October 26, 2025 • 32 mins
Joel and Matt discuss the state of the craft beer industry. And offer a little economic analysis for why craft breweries aren't thriving in 2025.
HTM listener Morgan contributed too much to her 401k. It's a good problem to have, but it's still a bit of a problem.
Plus, Credit card churning is popular with a certain segment of personal finance enthusiasts. It can be rewarding, but it can also trip you up!
Also, HTM listener David wants to know how far in advance he should be saving for a new car purchase.
HTM listener Morgan contributed too much to her 401k. It's a good problem to have, but it's still a bit of a problem.
Plus, Credit card churning is popular with a certain segment of personal finance enthusiasts. It can be rewarding, but it can also trip you up!
Also, HTM listener David wants to know how far in advance he should be saving for a new car purchase.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
You're listening to KFI AM six forty on demand.
Speaker 2 (00:06):
I'm Joel Larscard and I am Matt aultmis.
Speaker 3 (00:09):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter. It
is now time for the ludicrous headline of the week,
which is from The Times. The headline reads, and by
the way, this is an opinion piece. This isn't like
news you can use. You're still mad about it.
Speaker 2 (00:27):
I'm still mad about it.
Speaker 3 (00:28):
It's not an editorial though, right, And so the author
of this piece is h He's showed his cards a
little bit. He's sharing his opinion here and that's totally fine.
We'll also share our opinion. Yeah, we haven't got into
the headline, okay, if this author has a dumb opinion.
The headline taking the task for it reads, wacky labels
and silly names are killing craft beer. And so a
(00:48):
part of the reason too we're doing this is obviously
we read it on our on our own. A lot
of listeners send this one our way and wanted us away.
Speaker 2 (00:55):
What do you guys think?
Speaker 3 (00:56):
Yeah, you guys will tell you all you guys a fight.
First of all, man, the premise isn't true. I think
the labels, the fun names Unicorn versus Ninja, some of
the wager names out there, it's not killing craft beer. Instead,
I think it's fun helps you to remember the type
of Like there are so many different generic beers out there, right,
(01:16):
like generic hazy, I PA, that's a terrible name for
a beer. When you've got these more unique names, it
helps you to remember the beer. Obviously, you can't have
a wacky, fun name and have it taste awful, but
it helps you to It helps to cement its place
in your mind when you've got a sea of options
available to you.
Speaker 4 (01:33):
Yeah, like zombie Dust, Like that's a name that you
remember and you're like, Floyd, drink that again.
Speaker 3 (01:37):
And I've only, I think ever had that beer one
time in my entire life. But I know that beer
because it's called zombie dust.
Speaker 2 (01:43):
Wait, what's it? Four floyds? Three? Three floids? How many
floyds did it take to bear?
Speaker 3 (01:49):
It worked part of the time, half the time, but
the cannar it's just a fun part of the process
as well.
Speaker 2 (01:55):
I just don't think craft.
Speaker 3 (01:56):
Ear needs to be boring. And I think this author
he might be revealing the fact that maybe he likes
more of the generic stuff. You know, maybe he likes
maybe he thinks he likes a craft beer, but he
maybe he's actually drinking Blue moond or maybe it's more
of an esthetic thing, right, Like, there are some great
craft beers out there and they're rocking some really delicious
Like I'm thinking of Main Beer Company. Yeah, super kind
(02:19):
of generic. It's whitech and dinner, white labels, pretty plain vanilla.
Speaker 2 (02:25):
But guess what, they make really good beers.
Speaker 3 (02:26):
And for folks who like a craft beer but they
don't like sparkles to be on there canheart.
Speaker 2 (02:32):
Like literally some some beer.
Speaker 3 (02:33):
You know, some of these breweries, it's like sparkles coming off,
coming off the label. You're not going to get that
with Lunch by Main Maybeer Company.
Speaker 4 (02:42):
I think the thing that the author doesn't really get
about why craft beer is struggling now is the supply
and demand equation, that's more.
Speaker 2 (02:49):
That's what's going on here.
Speaker 4 (02:51):
Like we have this massive run up in craft breweries
from essentially you know, a handful to a handful in
every city, and they've just proliferated to such an extent
that the supply has just become overwhelming and then to
demand is also going down. People are drinking a lot
(03:12):
less in general. So I think this isn't This is
like an ever present story in markets, like lots of
money gets poured into the trendy space. The early movers
in that space do well, especially those who sell and
get out early. Think about Matt some of those smaller
craft brewers or medium sized craft brewers who were selling
to the big guys, and how much money they made
(03:34):
in the heyday. They were crushing, they walked away happy.
But I think in just fifteen years the number of
craft brewer's gone up six x something like that. And
consumer tastes of change. So it's not just that we're
drinking less craft beer, we're drinking less in general. Yes, alcohol, Yeah,
there's more spiked Seltzers and stuff like that. But it's
also just that people are like, I'll take the NA
(03:56):
option or I'll stick to soda or water or whatever.
Speaker 2 (04:01):
And so people are watching their their Watsy, watching their pocabo.
Speaker 4 (04:04):
It's not like people are like the names are too zany,
I'm out. Is there a personal finance lesson in this?
I mean, I think investing in trends can potentially be
your friend, especially in those early days it was, but
it can also come back to bite you. And we're
seeing craft breweries closing across more of this country now
than open. And also we're lucky we have more delicious
(04:25):
craft brewery brewing choices than ever.
Speaker 3 (04:28):
And yeah, all in all, I think it's a net good,
it's a net positive. And yeah, honestly it makes me
think of like I think of other industries or things
that kind of coincided with the craft beer movement. It
makes me think of like CrossFit, and not to take
this back so pointedly to like fitness or whatever, but
I want to say that that trends peaked like ten
years ago or so, and if you were someone who
(04:49):
was just like I want to do that.
Speaker 2 (04:50):
I want to open a gym.
Speaker 3 (04:52):
Just know that man getting a brick and mortar, signing
a lease, buying the equipment, getting trainers, training staff to
to be able to run your classes. Like that's a
really expensive endeavor as opposed to trying something on your
own that might be more Yeah, it's got lower stakes,
but yeah, there's always trends. It makes like even like
(05:12):
the boutique spin classes or whatever, like I feel like
we've seen a pretty pretty sharp decline in that as well,
not that folks aren't doing it on their own, but
they're finding more affordable alternatives.
Speaker 4 (05:22):
Well, and so many brands got in on the action,
and then there was a spin class soul cycle, Orange
theey on every corner, and at some point there just
wasn't enough demand to be able to satisfy investors and
gym owners, and so some of those places are going bust.
Speaker 2 (05:39):
Yeah, yeah, on that business totally.
Speaker 3 (05:40):
And in the end, I think my biggest takeaway too,
is just that the numbers are changing when it comes
to if you were interested in starting a business like
a local brewery, because before it's like, oh, if you
got big enough, maybe you could start distributing, and oh yeah,
we're gonna start we're gonna start shipping our beers across
the country. And all of a sudden, it's this national
phenomena as opposed to what was tapped taking place now,
(06:00):
which is that brewpubs that are succeeding are the ones
that are able to create a great space where folks
can come to you. Literally it's contributed local, yes, it's
contributing to the to the local culture and the sort
of the flavor of the town, and that's really important,
and that's something I don't think that that will go
out of style. I think those are replacing old school bars.
