,
your daughter's probably getting money from birthdays or holidays or
stuff like that, and like over easter, my kids got
five bucks in their last easter. They found that, but
(12:52):
that money can't be contributed to a ROTH because it
wasn't earned and so you want to separate those things out.
And that's where the spreadsheet comes in handy. It's not like, oh,
every money or every do that's in her account can
be contributed to this ROTH. That can't because if some
of those were gift dollars, they're excluded from that contribution ability.
So true, That is why I think you want at
least some documentation. And I do think Mary, you're right,
(13:12):
like I'm not a spreadsheet guy, to make sure you're
on the right side of the law, right, yeah, exactly, Yeah,
you don't want to be Jesse James in this thing.
And then when it comes to where you open it
Fidelity is for sure a great place to open a
kid's roth. I mean, it's one of the few places
we would wholeheartedly recommend you can avoid fees and account minimums.
She'll have access to cheap, incredibly diversified funds. And then
(13:34):
wherever she starts investing, and this is I think one
of the lynch pins here, it's likely where she'll remain
as she enters adulthood. Like my first four one K
was with Vanguard, and so I ended up opening multiple
accounts with Vanguard over the years. Eventually I opened up
an account with Fidelity too, But it was one of
those things where like, hey, this is where I started,
It probably where I'm gonna stick around, and that will
(13:56):
likely be true for your daughter. And I just can't
think of many better options than being with Fidelity over
the long haul, based on kind of all the things
that Fidelity prioritizes as a company exactly yep. And she's
you know, she's not going to get a match like
she would with maybe some of the newer brokerage firms,
the betterments and the robin Hoods, those might be worth considering,
(14:16):
But I think the more boring nature of Fidelity's website.
It's actually like a pro in a weird way.
Speaker 3 (14:24):
Actually to her long term financial advantage. Yeah.
Speaker 1 (14:26):
I mean, I think it might help her avoid some
of the perils of investing too, because if let's say
it is in a super flashy account and she's checking
her balanced a little more, and she's like, there's all
these pop ups about investing in crypto or individual stocks
or leverage ETFs or something like that margin investing, right, Yeah,
(14:47):
maybe as a seventeen, eighteen, nineteen year old investor, she
might be like, oh, that looks like fun and get
kind of dissuaded from doing the normal boring thing that's
really going to build wealth over time. And our kids
are just a little bit, you know, longer than yours.
They've just dipped their toes. I think into this world
really of making money. But I think kiddo roths. I
don't know about you, Matt. I'll be curious to see
how that conversation goes with your oldest. But yeah, I'm
(15:11):
hoping that for my daughter that I can do kind
of a parenthal match and incentivize her to get started
investing really soon.
Speaker 4 (15:18):
Heck, yeah, I think it's let's mention an app we
actually talked about on a recent episode that's called half
More like like mackelmore but half more. But their goal
is to help parents to find ways to pay their
kids for chores around the house so that they can
contribute even.
Speaker 1 (15:35):
More to that roth Ira.
Speaker 4 (15:37):
But the problem here is that there's this annual one
hundred and forty four dollars fee that's attached. It's not
super unreasonable, I guess, and it will help you to
jump through the some of the compliance oops. I like
what they're trying to do, but the real winning part
of the app is being able to assign certain chores
at home and paying your kid in a very irs
(15:57):
compliant way if she's making money outside the house though
DIY bookkeeping and just contributing, you know, in that sort
of manner. I think that should suit y'all just fine.
It's almost like bringing a bazooka to a knife fight, like, yeah,
you probably just seems unnecessary. Yeah, and it doesn't answer
like well, I remember during that conversation when a listener
brought that to our attention, one of my concerns was
(16:19):
the fact that is the data yours and this is
an app, and like a lot of businesses, today, they
are reliant on subscribers, which means folks were willing to
kind of continue to pay that fee even if they're
not fully utilizing that service. And I would certainly want
to make sure that you could at least export that
data to where you had some sort of record of that,
(16:39):
not feeling like you had to monthly fork over the
change in order to maintain the data that you've accrued
and built up over the previous years.
Speaker 1 (16:48):
It's really unnecessary for most parents unless you're really trying
to jump through some hoops and pay your kids for chores,
and that app can help you do that.
Speaker 2 (16:58):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (17:04):
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 4 (17:13):
All right, Joel, So we've talked about flying places, which,
by the way, we haven't talked about the radar outages
at the different airports.
Speaker 3 (17:19):
Well freaky, isn't it.
Speaker 1 (17:20):
Yeah, New York's enough time, I don't have you.
Speaker 4 (17:23):
Evidently something like that happened at the Atlanta Airport last
week or maybe it was earlier this week. Yeah, kind
of freaky. Yeah, don't know enough to actually comment. But
let's talk about not flying places, driving places.
Speaker 3 (17:34):
We're going to talk about cars, Joel.
Speaker 4 (17:37):
Half of new car purchases involved the trade in of
an old car, which makes sense, but remember that you
are almost always getting paid less for that car than
you would have received had you sold it privately. And
of course you've got a company stepping in the void,
car Vana. They're trying to convince folks to sell their
car directly to them instead of DIY selling it as well.
(17:58):
They're sending direct email and hopes that you're gonna get
excited about the possibility of selling your your used ride
upgrading to something nicer. It makes me think about the mail.
Please email.
Speaker 1 (18:07):
It's like, please sell me your car because they're like, hey,
we need we need more supply on some more inventory.
Maybe you're the sucker. Maybe this email is going to
entice you.
Speaker 3 (18:15):
Don't do it.
Speaker 4 (18:16):
And this isn't because we hate Carvana. I think they're
fine for some things. I actually purchased a vehicle from
them seven years ago. Now, a great experience, and I
don't think it can hurt either to get a quick quote.
I think it can be a great spot to say,
all right, let's just kind of see it's like the
first piece of data, right, like the first data entry.
But then after that, look at Kelly Bluebook, head over
(18:36):
to Edmunds. Because the offer from Carvana could be a
low ball offer, and of course listing it yourself on Facebook,
Marketplace or auto trader, it can be well worth the
effort to sell it because I think there's a good
chance you're gonna receive thousands more. It's just an interesting
thing that Carvana is stepping in there to be able
to provide a frictionless sort of environment. Carvana isn't ripping you.
(18:59):
I'm want to add all a disparaged Carvana. They are
providing a service. They are making life easy for you.
It's incredibly convenient to go with them. But what are
you willing to pay? Right and like always like everything,
like even if you want to fly to Thailand and
stay at the Four Seasons, more power to you, but
just know that you're going to be forking out much
more money to do that, just like you're going to
be paid much less money for your trade in where
(19:22):
you to upgrade anytime.
