April 27, 2025 • 32 mins
The department of education is going to start collection actions on student loans on May 5. Matt and Joel discuss what you need to do to be prepared for that!
Ask HTM: A listener wants to know if he should pay off student loans or not.
With all the recent market volatility, what do you do if you need to sell investments in short order!?
Ask HTM: Is it possible to report loans individuals make to the credit bureaus?
Ask HTM: A listener wants to know if he should pay off student loans or not.
With all the recent market volatility, what do you do if you need to sell investments in short order!?
Ask HTM: Is it possible to report loans individuals make to the credit bureaus?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
KFI 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?
Joel and Matt have you covered? This is how to
Money with Joel lars Guard and Matt.
Speaker 1 (00:18):
Altmes KFI AM six forty live everywhere on the iHeartRadio app.
This is how to Money. I am one of your hosts,
Joelarsgard and I am Matt alt Mixed. By the way,
you can always find more money saving information over at
(00:39):
howtomoney dot com. All right, let's let's talk about some
really important news happening right now.
Speaker 2 (00:45):
Matt.
Speaker 1 (00:45):
Let's talk about student loan debt collection, which it was
announced this week. Essentially the hey, the federal government, the
Department of Education is going to start collecting on student
loans that aren't being paid on. And Linda McMahon, the
Secretary of Education, and she wrote an op ed this
week in the Wall Street Journal. She basically explained the
(01:05):
need to collect on loans if payments aren't being made
And this is, I would say, a dramatic turn from
how the last administration handled student loans.
Speaker 3 (01:14):
Sure the attempts or.
Speaker 4 (01:16):
They weren't handling it, Yeah, ping it down the road.
We're going to ignore that these exist for everybody.
Speaker 1 (01:20):
Then the attempts at forgiveness that didn't come to pass,
and the Secretary Education basically said the drop dead date
to start making payments is May fit. So that's just
around the corner. And so if you don't, if you're
not able to make those payments, you're gonna see a
meaningful drop in your credit score. A lot of folks
already have. And then the most extreme cases, she highlighted
(01:42):
that some people could have their wages garnished, and they
could even have starting next year in our likelihood, they're
tax refunds taken back if they haven't been paying on
their student loans. So I think this is a call
to not put your head in the sand. If you
have student.
Speaker 3 (01:56):
Loans and you're like, what do I owe?
Speaker 1 (01:57):
Am I current? Am I paying right now? Logging account?
Check out the loan simulator on the Education Department's website,
and then I think something like forty percent of borrowers
are current on payments right now, Matt. So there's just
a lot of people, probably a lot of people listening
to this podcast right now that that haven't been paying
partly also because they're not sure if they're supposed to.
So just this could turn into into a messy situation
(02:20):
from millions and millions of folks. It could have wider
impacts on the economy too. So yeah, yeah, this I
would say to How Money listeners, it's more like eighty
percent of them are probably current, Like we hold a
higher standard here at How Money, don't we kill And we're.
Speaker 4 (02:33):
Actually going to have a student loan expert on the
show next week, so stay tuned for that. But while
we're talking about debt, dude, it is not just student loans.
While at Hub, they reported that credit card debt is
up as.
Speaker 3 (02:44):
Well, and so are delinquencies.
Speaker 4 (02:47):
Defaults were up thirty four percent year over year from
twenty twenty three to twenty twenty four, and inflation and
rising interest rates have been a double way and me
causing more folks to rely on their credit cards in
order to get by. And then, of course, what happens
they find themselves with a balance that is growing, they
have a payment that's too much to handle.
Speaker 3 (03:07):
And this isn't just younger folks as well.
Speaker 4 (03:09):
Over half of folks who are aged fifty to sixty four,
so that subset they have a recurring credit card balance
as well.
Speaker 1 (03:16):
I mean, it seems like this always seems like something that, oh,
it's a young people's thing.
Speaker 3 (03:19):
You don't have enough they have and they haven't learned
how to handle set. Yeah their cards. That was justcking
to me. No longer the case.
Speaker 1 (03:25):
People in their fifties and early sixties still have this
problem with credit cards.
Speaker 4 (03:28):
Yeah, they've got these recurring balances, and many are gonna
end up paying more in interest than their overall actual
balance and the overall actual charges that they put on
that card. It's a compounding you're doubling down all these
poor decisions.
Speaker 3 (03:41):
Essentially.
Speaker 4 (03:41):
It makes me think back to an early episode, like
way back in the day that we did I'm assuming
we did it on debt, but we're talking about interest
rates and how I pictured an escalator and it's just like, Okay,
you can ride these interest rates up by receiving interest payments,
by having your money at a high old savings account
for instance, and so those interest rates you can just
stand there on that step, man.
Speaker 3 (04:01):
It'll take you up to that next level. Or if you.
Speaker 4 (04:04):
Can supercharge it by you putting forth a little bit
of effort as well. So that's the guy that's walking
up the escalator and you know what, they're going to.
Speaker 3 (04:11):
Get there real real quick.
Speaker 4 (04:12):
But if you're trying to get to that next level
and the escalator is coming down, well you take that
first step, what happens boom, right, you're right back down
to ground level. So you have to work so much
harder to escape in this case that credit card balance. Yes,
so just yeah, just keep that in mind. It is nefarious.
Speaker 1 (04:27):
And I think a lot of people assume, ah, a
little bit, it's not that bad. But truly, even just
you know, a few thousand dollars in credit card debt
and paying the minimum, like what that does to your
finances every month. It's a big deal. And so I
think it's crucial to come up with a plan. If
you're one of these folks who does have credit card
debt you're hanging on to. We have resources on how
to money dot com to help. And if you are
(04:47):
someone you know is like overwhelmed by credit card debt,
there are organizations, nonprofit organizations that can help you out.
Money Management International and the National Foundation for Credit Counseling
are two places should at least consider going to low
cost or free help. And the places that you hear
advertise the for profit places, be careful before you reach
(05:12):
out to those folks.
Speaker 3 (05:13):
They will often take a.
Speaker 1 (05:14):
Lump sum of money and they might not might or
might not be able to help you out, oftentimes not.
Let's add just a little bit more bad debt news here,
real quick, Matt. One in five car buyers are now opting,
as it turns out, for eighty four month loans when
they buy a new car. So this is new stats
from Edmunds.
Speaker 3 (05:32):
Hate this. It gets two hates, yeah and.
Speaker 1 (05:34):
Double hate, and it's it's because it's the only way
they can afford the car they want. They're saying, well, hey,
well the rising cost of cars, interest rates going up
to that's impacted how much I can afford and how
much I can take take out the loan that I
can take out on this car. And so if you
go to the eighty four month loan, that's seven years,
so it's going to take the pay off that car.
(05:57):
And I think what it reveals is that we as
Americans have become payment buyers, like fully all the way,
buy now, pay later. And then when we think about
what happens with credit card loans. It's all about how
much can I afford right now, this month, instead of
thinking about our wealth building strategy from a more long
term perspective. But this trend, it's got cascady consequences, none
(06:20):
of what you're good, Yeah, because we want people to
pay cash for us whenever possible. And we also realize
that some people find themselves in a bind and they
can't write, even if they're looking for a cheaper used card. Hey,
it's not possible. I've got to find some way to
borrow some money. And I think forty eight month loans
are the max amount you should consider. Longer loans, they
(06:41):
just mask affordability problems, they don't actually solve them, and.
Speaker 4 (06:44):
Truly at that point, So one of the key things
you said is that people aren't able to afford the
card that they want. Like if you're in a position
where you are, yeah, in fact, you are in a pinch.
You don't have the cash on hand to be able
to purchase a used vehicle. Like you need to look
at the vehicle that you need to get you from
point A to point B to get you to your job.
If that's what you need for to take the kids
to school whatever it is that you need to for
(07:05):
as opposed to thinking about how this car.
Speaker 3 (07:07):
Is going to make me feel the wants it doesn't
matter really.
Speaker 1 (07:10):
And I was talking to someone just the other day, Matt,
and they owe something seventeen thousand dollars on their car,
and he was talking about, Oh, there's this great deal
on this other truck and it's like it's priced way
lower than it should be. Man, what a deal fifty
something thousand dollars. But if I trade this in, gosh
and think I'm gonna think about how much I'm.
Speaker 4 (07:28):
Gonna Oh, and of course so much money, dude, Like
I try my best to help to hold your tongue,
but also how much advice do you want on that?