Let's serve a bunch of different beers from a bunch
(06:22):
of different breweries, those hyper local craft breweries. You're like,
this is my local bar now, and I just drink
beers by you guys pretty much exactly, Yeah, which I'm
down with.
Speaker 1 (06:32):
You're listening to KFI AM six forty on demand.
Speaker 4 (06:37):
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 (06:43):
Joel, Let's now hear from a listener who yes, she
may have committed a four to one k f PA,
but she's also killing it when it comes to saving
for her retirement.
Speaker 5 (06:52):
Hi, man, Joel, this is Morgan from Minneapolis, Minnesota.
Speaker 2 (06:56):
I have a question.
Speaker 5 (06:56):
Regarding my four to one K. Last year, I changed
jobs around September. I had been consistently contributing to my
four to one K at my first employer and continue
to do so at my second employer. I calculated my
bi weekly contribution so that the total for the year
was the IRS max However, I was twelve dollars off.
I had contributed twenty three thy and twelve dollars for
(07:17):
the year. I looked into this a little, and all
the advice I found states that the issue needs to
be fixed by April fifteenth of the following year. I
missed this state. So I'm wondering what I should do.
Since it's such a small amount. Should I withdraw the
twelve dollars and pay in early withdraw penalty? If so,
do I need to take out an extra couple of
dollars to account for any growth that occurred in twenty
(07:38):
twenty five. I know it's such a small amount, but
I don't want any documentation headache to follow me down
the road. Thanks so much. I really appreciate all of
the advice and knowledge you've shared throughout the.
Speaker 2 (07:47):
Year, Matt.
Speaker 4 (07:48):
This kind of stuff frustrates me. I realized that contribution limits,
I guess, have to exist, and that with paid attention
to the details. But sometimes the mechanisms I think for
directing basic, super small mistakes can be frustrating. It can
feel like you got to spend hours to correct a
twelve dollars mistake, which just feels like a punch.
Speaker 2 (08:09):
In the face against the pain in the butt.
Speaker 4 (08:11):
Yeah, and you know, we've already got the alphabet super
retirement account things going on. We got contribution limits we
have to pay attention to. And then yeah, like just
if you over contribute by twelve bucks, it can be
it can be a little complicated to fix.
Speaker 2 (08:24):
But Morgan, we'll do our best to help you out here.
Speaker 3 (08:27):
Yeah, yeah, not so great on the fact that you
over contributed. But before we get to that, like, let's
just focus on the good, which is the fact that
you've maxed out your four one K, twenty three five
hundred dollars. Is so much money for this year. Actually
in next year it goes up one thousand bucks to
twenty four thousand, five hundred dollars. But kudos to you
for getting to the point where you are just so
(08:47):
excited and you are able to save big for your
future like that, you are certainly given future Morgan incredible
options at her disposal. When you look at stats from Vanguardoel,
they found that almost fifteen percent of folks are maxing
out their workplace retirement accounts, which was.
Speaker 2 (09:04):
Actually more than I would have thought.
Speaker 4 (09:06):
It's actually yeah, and is it just Vanguard customers, because
that maybe makes more sense, like that the Vanguard ilk
are contributing more to their retirem accounts. But I can't
imagine that's not fifteen percent of the average American well overall.
Speaker 3 (09:17):
At least that's the I think that's what's so difficult
with a snapshot of individuals finances when they say that, like, oh,
you know, like people aren't growing their incomes, and like
the fact that everyone is dynamic and you move from
different savings rates, and are you currently setting maxing setting
aside the maximum amount four or four one K?
Speaker 1 (09:36):
I don't know.
Speaker 3 (09:36):
It depends on what actually happened that year, right, Like
there might be plenty of years where you are, but
then some years where you aren't. There's just a whole
lot of variability as opposed to when you take a snapshot,
it freezes it in time. And that's I think some
of the problem behind some of the research and some
of the stats they get put out there because it's like, well, actually, yeah,
I'm not maxing out my four one K, but I
will be soon or when year I will be, you know.
Speaker 2 (09:58):
I think it's exactly right. I think there's a variable thing.
Speaker 4 (10:00):
A lot more dynamism than some of those like static
pictures tend to incorporate.
Speaker 2 (10:06):
And I agree.
Speaker 4 (10:07):
I think there's just a ton of movement from different
income brackets, different savings rates, different contribution amounts from person
to person year over year. That just it's hard to
digest and the way we like process information or the
way it gets presented. I'm curious what you would think though,
if we were to do a poll of how to
(10:27):
money listeners, what percentage of how to money listeners do
you think, given this stat about Vanguard from Vanguard, what
percentage of how to money listeners do you think are
maxing out their workplace retirement account?
Speaker 3 (10:37):
If the general public is at fifteen percent, I would
say we're at like twenty.
Speaker 2 (10:43):
Five to forty percent.
Speaker 3 (10:44):
Okay, yeah, I was going to say third, so I
would Yeah, I would say that at least forty to
eighty percent want to be fully maximized, you know, yeah,
maxing out there in their for one case. But yeah,
there's a difference between what you want to have happened
and what you are actually doing with the right right well,
and it is really, let's just be completely honest, that's
a ton of money, and it is a ton of
(11:05):
money for so much A lot of individuals like that's
a third of their income. So it's really hard to
have a savings rate that high dedicated just towards investing
and not towards other financial goals that you have as well.
So we get that it's not like this is the
goal everybody should have because we realize it's essentially impossible
for a lot of people too. And by the way, Morgan,
you're not alone on this right where you over contributed
(11:27):
is this is a scenario that people find themselves in
when they contribute too much. Often it is because they
change jobs, which maybe they're getting paid more now they're
trying to like rerun the numbers and it's more difficult
to hit the nail exactly on the head. Well, and
a lot of time about percentages of pay, which is
like hard.
Speaker 2 (11:44):
To zero only.
Speaker 3 (11:45):
And it's not like these amounts or these retirement fund
providers like they're not talking to each other on the
back end, right as opposed to when you are in
your employer's portal and you log into Vanguard or Fidelity
or wherever you are, a lot of times you're safeguards,
like you can't increase it to an amount where you
are going to set aside more from your paycheck that
(12:06):
is going to exceed the maximum contribution limit for that year.
So bouncing between jobs in particular is such a it's
really tricky.
Speaker 2 (12:14):
Actually, Yeah, for me.
Speaker 3 (12:15):
Personally, not having ever been employed, like more traditionally employed.
Speaker 2 (12:19):
I got that one time for a little while.
Speaker 3 (12:21):
Yeah, but I'm sure as heck didn't have a four
K MAT I guarantee that, man. But I've always taken
just a more kind of like cavalier approach to saving
for retirement, where it's just like, yeah, I just toss
a bunch of money in there because I've been self employed,
not because I've got a ton of money, but because
I've got full control over it as the employer and
as the employee being self employed, And so you can
(12:42):
kind of look at it towards the end of the
year and say, all.
