August 31, 2025 • 32 mins
Is more education always a good thing, leading to better pay? Nope. New information reveals that many job skills certificates are a total waste of your time and money.
Ask HTM: Bryant is 25 and wants to know how he and his wife should be investing.
More Americans are opting to use debit cards instead of credit cards right now. But the major problem for budgets is that spending isn't going down!
Ask HTM: Nathan is worried about paying back a 401k loan as he leaves a job.
Ask HTM: Bryant is 25 and wants to know how he and his wife should be investing.
More Americans are opting to use debit cards instead of credit cards right now. But the major problem for budgets is that spending isn't going down!
Ask HTM: Nathan is worried about paying back a 401k loan as he leaves a job.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
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 (00:13):
This is how to Money with Joel Larsgard and Matt altmes.
Speaker 3 (00:34):
KF.
Speaker 4 (00:35):
I am sixty live everywhere on the iHeartRadio app. This
is how to Money. I am Matt Altmekes.
Speaker 1 (00:41):
And I'm Joelarsgard. Don't forget to sign up for the
how to Money newsletter. You can find that up at
how tomoney dot com slash newsletter.
Speaker 3 (00:48):
Let's talk about getting a job, buddy.
Speaker 4 (00:50):
Some people assume that more education is always gonna be
a good thing, that it's gonna lead to better job opportunities,
it's gonna lead to better pay.
Speaker 1 (00:58):
That's a lot of times why folks do it. Like
the initials after my name, the more highly I'll be valued.
Speaker 4 (01:02):
I've got no ide compensated what any of those initials mean,
because I didn't take the course that teaches me what
all the initials mean.
Speaker 3 (01:09):
We all know the.
Speaker 4 (01:10):
Value of the college education, of course, but it has
also come into a bit more scrutiny as costs have
risen steeply over the years, and the value of certain
degrees has certainly declined. But it is not just college.
Job skill certificates are turns out, they're a bit overrated too.
Online courses certificates and credentialing are vastly overrated, as the
(01:32):
Burning Glass Institute recently found. They took a look at
over twenty three thousand of the most popular ones out there,
and which I'm just going to commend them for doing
a thorough job. That's amazing, yes, but they found that
just one in eight actually delivered notable wage gains.
Speaker 3 (01:47):
For those who completed the.
Speaker 4 (01:49):
Certifications, and the ones that paid off they were mostly
in the medical field, so it's like a nursing things
that are required to actually do the job, and so
I feel like even that kind of skews.
Speaker 3 (01:59):
The results a little bit.
Speaker 4 (02:00):
But they actually highlighted even a project management certificate that
you can stack from Harvard, which of course you're paying
for the name brand there. It's got a fourteen thousand
dollars price tag, but even that created minimal results.
Speaker 1 (02:12):
It was like some sort of you would think getting
it from Harvard adding that to your resume, though people
might even be like whoa, whoa, whoa. Okay, this this person,
this man or woman has like extra pizaz because they
got this, you know.
Speaker 3 (02:23):
Being the ivs have kind of lost their lost their
shine a little bit. Man.
Speaker 4 (02:26):
But so what we want to point folks to, though,
is there is this online tool that we'll link to
where you can see which of these certificates, which one
of these credentialing programs that you can be a part
of pay off, and which ones don't. But uh, yeah,
we want folks to be careful showing out a ton
of money for education and hopes that you will get
paid more because you may not. You might and if you,
(02:48):
and if so, I would also say encourage or see
if you can get your employer to pay for some
of that training, because it's like, hey, this is gonna
better prepare me for this project that we've got coming
up later this year, next quarter. I don't know whatever
language that your employer uses, but that can certainly help
you now. But it's also going to increase your value
in the market over time.
Speaker 1 (03:08):
Yeah, some of that stuff can can be edifying from
a personal standpoint, getting some of that extra education. Just
don't assume that it's going to lead to higher wages.
And also if you get someone else to pay for it,
that might be the sweet fact. Yeah, I'm thinking even
of Matt my wife, who like that continuing education is
part of the joy, Like she loved school and she's
kind of already missing it and so she is doing
(03:31):
like some additional training so she doesn't have to do
that costs money, But it's like for the love of
the game sort of thing.
Speaker 3 (03:37):
Right, personal fulfillment. That's one of the reasons that you
do the thing.
Speaker 1 (03:40):
Yeah, and there is a chance that it could lead
to higher pay, but a lot of these things really
you might appeal to a certain demographic or a person
looking for a certain sort of therapist. But it's also like,
are you gonna be able to charge more per hour
just because you have this extra training?
Speaker 3 (03:54):
No?
Speaker 1 (03:54):
Not usually so random, but interesting career news. If you
have young children, pre K could actually be your ticket
to higher earnings. This is the pre K for pay,
pre k for pay part of our frienduy so applely names.
So yeah, not everyone wants to send their child to
school at that age. But if making more money is
your goal, and there's a state funded pre K around
the corner from where you live. Well, there was this
(04:16):
study of Connecticut parents and it found that the ones
who sent their kids to pre K, they made more money.
And since that pre K runs on a lottery system,
it's not just like, oh, the smart people choose to
send their kids to pre K. It's it's really based on,
you know, the first people chosen, and some people don't
make the cut. It seems like we're talking about causation here,
(04:40):
which makes sense. I think, Matt, like, this makes intuitive sense, right, because, Yeah,
if your child is at home more, that means you
have less time to work, or you're you have to
go down to working part time because you have to
do more of the.
Speaker 3 (04:51):
Childcare and vice versa.
Speaker 5 (04:52):
Man.
Speaker 1 (04:53):
Yeah, or you're just less effective at your job because
you're juggling more things because yeah, you've tried, care becomes
more of your focus, and that often is going to
lead to lower pay. And so this study was basically saying, well, hey,
you're actually going to make more if you send your kid.
Speaker 3 (05:10):
Two pre K.
Speaker 1 (05:11):
But it's not even just for that one year. Higher
earnings lasted for years into the future. In the study,
they really only measured up until your kid went to
fifth grade, but just think, man, it's like, yeah, that
not just that single year, but into the future. Because
you're making more money that year, You're going to make
more money every single year from there on out on average.
And I know, making more money isn't the primary concern
(05:32):
for everyone, and those younger years with your children at
home can be incredibly meaningful. Plus, not every state makes
pre K free, but I just think this is helpful
information to know as you're weighing the trade offs of
sending your kid off to school early in one of
those state funded programs if you have access to one.
Speaker 4 (05:50):
Yeah, the real nuggets in that report were the fact
that parents reported higher levels of sanity.
Speaker 3 (05:56):
After their kids to pre K, which that I believe.
Speaker 4 (06:00):
I mean, it's all related, like literally when you've got
more capacity to do the things like around the house,
or even to like recondole friendships that maybe were on
the back burner while you're in the fog of a
baby who wouldn't sleep very well, or those crazy toddler years,
or for some folks it's yeah, to get back into
their career is something that they haven't paid much attention to.
Speaker 3 (06:19):
You can actually focus I know, yeah.
Speaker 4 (06:21):
Yeah, who knew while we're talking about jobs and careers.
Speaker 3 (06:25):
One page resumes.
Speaker 4 (06:27):
They were incredibly hot there, seemed like for a period
of time, in part because they made it really easy
for potential employers to just on a single sheet to
scan to know whether or not you've got what it
takes to come in for an interview. But that task
has now become less human centered. AI now calls stacks
of resumes before human can even basically lay eyes on it.
(06:49):
And so essentially to get past the first layer of defense,
you got to please the robot overlords basically, and they
care less about the length, and they care a bit
more about keywords that you are or aren't going to
include there in your resume. So it's going to you know,
it's basically certain to see if the words or the titles,
(07:10):
the positions you've held, if they match what it is
that they're looking for to that they're looking to hire for,
and if not, if you don't have that included, it's
a good idea, certainly to revisit it before.
Speaker 3 (07:20):
You submit your resume. I think it's yeah, I think it's.
Speaker 4 (07:23):
A wise move to tailor every single one of your
resumes to a specific job using the language that they
are using not just to be sneaky, but just to
you are envisioning yourself in that job, figuring out how
you are personally applying your skills and experience to how
it is that that organization is going to be able
to essentially further their cause.
Speaker 3 (07:40):
This doesn't It's like a little bit of mimicking, right.