Speaker 3 (07:35):
Do you know what I do every day?
Speaker 1 (07:37):
That's the kind of thing that people find themselves in.
We see more negative equity loans and stuff like that too.
And yeah, when you trade in a car that you
owe money on and you roll that into the new loan,
not only are those terms gonna be worse, the payment's
going to be higher. Like how long are you going
to be underwater in that car? And what happens if
there's some sort of emergency in your life. What we've
done with financing vehicles is posterous in this country, and
(08:01):
so many people their finances are suffering largely because of this.
Exactly that I'm taking on more debt than I need
to for vehicles and there's not enough money for the
other important necessities.
Speaker 3 (08:11):
Totally agree.
Speaker 5 (08:13):
You're listening to how To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:21):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Matt, let's get to a question specifically about
paying off student loans and the wisdom behind doing so.
Speaker 6 (08:34):
Hey guys, my name's Donald. I'm originally from Maryland, but
I'm currently living in North Carolina with my wife Chelsea,
my two cats, Peanut, Butter and Whiskey, so shout out
to them Chelsea included. So my question is about student
loan payoff strategy. I've been out of college for about
four years now, and I'm paying off both a private
and a student at a public loan. My plan for
(08:55):
the public loan is to pay as little as possible
and after ten years have the rest of given as
part of the public student loan forgiveness program as I'm
part of the military, but I'm less sure about the
private loan. It's currently sitting around seventy thousand with a
three point eight percent interest rate. I'm paying seven hundred
dollars a month towards that, and I want to know
if ever I should prioritize paying that off versus investing
(09:18):
in the market. I currently put around four hund a
month in the market and occasionally make a couple of
thousand dollars investment. Surely there has to be somewhere between
paying seven hundred dollars a month in the next ten
years and let's say doubling my payment to fourteen hundred.
I'm paying off in less than five years, which would
save me the most money. Right, So, the sooner I
paid off, the more I can invest. But if I
(09:39):
paid the minimum, I can invest less, but for a
longer time. So it is time the market always better
give it the great work. Ps. Chelsea and I often
combined couple's names to save time, so you guys would
either be Mole or Jat, So I'll you guys pick
your poison on that anyway, have a graderon.
Speaker 3 (09:54):
Guys, ooh, mole or jat? Which one do you prefer?
Speaker 1 (09:58):
J get behind mol I can't, But if it was Moel,
I want to go with JAT, I guess. So what's
out of a out of a lack of options for
better choices.
Speaker 4 (10:08):
What's funny is that we've already done this with our
last names and so on our shared calendar. So technically
it's the business Gmail accounts calendar, but we put things
on there that pertain to both of our families, so
for instance, our summer vacation trip and our couple or
I guess our family combined family name is I guess
it is by default, but somehow we've actively decided this
(10:29):
is alt Guard.
Speaker 3 (10:30):
And so that it could have been Lars mixed. It
could have been.
Speaker 4 (10:33):
Lars mixed, but I think alt Guard is just stronger
because you've got the Alt I don't know, a nice
hard tea there and then the Guard like both very strong.
Speaker 3 (10:42):
You put them together and you got how of money.
Speaker 1 (10:43):
The last name Combo is vastly superior to the first
name Combo, which that's that's actually a thing.
Speaker 4 (10:49):
So a friend of ours, her and her husband, when
they got married, they blended their last names together like
legally yeah, Michelle, Yeah, that's right. Yes, they got wried,
blended their last names and basically they met in the
middle when it came to what their new family name was.
Speaker 3 (11:06):
I can respect that.
Speaker 4 (11:07):
Yeah, it reminds me of like the was it in
the nineties, Like the couple name like the celebrity couples
like Brendiford. That's when that comes to mind. Brad Pitt, Yeah,
Jennifer Anderston, that was the ultimate couple.
Speaker 3 (11:19):
I think people said branch Alina. That was another.
Speaker 2 (11:21):
Yeah.
Speaker 3 (11:21):
Everything with.
Speaker 1 (11:24):
All the women he was with, they had to combine
the names. Oh man, I think that happened to other
celebrities too. But all right, let's get to Donald's question. Donald,
it sounds sounds like you're making a smart move while
you know, trying to pay as little as possible in
hopes to have maximum forgiveness on that student loan under
the PSLF program. I will say, though, with all the
noise around student loan policy right now, banking on public
(11:48):
service loan forgiveness being there for years to come, it
might be a mistake. The administration is taking a more
hostile attitude and approach toward PSLF, So we just don't
know if it's going to be a round forever. You
can hope for it, but there could be a rud
pull coming at least at some point for folks who
are in the PSLF process but haven't achieved forgiveness yet.
(12:10):
Not trying to freaking out or anything like that, but
I wanted to mention what student loan stuff is just
in flux.
Speaker 3 (12:16):
Right.
Speaker 1 (12:16):
It is, and we don't have a clear answer at
least to some of the questions that student loan borrowers have.
If Congress made a change, right, you'd likely be grandfathered in,
but that's also not guaranteed. So I guess it's just
I want to put that on your in your headspace, Donald,
just to be thinking about that and not count your
chickens before they have true.
Speaker 4 (12:36):
Yeah, a nice little note before we answer Donald's question
a little more directly here. But for multiple reasons, Donald,
we would prefer for you to keep that private student
loan around. And so if you head over to the
site and you hit start here, you will see the
money gears, but you don't pay off low interest debts
until you get to money gear six. You are investing
(12:56):
a lot, which is great. While simultaneously working to get
rid of those loans you want to you're working to
eradicate them.
Speaker 3 (13:02):
And you are at the point where you could opt.
Speaker 4 (13:05):
To invest maybe a bit less in order to get
rid of those loans a bit faster.
Speaker 3 (13:08):
But I just would not make that a priority.
Speaker 4 (13:11):
I wouldn't be taking that option, at least not at
this point, given the data that you shared with.
Speaker 3 (13:16):
Us, Matt.
Speaker 1 (13:17):
When I got my first real job out of college,
I kind of had it on my mind that I
wanted to get rid of the student loans that I had,
and I didn't have this insane amount. I think I
had like twelve thousand dollars with the student loans, and
I still remember getting to the point where I was
accelerating the payoff and I was like, all right, I
have a lump sum here. I can pay off like
three thousand dollars and be done with them. And looking back,
(13:38):
it was a mistake. I did it, and I wouldn't.
I wouldn't do it if I could go back in time,
because my interest rate one point eight seventy five percent, Yeah,
that's a little bit of a humble bread.
Speaker 3 (13:47):
Can I refinance that that for another thirty years?
Speaker 4 (13:50):
Perhaps like I'd be willing to pay even a little
bit more to stretch that thing out.
Speaker 3 (13:53):
Of course, depending on what you do with that money, right, I.
Speaker 1 (13:56):
Thought that was worth mentioning that, just, you know, a
minor financial mistake. Think about what that could have done
in a roth ira for me over the years if
I had made a different move. And we should also
mention that we're not typically fans of private student loans,
but during COVID, private student loan holders often had to
continue to make payments while folks with federal loans had
their payments paused for like three and a half years.
(14:17):
So you felt like you were on the outside looking
in if you had private student loans because you kind
of work because you were jealous of all the federal
people who had perpetual payment pauses, and you were still paying.
In many cases, although when interest rates were low, it
did make sense for some folks torey finance into a
private loan, even though protections for borrowers weren't nearly as good.
(14:38):
And so because of how low your interest rate is here, Donald,
I just don't see this as a high priority for you,
even if the balance is steep, right, because you can
you can make just as much, if not more money,
just by saving, right, you know what I mean? You
don't even have to invest those dollars, because then that's
where you maybe fall into treacherous territory. If it's like, well,
if I invest in the S and P and the
(14:58):
returns are this good, and you're making projections, it's not guaranteed.
It's not guaranteed. But when we're talking about an FDIC
ensured Hi Yo savings account through CIT or Betterment, which
are two of our favorite institutions paying the highest rates,
you're talking about guaranteed returns that are essentially on par
with what your student loan rate is.
Speaker 3 (15:16):
That's right.
Speaker 4 (15:16):
Yeah, it would be like paying off a three ish
percent mortgage early, were you to attack.
Speaker 3 (15:21):
These student loans and pay them down a bit faster.