Speaker 1 (19:23):
It feels like convenience is the name of the game
for companies these days. They're like, how can we make
your life more convenient? But there's an extraction that takes
place when you make your life more convenient. And I'm
not saying that it's not worth paying for sometimes, but
you have to be thoughtful about that because it's also
you can't convenience everything right, you know, and at some point,
if you do convenience everything, you're going to be forking
over a lot more money than you otherwise would. And
(19:45):
this is one of those places I think where the
numbers are substantial that I think the when you look
at the data something you're going to get paid typically
fifteen to twenty percent less doing a trade in of
a car than you would selling it directly to another
private party. And so if you're talking about a fifteen
thousand dollars car, you could be talking about three grand
less in your pocket. And so, oh, it's a hustle
(20:06):
to listen on face Yeah, I get that. I get
that it's not fun to feel the incoming Facebook messages
and to meet up with somebody, but it also might
be worth it because the dollar amounts significant, and there
are other things maybe where the trade off of convenience
is going to cost you less money and you say, no,
I'm going to do that on purpose. But if we
convenience everything, which it feels like we're doing as a culture,
(20:27):
it's going to cost money, right, And you might want
to sell your car, by the way, if you move
into a car free neighborhood. Dwell magazine Matter used to
subscribe to that. I haven't in a while, but I
loved that magazine, like the pictures more than anything. Beautiful homes.
Speaker 4 (20:40):
Yeah, like we talked about with Cali Cox Wednesday's right, Yeah, yeah,
So Dwell had this article about a car free community
called cul de Sac.
Speaker 1 (20:49):
Then you and I've kind of kept our eyes on.
It's in Tempe, Arizona, and it seems like it's been
a raging success because folks who opt to live there
they get sweet on campus amenities like a gym, they've
got cool shops, they've got you know, food options, and
gen z Ers in particulars seem to be all about
the amenities and places that they're living. I know, I
(21:10):
don't think my sister's gen Z.
Speaker 4 (21:11):
She's a millennial, but she's got the mindset's a very
young millennial, yes, and she's so into amenities where she lives,
even if it means training off and living in a
smaller space. But this, this cul de Sac in particular,
comes with free transit passes and free ebag access because hey,
guess what, you're giving up your car if you live there.
Speaker 1 (21:31):
And so it's really what they're trying to do is
create this antidote way of living to the standard car
centric lifestyle. And people are thrilled to pay more to
live there because they're downsizing their carefully, they're going to
save money there, and so I think also it's not
just because about saving on car costs. I think it
increases the community vibe. And I think people are thrilled
(21:51):
to pay more to live there not just because they're
spending less on car stuff, but because it's.
Speaker 4 (21:55):
An enjoyable place to hang. Yeah, it was created very thoughtfully,
like with intention. There's a lot of density right, Like
who doesn't want to be able to walk down the
steps around the corner and boom, there's a coffee shop there.
Speaker 1 (22:07):
There's a light rail line connected to cul de Sac
that it will get you so many other hop in
spots in town.
Speaker 3 (22:12):
Yeah.
Speaker 4 (22:12):
Yeah, they're getting a real community experience there, and not
to mention that you are there with like like minded people.
But I think a criticism of that is like, oh, yeah,
that's great, folks. If you've got the money to be
able to uproot your life, go buy this incredibly bosh
standard of living out here.
Speaker 3 (22:28):
We'removed from all, you.
Speaker 4 (22:30):
Know, just all the nice It is nice, it is nice,
But you don't have to move in order to accomplish
something like this. I think even I was we literally
were talking with some neighbors and we were talking about
how great it is to go and check your mail
and then be stuck for an hour, not stuck, but
like positively stuck for an hour.
Speaker 3 (22:46):
And she's like, ohoot, I gotta get inside and cook dinner.
Speaker 4 (22:48):
But because folks are walking around having conversations with neighbors,
it's something you can literally start doing today.
Speaker 1 (22:54):
We don't have to move to be able to do that.
I think we underrate those happenstance encounters with neighbors and friends,
Those who are the best one, those are more fulfilling
in so many ways than like, hey, let's get drinks
two Fridays from now. Yeah, it's kind of the rub
and shoulders, the everyday stuff that really does.
Speaker 4 (23:08):
It's that going back to friction man. Yeah, it's this
thing that makes life a little more enjoyable, and oftentimes
we write it off pretty quickly.
Speaker 2 (23:15):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:21):
Don't forget to sign up for the how to Money
newsletter over at howdimoney dot com slash newsletter.
Speaker 1 (23:26):
Let's get to a question now, Matt, about someone who
listens to the show and they're worried about their parents
potentially choosing a bad financial product.
Speaker 6 (23:36):
Hey, Matt and Joel, this is Hayden from Marboro, New York.
You guys made a passing comment in a recent episode
about the sky high fees associated with reverse mortgages, and
I was wondering if you could talk a little bit
about that. My parents have recently discussed that as a
big part of their future plans, recommended by their financial advisor,
and they gave me some articles to look at and read,
(23:58):
but I didn't see anything in there about, you know.
Speaker 3 (24:00):
Particularly high fees.
Speaker 6 (24:01):
So I was hoping you guys could just touch upon
that and maybe I could send this episode along to
them so they're informed enough to make the decisions that
they need to make, h you know, in their retirement.
Speaker 3 (24:10):
Thanks very much, Cheers, Jald.
Speaker 4 (24:13):
Did Hayden say Cheers because like us, he is a
fan of craft beer or from a cultural standpoint, he
just likes to party.
Speaker 1 (24:19):
He's like Cheers? Does he like the old school television
show Cheers with Norm oh Man? I watched those.
Speaker 3 (24:26):
Yeah, my dad was a huge Cheers fan.
Speaker 4 (24:28):
I was probably one of the few six year olds
that had seen like all this season.
Speaker 1 (24:33):
I don't know if that's good parents, You're bad, But
there's there's more of a Gilligan's Island fan myself.
Speaker 4 (24:38):
So see, I watched a lot of Cheers as a kid.
Obviously a lot of jokes went over my head. But
also Dallas, did you I never watch that? That was
the I can still hear the theme song in my head.
Think about how bum bum bum bum bum.
Speaker 1 (24:55):
There you go. Thank you for serenading. I'm gonna keep going.
Think about how it must have been to write some
of those shows like taking place all in one bar
or all on a deserted island like it did? Did
it not just like wear thin after a while.
Speaker 3 (25:09):
I sure did.
Speaker 4 (25:10):
Having limits and boundaries around what it is that you're
trying to do it can be even freeing. Perhaps, Yeah,
maybe I don't know. I've allowed more creative a writer
to a show.
Speaker 3 (25:18):
I gotta imagine. Maybe I don't know.
Speaker 1 (25:20):
All right, let's talk about reverse mortgages. So, Hayden, I
love that you're wanting to help your folks out, and
let's just like maybe talk about what are reverse mortgages?