Speaker 1 (07:43):
You're mimicking some of the specific words that they call
out because that's exactly what they're looking for. And if
you don't mimic right, if you're not including some of
that verbiage in your resume, then you it doesn't matter
how qualified you are. You've got to jump through that
hoop in order to even have shot.
Speaker 3 (08:00):
You haven't.
Speaker 4 (08:01):
Yeah, essentially, you have not communicated effectively to let them
know that you've got what it takes. And we don't
think you need to go out there and deliver a
resume that's like the length of Brothers Caramezov or Warren
Peace or anything like that, but you certainly revisit what
it is of that you are looking to submit.
Speaker 2 (08:18):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:25):
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.
Speaker 3 (08:33):
Group, Joel.
Speaker 4 (08:34):
This doesn't happen very often, but we're going to hear
from a listener who has been listening to the podcast
for quite a while, longer than my mom's been listening
to the podcast. Let's hear from Bryant.
Speaker 6 (08:44):
What's up, fellas. Bryant here from Montana. Longtime listening to
the show about six years, and I really appreciate what
you guys do. I've just got another boring investment question
that nobody probably wants to hear about, but have been
pretty curious, and I'm going to shoot anyway. A little context.
My wife and I are both twenty five years old,
and we've been together since we were sophomores in high school,
and she actually just finished up her doctoral degree and
(09:05):
started her career. We are very fortunate and we were
able to get through school debt free, so we currently
do not have any debt as far as investing goes.
I currently max out my roth IRA and my HSA.
On top of that, I have a pretty solid pension
and I've been investing for.
Speaker 3 (09:22):
About five years. My wife is kind of in the
opposite boat.
Speaker 6 (09:25):
She hasn't been able to invest at all while she
was in school, but is looking to start now. Her
employer offers her a four oh one K with up
to a five percent match in an HSA. Of course,
we plan to put enough money into her traditional.
Speaker 3 (09:40):
Four oh one K to get.
Speaker 6 (09:42):
The match and max out her HSA. That would put
us at about twenty percent of our income. We're looking
to up that to about twenty four percent, and we
were just curious whether we should put that extra money
into her four one K or whether we should open
a roth IRA for her. I'd really appreciate some feedback,
(10:02):
pretty curious on what I should do. I'm currently leaning
towards the IRA, but would love to get your guys' thoughts.
Speaker 3 (10:08):
Thanks.
Speaker 4 (10:09):
All right, Joel, is this just a yes or no
answer to to Bryant.
Speaker 3 (10:12):
As to whether or not I should go ahead with
the IRA. Let's have some color? Yeah? Okay? Well, first off,
high school sweethearts. I love I love that. That's awesome.
Speaker 1 (10:20):
You guys have been together for a long time and
the sophomores. Yeah, and he's been listening for a while.
Speaker 3 (10:25):
Too. Yes, he's been listening since he was a teenager.
That's crazy.
Speaker 4 (10:29):
Yeah, he's like, finally I can enjoy a craft beer,
just like just like the buddy the boys can't, right exactly,
And I mean it's no wonder that he's crushing it already, right,
and his wife has her doctorate at this young age as.
Speaker 3 (10:40):
Well, graduating debt free.
Speaker 1 (10:42):
That's just an incredible way to get started, like Tyra
getting off on the right foot. I mean, that's an
understatement for where Bryant and his his wife are, you know,
going in life. I mean they're they're just starting off
with everything kind of going in their direction to win
at their backs.
Speaker 4 (10:57):
Yeah, they are doing all the right stuff already. The
guy the roth Ira, the HSA A pension as well,
So I guess he's got some sort of old school
government job. Perhaps I don't know, but he's doing basically
d all of the above and it's helping him to
sock away quite a bit of money and in let's say,
very tax friendly vehicles as well.
Speaker 3 (11:16):
I'll say, Brian, a guy wasn't necessarily picking up any
of this in your.
Speaker 4 (11:19):
Voice, but the fact that your wife hasn't started investing
yet is nothing to be too worried about. Man Like,
she's been working her butt off, she's been getting that
debt free degree, which is incredible. And the higher likely
income that she is going to be able to earn
that she's gonna be able to garner will be well
worth it as far as a standard of living, how
(11:40):
much you're going to be able to invest, ultimately leading
to greater levels of financial freedom financial independence. So kudos
to you both for crushing it like that. I love
too that he said that twenty percent of his income.
It doesn't kind of feel like quite enough if he
wants to ramp it up to twenty four percent. And
a lot of folks, Matt, they continue to increase or
standard of living as that income goes up. And yeah,
(12:02):
maybe they kind of bump up their four one K
contribution by one percent each year or something like that.
But even then, what's your the amount of money you're investing,
it might not be keeping pace with the rate of
pay increases that you're getting. So actually, as a percentage
of your income, you're not doing as well as you
were in those early years. And the truth is not
having any student loans, which is I think rare for people,
(12:25):
especially with the amount of degrees they've gotten in their household,
that's hard to come by. But not having those student
loans makes it even more feasible to dedicate more of
your resources towards investing for your future. And there's just
something incredibly powerful but delaying some of those lifestyle upgrades
intentionally right when you're doing it on purpose for a
missional purpose of having greater levels of financial freedom earlier
(12:49):
in your life. And speaking from the other side of
forty Bryant, like, especially if you plan to have kids,
funneling more money away now is going to allow for
those greater levels of work and life flexibility.
Speaker 1 (13:01):
When it has the most impact. Matt, you and I
talk about this regularly just as friends, but like where
the happiness curve, where it hits the bottom is typically
right where you and I are in life, and we
feel like we're living our best lives now because we're
not worried about we're not trying to build this like
most of the Grindstone career, and we're also not worried
about finances because we've front loaded a lot of that sacrifice.
(13:22):
And I think that's where a lot of people find
themselves is they're like, I guess I need to start
saving for retirement. I haven't done anything yet, and so
they just feel like they have to work all the
time and they're missing out on a lot of the
relational and familial things that really make life worth living
in this spot in life in particular.
Speaker 4 (13:36):
So yeah, yeah, there are just more responsibilities that are
thrust upon us as we're trying to achieve, oftentimes at
this age, career success. But then there's demands being asked
of us from as a kid or i'm sorry, like
as a son or a daughter, from our parents as
they are aging from the standpoint of what it is
that we're trying to be able to provide for our
kids for them as well. But I think keeping that
(13:57):
lifestyle creep in check is basically what you're alluding to.
And I think just like I picture the horse, you know,
like the horses pulling the carriages in the cities, and
they got the blinders on because it doesn't really matter
all the craziness is going around them out there in
the city. All they need to be able to do
is just to walk exactly straight ahead. And I think
if you can kind of keep the blinders on from
a lifestyle standpoint, it's like, it doesn't really matter.
Speaker 3 (14:16):
That that guy over there.
Speaker 4 (14:18):
Or your old friends from high school or college are
going on this trip or they're doing that. Such a
great reason to get off of social media. Yeah, so
that you're not keeping up with the lifestyle upgrades that
lots of other folks are opting to do, whether intentionally
or not intentionally. But what we're saying here is to
continue to intentionally limit some of your spending, and it's
going to make socking away more money for future, for
(14:41):
future you just even more feasible and easy.
Speaker 1 (14:43):
My buddy Jim just bought a boat. Maybe that's why
I should do with my extra income. And it's like, oh,
I guess it's time that we all get both, right Huh.
It's like, no, enjoy your buddy Jim's boat, but like,
don't get one yourself and keep investing. It doesn't mean
that you can't, over time, like increase your spending, right.
I think you and I have also found ways to
loosen the reins in regards to that. But yeah, if
you want to do the right things first, and he's
(15:05):
at a particular age and place to be able to
kind of.
Speaker 4 (15:07):
Double down on the counter such, Yeah, I can have
such a massive impact. And for him, he's thinking about
bumping it up like five percent. Right, Well, if you
run the number, is that simple increase of five percent,
it can cut five years of your working timeline off.
We'll link to a classic Mister money Mustache post that
really very clearly and easily lays this out. But it
(15:28):
might even incentivize you to try to even increase your
contribution amounts over time.
Speaker 3 (15:32):
But the heart of your question here four on K
versus roth Ira.
Speaker 4 (15:36):
Yes, we are leaning the same direction you are, and
I'm going to say roth Ira, certainly get the full
match with your four one k of course, but then
or I guess with your wife, but then make sure
that you are maxing out her wroth Ira, and if
you want to contribute more than that, increasing four one
K contributions after that can make sense. So could opening
(15:57):
a taxable brokerage acount if earlier Toron is a goal
of yours. But the taking the roth route is great
because it's such a flexible account. It's giving you greater
levels of tax flexibility in the future as well. And actually,
on the note of tax, it like you are likely
going to continue to earn more and more money. So
you are in a you're currently in a lower tax bracket.