Speaker 4 (15:24):
But the only reason we would suggest for you to
pay off your student lens early now is if that
money was burning a hole in your pocket, if you
were going to spend it instead of saving that money,
instead of investing it. It comes to sort of like
I was saying earlier, it comes down to what you
would otherwise do with that money?
Speaker 3 (15:41):
What are the alternatives?
Speaker 4 (15:42):
But you don't sound like that kind of guy, Donald,
It sounds like you are a diligent investor. You are young,
and while I certainly understand the hatred of having your
student loans around for a decade or more, paying off
more quickly would mean investing less. It would mean having
less liquidity. And that specific like that in and of
itself right there, Like some liquid cash reserves, they are underrated.
Speaker 3 (16:03):
And of course we wouldn't want you to keep credit.
Speaker 4 (16:05):
Card debt around for instance, you know, like if we're
talking about paying the credit card companies twenty plus percent,
that's a different story.
Speaker 3 (16:13):
That's not what we're talking about here.
Speaker 4 (16:14):
There's a difference between that versus a three point five
to four percent return on your cash. You know, you're
at parody and just cash accounts. Like again, like Joel said,
you are not even having to.
Speaker 3 (16:24):
Invest those dollars.
Speaker 4 (16:26):
There's no need to funnel any more money towards the
student loans right now in our opinion.
Speaker 3 (16:30):
Yeah, that's one hundred percent spot on. All right, We've
got actually more to get to on today's show.
Speaker 5 (16:35):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (16:42):
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. Let's talk about investing because the
market has been on pins and needles in recent months.
You know, whether it's the whether it's the Yeah, all right,
I thought we were going to avoid the terrorists.
Speaker 3 (17:02):
But that's why I said the T word. I just
didn't want to say it.
Speaker 4 (17:05):
All when we're talking about terrorists, we're talking about truth
social posts, perhaps about firing your own pal, and then
him Trump saying that's the other T word. I guess
Trump I'll never mind them and be like, oh no,
I'm actually not going to fire him because of that. Though,
the market is reacting to this instability, to this uncertainty,
and some have made changes and uh, unfortunately they've panic
(17:28):
sold again.
Speaker 3 (17:29):
We hold a very high standard here, a hout of money.
Speaker 4 (17:31):
I don't think that's something that anybody in the how
to Money community has done. But as we're talking about
investing here, we want folks to know that it looks
like pretty soon you're gonna have access to even more
investment choices in your FOURROH one k, including private equity,
which you're thinking, all right, here's the ticket, this is
how i'm this is what's going to get me to
(17:51):
that next level.
Speaker 3 (17:52):
Forget the escalator. This is like an elevator that's going
to shoot me straight to the toss. Right. It sounds awesome.
Speaker 4 (17:58):
You're getting access to these rare VIP investments that only
rich folks currently enjoy, but when you in fact dig
a little deeper, it's not all that great.
Speaker 3 (18:07):
There aren't many private.
Speaker 4 (18:08):
Equity ETFs, and then the ones that actually do exist,
they come with really high fees and like the real
truly wealthy folks out there who are investing with private equity,
they're not taking the ETF route here. They're often for
like real private equity that most folks can access unless
they're a credited investor. Morning Star will link to this article,
(18:29):
but they summed it up pretty perfectly. At the moment,
these ETFs look like a distraction, which I completely agree with.
Man transparencies, low, fees are high, and then benefits up
here very questionable. This is very good advice from the
good folks over at morning Star.
Speaker 3 (18:45):
Yeah, you're just.
Speaker 1 (18:45):
Gonna hear people telling you about how Man, how cool
is it? That you can now invest in stuff that
you weren't able to before.
Speaker 3 (18:52):
Look at that.
Speaker 1 (18:53):
Finally, the investments of the rich available to you as
a normy.
Speaker 3 (18:57):
But doesn't sound like good water cooler talking as well.
Speaker 4 (18:59):
They're like, you know, I don't think I'm I'm wanna
switch over and do a little bit of private equity.
Speaker 3 (19:03):
You know, I'm want to dabble on that a little bit,
don't do it. Yeah.
Speaker 1 (19:05):
One question mat that's come up more recently on the
show and from listeners is is what if you're at
the point where you need to tap investments and the
market is down. That's a question I think on the
mind of a lot of retirees, parents with five twenty
nine plans, right, They've got money in there that they
need to use in the near future that I think
we took a question for one of those folks on Monday.
(19:25):
A couple of things here. One, make sure you change
your asset allocation as you get closer to needing the
money that you have been saving and investing four years
and potentially decades one hundred percent stocks like being all
the way in on an S and P five hundred
fund when you're months from retirement, right, or if you
have a high school senior that's just too risky.
Speaker 3 (19:47):
It's totally fine for people.
Speaker 1 (19:48):
Who are in the wealth building phase of their lives
and they're like a long way off from needing to
tap those funds. But if you're like, hey, pre sure
I'm a need those soon and you're taking on too
much risk, well, just know that can come back to you.
And for some people it has also know this drawing
down funds at the absolute peak of the market every
single time, that would be awesome, but it's also it's
(20:09):
also a pipe dream. You want to have enough flexibility,
you want to have enough cash on your side where
you can avoid taking out huge chunks during a significant
bear market. But it's also important to keep in mind
that you can't time your withdrawals perfectly. And I think
the stock market's down something like six percent from its
all time highs. And you also have to keep the
bigger picture in mind. Remember how far those dollars, how
(20:31):
much those dollars have grown, how far, how far they've come.
Working behind the scenes on your behalf, and we assumans, Matt,
we feel losses more keenly than we fill in. So
six percent draw down even if there's been a massive
run up in the market over the past like fifteen years, overall, well,
we feel about six percent blip downwards a heck of
a lot more than we feel the positives of the
(20:52):
wealth we've been able to build. The recent dip not ideal,
But if you've been investing for years or for decades,
you've grown those dollars meaningfully. Still, you've got to remember that,
and you've just got to know what your your risk tolerance.
And hopefully this recent pout of market volatility has helped
inform people of what their risk tolerance can and should
be moving forward.
Speaker 3 (21:10):
That is true.
Speaker 4 (21:11):
Yeah, it's not much comfort I think for folks who
have to have access to that money now, But for
folks who you know, they are a few years off
what you said a word you said a flexibility, and
so much of it I think comes down to flexibility.
And you're not only from an income standpoint, because I
think that's one one big part of it, right.
Speaker 3 (21:28):
It's just like, Okay, do I have the ability to.
Speaker 4 (21:30):
Perhaps generate some additional income to be able to pay
for whatever you're looking to pull those investments out for.
In the case of I'm thinking about five twenty nine's
it's like, well, we're planning to count on that, but okay,
in the future or next year, in the next couple
of years, do you think you have the ability to
perhaps cash flow more of that as opposed to pull
those investments out. So that's a certain amount of flexibility.
But then the ability to adjust how much you're spending
(21:52):
is on you know, that's the other side of the equation, Right,
So is there a gap year that's taking place? Again
we're talking about college here, but from a retirement standpoint,
what does retirement spending look like? If that's something that
there is a little bit more flexibility on, that is
one way to you You got to find that balance
between de risking and avoiding the sequence of returns risk.
Speaker 3 (22:12):
Right, that's what we're talking about here.
Speaker 4 (22:13):
With the fact that the stock market goes up three
out of four years, and so there's also the stark
reality of that there is a higher likelihood of seeing
a positive return than a negative return. So it often
does come down to your how comfortable you are are
with risk.
Speaker 1 (22:28):
And yeah, that flexibility even for someone who's saying I
was planning on retiring next year, well it might not
be ideal, but you might be able to work another
year or two longer to make sure that you've gotten
enough money stocked up and that you're not retiring into
the teeth of a downturn.
Speaker 4 (22:45):
Yeah, you also said you mentioned how the recent dip
hasn't been ideal. I feel like that there's a lot
of confusion too around that, because in large part that
has to do with the fact that people have different
definitions of what by the dip means. Because if you
are somebody who isn't investing and people start talking about
buying the dip and you're like, yeah, essentially, what you're
doing is timing the market. But there's a big difference
(23:07):
between that and regularly investing in the market and saying,
you know, I've got some extra cash on hand, I've
got a fully stocked emergency fund. Let's go ahead and
pour some of that money into some investments that I
would have eventually purchased. It reduces the emergency fund there
a little bit. But like, that's smart, that's savvy, Like
that's taking advantage of a SAT don't deplete it, but
don't deplete it.