Real click because some of them might be saying, I've
never heard of this. What is this financial product? Well, basically,
instead of paying a monthly mortgage to own your home,
which is what most people are doing for fifteen or
thirty years, most people thirty, let's be honest, you're being
(25:41):
paid to access the equity that you built up. And
the upside is that for cash strapped seniors and I
say seniors because you have to be sixty two years
or older or you're not allowed to take out a
reverse mortgage, they are able to stay in their homes
while getting a steady stream of monthly income covered their bills.
(26:01):
So it feels like for a lot of senior citizens
this win win. If there's no other place to grab cash.
It's like, well, I get to stay in my home
and I have money to spend every month that otherwise
where would I have found that money? And so in
addition though to the fees that we're going to discuss,
a reverse mortgage comes with downsides. So in particular, if
your parents care about you and your siblings inheriting the
(26:23):
home at some point in the future, a reverse mortgage
limits that possibility. But now we've got to talk about
the fees. And yeah, I feel like I just made
a reverse mortgage sound pretty great. Stay in the home,
money coming in every month.
Speaker 4 (26:34):
Yeah.
Speaker 3 (26:34):
No, let's set the context. Let's set the table here
a little bit, because it's.
Speaker 4 (26:38):
Interesting that Haydn's folks are leaning towards a reverse mortgage
and that their advisor has suggested it as a smart approach,
because it might be. But if their advisor has helped
them ahead of time to build up a nest egg
over the years, it might not be necessary. The advisor's
goal should be that they do not have to actually
get a reverse mortgage, because combination of well timed tapping
(27:02):
of social security, typically by waiting longer, it's going to
lead to a better outcome at least for one of
the parents they're one of the partners that plus tax
advantage accounts, and in addition to that, maybe some frugal
living there on the side that should hopefully be enough
for them to live off of for many decades. A
reverse mortgage is almost always considered an option of last
(27:24):
resort in order to make ends meet in the event
that the combination that I just mentioned of investments of
Social Security if it falls short of the type of
spending that they're looking to be able to perform and
do in their retired years. There So, again, decent planning
should allow folks to avoid this product altogether. But assuming
(27:45):
based on the fact that they're talking about it, sounds
like maybe that's not quite the case, and so they're
looking at what they have on hand to be able
to satisfy the type of retirement that they're looking to live.
Speaker 1 (27:54):
You might also see by the way a reverse mortgage
referred to as a home equity conversion mortgage, that's just
a anc way of saying the same thing. It's just
a different name for the same beast, But basically, yeah,
you're grabbing money from that property instead of paying it
off and then gaining liquidity from in the liquid asset.
As we all know, that's not easy. So the fees
are high as they are with the traditional mortgage. We're
(28:16):
talking origination fees, closing costs, appraisals, tidle search, all the above.
It's very has similar characteristics to taking out a mortgage
on a primary home, and you can typically have those
fees taken out of the loan amount, so maybe it
doesn't feel as bad, but they're still getting paid. And
when your parents are still the ones paying the fees,
(28:37):
they beginning charged interest and servicing fees as well as
a mortgage insurance premium, so.
Speaker 4 (28:43):
It all gets rolled into the Essentially it gets papered over,
so it feels nice and tidy. Yeah, like, where are
those fees at that the boys we're talking about, And
it turns out they're in there. It just it's minimizing
the amount of money they can take out of the house.
And so what are the tough things about our reverse
mortgage is that when there's this litany of fees being
assessed in different ways, it's just hard to get an
(29:04):
accurate account of exactly exactly what it's going to cost you.
But when you read the fine print. You might be
shocked to realize just how many thousands and thousands of
dollars are coming out of this asset. As it's like
you're trying to get blood from a stone or something
like that, Matt, and that's hard to do. And the
same thing is true with a home. Yeah, it's always
(29:25):
expensive to tap that home for money. Yeah, it's just
hard to gauge because of the fact that it's all
getting rolled into one but it is still happening. By
the way, let's look at some stats here. Close to
one in five reverse mortgages, they actually end in foreclosure,
often because the senior citizen there was unable to pay
property taxes. So this often works out poorly, which should
(29:46):
throw up an immediate red flag. So, Hayden, for your
folks man, prior to getting a reverse mortgage, I would
carefully assess the.
Speaker 3 (29:55):
Costs, specifically the fees there.
Speaker 5 (29:57):
Joel.
Speaker 4 (29:57):
You mentioned so home equity conversion mortgage. That's the term
specifically given to the FHA backed reverse mortgages, But there's
also private reverse mortgages out there as well, which might
be even more appealing to some folks because they're saying, oh,
I can go through this private lender, and I can get.
Speaker 3 (30:15):
A reverse mortgage at the age of fifty five.
Speaker 4 (30:17):
I don't have to wait another seven years live like
a popper in the meantime. But guess what that comes
with even higher fees, even worse rates, even worse aprs. Especially,
that's where it starts really getting ugly.
Speaker 1 (30:28):
Yeah, I agreed. So I would say, suggest considering other alternatives.
If I was your folks and they were like, we
just can't afford to live in this house anymore. We
want to, but we can't afford to live in it
anymore with what we've saved and with the social security
that's coming in and live the lifestyle that we want.
So consider selling or downsizing or even a cash out refinance.
(30:49):
Could be better. Could be better, I say, because that
isn't a great option either, but it could be better
than a reverse mortgage. They can invest cash that cash
and fusion, and they could draw it down over the
coming decades potentially, or turn it into like a monthly
stream of income with what's known as a single premium annuity,
which does it's like also known as an immediate income annuity,
(31:10):
which is one of the cheaper annuities out there there
aren't many good annuities out there. A reverse mortgage just
isn't the only viable option. It's just the one that
gets the most press because it's the easiest. But the
easiest thing isn't always what's best. And then you know,
if they do decide to go in this direction, they're
going to have to meet with a HUD counselor if
they're going with one of those HUD initiated reverse mortgages.
(31:33):
Matt right, the Consumer Financial Protection Bureau still around the heartbeat,
barely beating, but they have a list of questions that
your parents should be asking that will link to in
the show notes at how tomoney dot com. Make sure
they take a look at that they to be armed
with the right questions is really important before they do this.
And just know too that inheriting a property with reverse
(31:55):
mortgage that can be a nightmare as well. So again,
not sure if that's in the cards or if that's
a hope for you, you or your siblings, but no, that's
a pain of the butt if they are in the
middle of a reverse mortgage. These complex products, Matt, they
remind they remind me of like some of the commercials
for fancy new pharmaceutical drugs. I like the idea if
I had restless leg syndrome of getting rid of it, right,
but the cure often rests were talking about, right exactly. Yeah,
(32:19):
I mean, fortunately, my legs not restless at all. But
when you hear the side effects for some of those things,
like it's it's like, man, the cure is worse than
the disease. The side effects can be truly awful on
some of those drugs. And I don't know what percentage
of the population develops like a face rash or something
like that after taking that drug, or or something even worse,
but it's important to know that. A reverse mortgage. I
(32:40):
think of it like some of those pharmaceuticals where it's like, yeah,
it'd be nice to get rid of that problem, but
is it creating other problems that are are even more nefarious? Potentially?