Speaker 2 (12:45):
Right, how much more do I have left?
Speaker 3 (12:47):
Or if it's just if you're just sitting aside money
in an IRA again you're looking at Vanguard or Fidelity
or something like that, and you can only put so
much into whatever year it happens to be.
Speaker 2 (12:57):
Yeah, they're like, hey, actually no, yeah, exactly, it's like
more than number. What year would you like to apply
this to?
Speaker 3 (13:03):
And you've only got two options until April fifteenth, and
then they're like, oh no, you only have one option,
and actually you can only add this much additional dollars. Yeah,
it's not that's not the case that Morgan found herself
in because she's got two different employers here, right, exactly
the tricky spot, which is why this happens, particularly to
people who switch jobs.
Speaker 4 (13:20):
More often than Notah, And if you didn't fix it
in time, right, that's also not really a huge deal
because the stakes are low. Like if you had contributed
thousands of dollars over the limit, you feel more financial
pain that the stakes will be raised. You might be
a little freaking out a little bit more. We're talking
about twelve bucks, right, the cost of a Chipotle meal,
And yes, you should have paid tax on the cost
(13:40):
of that Chipotle meal.
Speaker 2 (13:41):
Is that what a buriedo costs? I think?
Speaker 4 (13:43):
So, okay, I don't typically eat a Chipotle, but I
hear it's good.
Speaker 2 (13:47):
There's not a bit like once there's not anyone. There's
not one anywhere near it? Say is there?
Speaker 4 (13:50):
If there was, I check it out? Probably would but
the problem is it becomes a manual process. You have
to file an amended return and you have to count
for that twelve dollar of additional income. That's really the
right way to proceed here. Yeah, which just sounds like
bringing a bazooka to a night fight. It just sounds ridiculous,
but that is the proper way to handle things.
Speaker 2 (14:12):
Yeah.
Speaker 3 (14:13):
I think what might be helpful in this case, as
we talk about it, is to kind of think through
the different scenarios where it would have been more ideal,
which is obviously in the first place, it would have
been the most ideal if she had hadn't over contributed,
but that's not the scenario she finds herself in.
Speaker 2 (14:26):
The second most ideal scenario is if.
Speaker 4 (14:28):
She wanted to a Dolorean at the speed of what
is it six eight miles an hour?
Speaker 2 (14:32):
I don't know. I thought it was eighty eight. I
think it was eighty eight.
Speaker 3 (14:35):
But in her case, she did over contribute, and so
ideally then you would make that correction before April fifteenth.
Speaker 2 (14:40):
You have the ability to do that. And she was
talking about like, well, what do I do with that money?
Speaker 3 (14:44):
Like, what would happen is you would take an excess
of contribution disbursement, and by doing that, you would pay
income tax on that twelve dollars from the previous year,
the year that you're filing your taxes, and then you would.
Speaker 2 (14:56):
Pay tax on SAM once is two dollars, Matt.
Speaker 3 (14:58):
And then he you would pay tax on any of
the earnings from that twelve dollars in the year that
you made the correction.
Speaker 2 (15:06):
So Sam once is two dollars and eight cents, Matt.
Speaker 3 (15:08):
But again, you didn't make this correction by April fifteenth,
and so in your case, what's going to happen effectively
here is that you're going to be taxed twice on
that twelve dollars because you didn't get it corrected in time,
and you can't withdraw it as well. By the way
you talked about taking a past that point, that money
out of that account.
Speaker 2 (15:26):
It stays in there.
Speaker 3 (15:27):
And again, sort of like you're saying, Angel, this is
not an awful consequence. But if you never remedy this
and were you to get audited, you could owe back taxes,
you could owe interest. And so yeah, filing that amended
return keeping notes on this moving forward I think would
be prudent. That being said, this is a very small
amount of money, and I cannot imagine a world that
(15:50):
we would live in Joel where the irs is coming
after a little old Morgan Morgan because of the fact
that she misplaced twelve dollars from when You're to the
next when it came to afore one. K all right,
We've got actually more to get to on today's show.
Speaker 1 (16:02):
You're listening to KFI AM six forty on demand.
Speaker 2 (16:07):
I am one of your hosts, Joel Larsgard and I
am Matt alt Mixed by the way.
Speaker 3 (16:11):
You can always find more money saving information over at
howtomoney dot com.
Speaker 4 (16:16):
Matt let's talk about credit card churning. The New York
Times they profile do it this practice this week, and
churning is essentially when people sign up for lots of
credit cards in a fairly short period of time, and
it is it is possible to sign up for even
like dozens of credit cards and making money from those
sign up bonuses along the way, typically over the course
(16:40):
of years. And the article profiled how lots of people
have reaped essentially tens of thousands of dollars in cash
back and free travel by going doing the going the
credit card churning route. It's a lot of money, but
I guess it's it's not surprising as sign up bonuses
have gotten richer over the US, and so this is
(17:01):
I think an extreme example of the flip side of
the credit card universe, where traditionally, you know, you think
about the fifty to sixty percent of people who don't
pay off their credit card balances. They are the people
you think of as getting taken advantage of by the
credit card companies. Well, this is kind of like a
Robin Hood esque scenario where these these credit card churners
(17:23):
boldly go forth to say no longer will we allow
you to take advantage of people, or actually, at least
we're going to try to take advantage of you on
the flip side and take those sign up bonuses without
giving you any sort of carrying a balance or paying
you any interest for the privilege of making this money
off your backs. The credit card companies, Matt, they loathe churning,
(17:43):
like they hate the term in and of itself. I
think it makes them shudder to their core. They really
don't want those kinds of customers. But there's also not
a whole lot that they can do about it. But
I guess like for us, all we should talk about
it is whether or not credit card churning makes for
individuals and for people listening to this show.
Speaker 3 (18:03):
Yeah, well, there are some things they can do about it,
like they can limit your ability to sign up for Well.
I'm specifically thinking of Chase because they I think it
was like a five slash twenty four rule. Basically within
two years, they're limiting your ability to take advantage of
an offered well.
Speaker 4 (18:19):
And I think what Chase's rule specifically is, and I
don't know that any other credit card issuer has done this,
is if you open up five cards within those two years,
you can't even We're just going to reject you out
right when you apply for a Chase card. So it's
not even just applying for Chase cards, it's like how
many cards have you applied for overall? If you've applied
for too many, we think you're a churner. We don't
want your business.
Speaker 3 (18:38):
Yeah, And I was looking at a Southwest card recently too,
and it was specifically calling out that, oh, this offer
isn't available if you've received any benefit at all from one.
Speaker 2 (18:46):
Of our cards within the past two years.
Speaker 3 (18:49):
But from a personal standpoint, this is something that we
want to warn people about, Like we want you to
beware before you attempt, because you're going to need to
pay attention closely. You're going to need to have like
attention to detailed skills in order to execute this properly.
Like if you're an accountant, you can probably pull this off.
Like if you're a baker, bakers have to measure pretty precise. Yeah,
(19:12):
if you are a coder, a programmer, these are all
things that require precision.