Speaker 3 (23:27):
No, absolutely not. But that's like when we see a
sale at the grocery store.
Speaker 4 (23:30):
It's no different. Literally, I did this yesterday. Coffee was
on sale, and what did I do. I bought a
few extra pounds of it, and I pulled some of
that consumption forward. And in the same way, I think
it's fine to take advantage of the dip in prices,
pull some of that consumption forward, pull some of that
investing forward. But the problem I think is is when
(23:51):
that buy the dip mentality derails what you would normally
consume or what you would normally keep cash on the
sidelines and you're waiting for the dip and take that happens.
When that's the case, you're missing out on gains along
the way.
Speaker 3 (24:03):
Yeah.
Speaker 4 (24:03):
So, or if you're attracted to investments that you otherwise
would not be attracted to, cause you see something plummet
and you're like, ooh maybe instead of vou oh it's
time to buy a bit more Tesla because their their
stocks in the tank and that's Is that a part
of your overall investing plan?
Speaker 5 (24:19):
Yeah?
Speaker 4 (24:20):
If so, then okay, maybe consider that. But otherwise, the
distraction element of it is I think the worst part. Yeah,
we got more money saving information to get to.
Speaker 5 (24:29):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (24:35):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter.
Speaker 1 (24:40):
We got more listener questions that we got to take,
including this one from listener Vic. He wants to help
some folks out in his life. Let's see if we
can help him make that a reality.
Speaker 7 (24:50):
I was listening to your show earlier today and you
were talking about installment notes. I am constantly loaning money
to different people, some clients, some not well. I would
love to help them with their credit, to give them
another tradeline. Are you telling me that if I loan,
(25:10):
for example, if I loaned one hundred thousand dollars to
person X, I can report it to the bureau or
who reports it to the bureau? And how does it
actually work for their FIICO to go up? Or how
does the tradeline show up in their credit report showing
(25:34):
that it's active, meaning that they're consistently paying me? And
does me the beneficiary, do I have to keep updating
the Bureau's monthly weekly every other month? I'm not sure?
Speaker 4 (25:51):
Thank you very much, all right, and that question was
from Vic, who just happened to forget to mention his name.
They're at the top of the question, we know via.
Speaker 3 (26:00):
I love this though, because it shows that.
Speaker 4 (26:02):
He is trying to make his clients and friends those
who he is lending money to aware of the credit
building possibilities of reporting these on time payments to the bureaus,
which is, by the way, the biggest factor in your
credit score. So being able to help them to report
on time payments for loans, I mean, that would be
a big help. But Vic, we're sad to say, we're
(26:23):
sad to hate some burster you bubble here, but it
is actually not possible for you as an individual to
do that.
Speaker 1 (26:29):
I wish we had better news and that you could
help the people you're lending money to in that way
you get that reported to the credit burius to boost
or score, but sadly not possible. We'll get into the
details of that in just a second two. But I
also want to ask the question like who are you
lending money to and why? And not that I'm against
people lending money to each other, but be careful because
(26:51):
you made it sound like you're lending money to clients
and then other people too, And I don't know who
the other people are.
Speaker 3 (26:55):
Are they friends, are they true acquaintances?
Speaker 1 (26:57):
Are they random strangers that you pass by like you
you want to you don't want to get taken advantage
of when you're lending money to people around you in
your orbit, and don't lend more than you can comfortably
afford to. Also, it's crucial anytime you're lending to someone
who's in your friend circle know that that lending money
to people in your community or in your family can
(27:19):
harm relationships.
Speaker 7 (27:20):
Right.
Speaker 1 (27:20):
I've just seen too many folks lend to friends or
family not get paid back. They're irreparably harming that relationship
and their finances at the same time. It's such an
egregious mistake that I want big to avoid. I want
everyone else out there to avoid. Out of a generous spirit,
you're often like, well, let me lend to you. I'm
hoping to get paid back, maybe with a little lecture
on top. Then they're late or they don't pay up
(27:40):
at all, and it sours the relationship. And it's just
not money is not worth ruining a relationship over.
Speaker 3 (27:46):
That's true.
Speaker 4 (27:46):
Look at Joel, with all the thoughtful helpful thoughts notes
at the at the beginning of the questions here thoughts
from Jack.
Speaker 3 (27:52):
Andy was signing life with the old school. That's enough
right there.
Speaker 4 (27:57):
But vic you so on the previous episode when you
heard us talking about this, we were referring to a
fintech service. Most likely this is what we're talking about,
called self and this allows folks to take out an
installment loan for the express purpose of building up their
credit scores. But only official data furnisures are allowed to
(28:17):
report things to the big three bureaus. And as an individual,
you there by yourself, you can't just show up at
their headquarters or write them an email in an attempt
to have those own payments reported in order to influence
their scores.
Speaker 1 (28:30):
If only you could guy with segn style stand in
front of Equifax and say, hey, here's my friend Gina.
I want you to report this so that she can
have a credit score increase.
Speaker 3 (28:39):
She is on time again. So there's a law called
the Fair.
Speaker 4 (28:43):
Credit Reporting Act that passed back in nineteen seventy and
that kind of outlined how the payments that you make
on time, how it impacts your credit score. And if
you were granted that ability under the FCRA, Well, you
would have then the additional legal responsibilities around potential dispute
which individuals they're just not well equipped to handle. Because
(29:04):
that's like you said, that's true, Like because you log
in check your credit report, it's a monthly sort of
reporting that takes place.
Speaker 3 (29:11):
That's why you see like the green circle around April.
Speaker 4 (29:13):
Yeah, yeah, yeah, And so it's just one of the
small things that it goes into creating these credit reports.
So while you may not be able to help these
folks build their credit though, not having this ability, I
actually think it will make your life far less miserable
of having these additional requirements that are basically mandatory.
Speaker 3 (29:33):
Yeah, I agree.
Speaker 1 (29:34):
I think you don't want to sign yourself up for
that type of existence, and if.
Speaker 4 (29:40):
You did, then you would have to start charging them
like higher rates of interest, right, which is what the
banks do.
Speaker 3 (29:44):
Right. Yeah.
Speaker 1 (29:45):
So let's talk about one maybe area where this has
developed in recent years, where private landlords, in particular, they
haven't had the ability to directly report payments directly.
Speaker 3 (29:58):
To the bureaus.
Speaker 1 (29:58):
And that's one of those things where you would say,
of all people who should have that ability to report,
it would be individual small time landlords, but there just
hasn't been a mechanism I guess for them to report
on time or late payments of someone who's living in.
Speaker 3 (30:14):
A homer apartment that they own.
Speaker 1 (30:17):
You would think that would be puttin into the bureaus though,
whether someone's paying their rent on time, that would be
an important thing for them to consider. But there are
now fortunately indirect third party companies that make this reporting possible. Zillo,
for instance, offers this service for free right and your
tenant has to pay through Zilo to you landlord has
to then say, okay, cool, I'm willing to accept payments
(30:38):
through Zillo's platform. I believe there's no fee if you
pay certain ways on both ends. I think the tenant
can pay with a credit card maybe and then pay
a fee, but self whot you mentioned just a second ago.
They also offer a similar free service that connects to
your bank in order to report payments. You can even
I think, pay them, as an individual fifty bucks to
(31:00):
report on time payments over the past two years in
an effort to increase your score more quickly, so kind
of get some of that back history. Yeah, but it's
amazing how you need this essentially need a third party
who is equipped and signed up to make these reports,
these monthly reports to the bureaus. You as an individual,
me as an individual, I own you know a handful
of properties. You do as well, Matt, And we can't
(31:22):
if one of our tennis doesn't pay on time unless
we're signed up through Zillo and we have that formal relationship.
There's nothing, no real recourse we have from a credit perspective.
Speaker 4 (31:31):
That being said, and I think that's one of the
reasons you're probably I don't know if you're planning to
mention these other companies, but the bureaus they also have
their services where you can do this as well. We're
just not huge fans of doing business with them if
you don't have to. As opposed to Zilla, who does
put out a fantastic product versus these other I don't
know what, feel more like government bureaus and they're not
government agencies. They're like they're bureaucratic nightmares and just poorly
(31:54):
run and it's more closely aligned with the government. I
will say then let's just say Zilla.