That's true. You've been listening to How to Money with
Joel Larsgard. You can always hear us live on KFI
AM six forty twelve pm to two pm on Sunday
and anytime on demand on the iHeartRadio app.
K IF I am six forty. You're listening to How
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Speaker 3 (00:11):
Joel and Matt have you covered?
Speaker 2 (00:14):
This is how to Money with Joel Lar's Guard and
Matt Ullmax.
Speaker 4 (01:00):
KF I Am six forty live everywhere on the iHeartRadio app.
Speaker 3 (01:04):
This is how Some Money. I am Matt Altmix.
Speaker 1 (01:06):
And I am Joel Larsgard and we're glad to have
you along for the show today. By the way, if
you're looking for the right credit card for your wallet,
well you want to be able to use it responsibly.
But if you do that, if you pay your credit
card on time and in full every single month, well
check out our credit card tool. You can find that
up on the website at howtomoney dot com. Matt, let's
(01:27):
start off talking about streaming. ESPN is launching its first
streaming service. The announced this week. They're trying to appeal
to cord cutters, which is most people. I don't think
I know anybody who still pays for cable every month.
I'm what about your folks?
Speaker 3 (01:42):
No, no, they're done with it too. They finally did
it because that's how I used to watch soccer. Yeah,
back in the day.
Speaker 1 (01:47):
I know, right, we log it under their stuff occasionally,
but now I swear it like and maybe I'm sure
I do know somebody who has cable, but I don't
hear them talking about it. And so every person you
talk to for the rest of this weekend, right, make
that be your first I will just ask me, like,
I gotta find somebody when that's the bane of most
people's existence. Though, is that it's been harder, Like we
got to have cable if you want Espn because Espn
(02:08):
Plus apparently was like trash. I don't know, I don't
really watch sports much anymore. But it's not gonna be cheap,
of course, because like when you're talking about the cable package,
ESPN commanded a huge percentage based on like the number
of channels that were there. Well, ESPN got a big
payout every time a cable package was sold. Well, you're
gonna pay if you want to pay Espn directly for
the privilege of streaming their content thirty bucks a month.
(02:32):
If you want to toss in Disney Plus and Hulu,
you're talking thirty six dollars a month, and maybe maybe
This is worth it for die hard sports nuts, but
it's a high price to pay if you want to
watch sports like basketball and football. And I think the
problem here too, Matt, is that there there's still a
lot of sports programming you're missing out on, even if
you sign.
Speaker 4 (02:50):
Up for the business fully encompassing of all the sports
that someone might wause, like.
Speaker 1 (02:54):
All the sports I could ever want to watch for
thirty bucks a month, I'd be like, yeah, okay, yeah,
I might be up for that. But the truth is
we're still talking about like regional sports packages for baseball.
We're still talking about MLS which is on Apple Plus,
which if you want to watch the European soccer matches,
you're talking about going with another streaming services, NFL games
now being spread around to different channels and other streaming
(03:15):
services too. So core cutting just used to be the
no brainer way to save money. But with the stratification
of streaming and more and more a proliferation of streaming services,
you have to be careful. Could you could spend more
than you used to spend for cable.
Speaker 4 (03:29):
That is very true, man, So all the opposite end
of the spectrum going irl.
Speaker 3 (03:35):
In real life.
Speaker 4 (03:35):
There to see a movie is getting cheaper, not more expensive, Joel.
The Journal, they had an article about the cult of
AMC Stubbs memberships and I hadn't even heard of this membership,
and so I read this article.
Speaker 1 (03:47):
I can't tell you the last time I went to
see a movie.
Speaker 4 (03:48):
People who have this membership evidently they love it. And
what it does is it allows them to watch four
movies a week for the monthly price of twenty six bucks,
which is actually a pretty.
Speaker 1 (03:59):
Good deal for a week, which is like sixteen a month.
Speaker 4 (04:03):
That's a lot of time in the movie theater price standpoint,
It's actually a pretty good deal given how much movie
tickets cost these days. But the problem is, like you said,
the fact that it's for what four movies are out
there that do you even want to see?
Speaker 1 (04:16):
Like all year, are there that many new movies coming
out every single.
Speaker 3 (04:19):
Actually did you hear? Derek?
Speaker 4 (04:20):
Friend of the show, Derek Thompson talked with somebody that
wrote an article for The Atlantic talking about pop culture
these days?
Speaker 3 (04:25):
Did you hear?
Speaker 1 (04:26):
Did you hear that episode or read that article?
Speaker 4 (04:28):
Fascinating, super fascinating, talking about how is pop culture the
worst it's ever been? And you know, and they go
back and forth, and they're like, well, no, like artists
back in the day, when they first were on the scene,
people didn't like them and it wasn't until.
Speaker 3 (04:41):
After that, after the fact, blah blah blah.
Speaker 4 (04:43):
But you can't argue the fact, Like if you look
back at movies specifically thirty years ago, Like if you
look back at to like nineteen ninety four, guess with
the top what the top grossing box office movies were
in ninety four? There were movies like The Lion King,
like the original Lion King, Lion King, Forrest Gump. What
else was dumb and dumber was in nineteen ninety Classics,
(05:04):
All Speed, Gunnar Raves, Dude, amazing movies. These were all original.
Speaker 1 (05:09):
Movies and they're just remaking up.
Speaker 3 (05:10):
They're all remixed. So last year, so twenty twenty four.
Speaker 1 (05:13):
I haven't remade Forest Compla it's coming.
Speaker 3 (05:16):
They'll do it with his son.
Speaker 1 (05:17):
Yeah.
Speaker 4 (05:18):
But thirty years later, all of the top grossing movies
in the box office were sequels. You're indespicable me forour
Mwana to Godzilla whatever. Like it's crazy how we are
addicted to sequels that there is just so attention being.
Speaker 3 (05:36):
Given Two new ideas.
Speaker 4 (05:37):
Yes, and some of it has to We were just
talking about this how it's somewhat of a reflection of
us as a society, Like we don't have the stomach,
we don't have the patience to be able to sit
down and experience something new. We're not contemplative enough, as
opposed to being like, well i've heard of that. Just
give me the second version of that. So maybe this
is a criticism of culture at large as opposed to
AMC specific.
Speaker 1 (05:58):
So it's like, the pricing's pretty good, the pricing is great,
but is there enough worth watching that you're willing to
pay the price? I guess maybe if you want to
see fewer movies but you want to discount. The AMC
announced that this summer they're going to be doing fifty
percent off on Wednesdays. So instead of feeling like, all right,
I pay this monthly fee, now I got to go
see as many movies as a possorld. Yeah, just go,
(06:19):
I don't know, watch a movie on Wednesdays Goddays once
or twice a month.
Speaker 4 (06:22):
And that's a free membership. So it's the free tier.
Give you that discount. That's right, that's nice.