Speaker 2 (19:17):
What if you're an influencer less, So.
Speaker 3 (19:19):
I think if you were an influencer or like an artist,
or if your surfer, this may not be the practice
for you. A lot of folks out there who are
really into this, so they keep a spreadsheet where they're
keeping up with it, they're checking it, and of course
they certainly cancel or downgrade the cards before they're charged.
Speaker 2 (19:36):
That annual fee. So just know that this is more.
This is like a like.
Speaker 3 (19:41):
A three thousand level class, right, This isn't like the
personal finance one on one kind of class that we're
talking about here. But even if you don't turn into
a hardcore churner, which I don't know if FO would
recommend from many folks to even consider that be smart
with your credit card usage and certainly take full advantage
of the perks though that your card does offer. Right
like the these are benefits that they offer. Don't go
(20:02):
out of your way necessarily to get as many.
Speaker 2 (20:05):
Of these as possible.
Speaker 3 (20:06):
But if there are perks, take advantage of them certainly,
and of course golden rules of credit don't carry a balance.
Speaker 4 (20:12):
It's also important to note that churning can lead to
a harmed credit score, especially in the short term. Over
over time, if you have a bunch of credit cards
open and you have a high credit limit, then it
might actually improve your score, but especially in the short term,
it can ding it. And if you're trying to get
credit soon, that can be a problem. If you're trying
to use your credit right to get a loan or
(20:33):
something like that and your score is diminished, that can
be that can be an issue. And the stakes are
higher than ever two now when we're talking about the
premium credit cards that come with like the super duper
high fees top of the line Amex and Chase options,
their annual fees are not much under one thousand dollars now,
Matt it's insane. That's a that's a really big annual fee.
(20:55):
To overcome you have to get a lot of perks
from that credit card that your dad's annual feedel. No, no,
it's not like a ninety five dollars annual fee. Now
feels like child's play. Seems like a steal. Yeah, and
those cards do come with like significant potential benefits, but
you often have to work really hard to get the
benefits to make them matter and jump through some hoops
or even some of them. It's like, oh, you want
(21:16):
the full hotel credit, Well you got to do the
hotel stay in the first half of the year and
the second half of the year, which, yeah, you just
have to really pay attention to the fine print. And
sometimes they want you to spend in ways that you
otherwise would not have spent, which means you're like manufacturing spending.
And so is that actually is this card the best
for your Is it actually encouraging you to spend in
ways you would not have otherwise? Oh, and City just
(21:39):
launched a new high end card. But it turns out
they don't know what they're doing apparently in this space,
and so the strata elites fighting words I mean they
was going after City. People were locked out of their
accounts for weeks without explanation, and so City was like
trying to get this game, like we're gonna chasing AMX,
We're coming for you, and then they completely screwed the
(22:02):
pooch on the launch.
Speaker 2 (22:02):
They put up the ball man.
Speaker 3 (22:03):
Yeah, okay, let's talk u about the rising costs of
health care coverage. We touched on that last week. But
it's going to cause many folks out there to opt
for high deductible.
Speaker 2 (22:13):
Plans this year.
Speaker 3 (22:15):
That being said, at the same time, folks with bronze
or folks with more of the catastrophic plans that are
available through the exchange will also be HSA eligible.
Speaker 2 (22:26):
Now this is great, man.
Speaker 3 (22:27):
Hsas are truly going mainstream, and if you have access
to one, certainly use it to save on taxes, to
be able to reduce the out of pocket costs that
you might have associated with medical expenses.
Speaker 2 (22:39):
But if you are able.
Speaker 3 (22:41):
Take full advantage by paying for healthcare costs out of
pocket and then investing within the HSA, that's the ultimate
way to use that account.
Speaker 2 (22:49):
It's not going to solve the high cost of health.
Speaker 3 (22:51):
Care in your life, but it can help to dull
the pain a bit as you got more more of
your wealth building for the future.
Speaker 4 (22:56):
And we're basically an open enrollment season or almost there
for most people who are listening Matt and so the
AHSA and FSA maybe depending on which one you have
available to you, do not forget to take advantage of
those and look into the specifics of how you can
use them effectively, not just to save on taxes, but
to grow your wealth. We've got more information about those
(23:19):
accounts up on our site at how to money dot com.
We got more money saving information to get to.
Speaker 1 (23:25):
You're listening to KFI AM six forty on demand.
Speaker 4 (23:33):
Forget to sign up for the how to Money newsletter.
You can find that up at how to money dot
com slash newsletter.
Speaker 3 (23:38):
It is now time for the Facebook Question of the Week,
and this one is from David, who writes, how does
everyone save for their next car purchase? I currently shouldn't
need another car for a while, got a twenty seventeen
with ninety two thousand miles twenty eighteen with ninety two
five hundred, but I would like to either pay cash
or put down a very large down payment. Basically, if
(23:59):
you had five plus years. Do you just put your
quote unquote payment into a high yield account or do
you actually invest the money and then take it out
and pay some gains on it later. Joel, what would
you do?
Speaker 4 (24:10):
I gotta say love this goal of paying cash for
your next car because and this is the kind of
planning that it takes to get their math that most
people don't do. They're like, yeah, it would be nice,
but even while they're driving something new ish and their
payment has subsided.
Speaker 2 (24:26):
They don't know anything about it.
Speaker 4 (24:28):
They just incorporate right that the money they would have
spent on that car payment back into their spending. They
funnel it somewhere else. They're not putting it into savings specifically
for the next vehicle they will need at some point
in the future. Most people are just a little too
short sighted for that. And so David, you're a champ
like you are thinking about this right and your cars
they're both babies, I would say, maybe they're like, they're
(24:51):
not even preteens. Math, they're very young. They're very young,
and so you should have many more years with these cars.
Speaker 3 (24:55):
They're about to be preteens. He's close to one hundred
thousand mark. You know that's winning preteens.
Speaker 2 (25:00):
I don't know.
Speaker 3 (25:00):
It feels like when the acne kicks in, you're like,
oh man, now I got a leg, go replace the
timing belt. True, there's some more headaches, there's more close,
there's more drama involved in doting one hundred thousand plus
mile vehicle.
Speaker 2 (25:09):
That's all I'm saying. Joys you and I well know
at this point.
Speaker 4 (25:12):
But you know, if you start saving for your next
car purchase with hey, hey, maybe if you're lucky, you
can wait till like twenty thirty five. Let's say you
wait a decade, you will easily be able to pay
cash without really having to do it and stretch yourself
out by saving too much. I'm not sure what your
other goals are and what savings you have on hand,
but you could start setting aside, I don't know, like
five hundred bucks a month, six thousand bucks a year,
(25:33):
which let's say you make it eight years, not even
ten before you have to replace those cars. That's forty
eight thousand dollars in cash alone that you saved. Very nice,
and that's you know, depending on your tasting cars, I
think I could buy two pretty nice ones.
Speaker 3 (25:46):
And that is actually before what you would earn on
that cash. If you would save it right straight into savings,
you'd have more than fifty four thousand dollars at today's
savings rate.