Speaker 1 (31:58):
But we've talked about through the years, who gets the
most complaints essentially every year when the CFPB releases the
it's the credit bureaus, like people are saying inaccurate reports,
there's my credit card guard tarnished for reasons that it
wasn't my fault exactly, the credit bureaus, they.
Speaker 3 (32:14):
Don't like to fix it.
Speaker 1 (32:15):
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
KFI 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?
Joel and Matt have you covered? This is how to
Money with Joel lars Guard and Matt.
Speaker 1 (00:18):
Altmes KFI AM six forty live everywhere on the iHeartRadio app.
This is how to Money. I am one of your hosts,
Joelarsgard and I am Matt alt Mixed. By the way,
you can always find more money saving information over at
(00:39):
howtomoney dot com. All right, let's let's talk about some
really important news happening right now.
Speaker 2 (00:45):
Matt.
Speaker 1 (00:45):
Let's talk about student loan debt collection, which it was
announced this week. Essentially the hey, the federal government, the
Department of Education is going to start collecting on student
loans that aren't being paid on. And Linda McMahon, the
Secretary of Education, and she wrote an op ed this
week in the Wall Street Journal. She basically explained the
(01:05):
need to collect on loans if payments aren't being made
And this is, I would say, a dramatic turn from
how the last administration handled student loans.
Speaker 3 (01:14):
Sure the attempts or.
Speaker 4 (01:16):
They weren't handling it, Yeah, ping it down the road.
We're going to ignore that these exist for everybody.
Speaker 1 (01:20):
Then the attempts at forgiveness that didn't come to pass,
and the Secretary Education basically said the drop dead date
to start making payments is May fit. So that's just
around the corner. And so if you don't, if you're
not able to make those payments, you're gonna see a
meaningful drop in your credit score. A lot of folks
already have. And then the most extreme cases, she highlighted
(01:42):
that some people could have their wages garnished, and they
could even have starting next year in our likelihood, they're
tax refunds taken back if they haven't been paying on
their student loans. So I think this is a call
to not put your head in the sand. If you
have student.
Speaker 3 (01:56):
Loans and you're like, what do I owe?
Speaker 1 (01:57):
Am I current? Am I paying right now? Logging account?
Check out the loan simulator on the Education Department's website,
and then I think something like forty percent of borrowers
are current on payments right now, Matt. So there's just
a lot of people, probably a lot of people listening
to this podcast right now that that haven't been paying
partly also because they're not sure if they're supposed to.
So just this could turn into into a messy situation
(02:20):
from millions and millions of folks. It could have wider
impacts on the economy too. So yeah, yeah, this I
would say to How Money listeners, it's more like eighty
percent of them are probably current, Like we hold a
higher standard here at How Money, don't we kill And we're.
Speaker 4 (02:33):
Actually going to have a student loan expert on the
show next week, so stay tuned for that. But while
we're talking about debt, dude, it is not just student loans.
While at Hub, they reported that credit card debt is
up as.
Speaker 3 (02:44):
Well, and so are delinquencies.
Speaker 4 (02:47):
Defaults were up thirty four percent year over year from
twenty twenty three to twenty twenty four, and inflation and
rising interest rates have been a double way and me
causing more folks to rely on their credit cards in
order to get by. And then, of course, what happens
they find themselves with a balance that is growing, they
have a payment that's too much to handle.
Speaker 3 (03:07):
And this isn't just younger folks as well.
Speaker 4 (03:09):
Over half of folks who are aged fifty to sixty four,
so that subset they have a recurring credit card balance
as well.
Speaker 1 (03:16):
I mean, it seems like this always seems like something that, oh,
it's a young people's thing.
Speaker 3 (03:19):
You don't have enough they have and they haven't learned
how to handle set. Yeah their cards. That was justcking
to me. No longer the case.
Speaker 1 (03:25):
People in their fifties and early sixties still have this
problem with credit cards.
Speaker 4 (03:28):
Yeah, they've got these recurring balances, and many are gonna
end up paying more in interest than their overall actual
balance and the overall actual charges that they put on
that card. It's a compounding you're doubling down all these
poor decisions.
Speaker 3 (03:41):
Essentially.
Speaker 4 (03:41):
It makes me think back to an early episode, like
way back in the day that we did I'm assuming
we did it on debt, but we're talking about interest
rates and how I pictured an escalator and it's just like, Okay,
you can ride these interest rates up by receiving interest payments,
by having your money at a high old savings account
for instance, and so those interest rates you can just
stand there on that step, man.
Speaker 3 (04:01):
It'll take you up to that next level. Or if you.
Speaker 4 (04:04):
Can supercharge it by you putting forth a little bit
of effort as well. So that's the guy that's walking
up the escalator and you know what, they're going to.
Speaker 3 (04:11):
Get there real real quick.
Speaker 4 (04:12):
But if you're trying to get to that next level
and the escalator is coming down, well you take that
first step, what happens boom, right, you're right back down
to ground level. So you have to work so much
harder to escape in this case that credit card balance. Yes,
so just yeah, just keep that in mind. It is nefarious.
Speaker 1 (04:27):
And I think a lot of people assume, ah, a
little bit, it's not that bad. But truly, even just
you know, a few thousand dollars in credit card debt
and paying the minimum, like what that does to your
finances every month. It's a big deal. And so I
think it's crucial to come up with a plan. If
you're one of these folks who does have credit card
debt you're hanging on to. We have resources on how
to money dot com to help. And if you are
(04:47):
someone you know is like overwhelmed by credit card debt,
there are organizations, nonprofit organizations that can help you out.
Money Management International and the National Foundation for Credit Counseling
are two places should at least consider going to low
cost or free help. And the places that you hear
advertise the for profit places, be careful before you reach
(05:12):
out to those folks.
Speaker 3 (05:13):
They will often take a.
Speaker 1 (05:14):
Lump sum of money and they might not might or
might not be able to help you out, oftentimes not.
Let's add just a little bit more bad debt news here,
real quick, Matt. One in five car buyers are now opting,
as it turns out, for eighty four month loans when
they buy a new car. So this is new stats
from Edmunds.
Speaker 3 (05:32):
Hate this. It gets two hates, yeah and.
Speaker 1 (05:34):
Double hate, and it's it's because it's the only way
they can afford the car they want. They're saying, well, hey,
well the rising cost of cars, interest rates going up
to that's impacted how much I can afford and how
much I can take take out the loan that I
can take out on this car. And so if you
go to the eighty four month loan, that's seven years,
so it's going to take the pay off that car.
(05:57):
And I think what it reveals is that we as
Americans have become payment buyers, like fully all the way,
buy now, pay later. And then when we think about
what happens with credit card loans. It's all about how
much can I afford right now, this month, instead of
thinking about our wealth building strategy from a more long
term perspective. But this trend, it's got cascady consequences, none
(06:20):
of what you're good, Yeah, because we want people to
pay cash for us whenever possible. And we also realize
that some people find themselves in a bind and they
can't write, even if they're looking for a cheaper used card. Hey,
it's not possible. I've got to find some way to
borrow some money. And I think forty eight month loans
are the max amount you should consider. Longer loans, they
(06:41):
just mask affordability problems, they don't actually solve them, and.
Speaker 4 (06:44):
Truly at that point, So one of the key things
you said is that people aren't able to afford the
card that they want. Like if you're in a position
where you are, yeah, in fact, you are in a pinch.
You don't have the cash on hand to be able
to purchase a used vehicle. Like you need to look
at the vehicle that you need to get you from
point A to point B to get you to your job.
If that's what you need for to take the kids
to school whatever it is that you need to for
(07:05):
as opposed to thinking about how this car.
Speaker 3 (07:07):
Is going to make me feel the wants it doesn't
matter really.
Speaker 1 (07:10):
And I was talking to someone just the other day, Matt,
and they owe something seventeen thousand dollars on their car,
and he was talking about, Oh, there's this great deal
on this other truck and it's like it's priced way
lower than it should be. Man, what a deal fifty
something thousand dollars. But if I trade this in, gosh
and think I'm gonna think about how much I'm.
Speaker 4 (07:28):
Gonna Oh, and of course so much money, dude, Like
I try my best to help to hold your tongue,
but also how much advice do you want on that?
Speaker 3 (07:35):
Do you know what I do every day?
Speaker 1 (07:37):
That's the kind of thing that people find themselves in.
We see more negative equity loans and stuff like that too.