Speaker 1 (06:27):
All right, We've got actually more to get to On
today's show.
Speaker 2 (06:30):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (06:37):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (06:42):
Let's get to a real money question a conundrum here,
specifically from a listener who wants to know how or
the details about opening a wroth for a kid.
Speaker 5 (06:52):
Hey, guys, this is Mary from South Carolina. Joel recently said,
you guys need some great listener questions, and I think
I'm pretty great. Here we go. One of the reasons
that we like listening to y'all is because you're kind
of in the same ages and stages. Our oldest is twelve,
and she's starting to earn some money from babysitting and
pet sitting and stuff like that. And we went over
(07:14):
some compound interest calculators with her. She is pretty excited
about those. So wondering how detailed I need to get
with documentation. So far, I've just been putting memos in
the money I transfer into her youth account with USAA.
I don't know if I need to go all in
(07:36):
like Matt and do a spreadsheet. That sounds pretty exhausting. Also,
would you guys recommend Fidelity for a youth roth Ira,
We already have our brokerage account for them. Thank you, Joel.
Speaker 4 (07:48):
I feel called out sometimes, like you've recently documented, you
need to do the exhausting thing in order to take
get ahead with your money.
Speaker 3 (07:57):
That's true, no, but not always, not always.
Speaker 1 (08:00):
Sometimes there's a lot of low hanging fruit when it
comes to purfle tire.
Speaker 3 (08:02):
Sure. Mary, we appreciate you as a listener.
Speaker 4 (08:05):
I can certainly see why it would be fun too
to having a kid who's also in the same ages
and stages as us as well. We're you know, our
oldest daughters are going to be turning twelve this year
as well.
Speaker 1 (08:14):
That's right, yeah, this summer, and obviously Matt Mary's getting
her twelve year old started off on the right foot, right,
And it's really it's really fun to watch your kid
become kind of a micro entrepreneur. And twelve eleven, twelve
is kind of the perfect age, especially if you feel
like your kid's got some maturity, like babysitting dollars, especially
(08:35):
in today's economy, they can add up, they can add
up really quickly, Like my daughter has been babysitting the
kids across the street a little bit here and there,
and it's so exciting to her to see like money
roll in, to come back home and be like, I
was over there for like four hours. I made twenty bucks,
you know, and the parents are thrilled because babysitting costs
a heck of a lot more than that most of
the time. And so yeah, I think that if you're
(08:57):
just the mother's helper though right exactly is more like
that's exactly what it is. Yeah, Like she hasn't been
left alone with them yet, but they can get a
lot of stuff done.
Speaker 3 (09:05):
Cooking dinner for them, their laundry as well.
Speaker 1 (09:07):
It's the Cinderella story really when it comes down to it.
But I think doing that getting them excited about like
making some money, then you know that enticing that excitement
about compounding, maybe even including a parent match if you're
up for it, Mary, and if you can, those are
ways to spur your child towards becoming a lifelong investor.
Just getting them excited about like what money can do
(09:28):
for them, and you want her to be able to
enjoy some of that money now, of course, But you know,
I think also getting excited about how those unspent dollars
ten and will grow. That's pretty neat too. You kind
of want to both end.
Speaker 4 (09:40):
Yeah, that's the personal finance education that's taking place. But
at the same so you are instilling those values, which
is amazing Mary.
Speaker 3 (09:48):
But on top of.
Speaker 4 (09:49):
That, I mean, let's imagine a three thousand dollars contribution
towards a roth IRA for over fifty years.
Speaker 1 (09:54):
Let's say from age twelve to.
Speaker 4 (09:56):
Sixty two, So for fifty years there, that's going to
result in over one point two.
Speaker 3 (10:00):
Million dollars just in a roth IRA.
Speaker 1 (10:04):
Wow, tax free dollars.
Speaker 3 (10:05):
Incredible.
Speaker 4 (10:06):
And yeah, by you helping her to get the experience
by investing some of the money that she's earning, it
does both she gets that financial head start, but also
she's learning. But to your question, how detailed do you
need to be on that record keeping front? I think
having you got to have something right, no matter what,
you need to have something. You don't necessarily need a
(10:26):
super fancy spreadsheet or anything like that. And this I
think the standard is lower than it would be for
an HSA, a health savings account for instance. But because
your daughter can only contribute earned money, you want to
make sure that you are not over contributing to that account.
And so because of that, I still think it's really
you know, she Mary is missing the spreadsheet specifically. I
(10:47):
still think that that is the easiest way, because you
could create a document where you're like, Okay, let me
just write a quick summary, like she's talking about in
the memo of it. Sounds like what she's doing are
transfers with her online savings account. Perhaps she's listening out
the details within that. But I think what's easier than
that is just going into your Google sheet, which is
what I've got going on, and literally just copy and
(11:08):
pasting the previous line, changing the date, and updating the
hours so it doesn't have to be the super complex
It's been so long since I've updated my spreadsheet formula.
I'm into it, but I'm not creating these complex functions.
Speaker 1 (11:21):
If then also, you know, like all that sort of thing,
it's really two inputs. It's like the date that work
was accomplished. I've got four, like literally four, I've got
four columns.
Speaker 4 (11:28):
It's the dates, the number of hours, the rate that
she's being paid, and then the.
Speaker 1 (11:33):
Total okay, number of dollars even that you could probably
get by with a little bit less information, but super
easy though.
Speaker 4 (11:38):
But especially that's the thing, like literally the ability to
just to copy and paste and then updating that. And
it's not like I do that. I'll be honest, I
forget sometimes like I always pay her, pay my daughter.
But you're not perfect.
Speaker 3 (11:50):
I'm not perfect.
Speaker 4 (11:51):
But sometimes it'll be a few weeks before I'm like, oh, shoot,
I haven't sat down an updated that. And I'll sit
down and essentially I just kind of batch update that
sheet and what this actually looks like. We'll be a
work in progress, because again, the whole point is to
get them investing. I haven't sat down yet, but I'm
envisioning that will also down with her at the end
of the year and we'll say, all right, this is
how much you officially earned over the course of the year.
(12:12):
You can invest every single one of those dollars in
the account and tall you know, run some compound interest
calculators calculations Mary like you are, and hopefully she will
want to invest a lot. But then making it clear
that hey, I'm willing to provide a parent match. It
doesn't have to be this extraordinarily onerous, heavy exhausting task
that you need to do every single time she earned
that buck.
Speaker 1 (12:32):
I think what you're trying to do by creating the spreadsheet,
and what Mary's probably trying to do too, or should
be trying to do, is to avoid putting money into
a ROTH I rate that wasn't earned income. So for instance,
your daughter's probably getting money from birthdays or holidays or
stuff like that, and like over easter, my kids got
five bucks in their last easter. They found that, but
(12:52):
that money can't be contributed to a ROTH because it
wasn't earned and so you want to separate those things out.