(16:18):
Let's go ahead and bite the bullet. Now pay the
tax man and never have to worry about taxes in
that account for the rest of your life.
Speaker 1 (16:24):
Well, at some point you might get to the point
where regular contributions to roth Ira aren't allowed even much possible. Yeah, yeah,
And so actually being able to fill that bucket up
while the bucket's accessible makes sense because at some point
you might lose access to that bucket.
Speaker 3 (16:40):
Totally agree.
Speaker 2 (16:42):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (16:49):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 3 (16:53):
All right, let's talk about spending.
Speaker 5 (16:55):
Matt.
Speaker 1 (16:55):
Americans are putting down their credit cards in favor of
debit cards.
Speaker 3 (17:00):
Yeah, I'm generally for it.
Speaker 1 (17:02):
Okay, Well, I think it depends on your take here, right,
And you and I we've talked. We usually say good
things about credit cards. Although we have the Golden rules
of plastic, and if people don' follow the golden rules
of plastic, they shouldn't be using credit cards in the
first place right exactly.
Speaker 4 (17:19):
But we also just know that roughly half of people
don't use credit cards properly, which is always why we
in sort of caveat but hopefully, hopefully the vast majority
of how the money listeners are using their credit cards properly.
But it's interesting to see kind of the tide shift,
and it looks like it might be a predictor a
harbinger of economic things to come that people are like, oh, no,
(17:39):
I'm getting worried about how much I'm racking up on
my credit card. Maybe maybe I need to make a change.
And if I'm paying with the debit card, will I
know that I'm not spending more than I actually have
because it's coming directly out of my checking or my
spending account, whatever you call it. But yeah, it's also
not like the overall spending levels are receding, like we're
still seeing spending kind of happening the same levels. People
(18:00):
are just using a different device, a different piece of plastic,
and it seems like they're doing that largely in an
effort to rein in their spending, but it's maybe it's
not actually working. It's true, you can't spend which you
don't have on a debit card. But on the flip side,
you also don't get the same rewards or protections. And
I think protections are probably more important than rewards here
(18:21):
because rewards don't really matter if you're going into credit
card debt. I think a lot of people are like, oh, man,
it's gonna be great to get that free flight. What
it doesn't matter if you're perpetually in credit card debt.
That flight actually costs you a lot more than you think.
But the protections are important. It's something I think people
under consider because if you lose your debit card and
someone buys stuff with your card, well, you're trying to
(18:42):
call those funds back from your bank, and if you
don't recognize in time, you can be on the hook
for some of the money that was taken with a
credit card. You file a dispute, you're never out the money,
that's true, you don't oh for purchases that were not
made by you, so or refunds that were not refunded
to you. That that's a particular situation I'm finding myself,
Oh really, I won't share right now. Then maybe depending
(19:04):
on the resolution, we will see. But in the meantime,
the credit card company has credited me, that's credit, but
that company is like, it's not responded to the credit
card company, and it's just it makes me, makes me
not want to do business with them even more.
Speaker 1 (19:17):
It's like innocent until proven guilty, right with a credit card,
whereas debit card you're more like guilty until proven innocent.
And so it's it's it's worth it to take that
into account. I think two just on top of this,
because of human nature and bias no matter whether you're
using a debit card or a credit card. Matt, I
think what something that used to be powerful for people was, Yeah,
(19:39):
checks were a pain of the butt, but people would
reconcile their checkbook as they were as they were spending,
as they were making those purchases, and there was something
about the act of writing it down connecting it to
your brain, the neurons firing, and just the realization that
you had less money in your account because you were
doing that reconciliation like as you were on the spending. Yeah,
and I think that the check ledger right there right.
(20:00):
I think the swiping, the tapping, the auto fill of
credit cards and debit cards is something maybe that we've
gotten super duper used to. It's easier than ever to
be parted with our money. So whether you're using, no
matter what form of payment you feel most inclined to use,
I think it's more important than ever to kind of
just be on top of that, create a record and
(20:22):
make sure you're following up and that the spending you're doing,
whether it is on credit or debit, is actually fitting
into your budget.
Speaker 3 (20:27):
That's true.
Speaker 4 (20:28):
Yeah, Generally speaking, I am in favor of folks spending
less on credit because it's just less of a reliance
on a debt product and more just tapping into their
actual funds that they have on hand. Right, But it
turns out that a part of why folks may not
be relying on credit cards as much is because they're
relying on potentially worse forms of worse debt products out there,
(20:48):
like personal loans. There has been an eighteen percent year
over year jump when it comes to personal loans. But
also by Now, Pay Later, and we wanted to talk
about that because their continued rise of buy now, pay
later is just showing that we are prioritizing this near
term happiness over long term freedom. But something new here,
buy now, new here, the buy now, pay later companies.
(21:11):
As it turns out, they don't want to play nice
with the credit bureaus anymore. As more and more customers
are falling behind on their monthly buy now, Pay later obligations,
they are worried that their user base is going to
see a significant credit score drop, and so they want
to avoid that at all costs, of course, because it's
going to harm their business model.
Speaker 3 (21:30):
And basically like, I hate it.
Speaker 4 (21:33):
I hate it because the buy now, pay later companies
like they are literally seeing the quiet part out loud.
They're like, no, no, no, no, we don't want to share
our user information with the credit bureaus because their scores
are going to drop. Yeah, they're admitting. It's like on
a house, like there's a water stain, there's rot underneath
the surface, there's there's termites up in there, dude, and
you just toss some pain out and you're just like, oh,
let me get some paper, just kind of paper over that. No,
let's just delicately put another code of painel on here
(21:55):
so it looks perfectly fine. It feels like it. It
feels like a house of cards. And I am not
a fan of the fact that the buy not like
the Klarnas. I guess I think after pay as well,
that the fact that they're just they've got cold feet
and they're walking back from the agreement to start sharing
the user data with the credit bureaus.
Speaker 1 (22:11):
Every day buy Now, Pay Later becomes a bigger borrowing segment,
and every day that it's not factored into credit scores,
credit scores become at least a little bit less trustworthy.
And so at some point, as is it.
Speaker 3 (22:23):
Agurate information anymore? We don't know, right, it's looking like
it's not.
Speaker 1 (22:26):
And so yeah, I would love to see buy Now,
Pay Later actually factor into your credit score.
Speaker 3 (22:31):
I think it's going to need to at some point.
Speaker 1 (22:32):
It's becoming too important of a segment of debt products
and stuff in general that that really needs to for
those to be accurate.
Speaker 4 (22:39):
And it's another lesson too, the fact that just because
there are companies that are willing to lend you money,
that are willing to say, oh yeah, yeah, go ahead
and get the thing and just give us, like I
don't know.
Speaker 3 (22:46):
A quarter of how much it costs and then let's talk.
Speaker 4 (22:49):
Let's talk next month too, they are willing to say yes,
but it's up to you as an individual to say, oh,
do I have the ability to pay back on these
debt obligations that I've signed up for?
Speaker 3 (22:58):
Yeah, that's one hundred percent spot on.
Speaker 2 (23:00):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:06):
Don't forget to sign up for the how to Money
newsletter over at howdomoney dot com slash newsletter.
Speaker 1 (23:11):
Matt, let's get to a question specifically about a four
to oh one K loan and a little nervousness about
not being able to pay it back in time.
Speaker 3 (23:21):
Hello Matt and Joel.
Speaker 5 (23:23):
My name is Nathan Parkinson from Pocatello, Idaho. I have
a four to oh one k through my work right
now that I have a four to oh one K
loan through, and I was thinking about moving jobs and
one of the places I was planning on going to
(23:45):
doesn't have a four to oh one K. The difference
in pay might be at least thirty thousand dollars, so
I wasn't sure if I can't.
Speaker 3 (23:57):
Pay off that loan.
Speaker 5 (23:59):
I've read that sixty to ninety days that you have
to pay it off or you might get charged on
your tax taxes. I just wanted to be able to
find out if I should be looking for a different
job that actually offers a four to oh one K loan,
and how I might be able to find something that
(24:23):
can either get a match or if it doesn't have
a four to oh one k loan, how I go
about getting more into my IRA four oh one k.