Speaker 2 (25:56):
But let's run the numbers here. Let's say you invested
those dollars.
Speaker 3 (25:59):
You're looking at closer to seventy thousand dollars depending on
the specific rate of return, which is far more than
the cost of your average used car these days. Granted
this is off. In the future, everything's going to be
more expensive most likely. But that being said, I think
these numbers will help you to aim properly. And maybe
you want to upgrade to a nicer car when the
time comes, or if you feel like you need to
replace it sooner, like let's say like in five years
(26:22):
instead of eight. We'll just run the numbers with those
parameters in mind, essentially kind of like back into it,
and you might need to make some adjustments. Maybe you
double your monthly savings to a thousand in order to
avoid taking on car debt in the future. But either way,
I think it's worth man, it's worth saving more, It's
worth lowering your expectations to never have a car loan.
(26:42):
I think that is just it's just a highly underrated
personal finance move to not have a car payment.
Speaker 4 (26:48):
I love the suggestion of lowering your expectations, Matt. I
think so many times people like Buck when they hear
that though, they're like, what do you mean? No? I
want what I want? Man, And the truth is cool,
you can want what you want. It just comes with
there's an impact of that.
Speaker 2 (27:02):
Right.
Speaker 4 (27:03):
So if the thing you want is a brand new
car and you can't afford it, well, then that comes
with debt, and that comes with a lack of independence
and choice in your life. So what do you value more?
And so, yeah, what kind of car will make you happy?
What can you get by with? I think is a
good question. The medium household income is something like seventy
thousand dollars, Matt, and the average car payment is something
(27:25):
like six hundred and fifty dollars a month. That's not sustainable. Like,
that's more than ten percent of your income on one
car in your driveway, which is crazy. It's a lot, Yeah,
and it often just prevents people from being able to
reach the freedom they want to reach. The car in
their driveway I think is a big, big part of it.
If you're doing all the other stuff, right, go ahead,
(27:45):
buy a nice car with the cash you've saved, but
not until then. And at the risk of sounding harsh,
I just think a car is not a fixed necessity.
I do think cars are more of an optional luxury,
and I am, oh, yeah, taking my own medicine over here, Matt.
I have the last two cars that I have personally
owned are We're both from two thousand and six. The
car I drive right now, it's in six, and I
(28:06):
love it. It's not vintage, it's not cool, but it gives
me where I need to go and I enjoy driving
in it. So I just think that could I justify
spending more money on a fancier car, Yeah, I could,
but I don't want to because I value other things
in life a whole lot more than the car that's
in my trapway.
Speaker 2 (28:25):
That's right, buddy.
Speaker 3 (28:26):
Let's hear now from anonymous who writes anyone have experience
with credit repair. I've been paying my student loans religiously
since twenty nineteen, but it was recently transferred to a
new loan servicer. My loan amount is not too high,
and I did not notice that the auto payment was
not transferred They emailed me once during this time, but
I didn't see it. Three months later, my bank notified
(28:47):
me that my credit score had changed. When I realized
what had happened, I became current and I set up
the auto payment again. I called the new loan servicer,
no help there, and submitted credit disputes to the credit bureaus.
I also submitted a CFPB complaint. I've probably done everything
that can be done, but I wanted to check if
someone else had a different experience to make matters worse.
I am in the middle of a loan application and
(29:09):
this came completely out of the blue. Yeah, it felt
like you just got kicked while he was down.
Speaker 2 (29:13):
That's the wrong time.
Speaker 4 (29:14):
Wrong time to have a credit score glitch, right, is
when you actually need to use it, because, like I think,
most of the time, we're kind of the credit score
doesn't really have that much impact on our lives until
we need it to have a ton of impact, whether
we're running an apartment or a house, or trying to
buy a house, or trying to buy a car and
get a loan that kind of stuff. That's when like
(29:35):
the credit score matters a ton, and it just sucks
to have this glitch happen and not notice it and
then watch your credit score plummets. It is a good
reminder to check your accounts and your credit card statements
on a monthly basis. It's hard to say. I think
if the Consumer Financial Protection Bureau or the credit bureaus
are going to be able to help you out on
this front. I think it's worth asking, it's worth barking
(29:56):
up the tree. But you might have to claw your
score back up on your own after this mistake. And
the truth is, if this is like your sole credit
mistake and you handle things properly moving forward, I don't
think it's It might be severe, but it shouldn't be
long lasting.
Speaker 2 (30:11):
That's right.
Speaker 3 (30:12):
But they asked about credit repair, which is not something
we would recommend. There are so many for profit companies
out there in that space, in the credit repair space,
that charge a lot to do things that you can
do on your own, sort of like what you've already done, basically,
like you've disputed the items on your credit report. They
sometimes they can get something temporarily removed which boosts your
(30:34):
score for a bit and hopefully you're like, oh, it worked.
Speaker 2 (30:35):
Hopefully you don't see that as.
Speaker 3 (30:36):
Like I guess the selling point, but these companies are
never worth the time of day or the money that
you would fork over to them. This is definitely something
we would recommend to DIY and honestly continue to pay
close attention to what makes up your credit score, the
basics here, the fundamentals, and then do everything you can
to write the ship, continue to make all your payments
on time, minimize your credit utilization. But above all, I
(30:59):
think you're just gonna have to take your time with it,
like you need to be patient. It takes time, but
it is better than you forking out the money and
not getting the results, which is the alternative here.
Speaker 4 (31:10):
Yeah, it's like good money after bad but it's like
good money after credit score plumbt And you don't want
to do that. And if you really feel like you
need the help of a pro, you can contact like
a nonprofit like Money Management International or the National Foundation
for Credit Counseling. I hate that you're currently trying to
take out a loan. I know this is making it
harder to get the terms that you want and that
(31:31):
truly you deserve based on the way that you've handled
credit over a long period of time.
Speaker 2 (31:36):
If this is for a house.
Speaker 4 (31:37):
It really is a big deal and you're I don't know,
maybe that's something that you can talk with the loan
officeerch or credit union about. But if it's you know,
and if it's for a car, this could be a
good thing. It could prevent you from taking on more
debt than you probably should that you probably should be avoiding.
So I really do sympathize with this poster.
Speaker 2 (31:53):
Max.
Speaker 4 (31:53):
I know it's frustrating to feel like one mistake sets
you back on the credit score front, but I think
this is just a good warning for all of us
because the credit score, it's important when we need it,
and we have to be paying attention to where our
score is at and monitoring to make sure that we're
not making small mistakes that lead to drops in that score. Yeah, okay,
(32:14):
thank you as always for listening to the show. We
appreciate your time and attention. You can always find more
money saving information up on our website at howtomoney dot com.
We'll see you back here next week. You're listening to
How To Money on KFI AM six forty
Speaker 1 (32:29):
KFI AM six forty on demand
You're listening to KFI AM six forty on demand.
Speaker 2 (00:06):
I'm Joel Larscard and I am Matt aultmis.
Speaker 3 (00:09):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter. It
is now time for the ludicrous headline of the week,
which is from The Times. The headline reads, and by
the way, this is an opinion piece. This isn't like
news you can use. You're still mad about it.