And that's where the spreadsheet comes in handy. It's not like, oh,
every money or every do that's in her account can
be contributed to this ROTH. That can't because if some
of those were gift dollars, they're excluded from that contribution ability.
So true, That is why I think you want at
least some documentation. And I do think Mary, you're right,
(13:12):
like I'm not a spreadsheet guy, to make sure you're
on the right side of the law, right, yeah, exactly, Yeah,
you don't want to be Jesse James in this thing.
And then when it comes to where you open it
Fidelity is for sure a great place to open a
kid's roth. I mean, it's one of the few places
we would wholeheartedly recommend you can avoid fees and account minimums.
She'll have access to cheap, incredibly diversified funds. And then
(13:34):
wherever she starts investing, and this is I think one
of the lynch pins here, it's likely where she'll remain
as she enters adulthood. Like my first four one K
was with Vanguard, and so I ended up opening multiple
accounts with Vanguard over the years. Eventually I opened up
an account with Fidelity too, But it was one of
those things where like, hey, this is where I started,
It probably where I'm gonna stick around, and that will
(13:56):
likely be true for your daughter. And I just can't
think of many better options than being with Fidelity over
the long haul, based on kind of all the things
that Fidelity prioritizes as a company exactly yep. And she's
you know, she's not going to get a match like
she would with maybe some of the newer brokerage firms,
the betterments and the robin Hoods, those might be worth considering,
(14:16):
But I think the more boring nature of Fidelity's website.
It's actually like a pro in a weird way.
Speaker 3 (14:24):
Actually to her long term financial advantage. Yeah.
Speaker 1 (14:26):
I mean, I think it might help her avoid some
of the perils of investing too, because if let's say
it is in a super flashy account and she's checking
her balanced a little more, and she's like, there's all
these pop ups about investing in crypto or individual stocks
or leverage ETFs or something like that margin investing, right, Yeah,
(14:47):
maybe as a seventeen, eighteen, nineteen year old investor, she
might be like, oh, that looks like fun and get
kind of dissuaded from doing the normal boring thing that's
really going to build wealth over time. And our kids
are just a little bit, you know, longer than yours.
They've just dipped their toes. I think into this world
really of making money. But I think kiddo roths. I
don't know about you, Matt. I'll be curious to see
how that conversation goes with your oldest. But yeah, I'm
(15:11):
hoping that for my daughter that I can do kind
of a parenthal match and incentivize her to get started
investing really soon.
Speaker 4 (15:18):
Heck, yeah, I think it's let's mention an app we
actually talked about on a recent episode that's called half
More like like mackelmore but half more. But their goal
is to help parents to find ways to pay their
kids for chores around the house so that they can
contribute even.
Speaker 1 (15:35):
More to that roth Ira.
Speaker 4 (15:37):
But the problem here is that there's this annual one
hundred and forty four dollars fee that's attached. It's not
super unreasonable, I guess, and it will help you to
jump through the some of the compliance oops. I like
what they're trying to do, but the real winning part
of the app is being able to assign certain chores
at home and paying your kid in a very irs
(15:57):
compliant way if she's making money outside the house though
DIY bookkeeping and just contributing, you know, in that sort
of manner. I think that should suit y'all just fine.
It's almost like bringing a bazooka to a knife fight, like, yeah,
you probably just seems unnecessary. Yeah, and it doesn't answer
like well, I remember during that conversation when a listener
brought that to our attention, one of my concerns was
(16:19):
the fact that is the data yours and this is
an app, and like a lot of businesses, today, they
are reliant on subscribers, which means folks were willing to
kind of continue to pay that fee even if they're
not fully utilizing that service. And I would certainly want
to make sure that you could at least export that
data to where you had some sort of record of that,
(16:39):
not feeling like you had to monthly fork over the
change in order to maintain the data that you've accrued
and built up over the previous years.
Speaker 1 (16:48):
It's really unnecessary for most parents unless you're really trying
to jump through some hoops and pay your kids for chores,
and that app can help you do that.
Speaker 2 (16:58):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (17:04):
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 4 (17:13):
All right, Joel, So we've talked about flying places, which,
by the way, we haven't talked about the radar outages
at the different airports.
Speaker 3 (17:19):
Well freaky, isn't it.
Speaker 1 (17:20):
Yeah, New York's enough time, I don't have you.
Speaker 4 (17:23):
Evidently something like that happened at the Atlanta Airport last
week or maybe it was earlier this week. Yeah, kind
of freaky. Yeah, don't know enough to actually comment. But
let's talk about not flying places, driving places.
Speaker 3 (17:34):
We're going to talk about cars, Joel.
Speaker 4 (17:37):
Half of new car purchases involved the trade in of
an old car, which makes sense, but remember that you
are almost always getting paid less for that car than
you would have received had you sold it privately. And
of course you've got a company stepping in the void,
car Vana. They're trying to convince folks to sell their
car directly to them instead of DIY selling it as well.
(17:58):
They're sending direct email and hopes that you're gonna get
excited about the possibility of selling your your used ride
upgrading to something nicer. It makes me think about the mail.
Please email.
Speaker 1 (18:07):
It's like, please sell me your car because they're like, hey,
we need we need more supply on some more inventory.
Maybe you're the sucker. Maybe this email is going to
entice you.
Speaker 3 (18:15):
Don't do it.
Speaker 4 (18:16):
And this isn't because we hate Carvana. I think they're
fine for some things. I actually purchased a vehicle from
them seven years ago. Now, a great experience, and I
don't think it can hurt either to get a quick quote.
I think it can be a great spot to say,
all right, let's just kind of see it's like the
first piece of data, right, like the first data entry.
But then after that, look at Kelly Bluebook, head over
(18:36):
to Edmunds. Because the offer from Carvana could be a
low ball offer, and of course listing it yourself on Facebook,
Marketplace or auto trader, it can be well worth the
effort to sell it because I think there's a good
chance you're gonna receive thousands more. It's just an interesting
thing that Carvana is stepping in there to be able
to provide a frictionless sort of environment. Carvana isn't ripping you.
(18:59):
I'm want to add all a disparaged Carvana. They are
providing a service. They are making life easy for you.
It's incredibly convenient to go with them. But what are
you willing to pay? Right and like always like everything,
like even if you want to fly to Thailand and
stay at the Four Seasons, more power to you, but
just know that you're going to be forking out much
more money to do that, just like you're going to
be paid much less money for your trade in where
(19:22):
you to upgrade anytime.