Speaker 3 (24:35):
Thanks Matt and Joel.
Speaker 4 (24:36):
Ooh, Nathan's in a tight spot here, Joel, I certainly
hate to see him not take this job that pays
a whole lot more because of this decision that he's
made here in the pasture. Honestly, these are the sorts
of situations. These are the things we want folks to
avoid completely, and it's why we tend to be against
four to one k loans, because the common refrain that
you hear when you talk about a four one k
(24:58):
loan is like, Hey, you're just.
Speaker 1 (24:59):
Gonna pay yoursel elf back, no harm, no foul, even
that interest that you're paying, Yeah, it's going.
Speaker 3 (25:04):
Back to you.
Speaker 4 (25:05):
But the assumption is that because of that, I guess
it's just not that bad. But when you take the
money out, it's also not in the market, it's not
growing on your behalf, and then you might end up
in a situation like Nathan, where you are looking for
a new job, or maybe even worse, maybe you are
in a situation where you get laid off and oh,
you know what, that four one K loan it can
(25:27):
present a real issue.
Speaker 3 (25:28):
Yes, you don't have the ability to pay back pretty quickly,
that's right.
Speaker 1 (25:31):
Yeah, so the four one K loan, it sounds like
the easiest way to get money. Hey, it's better than
a lot of other options. And it might be depending
on your you know, ability to pay back how long
it's going to take. But there are a lot of
potential downsides too. And think about the run up we've
seen in the market, Matt, what Nathan took out not
to you know, point into this source spot Nathan.
Speaker 3 (25:51):
Sorry, but like it is.
Speaker 1 (25:54):
The market's been up like what thirty five percent essentially
over the past five or six months. So Nathan's right,
if he doesn't pay this loan back in a timely fashion,
he's gonna owe money, right because it's going to be
treated as a disbursement. So I think he said in
his email he owes about fifty three hundred dollars toward
this four roh and K loan and So what does
(26:14):
that look like, Well, it means he's going to pay
ordinary income tax on that money, as well as a
ten percent early withdraw penalty on top. So I don't
think Nathan's fifty nine and a half because of that,
he is going to owe that extra ten percent. And
that's I don't know. To somebody like me, that feels
like Harry Houdini got punched, Matt, you remember why. That's
(26:35):
that's how we ended up dying, right, was like somebody
punched him when he wasn't ready, and was it?
Speaker 3 (26:39):
I thound it was like a canniball. I thought it
was somebody.
Speaker 1 (26:41):
I think I think it was like some young fella,
because he would let people come punch him as hard
as as hard as he could during his acts, and
they were like, oh, I'm going to punch her, and
he wasn't. He wasn't ready, he wasn't doing his act.
It was like because he punched him exactly exactly.
Speaker 3 (26:53):
I don't like that.
Speaker 1 (26:53):
Of course, he wasn't ready, internal bleeding, all that kind
of stuff. That's what this feels like to me.
Speaker 4 (26:58):
You probably got to feel pretty bad about yourself if
you're the guy that like initially you're like, yeah, I gotcha.
Speaker 3 (27:02):
But then you're like, oh, oh, I'm.
Speaker 1 (27:04):
Sorry, dude, I killed the greatest musician magician of all time,
you know, killed the guy. Yeah, Well, in this specifics
matter here, by the way, because the IRS says that
you need to pay back this four one K loan
before you file taxes, and you could even wait until
October with an extension next year. That'd be fine with
the IRS. They're okay with that. But your employer likely
has more stringent requirements in their play in documents, and
(27:27):
that's what you're really going to want to pay attention to.
Most plans require that you pay back that loan in
full right when you leave your job with no grace
period your employer, I don't know, Nathan mentioned like sixty
or ninety days. Yeah, there's a chance that your employer
has has that written into those planned documents. But don't
count your chickens before they they hatch. Don't assume this.
(27:48):
Make sure that that's the case, that that's exactly how
your employer treats this dispartment disbursement.
Speaker 3 (27:53):
You want to just make.
Speaker 1 (27:54):
Sure you're following the letter of the law here, because,
like we just said, the adverse concepts. This could be significant,
and this is one of those really important things where man,
I would be willing to make a lot of sacrifices
in order to pay this four K loan back in
the required time period, Like, for instance, I might even
be willing to delay taking that new job if that's
(28:15):
something you have any control over, in order to pay
the sucker off, maybe even take out like I would.
I think I would certainly be willing to drain my
emergency fund, maybe even borrow from a helock in order
to avoid that negative outcome, and then of course make
a plan to replenish that e fund, make a plan
to pay back that he lock eight like as soon
as possible. I certain I don't think I would go
(28:36):
as far as like taking out a payday loan, Joel, Yeah,
that feels a little a little too far, But like,
the only way I'm doing that, Matt, is if there's
some mob boss who's starting to break knee caps, And
in that case, I'd probably take out a payday loan.
Speaker 3 (28:46):
But that's it. You might want to consider it, and
I'm not that out of trouble right now.
Speaker 4 (28:50):
I don't think I would do this, but depending on
your situation. You might even want to like maybe borrow
from a relative with the assurances. And this is obviously
assuming that you are taking this very seriously and you
plan to not borrow from yourself like this every again.
But just make assurances to them that they that you
will be paying them back regularly over the coming year
or so. But man, just that the difference in your
(29:13):
salary right there, that thirty thousand dollars is significant, and
I wouldn't let this four one k loan keep you
tethered to that significantly lower paying job. You know, I
think where there's a will, there's a way. But certainly
make it a high priority to completely eliminate this.
Speaker 1 (29:30):
Yeah, I mean it'd be it'd be kind of like
a self inflicted wound to say, I'm going to stay
at this job if I really want to move on,
and I'm going to get paid a lot more just
because of this four one k lon. There's there's got
to be a way, And you mentioned some good methods Matt,
of finding the money to get rid of this four
one k loan so that you're not, you know, taking
keeping that money out of your four one k forever,
(29:52):
and that you're also not paying the tax and penalty,
which is a big deal. You also mentioned, Nathan, that
you're holding out for another job or for an employer
that offers a four to one K.
Speaker 4 (30:03):
And which I will say, by the way, to reiterate,
we're talking about four one k loan, not because at
one point he said, what if the new one doesn't
have a four to one K loan? I think maybe
he misspoke and that's what he's specifically talking about, a
four one K plan. Yeah, specifically especially one with a match.
Speaker 1 (30:17):
And you do have to consider that, you know, you
and I talked regularly, Matt about the secondary benefits that
employers offer, and those benefits had up incredibly some you know,
some employers offering health insurance with a significant discount where
they'll pay like eighty or ninety percent of the premiums
for you yeah, and straight up free.
Speaker 2 (30:35):
Yeah.
Speaker 4 (30:35):
I got friends that are having babies and everything is
just like completely covered at super fancy employers.
Speaker 3 (30:40):
Has me just weeping with those catill health care plans.
Knowing how much money I spent on labor and delivery
over my lifetime. I know, I self employed individuals the
healthcare still had the privilege of being able to do that.
Speaker 1 (30:51):
Yes, yes, so those things really matter, and a four
one K plan is incredibly helpful. I think not having
access to a workplace retirement account would be a bummer.
No match, no ability to shovel chunks of money into
a tax advantaged account. That's that's a downer. It's a
downer for anyone who wants to be smart with their money.
Like you're looking for that in an employer, and you're
hoping that they're competitive in that, right.
Speaker 4 (31:12):
But it's not a deal breaker though, No, especially especially
given the difference in income. So and here's the other
thing too that I want to address, Like, you can
still get really wealthy, Nathan, with just an IRA.
Speaker 3 (31:22):
Yeah, yeah, so.
Speaker 1 (31:24):
You can be a roth IRA millionaire in what thirty
six years?
Speaker 4 (31:26):
Thirty five? Well at seven and a half percent, it's
thirty five years.
Speaker 3 (31:30):
That was way off.
Speaker 4 (31:30):
It's a here right there. That's pretty incredible in my opinion.
And that's just the I mean, I know for a
lot of folks it might be it's it's difficult for
them to max out an IRA every single year.
Speaker 3 (31:43):
As opposed to a four to one K.
Speaker 4 (31:45):
You can become a four to one K millionaire in
as little as twenty years. But at the same time,
who's maxing out their four one K? I know some
folks are, but there's a lot of folks for saying
twenty three thousand, five hundred dollars. Dudes, I'm sorry, but
I ain't got that kind of money setting around, right.