Speaker 2 (00:27):
I'm still mad about it.
Speaker 3 (00:28):
It's not an editorial though, right, And so the author
of this piece is h He's showed his cards a
little bit. He's sharing his opinion here and that's totally fine.
We'll also share our opinion. Yeah, we haven't got into
the headline, okay, if this author has a dumb opinion.
The headline taking the task for it reads, wacky labels
and silly names are killing craft beer. And so a
(00:48):
part of the reason too we're doing this is obviously
we read it on our on our own. A lot
of listeners send this one our way and wanted us away.
Speaker 2 (00:55):
What do you guys think?
Speaker 3 (00:56):
Yeah, you guys will tell you all you guys a fight.
First of all, man, the premise isn't true. I think
the labels, the fun names Unicorn versus Ninja, some of
the wager names out there, it's not killing craft beer. Instead,
I think it's fun helps you to remember the type
of Like there are so many different generic beers out there, right,
(01:16):
like generic hazy, I PA, that's a terrible name for
a beer. When you've got these more unique names, it
helps you to remember the beer. Obviously, you can't have
a wacky, fun name and have it taste awful, but
it helps you to It helps to cement its place
in your mind when you've got a sea of options
available to you.
Speaker 4 (01:33):
Yeah, like zombie Dust, Like that's a name that you
remember and you're like, Floyd, drink that again.
Speaker 3 (01:37):
And I've only, I think ever had that beer one
time in my entire life. But I know that beer
because it's called zombie dust.
Speaker 2 (01:43):
Wait, what's it? Four floyds? Three? Three floids? How many
floyds did it take to bear?
Speaker 3 (01:49):
It worked part of the time, half the time, but
the cannar it's just a fun part of the process
as well.
Speaker 2 (01:55):
I just don't think craft.
Speaker 3 (01:56):
Ear needs to be boring. And I think this author
he might be revealing the fact that maybe he likes
more of the generic stuff. You know, maybe he likes
maybe he thinks he likes a craft beer, but he
maybe he's actually drinking Blue moond or maybe it's more
of an esthetic thing, right, Like, there are some great
craft beers out there and they're rocking some really delicious
Like I'm thinking of Main Beer Company. Yeah, super kind
(02:19):
of generic. It's whitech and dinner, white labels, pretty plain vanilla.
Speaker 2 (02:25):
But guess what, they make really good beers.
Speaker 3 (02:26):
And for folks who like a craft beer but they
don't like sparkles to be on there canheart.
Speaker 2 (02:32):
Like literally some some beer.
Speaker 3 (02:33):
You know, some of these breweries, it's like sparkles coming off,
coming off the label. You're not going to get that
with Lunch by Main Maybeer Company.
Speaker 4 (02:42):
I think the thing that the author doesn't really get
about why craft beer is struggling now is the supply
and demand equation, that's more.
Speaker 2 (02:49):
That's what's going on here.
Speaker 4 (02:51):
Like we have this massive run up in craft breweries
from essentially you know, a handful to a handful in
every city, and they've just proliferated to such an extent
that the supply has just become overwhelming and then to
demand is also going down. People are drinking a lot
(03:12):
less in general. So I think this isn't This is
like an ever present story in markets, like lots of
money gets poured into the trendy space. The early movers
in that space do well, especially those who sell and
get out early. Think about Matt some of those smaller
craft brewers or medium sized craft brewers who were selling
to the big guys, and how much money they made
(03:34):
in the heyday. They were crushing, they walked away happy.
But I think in just fifteen years the number of
craft brewer's gone up six x something like that. And
consumer tastes of change. So it's not just that we're
drinking less craft beer, we're drinking less in general. Yes, alcohol, Yeah,
there's more spiked Seltzers and stuff like that. But it's
also just that people are like, I'll take the NA
(03:56):
option or I'll stick to soda or water or whatever.
Speaker 2 (04:01):
And so people are watching their their Watsy, watching their pocabo.
Speaker 4 (04:04):
It's not like people are like the names are too zany,
I'm out. Is there a personal finance lesson in this?
I mean, I think investing in trends can potentially be
your friend, especially in those early days it was, but
it can also come back to bite you. And we're
seeing craft breweries closing across more of this country now
than open. And also we're lucky we have more delicious
(04:25):
craft brewery brewing choices than ever.
Speaker 3 (04:28):
And yeah, all in all, I think it's a net good,
it's a net positive. And yeah, honestly it makes me
think of like I think of other industries or things
that kind of coincided with the craft beer movement. It
makes me think of like CrossFit, and not to take
this back so pointedly to like fitness or whatever, but
I want to say that that trends peaked like ten
years ago or so, and if you were someone who
(04:49):
was just like I want to do that.
Speaker 2 (04:50):
I want to open a gym.
Speaker 3 (04:52):
Just know that man getting a brick and mortar, signing
a lease, buying the equipment, getting trainers, training staff to
to be able to run your classes. Like that's a
really expensive endeavor as opposed to trying something on your
own that might be more Yeah, it's got lower stakes,
but yeah, there's always trends. It makes like even like
(05:12):
the boutique spin classes or whatever, like I feel like
we've seen a pretty pretty sharp decline in that as well,
not that folks aren't doing it on their own, but
they're finding more affordable alternatives.
Speaker 4 (05:22):
Well, and so many brands got in on the action,
and then there was a spin class soul cycle, Orange
theey on every corner, and at some point there just
wasn't enough demand to be able to satisfy investors and
gym owners, and so some of those places are going bust.
Speaker 2 (05:39):
Yeah, yeah, on that business totally.
Speaker 3 (05:40):
And in the end, I think my biggest takeaway too,
is just that the numbers are changing when it comes
to if you were interested in starting a business like
a local brewery, because before it's like, oh, if you
got big enough, maybe you could start distributing, and oh yeah,
we're gonna start we're gonna start shipping our beers across
the country. And all of a sudden, it's this national
phenomena as opposed to what was tapped taking place now,
(06:00):
which is that brewpubs that are succeeding are the ones
that are able to create a great space where folks
can come to you. Literally it's contributed local, yes, it's
contributing to the to the local culture and the sort
of the flavor of the town, and that's really important,
and that's something I don't think that that will go
out of style. I think those are replacing old school bars.
Let's serve a bunch of different beers from a bunch
(06:22):
of different breweries, those hyper local craft breweries. You're like,
this is my local bar now, and I just drink
beers by you guys pretty much exactly, Yeah, which I'm
down with.
Speaker 1 (06:32):
You're listening to KFI AM six forty on demand.
Speaker 4 (06:37):
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 (06:43):
Joel, Let's now hear from a listener who yes, she
may have committed a four to one k f PA,
but she's also killing it when it comes to saving
for her retirement.
Speaker 5 (06:52):
Hi, man, Joel, this is Morgan from Minneapolis, Minnesota.
Speaker 2 (06:56):
I have a question.
Speaker 5 (06:56):
Regarding my four to one K. Last year, I changed
jobs around September. I had been consistently contributing to my
four to one K at my first employer and continue
to do so at my second employer. I calculated my
bi weekly contribution so that the total for the year
was the IRS max However, I was twelve dollars off.