And yeah, when you trade in a car that you
owe money on and you roll that into the new loan,
not only are those terms gonna be worse, the payment's
going to be higher. Like how long are you going
to be underwater in that car? And what happens if
there's some sort of emergency in your life. What we've
done with financing vehicles is posterous in this country, and
(08:01):
so many people their finances are suffering largely because of this.
Exactly that I'm taking on more debt than I need
to for vehicles and there's not enough money for the
other important necessities.
Speaker 3 (08:11):
Totally agree.
Speaker 5 (08:13):
You're listening to how To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:21):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Matt, let's get to a question specifically about
paying off student loans and the wisdom behind doing so.
Speaker 6 (08:34):
Hey guys, my name's Donald. I'm originally from Maryland, but
I'm currently living in North Carolina with my wife Chelsea,
my two cats, Peanut, Butter and Whiskey, so shout out
to them Chelsea included. So my question is about student
loan payoff strategy. I've been out of college for about
four years now, and I'm paying off both a private
and a student at a public loan. My plan for
(08:55):
the public loan is to pay as little as possible
and after ten years have the rest of given as
part of the public student loan forgiveness program as I'm
part of the military, but I'm less sure about the
private loan. It's currently sitting around seventy thousand with a
three point eight percent interest rate. I'm paying seven hundred
dollars a month towards that, and I want to know
if ever I should prioritize paying that off versus investing
(09:18):
in the market. I currently put around four hund a
month in the market and occasionally make a couple of
thousand dollars investment. Surely there has to be somewhere between
paying seven hundred dollars a month in the next ten
years and let's say doubling my payment to fourteen hundred.
I'm paying off in less than five years, which would
save me the most money. Right, So, the sooner I
paid off, the more I can invest. But if I
(09:39):
paid the minimum, I can invest less, but for a
longer time. So it is time the market always better
give it the great work. Ps. Chelsea and I often
combined couple's names to save time, so you guys would
either be Mole or Jat, So I'll you guys pick
your poison on that anyway, have a graderon.
Speaker 3 (09:54):
Guys, ooh, mole or jat? Which one do you prefer?
Speaker 1 (09:58):
J get behind mol I can't, But if it was Moel,
I want to go with JAT, I guess. So what's
out of a out of a lack of options for
better choices.
Speaker 4 (10:08):
What's funny is that we've already done this with our
last names and so on our shared calendar. So technically
it's the business Gmail accounts calendar, but we put things
on there that pertain to both of our families, so
for instance, our summer vacation trip and our couple or
I guess our family combined family name is I guess
it is by default, but somehow we've actively decided this
(10:29):
is alt Guard.
Speaker 3 (10:30):
And so that it could have been Lars mixed. It
could have been.
Speaker 4 (10:33):
Lars mixed, but I think alt Guard is just stronger
because you've got the Alt I don't know, a nice
hard tea there and then the Guard like both very strong.
Speaker 3 (10:42):
You put them together and you got how of money.
Speaker 1 (10:43):
The last name Combo is vastly superior to the first
name Combo, which that's that's actually a thing.
Speaker 4 (10:49):
So a friend of ours, her and her husband, when
they got married, they blended their last names together like
legally yeah, Michelle, Yeah, that's right. Yes, they got wried,
blended their last names and basically they met in the
middle when it came to what their new family name was.
Speaker 3 (11:06):
I can respect that.
Speaker 4 (11:07):
Yeah, it reminds me of like the was it in
the nineties, Like the couple name like the celebrity couples
like Brendiford. That's when that comes to mind. Brad Pitt, Yeah,
Jennifer Anderston, that was the ultimate couple.
Speaker 3 (11:19):
I think people said branch Alina. That was another.
Speaker 2 (11:21):
Yeah.
Speaker 3 (11:21):
Everything with.
Speaker 1 (11:24):
All the women he was with, they had to combine
the names. Oh man, I think that happened to other
celebrities too. But all right, let's get to Donald's question. Donald,
it sounds sounds like you're making a smart move while
you know, trying to pay as little as possible in
hopes to have maximum forgiveness on that student loan under
the PSLF program. I will say, though, with all the
noise around student loan policy right now, banking on public
(11:48):
service loan forgiveness being there for years to come, it
might be a mistake. The administration is taking a more
hostile attitude and approach toward PSLF, So we just don't
know if it's going to be a round forever. You
can hope for it, but there could be a rud
pull coming at least at some point for folks who
are in the PSLF process but haven't achieved forgiveness yet.
(12:10):
Not trying to freaking out or anything like that, but
I wanted to mention what student loan stuff is just
in flux.
Speaker 3 (12:16):
Right.
Speaker 1 (12:16):
It is, and we don't have a clear answer at
least to some of the questions that student loan borrowers have.
If Congress made a change, right, you'd likely be grandfathered in,
but that's also not guaranteed. So I guess it's just
I want to put that on your in your headspace, Donald,
just to be thinking about that and not count your
chickens before they have true.
Speaker 4 (12:36):
Yeah, a nice little note before we answer Donald's question
a little more directly here. But for multiple reasons, Donald,
we would prefer for you to keep that private student
loan around. And so if you head over to the
site and you hit start here, you will see the
money gears, but you don't pay off low interest debts
until you get to money gear six. You are investing
(12:56):
a lot, which is great. While simultaneously working to get
rid of those loans you want to you're working to
eradicate them.
Speaker 3 (13:02):
And you are at the point where you could opt.
Speaker 4 (13:05):
To invest maybe a bit less in order to get
rid of those loans a bit faster.
Speaker 3 (13:08):
But I just would not make that a priority.
Speaker 4 (13:11):
I wouldn't be taking that option, at least not at
this point, given the data that you shared with.
Speaker 3 (13:16):
Us, Matt.
Speaker 1 (13:17):
When I got my first real job out of college,
I kind of had it on my mind that I
wanted to get rid of the student loans that I had,
and I didn't have this insane amount. I think I
had like twelve thousand dollars with the student loans, and
I still remember getting to the point where I was
accelerating the payoff and I was like, all right, I
have a lump sum here. I can pay off like
three thousand dollars and be done with them. And looking back,
(13:38):
it was a mistake. I did it, and I wouldn't.
I wouldn't do it if I could go back in time,
because my interest rate one point eight seventy five percent, Yeah,
that's a little bit of a humble bread.
Speaker 3 (13:47):
Can I refinance that that for another thirty years?
Speaker 4 (13:50):
Perhaps like I'd be willing to pay even a little
bit more to stretch that thing out.
Speaker 3 (13:53):
Of course, depending on what you do with that money, right, I.
Speaker 1 (13:56):
Thought that was worth mentioning that, just, you know, a
minor financial mistake. Think about what that could have done
in a roth ira for me over the years if
I had made a different move. And we should also
mention that we're not typically fans of private student loans,
but during COVID, private student loan holders often had to
continue to make payments while folks with federal loans had
their payments paused for like three and a half years.
(14:17):
So you felt like you were on the outside looking
in if you had private student loans because you kind
of work because you were jealous of all the federal
people who had perpetual payment pauses, and you were still paying.
In many cases, although when interest rates were low, it
did make sense for some folks torey finance into a
private loan, even though protections for borrowers weren't nearly as good.
(14:38):
And so because of how low your interest rate is here, Donald,
I just don't see this as a high priority for you,
even if the balance is steep, right, because you can
you can make just as much, if not more money,
just by saving, right, you know what I mean? You
don't even have to invest those dollars, because then that's
where you maybe fall into treacherous territory. If it's like, well,
if I invest in the S and P and the
(14:58):
returns are this good, and you're making projections, it's not guaranteed.
It's not guaranteed. But when we're talking about an FDIC
ensured Hi Yo savings account through CIT or Betterment, which
are two of our favorite institutions paying the highest rates,
you're talking about guaranteed returns that are essentially on par
with what your student loan rate is.
Speaker 3 (15:16):
That's right.
Speaker 4 (15:16):
Yeah, it would be like paying off a three ish
percent mortgage early, were you to attack.
Speaker 3 (15:21):
These student loans and pay them down a bit faster.
Speaker 4 (15:24):
But the only reason we would suggest for you to
pay off your student lens early now is if that
money was burning a hole in your pocket, if you
were going to spend it instead of saving that money,
instead of investing it. It comes to sort of like
I was saying earlier, it comes down to what you
would otherwise do with that money?
Speaker 3 (15:41):
What are the alternatives?