Speaker 1 (32:01):
That'd be a third of my income, or that'd be
half of my income, and that seems impossible, but.
Speaker 4 (32:05):
It's still possible, even just with the boring old IRA
at your disposal.
Speaker 3 (32:10):
Yeah, that's exactly right.
Speaker 1 (32:12):
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.
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 (00:13):
This is how to Money with Joel Larsgard and Matt altmes.
Speaker 3 (00:34):
KF.
Speaker 4 (00:35):
I am sixty live everywhere on the iHeartRadio app. This
is how to Money. I am Matt Altmekes.
Speaker 1 (00:41):
And I'm Joelarsgard. Don't forget to sign up for the
how to Money newsletter. You can find that up at
how tomoney dot com slash newsletter.
Speaker 3 (00:48):
Let's talk about getting a job, buddy.
Speaker 4 (00:50):
Some people assume that more education is always gonna be
a good thing, that it's gonna lead to better job opportunities,
it's gonna lead to better pay.
Speaker 1 (00:58):
That's a lot of times why folks do it. Like
the initials after my name, the more highly I'll be valued.
Speaker 4 (01:02):
I've got no ide compensated what any of those initials mean,
because I didn't take the course that teaches me what
all the initials mean.
Speaker 3 (01:09):
We all know the.
Speaker 4 (01:10):
Value of the college education, of course, but it has
also come into a bit more scrutiny as costs have
risen steeply over the years, and the value of certain
degrees has certainly declined. But it is not just college.
Job skill certificates are turns out, they're a bit overrated too.
Online courses certificates and credentialing are vastly overrated, as the
(01:32):
Burning Glass Institute recently found. They took a look at
over twenty three thousand of the most popular ones out there,
and which I'm just going to commend them for doing
a thorough job. That's amazing, yes, but they found that
just one in eight actually delivered notable wage gains.
Speaker 3 (01:47):
For those who completed the.
Speaker 4 (01:49):
Certifications, and the ones that paid off they were mostly
in the medical field, so it's like a nursing things
that are required to actually do the job, and so
I feel like even that kind of skews.
Speaker 3 (01:59):
The results a little bit.
Speaker 4 (02:00):
But they actually highlighted even a project management certificate that
you can stack from Harvard, which of course you're paying
for the name brand there. It's got a fourteen thousand
dollars price tag, but even that created minimal results.
Speaker 1 (02:12):
It was like some sort of you would think getting
it from Harvard adding that to your resume, though people
might even be like whoa, whoa, whoa. Okay, this this person,
this man or woman has like extra pizaz because they
got this, you know.
Speaker 3 (02:23):
Being the ivs have kind of lost their lost their
shine a little bit. Man.
Speaker 4 (02:26):
But so what we want to point folks to, though,
is there is this online tool that we'll link to
where you can see which of these certificates, which one
of these credentialing programs that you can be a part
of pay off, and which ones don't. But uh, yeah,
we want folks to be careful showing out a ton
of money for education and hopes that you will get
paid more because you may not. You might and if you,
(02:48):
and if so, I would also say encourage or see
if you can get your employer to pay for some
of that training, because it's like, hey, this is gonna
better prepare me for this project that we've got coming
up later this year, next quarter. I don't know whatever
language that your employer uses, but that can certainly help
you now. But it's also going to increase your value
in the market over time.
Speaker 1 (03:08):
Yeah, some of that stuff can can be edifying from
a personal standpoint, getting some of that extra education. Just
don't assume that it's going to lead to higher wages.
And also if you get someone else to pay for it,
that might be the sweet fact. Yeah, I'm thinking even
of Matt my wife, who like that continuing education is
part of the joy, Like she loved school and she's
kind of already missing it and so she is doing
(03:31):
like some additional training so she doesn't have to do
that costs money, But it's like for the love of
the game sort of thing.
Speaker 3 (03:37):
Right, personal fulfillment. That's one of the reasons that you
do the thing.
Speaker 1 (03:40):
Yeah, and there is a chance that it could lead
to higher pay, but a lot of these things really
you might appeal to a certain demographic or a person
looking for a certain sort of therapist. But it's also like,
are you gonna be able to charge more per hour
just because you have this extra training?
Speaker 3 (03:54):
No?
Speaker 1 (03:54):
Not usually so random, but interesting career news. If you
have young children, pre K could actually be your ticket
to higher earnings. This is the pre K for pay,
pre k for pay part of our frienduy so applely names.
So yeah, not everyone wants to send their child to
school at that age. But if making more money is
your goal, and there's a state funded pre K around
the corner from where you live. Well, there was this
(04:16):
study of Connecticut parents and it found that the ones
who sent their kids to pre K, they made more money.
And since that pre K runs on a lottery system,
it's not just like, oh, the smart people choose to
send their kids to pre K. It's it's really based on,
you know, the first people chosen, and some people don't
make the cut. It seems like we're talking about causation here,
(04:40):
which makes sense. I think, Matt, like, this makes intuitive sense, right, because, Yeah,
if your child is at home more, that means you
have less time to work, or you're you have to
go down to working part time because you have to
do more of the.
Speaker 3 (04:51):
Childcare and vice versa.
Speaker 5 (04:52):
Man.
Speaker 1 (04:53):
Yeah, or you're just less effective at your job because
you're juggling more things because yeah, you've tried, care becomes
more of your focus, and that often is going to
lead to lower pay. And so this study was basically saying, well, hey,
you're actually going to make more if you send your kid.
Speaker 3 (05:10):
Two pre K.
Speaker 1 (05:11):
But it's not even just for that one year. Higher
earnings lasted for years into the future. In the study,
they really only measured up until your kid went to
fifth grade, but just think, man, it's like, yeah, that
not just that single year, but into the future. Because
you're making more money that year, You're going to make
more money every single year from there on out on average.
And I know, making more money isn't the primary concern
(05:32):
for everyone, and those younger years with your children at
home can be incredibly meaningful. Plus, not every state makes
pre K free, but I just think this is helpful
information to know as you're weighing the trade offs of
sending your kid off to school early in one of
those state funded programs if you have access to one.
Speaker 4 (05:50):
Yeah, the real nuggets in that report were the fact
that parents reported higher levels of sanity.
Speaker 3 (05:56):
After their kids to pre K, which that I believe.
Speaker 4 (06:00):
I mean, it's all related, like literally when you've got
more capacity to do the things like around the house,
or even to like recondole friendships that maybe were on
the back burner while you're in the fog of a
baby who wouldn't sleep very well, or those crazy toddler years,
or for some folks it's yeah, to get back into
their career is something that they haven't paid much attention to.
Speaker 3 (06:19):
You can actually focus I know, yeah.
Speaker 4 (06:21):
Yeah, who knew while we're talking about jobs and careers.
Speaker 3 (06:25):
One page resumes.
Speaker 4 (06:27):
They were incredibly hot there, seemed like for a period
of time, in part because they made it really easy
for potential employers to just on a single sheet to
scan to know whether or not you've got what it
takes to come in for an interview. But that task
has now become less human centered. AI now calls stacks
of resumes before human can even basically lay eyes on it.
(06:49):
And so essentially to get past the first layer of defense,
you got to please the robot overlords basically, and they
care less about the length, and they care a bit
more about keywords that you are or aren't going to
include there in your resume. So it's going to you know,
it's basically certain to see if the words or the titles,
(07:10):
the positions you've held, if they match what it is
that they're looking for to that they're looking to hire for,
and if not, if you don't have that included, it's
a good idea, certainly to revisit it before.
Speaker 3 (07:20):
You submit your resume. I think it's yeah, I think it's.
Speaker 4 (07:23):
A wise move to tailor every single one of your
resumes to a specific job using the language that they
are using not just to be sneaky, but just to
you are envisioning yourself in that job, figuring out how
you are personally applying your skills and experience to how
it is that that organization is going to be able
to essentially further their cause.
Speaker 3 (07:40):
This doesn't It's like a little bit of mimicking, right.
Speaker 1 (07:43):
You're mimicking some of the specific words that they call
out because that's exactly what they're looking for. And if
you don't mimic right, if you're not including some of
that verbiage in your resume, then you it doesn't matter
how qualified you are. You've got to jump through that
hoop in order to even have shot.
Speaker 3 (08:00):
You haven't.