I had contributed twenty three thy and twelve dollars for
(07:17):
the year. I looked into this a little, and all
the advice I found states that the issue needs to
be fixed by April fifteenth of the following year. I
missed this state. So I'm wondering what I should do.
Since it's such a small amount. Should I withdraw the
twelve dollars and pay in early withdraw penalty? If so,
do I need to take out an extra couple of
dollars to account for any growth that occurred in twenty
(07:38):
twenty five. I know it's such a small amount, but
I don't want any documentation headache to follow me down
the road. Thanks so much. I really appreciate all of
the advice and knowledge you've shared throughout the.
Speaker 2 (07:47):
Year, Matt.
Speaker 4 (07:48):
This kind of stuff frustrates me. I realized that contribution limits,
I guess, have to exist, and that with paid attention
to the details. But sometimes the mechanisms I think for
directing basic, super small mistakes can be frustrating. It can
feel like you got to spend hours to correct a
twelve dollars mistake, which just feels like a punch.
Speaker 2 (08:09):
In the face against the pain in the butt.
Speaker 4 (08:11):
Yeah, and you know, we've already got the alphabet super
retirement account things going on. We got contribution limits we
have to pay attention to. And then yeah, like just
if you over contribute by twelve bucks, it can be
it can be a little complicated to fix.
Speaker 2 (08:24):
But Morgan, we'll do our best to help you out here.
Speaker 3 (08:27):
Yeah, yeah, not so great on the fact that you
over contributed. But before we get to that, like, let's
just focus on the good, which is the fact that
you've maxed out your four one K, twenty three five
hundred dollars. Is so much money for this year. Actually
in next year it goes up one thousand bucks to
twenty four thousand, five hundred dollars. But kudos to you
for getting to the point where you are just so
(08:47):
excited and you are able to save big for your
future like that, you are certainly given future Morgan incredible
options at her disposal. When you look at stats from Vanguardoel,
they found that almost fifteen percent of folks are maxing
out their workplace retirement accounts, which was.
Speaker 2 (09:04):
Actually more than I would have thought.
Speaker 4 (09:06):
It's actually yeah, and is it just Vanguard customers, because
that maybe makes more sense, like that the Vanguard ilk
are contributing more to their retirem accounts. But I can't
imagine that's not fifteen percent of the average American well overall.
Speaker 3 (09:17):
At least that's the I think that's what's so difficult
with a snapshot of individuals finances when they say that, like, oh,
you know, like people aren't growing their incomes, and like
the fact that everyone is dynamic and you move from
different savings rates, and are you currently setting maxing setting
aside the maximum amount four or four one K?
Speaker 1 (09:36):
I don't know.
Speaker 3 (09:36):
It depends on what actually happened that year, right, Like
there might be plenty of years where you are, but
then some years where you aren't. There's just a whole
lot of variability as opposed to when you take a snapshot,
it freezes it in time. And that's I think some
of the problem behind some of the research and some
of the stats they get put out there because it's like, well, actually, yeah,
I'm not maxing out my four one K, but I
will be soon or when year I will be, you know.
Speaker 2 (09:58):
I think it's exactly right. I think there's a variable thing.
Speaker 4 (10:00):
A lot more dynamism than some of those like static
pictures tend to incorporate.
Speaker 2 (10:06):
And I agree.
Speaker 4 (10:07):
I think there's just a ton of movement from different
income brackets, different savings rates, different contribution amounts from person
to person year over year. That just it's hard to
digest and the way we like process information or the
way it gets presented. I'm curious what you would think though,
if we were to do a poll of how to
(10:27):
money listeners, what percentage of how to money listeners do
you think, given this stat about Vanguard from Vanguard, what
percentage of how to money listeners do you think are
maxing out their workplace retirement account?
Speaker 3 (10:37):
If the general public is at fifteen percent, I would
say we're at like twenty.
Speaker 2 (10:43):
Five to forty percent.
Speaker 3 (10:44):
Okay, yeah, I was going to say third, so I
would Yeah, I would say that at least forty to
eighty percent want to be fully maximized, you know, yeah,
maxing out there in their for one case. But yeah,
there's a difference between what you want to have happened
and what you are actually doing with the right right well,
and it is really, let's just be completely honest, that's
a ton of money, and it is a ton of
(11:05):
money for so much A lot of individuals like that's
a third of their income. So it's really hard to
have a savings rate that high dedicated just towards investing
and not towards other financial goals that you have as well.
So we get that it's not like this is the
goal everybody should have because we realize it's essentially impossible
for a lot of people too. And by the way, Morgan,
you're not alone on this right where you over contributed
(11:27):
is this is a scenario that people find themselves in
when they contribute too much. Often it is because they
change jobs, which maybe they're getting paid more now they're
trying to like rerun the numbers and it's more difficult
to hit the nail exactly on the head. Well, and
a lot of time about percentages of pay, which is
like hard.
Speaker 2 (11:44):
To zero only.
Speaker 3 (11:45):
And it's not like these amounts or these retirement fund
providers like they're not talking to each other on the
back end, right as opposed to when you are in
your employer's portal and you log into Vanguard or Fidelity
or wherever you are, a lot of times you're safeguards,
like you can't increase it to an amount where you
are going to set aside more from your paycheck that
(12:06):
is going to exceed the maximum contribution limit for that year.
So bouncing between jobs in particular is such a it's
really tricky.
Speaker 2 (12:14):
Actually, Yeah, for me.
Speaker 3 (12:15):
Personally, not having ever been employed, like more traditionally employed.
Speaker 2 (12:19):
I got that one time for a little while.
Speaker 3 (12:21):
Yeah, but I'm sure as heck didn't have a four
K MAT I guarantee that, man. But I've always taken
just a more kind of like cavalier approach to saving
for retirement, where it's just like, yeah, I just toss
a bunch of money in there because I've been self employed,
not because I've got a ton of money, but because
I've got full control over it as the employer and
as the employee being self employed, And so you can
(12:42):
kind of look at it towards the end of the
year and say, all.
Speaker 2 (12:45):
Right, how much more do I have left?
Speaker 3 (12:47):
Or if it's just if you're just sitting aside money
in an IRA again you're looking at Vanguard or Fidelity
or something like that, and you can only put so
much into whatever year it happens to be.
Speaker 2 (12:57):
Yeah, they're like, hey, actually no, yeah, exactly, it's like
more than number. What year would you like to apply
this to?
Speaker 3 (13:03):
And you've only got two options until April fifteenth, and
then they're like, oh no, you only have one option,
and actually you can only add this much additional dollars. Yeah,
it's not that's not the case that Morgan found herself
in because she's got two different employers here, right, exactly
the tricky spot, which is why this happens, particularly to
people who switch jobs.
Speaker 4 (13:20):
More often than Notah, And if you didn't fix it
in time, right, that's also not really a huge deal
because the stakes are low. Like if you had contributed
thousands of dollars over the limit, you feel more financial
pain that the stakes will be raised. You might be
a little freaking out a little bit more. We're talking
about twelve bucks, right, the cost of a Chipotle meal,
And yes, you should have paid tax on the cost
(13:40):
of that Chipotle meal.