Speaker 4 (15:42):
But you don't sound like that kind of guy, Donald,
It sounds like you are a diligent investor. You are young,
and while I certainly understand the hatred of having your
student loans around for a decade or more, paying off
more quickly would mean investing less. It would mean having
less liquidity. And that specific like that in and of
itself right there, Like some liquid cash reserves, they are underrated.
Speaker 3 (16:03):
And of course we wouldn't want you to keep credit.
Speaker 4 (16:05):
Card debt around for instance, you know, like if we're
talking about paying the credit card companies twenty plus percent,
that's a different story.
Speaker 3 (16:13):
That's not what we're talking about here.
Speaker 4 (16:14):
There's a difference between that versus a three point five
to four percent return on your cash. You know, you're
at parody and just cash accounts. Like again, like Joel said,
you are not even having to.
Speaker 3 (16:24):
Invest those dollars.
Speaker 4 (16:26):
There's no need to funnel any more money towards the
student loans right now in our opinion.
Speaker 3 (16:30):
Yeah, that's one hundred percent spot on. All right, We've
got actually more to get to on today's show.
Speaker 5 (16:35):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (16:42):
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. Let's talk about investing because the
market has been on pins and needles in recent months.
You know, whether it's the whether it's the Yeah, all right,
I thought we were going to avoid the terrorists.
Speaker 3 (17:02):
But that's why I said the T word. I just
didn't want to say it.
Speaker 4 (17:05):
All when we're talking about terrorists, we're talking about truth
social posts, perhaps about firing your own pal, and then
him Trump saying that's the other T word. I guess
Trump I'll never mind them and be like, oh no,
I'm actually not going to fire him because of that. Though,
the market is reacting to this instability, to this uncertainty,
and some have made changes and uh, unfortunately they've panic
(17:28):
sold again.
Speaker 3 (17:29):
We hold a very high standard here, a hout of money.
Speaker 4 (17:31):
I don't think that's something that anybody in the how
to Money community has done. But as we're talking about
investing here, we want folks to know that it looks
like pretty soon you're gonna have access to even more
investment choices in your FOURROH one k, including private equity,
which you're thinking, all right, here's the ticket, this is
how i'm this is what's going to get me to
(17:51):
that next level.
Speaker 3 (17:52):
Forget the escalator. This is like an elevator that's going
to shoot me straight to the toss. Right. It sounds awesome.
Speaker 4 (17:58):
You're getting access to these rare VIP investments that only
rich folks currently enjoy, but when you in fact dig
a little deeper, it's not all that great.
Speaker 3 (18:07):
There aren't many private.
Speaker 4 (18:08):
Equity ETFs, and then the ones that actually do exist,
they come with really high fees and like the real
truly wealthy folks out there who are investing with private equity,
they're not taking the ETF route here. They're often for
like real private equity that most folks can access unless
they're a credited investor. Morning Star will link to this article,
(18:29):
but they summed it up pretty perfectly. At the moment,
these ETFs look like a distraction, which I completely agree with.
Man transparencies, low, fees are high, and then benefits up
here very questionable. This is very good advice from the
good folks over at morning Star.
Speaker 3 (18:45):
Yeah, you're just.
Speaker 1 (18:45):
Gonna hear people telling you about how Man, how cool
is it? That you can now invest in stuff that
you weren't able to before.
Speaker 3 (18:52):
Look at that.
Speaker 1 (18:53):
Finally, the investments of the rich available to you as
a normy.
Speaker 3 (18:57):
But doesn't sound like good water cooler talking as well.
Speaker 4 (18:59):
They're like, you know, I don't think I'm I'm wanna
switch over and do a little bit of private equity.
Speaker 3 (19:03):
You know, I'm want to dabble on that a little bit,
don't do it. Yeah.
Speaker 1 (19:05):
One question mat that's come up more recently on the
show and from listeners is is what if you're at
the point where you need to tap investments and the
market is down. That's a question I think on the
mind of a lot of retirees, parents with five twenty
nine plans, right, They've got money in there that they
need to use in the near future that I think
we took a question for one of those folks on Monday.
(19:25):
A couple of things here. One, make sure you change
your asset allocation as you get closer to needing the
money that you have been saving and investing four years
and potentially decades one hundred percent stocks like being all
the way in on an S and P five hundred
fund when you're months from retirement, right, or if you
have a high school senior that's just too risky.
Speaker 3 (19:47):
It's totally fine for people.
Speaker 1 (19:48):
Who are in the wealth building phase of their lives
and they're like a long way off from needing to
tap those funds. But if you're like, hey, pre sure
I'm a need those soon and you're taking on too
much risk, well, just know that can come back to you.
And for some people it has also know this drawing
down funds at the absolute peak of the market every
single time, that would be awesome, but it's also it's
(20:09):
also a pipe dream. You want to have enough flexibility,
you want to have enough cash on your side where
you can avoid taking out huge chunks during a significant
bear market. But it's also important to keep in mind
that you can't time your withdrawals perfectly. And I think
the stock market's down something like six percent from its
all time highs. And you also have to keep the
bigger picture in mind. Remember how far those dollars, how
(20:31):
much those dollars have grown, how far, how far they've come.
Working behind the scenes on your behalf, and we assumans, Matt,
we feel losses more keenly than we fill in. So
six percent draw down even if there's been a massive
run up in the market over the past like fifteen years, overall, well,
we feel about six percent blip downwards a heck of
a lot more than we feel the positives of the
(20:52):
wealth we've been able to build. The recent dip not ideal,
But if you've been investing for years or for decades,
you've grown those dollars meaningfully. Still, you've got to remember that,
and you've just got to know what your your risk tolerance.
And hopefully this recent pout of market volatility has helped
inform people of what their risk tolerance can and should
be moving forward.
Speaker 3 (21:10):
That is true.
Speaker 4 (21:11):
Yeah, it's not much comfort I think for folks who
have to have access to that money now, But for
folks who you know, they are a few years off
what you said a word you said a flexibility, and
so much of it I think comes down to flexibility.
And you're not only from an income standpoint, because I
think that's one one big part of it, right.
Speaker 3 (21:28):
It's just like, Okay, do I have the ability to.
Speaker 4 (21:30):
Perhaps generate some additional income to be able to pay
for whatever you're looking to pull those investments out for.
In the case of I'm thinking about five twenty nine's
it's like, well, we're planning to count on that, but okay,
in the future or next year, in the next couple
of years, do you think you have the ability to
perhaps cash flow more of that as opposed to pull
those investments out. So that's a certain amount of flexibility.
But then the ability to adjust how much you're spending
(21:52):
is on you know, that's the other side of the equation, Right,
So is there a gap year that's taking place? Again
we're talking about college here, but from a retirement standpoint,
what does retirement spending look like? If that's something that
there is a little bit more flexibility on, that is
one way to you You got to find that balance
between de risking and avoiding the sequence of returns risk.
Speaker 3 (22:12):
Right, that's what we're talking about here.
Speaker 4 (22:13):
With the fact that the stock market goes up three
out of four years, and so there's also the stark
reality of that there is a higher likelihood of seeing
a positive return than a negative return. So it often
does come down to your how comfortable you are are
with risk.
Speaker 1 (22:28):
And yeah, that flexibility even for someone who's saying I
was planning on retiring next year, well it might not
be ideal, but you might be able to work another
year or two longer to make sure that you've gotten
enough money stocked up and that you're not retiring into
the teeth of a downturn.
Speaker 4 (22:45):
Yeah, you also said you mentioned how the recent dip
hasn't been ideal. I feel like that there's a lot
of confusion too around that, because in large part that
has to do with the fact that people have different
definitions of what by the dip means. Because if you
are somebody who isn't investing and people start talking about
buying the dip and you're like, yeah, essentially, what you're
doing is timing the market. But there's a big difference
(23:07):
between that and regularly investing in the market and saying,
you know, I've got some extra cash on hand, I've
got a fully stocked emergency fund. Let's go ahead and
pour some of that money into some investments that I
would have eventually purchased. It reduces the emergency fund there
a little bit. But like, that's smart, that's savvy, Like
that's taking advantage of a SAT don't deplete it, but
don't deplete it.
Speaker 3 (23:27):
No, absolutely not. But that's like when we see a
sale at the grocery store.