Speaker 4 (08:01):
Yeah, essentially, you have not communicated effectively to let them
know that you've got what it takes. And we don't
think you need to go out there and deliver a
resume that's like the length of Brothers Caramezov or Warren
Peace or anything like that, but you certainly revisit what
it is of that you are looking to submit.
Speaker 2 (08:18):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:25):
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.
Speaker 3 (08:33):
Group, Joel.
Speaker 4 (08:34):
This doesn't happen very often, but we're going to hear
from a listener who has been listening to the podcast
for quite a while, longer than my mom's been listening
to the podcast. Let's hear from Bryant.
Speaker 6 (08:44):
What's up, fellas. Bryant here from Montana. Longtime listening to
the show about six years, and I really appreciate what
you guys do. I've just got another boring investment question
that nobody probably wants to hear about, but have been
pretty curious, and I'm going to shoot anyway. A little context.
My wife and I are both twenty five years old,
and we've been together since we were sophomores in high school,
and she actually just finished up her doctoral degree and
(09:05):
started her career. We are very fortunate and we were
able to get through school debt free, so we currently
do not have any debt as far as investing goes.
I currently max out my roth IRA and my HSA.
On top of that, I have a pretty solid pension
and I've been investing for.
Speaker 3 (09:22):
About five years. My wife is kind of in the
opposite boat.
Speaker 6 (09:25):
She hasn't been able to invest at all while she
was in school, but is looking to start now. Her
employer offers her a four oh one K with up
to a five percent match in an HSA. Of course,
we plan to put enough money into her traditional.
Speaker 3 (09:40):
Four oh one K to get.
Speaker 6 (09:42):
The match and max out her HSA. That would put
us at about twenty percent of our income. We're looking
to up that to about twenty four percent, and we
were just curious whether we should put that extra money
into her four one K or whether we should open
a roth IRA for her. I'd really appreciate some feedback,
(10:02):
pretty curious on what I should do. I'm currently leaning
towards the IRA, but would love to get your guys' thoughts.
Speaker 3 (10:08):
Thanks.
Speaker 4 (10:09):
All right, Joel, is this just a yes or no
answer to to Bryant.
Speaker 3 (10:12):
As to whether or not I should go ahead with
the IRA. Let's have some color? Yeah? Okay? Well, first off,
high school sweethearts. I love I love that. That's awesome.
Speaker 1 (10:20):
You guys have been together for a long time and
the sophomores. Yeah, and he's been listening for a while.
Speaker 3 (10:25):
Too. Yes, he's been listening since he was a teenager.
That's crazy.
Speaker 4 (10:29):
Yeah, he's like, finally I can enjoy a craft beer,
just like just like the buddy the boys can't, right exactly,
And I mean it's no wonder that he's crushing it already, right,
and his wife has her doctorate at this young age as.
Speaker 3 (10:40):
Well, graduating debt free.
Speaker 1 (10:42):
That's just an incredible way to get started, like Tyra
getting off on the right foot. I mean, that's an
understatement for where Bryant and his his wife are, you know,
going in life. I mean they're they're just starting off
with everything kind of going in their direction to win
at their backs.
Speaker 4 (10:57):
Yeah, they are doing all the right stuff already. The
guy the roth Ira, the HSA A pension as well,
So I guess he's got some sort of old school
government job. Perhaps I don't know, but he's doing basically
d all of the above and it's helping him to
sock away quite a bit of money and in let's say,
very tax friendly vehicles as well.
Speaker 3 (11:16):
I'll say, Brian, a guy wasn't necessarily picking up any
of this in your.
Speaker 4 (11:19):
Voice, but the fact that your wife hasn't started investing
yet is nothing to be too worried about. Man Like,
she's been working her butt off, she's been getting that
debt free degree, which is incredible. And the higher likely
income that she is going to be able to earn
that she's gonna be able to garner will be well
worth it as far as a standard of living, how
(11:40):
much you're going to be able to invest, ultimately leading
to greater levels of financial freedom financial independence. So kudos
to you both for crushing it like that. I love
too that he said that twenty percent of his income.
It doesn't kind of feel like quite enough if he
wants to ramp it up to twenty four percent. And
a lot of folks, Matt, they continue to increase or
standard of living as that income goes up. And yeah,
(12:02):
maybe they kind of bump up their four one K
contribution by one percent each year or something like that.
But even then, what's your the amount of money you're investing,
it might not be keeping pace with the rate of
pay increases that you're getting. So actually, as a percentage
of your income, you're not doing as well as you
were in those early years. And the truth is not
having any student loans, which is I think rare for people,
(12:25):
especially with the amount of degrees they've gotten in their household,
that's hard to come by. But not having those student
loans makes it even more feasible to dedicate more of
your resources towards investing for your future. And there's just
something incredibly powerful but delaying some of those lifestyle upgrades
intentionally right when you're doing it on purpose for a
missional purpose of having greater levels of financial freedom earlier
(12:49):
in your life. And speaking from the other side of
forty Bryant, like, especially if you plan to have kids,
funneling more money away now is going to allow for
those greater levels of work and life flexibility.
Speaker 1 (13:01):
When it has the most impact. Matt, you and I
talk about this regularly just as friends, but like where
the happiness curve, where it hits the bottom is typically
right where you and I are in life, and we
feel like we're living our best lives now because we're
not worried about we're not trying to build this like
most of the Grindstone career, and we're also not worried
about finances because we've front loaded a lot of that sacrifice.
(13:22):
And I think that's where a lot of people find
themselves is they're like, I guess I need to start
saving for retirement. I haven't done anything yet, and so
they just feel like they have to work all the
time and they're missing out on a lot of the
relational and familial things that really make life worth living
in this spot in life in particular.
Speaker 4 (13:36):
So yeah, yeah, there are just more responsibilities that are
thrust upon us as we're trying to achieve, oftentimes at
this age, career success. But then there's demands being asked
of us from as a kid or i'm sorry, like
as a son or a daughter, from our parents as
they are aging from the standpoint of what it is
that we're trying to be able to provide for our
kids for them as well. But I think keeping that
(13:57):
lifestyle creep in check is basically what you're alluding to.
And I think just like I picture the horse, you know,
like the horses pulling the carriages in the cities, and
they got the blinders on because it doesn't really matter
all the craziness is going around them out there in
the city. All they need to be able to do
is just to walk exactly straight ahead. And I think
if you can kind of keep the blinders on from
a lifestyle standpoint, it's like, it doesn't really matter.
Speaker 3 (14:16):
That that guy over there.
Speaker 4 (14:18):
Or your old friends from high school or college are
going on this trip or they're doing that. Such a
great reason to get off of social media. Yeah, so
that you're not keeping up with the lifestyle upgrades that
lots of other folks are opting to do, whether intentionally
or not intentionally. But what we're saying here is to
continue to intentionally limit some of your spending, and it's
going to make socking away more money for future, for
(14:41):
future you just even more feasible and easy.
Speaker 1 (14:43):
My buddy Jim just bought a boat. Maybe that's why
I should do with my extra income. And it's like, oh,
I guess it's time that we all get both, right Huh.
It's like, no, enjoy your buddy Jim's boat, but like,
don't get one yourself and keep investing. It doesn't mean
that you can't, over time, like increase your spending, right.
I think you and I have also found ways to
loosen the reins in regards to that. But yeah, if
you want to do the right things first, and he's
(15:05):
at a particular age and place to be able to
kind of.
Speaker 4 (15:07):
Double down on the counter such, Yeah, I can have
such a massive impact. And for him, he's thinking about
bumping it up like five percent. Right, Well, if you
run the number, is that simple increase of five percent,
it can cut five years of your working timeline off.
We'll link to a classic Mister money Mustache post that
really very clearly and easily lays this out. But it
(15:28):
might even incentivize you to try to even increase your
contribution amounts over time.
Speaker 3 (15:32):
But the heart of your question here four on K
versus roth Ira.
Speaker 4 (15:36):
Yes, we are leaning the same direction you are, and
I'm going to say roth Ira, certainly get the full
match with your four one k of course, but then
or I guess with your wife, but then make sure
that you are maxing out her wroth Ira, and if
you want to contribute more than that, increasing four one
K contributions after that can make sense. So could opening
(15:57):
a taxable brokerage acount if earlier Toron is a goal
of yours. But the taking the roth route is great
because it's such a flexible account. It's giving you greater
levels of tax flexibility in the future as well. And actually,
on the note of tax, it like you are likely
going to continue to earn more and more money. So
you are in a you're currently in a lower tax bracket.