Speaker 1 (19:23):
It feels like convenience is the name of the game
for companies these days. They're like, how can we make
your life more convenient? But there's an extraction that takes
place when you make your life more convenient. And I'm
not saying that it's not worth paying for sometimes, but
you have to be thoughtful about that because it's also
you can't convenience everything right, you know, and at some point,
if you do convenience everything, you're going to be forking
over a lot more money than you otherwise would. And
(19:45):
this is one of those places I think where the
numbers are substantial that I think the when you look
at the data something you're going to get paid typically
fifteen to twenty percent less doing a trade in of
a car than you would selling it directly to another
private party. And so if you're talking about a fifteen
thousand dollars car, you could be talking about three grand
less in your pocket. And so, oh, it's a hustle
(20:06):
to listen on face Yeah, I get that. I get
that it's not fun to feel the incoming Facebook messages
and to meet up with somebody, but it also might
be worth it because the dollar amounts significant, and there
are other things maybe where the trade off of convenience
is going to cost you less money and you say, no,
I'm going to do that on purpose. But if we
convenience everything, which it feels like we're doing as a culture,
(20:27):
it's going to cost money, right, And you might want
to sell your car, by the way, if you move
into a car free neighborhood. Dwell magazine Matter used to
subscribe to that. I haven't in a while, but I
loved that magazine, like the pictures more than anything. Beautiful homes.
Speaker 4 (20:40):
Yeah, like we talked about with Cali Cox Wednesday's right, Yeah, yeah,
So Dwell had this article about a car free community
called cul de Sac.
Speaker 1 (20:49):
Then you and I've kind of kept our eyes on.
It's in Tempe, Arizona, and it seems like it's been
a raging success because folks who opt to live there
they get sweet on campus amenities like a gym, they've
got cool shops, they've got you know, food options, and
gen z Ers in particulars seem to be all about
the amenities and places that they're living. I know, I
(21:10):
don't think my sister's gen Z.
Speaker 4 (21:11):
She's a millennial, but she's got the mindset's a very
young millennial, yes, and she's so into amenities where she lives,
even if it means training off and living in a
smaller space. But this, this cul de Sac in particular,
comes with free transit passes and free ebag access because hey,
guess what, you're giving up your car if you live there.
Speaker 1 (21:31):
And so it's really what they're trying to do is
create this antidote way of living to the standard car
centric lifestyle. And people are thrilled to pay more to
live there because they're downsizing their carefully, they're going to
save money there, and so I think also it's not
just because about saving on car costs. I think it
increases the community vibe. And I think people are thrilled
(21:51):
to pay more to live there not just because they're
spending less on car stuff, but because it's.
Speaker 4 (21:55):
An enjoyable place to hang. Yeah, it was created very thoughtfully,
like with intention. There's a lot of density right, Like
who doesn't want to be able to walk down the
steps around the corner and boom, there's a coffee shop there.
Speaker 1 (22:07):
There's a light rail line connected to cul de Sac
that it will get you so many other hop in
spots in town.
Speaker 3 (22:12):
Yeah.
Speaker 4 (22:12):
Yeah, they're getting a real community experience there, and not
to mention that you are there with like like minded people.
But I think a criticism of that is like, oh, yeah,
that's great, folks. If you've got the money to be
able to uproot your life, go buy this incredibly bosh
standard of living out here.
Speaker 3 (22:28):
We'removed from all, you.
Speaker 4 (22:30):
Know, just all the nice It is nice, it is nice,
But you don't have to move in order to accomplish
something like this. I think even I was we literally
were talking with some neighbors and we were talking about
how great it is to go and check your mail
and then be stuck for an hour, not stuck, but
like positively stuck for an hour.
Speaker 3 (22:46):
And she's like, ohoot, I gotta get inside and cook dinner.
Speaker 4 (22:48):
But because folks are walking around having conversations with neighbors,
it's something you can literally start doing today.
Speaker 1 (22:54):
We don't have to move to be able to do that.
I think we underrate those happenstance encounters with neighbors and friends,
Those who are the best one, those are more fulfilling
in so many ways than like, hey, let's get drinks
two Fridays from now. Yeah, it's kind of the rub
and shoulders, the everyday stuff that really does.
Speaker 4 (23:08):
It's that going back to friction man. Yeah, it's this
thing that makes life a little more enjoyable, and oftentimes
we write it off pretty quickly.
Speaker 2 (23:15):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:21):
Don't forget to sign up for the how to Money
newsletter over at howdimoney dot com slash newsletter.
Speaker 1 (23:26):
Let's get to a question now, Matt, about someone who
listens to the show and they're worried about their parents
potentially choosing a bad financial product.
Speaker 6 (23:36):
Hey, Matt and Joel, this is Hayden from Marboro, New York.
You guys made a passing comment in a recent episode
about the sky high fees associated with reverse mortgages, and
I was wondering if you could talk a little bit
about that. My parents have recently discussed that as a
big part of their future plans, recommended by their financial advisor,
and they gave me some articles to look at and read,
(23:58):
but I didn't see anything in there about, you know.
Speaker 3 (24:00):
Particularly high fees.
Speaker 6 (24:01):
So I was hoping you guys could just touch upon
that and maybe I could send this episode along to
them so they're informed enough to make the decisions that
they need to make, h you know, in their retirement.
Speaker 3 (24:10):
Thanks very much, Cheers, Jald.
Speaker 4 (24:13):
Did Hayden say Cheers because like us, he is a
fan of craft beer or from a cultural standpoint, he
just likes to party.
Speaker 1 (24:19):
He's like Cheers? Does he like the old school television
show Cheers with Norm oh Man? I watched those.
Speaker 3 (24:26):
Yeah, my dad was a huge Cheers fan.
Speaker 4 (24:28):
I was probably one of the few six year olds
that had seen like all this season.
Speaker 1 (24:33):
I don't know if that's good parents, You're bad, But
there's there's more of a Gilligan's Island fan myself.
Speaker 4 (24:38):
So see, I watched a lot of Cheers as a kid.
Obviously a lot of jokes went over my head. But
also Dallas, did you I never watch that? That was
the I can still hear the theme song in my head.
Think about how bum bum bum bum bum.
Speaker 1 (24:55):
There you go. Thank you for serenading. I'm gonna keep going.
Think about how it must have been to write some
of those shows like taking place all in one bar
or all on a deserted island like it did? Did
it not just like wear thin after a while.
Speaker 3 (25:09):
I sure did.
Speaker 4 (25:10):
Having limits and boundaries around what it is that you're
trying to do it can be even freeing. Perhaps, Yeah,
maybe I don't know. I've allowed more creative a writer
to a show.
Speaker 3 (25:18):
I gotta imagine. Maybe I don't know.
Speaker 1 (25:20):
All right, let's talk about reverse mortgages. So, Hayden, I
love that you're wanting to help your folks out, and
let's just like maybe talk about what are reverse mortgages?
Real click because some of them might be saying, I've
never heard of this. What is this financial product? Well, basically,
instead of paying a monthly mortgage to own your home,
which is what most people are doing for fifteen or
thirty years, most people thirty, let's be honest, you're being
(25:41):
paid to access the equity that you built up. And
the upside is that for cash strapped seniors and I
say seniors because you have to be sixty two years
or older or you're not allowed to take out a
reverse mortgage, they are able to stay in their homes
while getting a steady stream of monthly income covered their bills.