Speaker 4 (23:30):
It's no different. Literally, I did this yesterday. Coffee was
on sale, and what did I do. I bought a
few extra pounds of it, and I pulled some of
that consumption forward. And in the same way, I think
it's fine to take advantage of the dip in prices,
pull some of that consumption forward, pull some of that
investing forward. But the problem I think is is when
(23:51):
that buy the dip mentality derails what you would normally
consume or what you would normally keep cash on the
sidelines and you're waiting for the dip and take that happens.
When that's the case, you're missing out on gains along
the way.
Speaker 3 (24:03):
Yeah.
Speaker 4 (24:03):
So, or if you're attracted to investments that you otherwise
would not be attracted to, cause you see something plummet
and you're like, ooh maybe instead of vou oh it's
time to buy a bit more Tesla because their their
stocks in the tank and that's Is that a part
of your overall investing plan?
Speaker 5 (24:19):
Yeah?
Speaker 4 (24:20):
If so, then okay, maybe consider that. But otherwise, the
distraction element of it is I think the worst part. Yeah,
we got more money saving information to get to.
Speaker 5 (24:29):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (24:35):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter.
Speaker 1 (24:40):
We got more listener questions that we got to take,
including this one from listener Vic. He wants to help
some folks out in his life. Let's see if we
can help him make that a reality.
Speaker 7 (24:50):
I was listening to your show earlier today and you
were talking about installment notes. I am constantly loaning money
to different people, some clients, some not well. I would
love to help them with their credit, to give them
another tradeline. Are you telling me that if I loan,
(25:10):
for example, if I loaned one hundred thousand dollars to
person X, I can report it to the bureau or
who reports it to the bureau? And how does it
actually work for their FIICO to go up? Or how
does the tradeline show up in their credit report showing
(25:34):
that it's active, meaning that they're consistently paying me? And
does me the beneficiary, do I have to keep updating
the Bureau's monthly weekly every other month? I'm not sure?
Speaker 4 (25:51):
Thank you very much, all right, and that question was
from Vic, who just happened to forget to mention his name.
They're at the top of the question, we know via.
Speaker 3 (26:00):
I love this though, because it shows that.
Speaker 4 (26:02):
He is trying to make his clients and friends those
who he is lending money to aware of the credit
building possibilities of reporting these on time payments to the bureaus,
which is, by the way, the biggest factor in your
credit score. So being able to help them to report
on time payments for loans, I mean, that would be
a big help. But Vic, we're sad to say, we're
(26:23):
sad to hate some burster you bubble here, but it
is actually not possible for you as an individual to
do that.
Speaker 1 (26:29):
I wish we had better news and that you could
help the people you're lending money to in that way
you get that reported to the credit burius to boost
or score, but sadly not possible. We'll get into the
details of that in just a second two. But I
also want to ask the question like who are you
lending money to and why? And not that I'm against
people lending money to each other, but be careful because
(26:51):
you made it sound like you're lending money to clients
and then other people too, And I don't know who
the other people are.
Speaker 3 (26:55):
Are they friends, are they true acquaintances?
Speaker 1 (26:57):
Are they random strangers that you pass by like you
you want to you don't want to get taken advantage
of when you're lending money to people around you in
your orbit, and don't lend more than you can comfortably
afford to. Also, it's crucial anytime you're lending to someone
who's in your friend circle know that that lending money
to people in your community or in your family can
(27:19):
harm relationships.
Speaker 7 (27:20):
Right.
Speaker 1 (27:20):
I've just seen too many folks lend to friends or
family not get paid back. They're irreparably harming that relationship
and their finances at the same time. It's such an
egregious mistake that I want big to avoid. I want
everyone else out there to avoid. Out of a generous spirit,
you're often like, well, let me lend to you. I'm
hoping to get paid back, maybe with a little lecture
on top. Then they're late or they don't pay up
(27:40):
at all, and it sours the relationship. And it's just
not money is not worth ruining a relationship over.
Speaker 3 (27:46):
That's true.
Speaker 4 (27:46):
Look at Joel, with all the thoughtful helpful thoughts notes
at the at the beginning of the questions here thoughts
from Jack.
Speaker 3 (27:52):
Andy was signing life with the old school. That's enough
right there.
Speaker 4 (27:57):
But vic you so on the previous episode when you
heard us talking about this, we were referring to a
fintech service. Most likely this is what we're talking about,
called self and this allows folks to take out an
installment loan for the express purpose of building up their
credit scores. But only official data furnisures are allowed to
(28:17):
report things to the big three bureaus. And as an individual,
you there by yourself, you can't just show up at
their headquarters or write them an email in an attempt
to have those own payments reported in order to influence
their scores.
Speaker 1 (28:30):
If only you could guy with segn style stand in
front of Equifax and say, hey, here's my friend Gina.
I want you to report this so that she can
have a credit score increase.
Speaker 3 (28:39):
She is on time again. So there's a law called
the Fair.
Speaker 4 (28:43):
Credit Reporting Act that passed back in nineteen seventy and
that kind of outlined how the payments that you make
on time, how it impacts your credit score. And if
you were granted that ability under the FCRA, Well, you
would have then the additional legal responsibilities around potential dispute
which individuals they're just not well equipped to handle. Because
(29:04):
that's like you said, that's true, Like because you log
in check your credit report, it's a monthly sort of
reporting that takes place.
Speaker 3 (29:11):
That's why you see like the green circle around April.
Speaker 4 (29:13):
Yeah, yeah, yeah, And so it's just one of the
small things that it goes into creating these credit reports.
So while you may not be able to help these
folks build their credit though, not having this ability, I
actually think it will make your life far less miserable
of having these additional requirements that are basically mandatory.
Speaker 3 (29:33):
Yeah, I agree.
Speaker 1 (29:34):
I think you don't want to sign yourself up for
that type of existence, and if.
Speaker 4 (29:40):
You did, then you would have to start charging them
like higher rates of interest, right, which is what the
banks do.
Speaker 3 (29:44):
Right. Yeah.
Speaker 1 (29:45):
So let's talk about one maybe area where this has
developed in recent years, where private landlords, in particular, they
haven't had the ability to directly report payments directly.
Speaker 3 (29:58):
To the bureaus.
Speaker 1 (29:58):
And that's one of those things where you would say,
of all people who should have that ability to report,
it would be individual small time landlords, but there just
hasn't been a mechanism I guess for them to report
on time or late payments of someone who's living in.
Speaker 3 (30:14):
A homer apartment that they own.
Speaker 1 (30:17):
You would think that would be puttin into the bureaus though,
whether someone's paying their rent on time, that would be
an important thing for them to consider. But there are
now fortunately indirect third party companies that make this reporting possible. Zillo,
for instance, offers this service for free right and your
tenant has to pay through Zilo to you landlord has
to then say, okay, cool, I'm willing to accept payments
(30:38):
through Zillo's platform. I believe there's no fee if you
pay certain ways on both ends. I think the tenant
can pay with a credit card maybe and then pay
a fee, but self whot you mentioned just a second ago.
They also offer a similar free service that connects to
your bank in order to report payments. You can even
I think, pay them, as an individual fifty bucks to
(31:00):
report on time payments over the past two years in
an effort to increase your score more quickly, so kind
of get some of that back history. Yeah, but it's
amazing how you need this essentially need a third party
who is equipped and signed up to make these reports,
these monthly reports to the bureaus. You as an individual,
me as an individual, I own you know a handful
of properties. You do as well, Matt, And we can't
(31:22):
if one of our tennis doesn't pay on time unless
we're signed up through Zillo and we have that formal relationship.
There's nothing, no real recourse we have from a credit perspective.
Speaker 4 (31:31):
That being said, and I think that's one of the
reasons you're probably I don't know if you're planning to
mention these other companies, but the bureaus they also have
their services where you can do this as well. We're
just not huge fans of doing business with them if
you don't have to. As opposed to Zilla, who does
put out a fantastic product versus these other I don't
know what, feel more like government bureaus and they're not
government agencies. They're like they're bureaucratic nightmares and just poorly
(31:54):
run and it's more closely aligned with the government. I
will say then let's just say Zilla.
Speaker 1 (31:58):
But we've talked about through the years, who gets the
most complaints essentially every year when the CFPB releases the
it's the credit bureaus, like people are saying inaccurate reports,
there's my credit card guard tarnished for reasons that it
wasn't my fault exactly, the credit bureaus, they.
Speaker 3 (32:14):
Don't like to fix it.
Speaker 1 (32:15):
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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