(16:18):
Let's go ahead and bite the bullet. Now pay the
tax man and never have to worry about taxes in
that account for the rest of your life.
Speaker 1 (16:24):
Well, at some point you might get to the point
where regular contributions to roth Ira aren't allowed even much possible. Yeah, yeah,
And so actually being able to fill that bucket up
while the bucket's accessible makes sense because at some point
you might lose access to that bucket.
Speaker 3 (16:40):
Totally agree.
Speaker 2 (16:42):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (16:49):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 3 (16:53):
All right, let's talk about spending.
Speaker 5 (16:55):
Matt.
Speaker 1 (16:55):
Americans are putting down their credit cards in favor of
debit cards.
Speaker 3 (17:00):
Yeah, I'm generally for it.
Speaker 1 (17:02):
Okay, Well, I think it depends on your take here, right,
And you and I we've talked. We usually say good
things about credit cards. Although we have the Golden rules
of plastic, and if people don' follow the golden rules
of plastic, they shouldn't be using credit cards in the
first place right exactly.
Speaker 4 (17:19):
But we also just know that roughly half of people
don't use credit cards properly, which is always why we
in sort of caveat but hopefully, hopefully the vast majority
of how the money listeners are using their credit cards properly.
But it's interesting to see kind of the tide shift,
and it looks like it might be a predictor a
harbinger of economic things to come that people are like, oh, no,
(17:39):
I'm getting worried about how much I'm racking up on
my credit card. Maybe maybe I need to make a change.
And if I'm paying with the debit card, will I
know that I'm not spending more than I actually have
because it's coming directly out of my checking or my
spending account, whatever you call it. But yeah, it's also
not like the overall spending levels are receding, like we're
still seeing spending kind of happening the same levels. People
(18:00):
are just using a different device, a different piece of plastic,
and it seems like they're doing that largely in an
effort to rein in their spending, but it's maybe it's
not actually working. It's true, you can't spend which you
don't have on a debit card. But on the flip side,
you also don't get the same rewards or protections. And
I think protections are probably more important than rewards here
(18:21):
because rewards don't really matter if you're going into credit
card debt. I think a lot of people are like, oh, man,
it's gonna be great to get that free flight. What
it doesn't matter if you're perpetually in credit card debt.
That flight actually costs you a lot more than you think.
But the protections are important. It's something I think people
under consider because if you lose your debit card and
someone buys stuff with your card, well, you're trying to
(18:42):
call those funds back from your bank, and if you
don't recognize in time, you can be on the hook
for some of the money that was taken with a
credit card. You file a dispute, you're never out the money,
that's true, you don't oh for purchases that were not
made by you, so or refunds that were not refunded
to you. That that's a particular situation I'm finding myself,
Oh really, I won't share right now. Then maybe depending
(19:04):
on the resolution, we will see. But in the meantime,
the credit card company has credited me, that's credit, but
that company is like, it's not responded to the credit
card company, and it's just it makes me, makes me
not want to do business with them even more.
Speaker 1 (19:17):
It's like innocent until proven guilty, right with a credit card,
whereas debit card you're more like guilty until proven innocent.
And so it's it's it's worth it to take that
into account. I think two just on top of this,
because of human nature and bias no matter whether you're
using a debit card or a credit card. Matt, I
think what something that used to be powerful for people was, Yeah,
(19:39):
checks were a pain of the butt, but people would
reconcile their checkbook as they were as they were spending,
as they were making those purchases, and there was something
about the act of writing it down connecting it to
your brain, the neurons firing, and just the realization that
you had less money in your account because you were
doing that reconciliation like as you were on the spending. Yeah,
and I think that the check ledger right there right.
(20:00):
I think the swiping, the tapping, the auto fill of
credit cards and debit cards is something maybe that we've
gotten super duper used to. It's easier than ever to
be parted with our money. So whether you're using, no
matter what form of payment you feel most inclined to use,
I think it's more important than ever to kind of
just be on top of that, create a record and
(20:22):
make sure you're following up and that the spending you're doing,
whether it is on credit or debit, is actually fitting
into your budget.
Speaker 3 (20:27):
That's true.
Speaker 4 (20:28):
Yeah, Generally speaking, I am in favor of folks spending
less on credit because it's just less of a reliance
on a debt product and more just tapping into their
actual funds that they have on hand. Right, But it
turns out that a part of why folks may not
be relying on credit cards as much is because they're
relying on potentially worse forms of worse debt products out there,
(20:48):
like personal loans. There has been an eighteen percent year
over year jump when it comes to personal loans. But
also by Now, Pay Later, and we wanted to talk
about that because their continued rise of buy now, pay
later is just showing that we are prioritizing this near
term happiness over long term freedom. But something new here,
buy now, new here, the buy now, pay later companies.
(21:11):
As it turns out, they don't want to play nice
with the credit bureaus anymore. As more and more customers
are falling behind on their monthly buy now, Pay later obligations,
they are worried that their user base is going to
see a significant credit score drop, and so they want
to avoid that at all costs, of course, because it's
going to harm their business model.
Speaker 3 (21:30):
And basically like, I hate it.
Speaker 4 (21:33):
I hate it because the buy now, pay later companies
like they are literally seeing the quiet part out loud.
They're like, no, no, no, no, we don't want to share
our user information with the credit bureaus because their scores
are going to drop. Yeah, they're admitting. It's like on
a house, like there's a water stain, there's rot underneath
the surface, there's there's termites up in there, dude, and
you just toss some pain out and you're just like, oh,
let me get some paper, just kind of paper over that. No,
let's just delicately put another code of painel on here
(21:55):
so it looks perfectly fine. It feels like it. It
feels like a house of cards. And I am not
a fan of the fact that the buy not like
the Klarnas. I guess I think after pay as well,
that the fact that they're just they've got cold feet
and they're walking back from the agreement to start sharing
the user data with the credit bureaus.
Speaker 1 (22:11):
Every day buy Now, Pay Later becomes a bigger borrowing segment,
and every day that it's not factored into credit scores,
credit scores become at least a little bit less trustworthy.
And so at some point, as is it.
Speaker 3 (22:23):
Agurate information anymore? We don't know, right, it's looking like
it's not.
Speaker 1 (22:26):
And so yeah, I would love to see buy Now,
Pay Later actually factor into your credit score.
Speaker 3 (22:31):
I think it's going to need to at some point.
Speaker 1 (22:32):
It's becoming too important of a segment of debt products
and stuff in general that that really needs to for
those to be accurate.
Speaker 4 (22:39):
And it's another lesson too, the fact that just because
there are companies that are willing to lend you money,
that are willing to say, oh yeah, yeah, go ahead
and get the thing and just give us, like I
don't know.
Speaker 3 (22:46):
A quarter of how much it costs and then let's talk.
Speaker 4 (22:49):
Let's talk next month too, they are willing to say yes,
but it's up to you as an individual to say, oh,
do I have the ability to pay back on these
debt obligations that I've signed up for?
Speaker 3 (22:58):
Yeah, that's one hundred percent spot on.
Speaker 2 (23:00):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:06):
Don't forget to sign up for the how to Money
newsletter over at howdomoney dot com slash newsletter.
Speaker 1 (23:11):
Matt, let's get to a question specifically about a four
to oh one K loan and a little nervousness about
not being able to pay it back in time.
Speaker 3 (23:21):
Hello Matt and Joel.
Speaker 5 (23:23):
My name is Nathan Parkinson from Pocatello, Idaho. I have
a four to oh one k through my work right
now that I have a four to oh one K
loan through, and I was thinking about moving jobs and
one of the places I was planning on going to
(23:45):
doesn't have a four to oh one K. The difference
in pay might be at least thirty thousand dollars, so
I wasn't sure if I can't.
Speaker 3 (23:57):
Pay off that loan.
Speaker 5 (23:59):
I've read that sixty to ninety days that you have
to pay it off or you might get charged on
your tax taxes. I just wanted to be able to
find out if I should be looking for a different
job that actually offers a four to oh one K loan,
and how I might be able to find something that
(24:23):
can either get a match or if it doesn't have
a four to oh one k loan, how I go
about getting more into my IRA four oh one k.
Speaker 3 (24:35):
Thanks Matt and Joel.
Speaker 4 (24:36):
Ooh, Nathan's in a tight spot here, Joel, I certainly
hate to see him not take this job that pays
a whole lot more because of this decision that he's
made here in the pasture. Honestly, these are the sorts
of situations. These are the things we want folks to
avoid completely, and it's why we tend to be against
four to one k loans, because the common refrain that
you hear when you talk about a four one k
(24:58):
loan is like, Hey, you're just.