(26:01):
So it feels like for a lot of senior citizens
this win win. If there's no other place to grab cash.
It's like, well, I get to stay in my home
and I have money to spend every month that otherwise
where would I have found that money? And so in
addition though to the fees that we're going to discuss,
a reverse mortgage comes with downsides. So in particular, if
your parents care about you and your siblings inheriting the
(26:23):
home at some point in the future, a reverse mortgage
limits that possibility. But now we've got to talk about
the fees. And yeah, I feel like I just made
a reverse mortgage sound pretty great. Stay in the home,
money coming in every month.
Speaker 4 (26:34):
Yeah.
Speaker 3 (26:34):
No, let's set the context. Let's set the table here
a little bit, because it's.
Speaker 4 (26:38):
Interesting that Haydn's folks are leaning towards a reverse mortgage
and that their advisor has suggested it as a smart approach,
because it might be. But if their advisor has helped
them ahead of time to build up a nest egg
over the years, it might not be necessary. The advisor's
goal should be that they do not have to actually
get a reverse mortgage, because combination of well timed tapping
(27:02):
of social security, typically by waiting longer, it's going to
lead to a better outcome at least for one of
the parents they're one of the partners that plus tax
advantage accounts, and in addition to that, maybe some frugal
living there on the side that should hopefully be enough
for them to live off of for many decades. A
reverse mortgage is almost always considered an option of last
(27:24):
resort in order to make ends meet in the event
that the combination that I just mentioned of investments of
Social Security if it falls short of the type of
spending that they're looking to be able to perform and
do in their retired years. There So, again, decent planning
should allow folks to avoid this product altogether. But assuming
(27:45):
based on the fact that they're talking about it, sounds
like maybe that's not quite the case, and so they're
looking at what they have on hand to be able
to satisfy the type of retirement that they're looking to live.
Speaker 1 (27:54):
You might also see by the way a reverse mortgage
referred to as a home equity conversion mortgage, that's just
a anc way of saying the same thing. It's just
a different name for the same beast, But basically, yeah,
you're grabbing money from that property instead of paying it
off and then gaining liquidity from in the liquid asset.
As we all know, that's not easy. So the fees
are high as they are with the traditional mortgage. We're
(28:16):
talking origination fees, closing costs, appraisals, tidle search, all the above.
It's very has similar characteristics to taking out a mortgage
on a primary home, and you can typically have those
fees taken out of the loan amount, so maybe it
doesn't feel as bad, but they're still getting paid. And
when your parents are still the ones paying the fees,
(28:37):
they beginning charged interest and servicing fees as well as
a mortgage insurance premium, so.
Speaker 4 (28:43):
It all gets rolled into the Essentially it gets papered over,
so it feels nice and tidy. Yeah, like, where are
those fees at that the boys we're talking about, And
it turns out they're in there. It just it's minimizing
the amount of money they can take out of the house.
And so what are the tough things about our reverse
mortgage is that when there's this litany of fees being
assessed in different ways, it's just hard to get an
(29:04):
accurate account of exactly exactly what it's going to cost you.
But when you read the fine print. You might be
shocked to realize just how many thousands and thousands of
dollars are coming out of this asset. As it's like
you're trying to get blood from a stone or something
like that, Matt, and that's hard to do. And the
same thing is true with a home. Yeah, it's always
(29:25):
expensive to tap that home for money. Yeah, it's just
hard to gauge because of the fact that it's all
getting rolled into one but it is still happening. By
the way, let's look at some stats here. Close to
one in five reverse mortgages, they actually end in foreclosure,
often because the senior citizen there was unable to pay
property taxes. So this often works out poorly, which should
(29:46):
throw up an immediate red flag. So, Hayden, for your
folks man, prior to getting a reverse mortgage, I would
carefully assess the.
Speaker 3 (29:55):
Costs, specifically the fees there.
Speaker 5 (29:57):
Joel.
Speaker 4 (29:57):
You mentioned so home equity conversion mortgage. That's the term
specifically given to the FHA backed reverse mortgages, But there's
also private reverse mortgages out there as well, which might
be even more appealing to some folks because they're saying, oh,
I can go through this private lender, and I can get.
Speaker 3 (30:15):
A reverse mortgage at the age of fifty five.
Speaker 4 (30:17):
I don't have to wait another seven years live like
a popper in the meantime. But guess what that comes
with even higher fees, even worse rates, even worse aprs. Especially,
that's where it starts really getting ugly.
Speaker 1 (30:28):
Yeah, I agreed. So I would say, suggest considering other alternatives.
If I was your folks and they were like, we
just can't afford to live in this house anymore. We
want to, but we can't afford to live in it
anymore with what we've saved and with the social security
that's coming in and live the lifestyle that we want.
So consider selling or downsizing or even a cash out refinance.
(30:49):
Could be better. Could be better, I say, because that
isn't a great option either, but it could be better
than a reverse mortgage. They can invest cash that cash
and fusion, and they could draw it down over the
coming decades potentially, or turn it into like a monthly
stream of income with what's known as a single premium annuity,
which does it's like also known as an immediate income annuity,
(31:10):
which is one of the cheaper annuities out there there
aren't many good annuities out there. A reverse mortgage just
isn't the only viable option. It's just the one that
gets the most press because it's the easiest. But the
easiest thing isn't always what's best. And then you know,
if they do decide to go in this direction, they're
going to have to meet with a HUD counselor if
they're going with one of those HUD initiated reverse mortgages.
(31:33):
Matt right, the Consumer Financial Protection Bureau still around the heartbeat,
barely beating, but they have a list of questions that
your parents should be asking that will link to in
the show notes at how tomoney dot com. Make sure
they take a look at that they to be armed
with the right questions is really important before they do this.
And just know too that inheriting a property with reverse
(31:55):
mortgage that can be a nightmare as well. So again,
not sure if that's in the cards or if that's
a hope for you, you or your siblings, but no, that's
a pain of the butt if they are in the
middle of a reverse mortgage. These complex products, Matt, they
remind they remind me of like some of the commercials
for fancy new pharmaceutical drugs. I like the idea if
I had restless leg syndrome of getting rid of it, right,
but the cure often rests were talking about, right exactly. Yeah,
(32:19):
I mean, fortunately, my legs not restless at all. But
when you hear the side effects for some of those things,
like it's it's like, man, the cure is worse than
the disease. The side effects can be truly awful on
some of those drugs. And I don't know what percentage
of the population develops like a face rash or something
like that after taking that drug, or or something even worse,
but it's important to know that. A reverse mortgage. I
(32:40):
think of it like some of those pharmaceuticals where it's like, yeah,
it'd be nice to get rid of that problem, but
is it creating other problems that are are even more nefarious? Potentially?
That's true. You've been listening to How to Money with
Joel Larsgard. You can always hear us live on KFI
AM six forty twelve pm to two pm on Sunday
and anytime on demand on the iHeartRadio app.
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