Speaker 1 (24:59):
Gonna pay yoursel elf back, no harm, no foul, even
that interest that you're paying, Yeah, it's going.
Speaker 3 (25:04):
Back to you.
Speaker 4 (25:05):
But the assumption is that because of that, I guess
it's just not that bad. But when you take the
money out, it's also not in the market, it's not
growing on your behalf, and then you might end up
in a situation like Nathan, where you are looking for
a new job, or maybe even worse, maybe you are
in a situation where you get laid off and oh,
you know what, that four one K loan it can
(25:27):
present a real issue.
Speaker 3 (25:28):
Yes, you don't have the ability to pay back pretty quickly,
that's right.
Speaker 1 (25:31):
Yeah, so the four one K loan, it sounds like
the easiest way to get money. Hey, it's better than
a lot of other options. And it might be depending
on your you know, ability to pay back how long
it's going to take. But there are a lot of
potential downsides too. And think about the run up we've
seen in the market, Matt, what Nathan took out not
to you know, point into this source spot Nathan.
Speaker 3 (25:51):
Sorry, but like it is.
Speaker 1 (25:54):
The market's been up like what thirty five percent essentially
over the past five or six months. So Nathan's right,
if he doesn't pay this loan back in a timely fashion,
he's gonna owe money, right because it's going to be
treated as a disbursement. So I think he said in
his email he owes about fifty three hundred dollars toward
this four roh and K loan and So what does
(26:14):
that look like, Well, it means he's going to pay
ordinary income tax on that money, as well as a
ten percent early withdraw penalty on top. So I don't
think Nathan's fifty nine and a half because of that,
he is going to owe that extra ten percent. And
that's I don't know. To somebody like me, that feels
like Harry Houdini got punched, Matt, you remember why. That's
(26:35):
that's how we ended up dying, right, was like somebody
punched him when he wasn't ready, and was it?
Speaker 3 (26:39):
I thound it was like a canniball. I thought it
was somebody.
Speaker 1 (26:41):
I think I think it was like some young fella,
because he would let people come punch him as hard
as as hard as he could during his acts, and
they were like, oh, I'm going to punch her, and
he wasn't. He wasn't ready, he wasn't doing his act.
It was like because he punched him exactly exactly.
Speaker 3 (26:53):
I don't like that.
Speaker 1 (26:53):
Of course, he wasn't ready, internal bleeding, all that kind
of stuff. That's what this feels like to me.
Speaker 4 (26:58):
You probably got to feel pretty bad about yourself if
you're the guy that like initially you're like, yeah, I gotcha.
Speaker 3 (27:02):
But then you're like, oh, oh, I'm.
Speaker 1 (27:04):
Sorry, dude, I killed the greatest musician magician of all time,
you know, killed the guy. Yeah, Well, in this specifics
matter here, by the way, because the IRS says that
you need to pay back this four one K loan
before you file taxes, and you could even wait until
October with an extension next year. That'd be fine with
the IRS. They're okay with that. But your employer likely
has more stringent requirements in their play in documents, and
(27:27):
that's what you're really going to want to pay attention to.
Most plans require that you pay back that loan in
full right when you leave your job with no grace
period your employer, I don't know, Nathan mentioned like sixty
or ninety days. Yeah, there's a chance that your employer
has has that written into those planned documents. But don't
count your chickens before they they hatch. Don't assume this.
(27:48):
Make sure that that's the case, that that's exactly how
your employer treats this dispartment disbursement.
Speaker 3 (27:53):
You want to just make.
Speaker 1 (27:54):
Sure you're following the letter of the law here, because,
like we just said, the adverse concepts. This could be significant,
and this is one of those really important things where man,
I would be willing to make a lot of sacrifices
in order to pay this four K loan back in
the required time period, Like, for instance, I might even
be willing to delay taking that new job if that's
(28:15):
something you have any control over, in order to pay
the sucker off, maybe even take out like I would.
I think I would certainly be willing to drain my
emergency fund, maybe even borrow from a helock in order
to avoid that negative outcome, and then of course make
a plan to replenish that e fund, make a plan
to pay back that he lock eight like as soon
as possible. I certain I don't think I would go
(28:36):
as far as like taking out a payday loan, Joel, Yeah,
that feels a little a little too far, But like,
the only way I'm doing that, Matt, is if there's
some mob boss who's starting to break knee caps, And
in that case, I'd probably take out a payday loan.
Speaker 3 (28:46):
But that's it. You might want to consider it, and
I'm not that out of trouble right now.
Speaker 4 (28:50):
I don't think I would do this, but depending on
your situation. You might even want to like maybe borrow
from a relative with the assurances. And this is obviously
assuming that you are taking this very seriously and you
plan to not borrow from yourself like this every again.
But just make assurances to them that they that you
will be paying them back regularly over the coming year
or so. But man, just that the difference in your
(29:13):
salary right there, that thirty thousand dollars is significant, and
I wouldn't let this four one k loan keep you
tethered to that significantly lower paying job. You know, I
think where there's a will, there's a way. But certainly
make it a high priority to completely eliminate this.
Speaker 1 (29:30):
Yeah, I mean it'd be it'd be kind of like
a self inflicted wound to say, I'm going to stay
at this job if I really want to move on,
and I'm going to get paid a lot more just
because of this four one k lon. There's there's got
to be a way, And you mentioned some good methods Matt,
of finding the money to get rid of this four
one k loan so that you're not, you know, taking
keeping that money out of your four one k forever,
(29:52):
and that you're also not paying the tax and penalty,
which is a big deal. You also mentioned, Nathan, that
you're holding out for another job or for an employer
that offers a four to one K.
Speaker 4 (30:03):
And which I will say, by the way, to reiterate,
we're talking about four one k loan, not because at
one point he said, what if the new one doesn't
have a four to one K loan? I think maybe
he misspoke and that's what he's specifically talking about, a
four one K plan. Yeah, specifically especially one with a match.
Speaker 1 (30:17):
And you do have to consider that, you know, you
and I talked regularly, Matt about the secondary benefits that
employers offer, and those benefits had up incredibly some you know,
some employers offering health insurance with a significant discount where
they'll pay like eighty or ninety percent of the premiums
for you yeah, and straight up free.
Speaker 2 (30:35):
Yeah.
Speaker 4 (30:35):
I got friends that are having babies and everything is
just like completely covered at super fancy employers.
Speaker 3 (30:40):
Has me just weeping with those catill health care plans.
Knowing how much money I spent on labor and delivery
over my lifetime. I know, I self employed individuals the
healthcare still had the privilege of being able to do that.
Speaker 1 (30:51):
Yes, yes, so those things really matter, and a four
one K plan is incredibly helpful. I think not having
access to a workplace retirement account would be a bummer.
No match, no ability to shovel chunks of money into
a tax advantaged account. That's that's a downer. It's a
downer for anyone who wants to be smart with their money.
Like you're looking for that in an employer, and you're
hoping that they're competitive in that, right.
Speaker 4 (31:12):
But it's not a deal breaker though, No, especially especially
given the difference in income. So and here's the other
thing too that I want to address, Like, you can
still get really wealthy, Nathan, with just an IRA.
Speaker 3 (31:22):
Yeah, yeah, so.
Speaker 1 (31:24):
You can be a roth IRA millionaire in what thirty
six years?
Speaker 4 (31:26):
Thirty five? Well at seven and a half percent, it's
thirty five years.
Speaker 3 (31:30):
That was way off.
Speaker 4 (31:30):
It's a here right there. That's pretty incredible in my opinion.
And that's just the I mean, I know for a
lot of folks it might be it's it's difficult for
them to max out an IRA every single year.
Speaker 3 (31:43):
As opposed to a four to one K.
Speaker 4 (31:45):
You can become a four to one K millionaire in
as little as twenty years. But at the same time,
who's maxing out their four one K? I know some
folks are, but there's a lot of folks for saying
twenty three thousand, five hundred dollars. Dudes, I'm sorry, but
I ain't got that kind of money setting around, right.
Speaker 1 (32:01):
That'd be a third of my income, or that'd be
half of my income, and that seems impossible, but.
Speaker 4 (32:05):
It's still possible, even just with the boring old IRA
at your disposal.
Speaker 3 (32:10):
Yeah, that's exactly right.
Speaker 1 (32:12):
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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