Speaker 2 (13:41):
Is that what a buriedo costs? I think?
Speaker 4 (13:43):
So, okay, I don't typically eat a Chipotle, but I
hear it's good.
Speaker 2 (13:47):
There's not a bit like once there's not anyone. There's
not one anywhere near it? Say is there?
Speaker 4 (13:50):
If there was, I check it out? Probably would but
the problem is it becomes a manual process. You have
to file an amended return and you have to count
for that twelve dollar of additional income. That's really the
right way to proceed here. Yeah, which just sounds like
bringing a bazooka to a night fight. It just sounds ridiculous,
but that is the proper way to handle things.
Speaker 2 (14:12):
Yeah.
Speaker 3 (14:13):
I think what might be helpful in this case, as
we talk about it, is to kind of think through
the different scenarios where it would have been more ideal,
which is obviously in the first place, it would have
been the most ideal if she had hadn't over contributed,
but that's not the scenario she finds herself in.
Speaker 2 (14:26):
The second most ideal scenario is if.
Speaker 4 (14:28):
She wanted to a Dolorean at the speed of what
is it six eight miles an hour?
Speaker 2 (14:32):
I don't know. I thought it was eighty eight. I
think it was eighty eight.
Speaker 3 (14:35):
But in her case, she did over contribute, and so
ideally then you would make that correction before April fifteenth.
Speaker 2 (14:40):
You have the ability to do that. And she was
talking about like, well, what do I do with that money?
Speaker 3 (14:44):
Like, what would happen is you would take an excess
of contribution disbursement, and by doing that, you would pay
income tax on that twelve dollars from the previous year,
the year that you're filing your taxes, and then you would.
Speaker 2 (14:56):
Pay tax on SAM once is two dollars, Matt.
Speaker 3 (14:58):
And then he you would pay tax on any of
the earnings from that twelve dollars in the year that
you made the correction.
Speaker 2 (15:06):
So Sam once is two dollars and eight cents, Matt.
Speaker 3 (15:08):
But again, you didn't make this correction by April fifteenth,
and so in your case, what's going to happen effectively
here is that you're going to be taxed twice on
that twelve dollars because you didn't get it corrected in time,
and you can't withdraw it as well. By the way
you talked about taking a past that point, that money
out of that account.
Speaker 2 (15:26):
It stays in there.
Speaker 3 (15:27):
And again, sort of like you're saying, Angel, this is
not an awful consequence. But if you never remedy this
and were you to get audited, you could owe back taxes,
you could owe interest. And so yeah, filing that amended
return keeping notes on this moving forward I think would
be prudent. That being said, this is a very small
amount of money, and I cannot imagine a world that
(15:50):
we would live in Joel where the irs is coming
after a little old Morgan Morgan because of the fact
that she misplaced twelve dollars from when You're to the
next when it came to afore one. K all right,
We've got actually more to get to on today's show.
Speaker 1 (16:02):
You're listening to KFI AM six forty on demand.
Speaker 2 (16:07):
I am one of your hosts, Joel Larsgard and I
am Matt alt Mixed by the way.
Speaker 3 (16:11):
You can always find more money saving information over at
howtomoney dot com.
Speaker 4 (16:16):
Matt let's talk about credit card churning. The New York
Times they profile do it this practice this week, and
churning is essentially when people sign up for lots of
credit cards in a fairly short period of time, and
it is it is possible to sign up for even
like dozens of credit cards and making money from those
sign up bonuses along the way, typically over the course
(16:40):
of years. And the article profiled how lots of people
have reaped essentially tens of thousands of dollars in cash
back and free travel by going doing the going the
credit card churning route. It's a lot of money, but
I guess it's it's not surprising as sign up bonuses
have gotten richer over the US, and so this is
(17:01):
I think an extreme example of the flip side of
the credit card universe, where traditionally, you know, you think
about the fifty to sixty percent of people who don't
pay off their credit card balances. They are the people
you think of as getting taken advantage of by the
credit card companies. Well, this is kind of like a
Robin Hood esque scenario where these these credit card churners
(17:23):
boldly go forth to say no longer will we allow
you to take advantage of people, or actually, at least
we're going to try to take advantage of you on
the flip side and take those sign up bonuses without
giving you any sort of carrying a balance or paying
you any interest for the privilege of making this money
off your backs. The credit card companies, Matt, they loathe churning,
(17:43):
like they hate the term in and of itself. I
think it makes them shudder to their core. They really
don't want those kinds of customers. But there's also not
a whole lot that they can do about it. But
I guess like for us, all we should talk about
it is whether or not credit card churning makes for
individuals and for people listening to this show.
Speaker 3 (18:03):
Yeah, well, there are some things they can do about it,
like they can limit your ability to sign up for Well.
I'm specifically thinking of Chase because they I think it
was like a five slash twenty four rule. Basically within
two years, they're limiting your ability to take advantage of
an offered well.
Speaker 4 (18:19):
And I think what Chase's rule specifically is, and I
don't know that any other credit card issuer has done this,
is if you open up five cards within those two years,
you can't even We're just going to reject you out
right when you apply for a Chase card. So it's
not even just applying for Chase cards, it's like how
many cards have you applied for overall? If you've applied
for too many, we think you're a churner. We don't
want your business.
Speaker 3 (18:38):
Yeah, And I was looking at a Southwest card recently too,
and it was specifically calling out that, oh, this offer
isn't available if you've received any benefit at all from one.
Speaker 2 (18:46):
Of our cards within the past two years.
Speaker 3 (18:49):
But from a personal standpoint, this is something that we
want to warn people about, Like we want you to
beware before you attempt, because you're going to need to
pay attention closely. You're going to need to have like
attention to detailed skills in order to execute this properly.
Like if you're an accountant, you can probably pull this off.
Like if you're a baker, bakers have to measure pretty precise. Yeah,
(19:12):
if you are a coder, a programmer, these are all
things that require precision.
Speaker 2 (19:17):
What if you're an influencer less, So.
Speaker 3 (19:19):
I think if you were an influencer or like an artist,
or if your surfer, this may not be the practice
for you. A lot of folks out there who are
really into this, so they keep a spreadsheet where they're
keeping up with it, they're checking it, and of course
they certainly cancel or downgrade the cards before they're charged.
Speaker 2 (19:36):
That annual fee. So just know that this is more.
This is like a like.
Speaker 3 (19:41):
A three thousand level class, right, This isn't like the
personal finance one on one kind of class that we're
talking about here. But even if you don't turn into
a hardcore churner, which I don't know if FO would
recommend from many folks to even consider that be smart
with your credit card usage and certainly take full advantage
of the perks though that your card does offer. Right
like the these are benefits that they offer. Don't go
(20:02):
out of your way necessarily to get as many.
Speaker 2 (20:05):
Of these as possible.
Speaker 3 (20:06):
But if there are perks, take advantage of them certainly,
and of course golden rules of credit don't carry a balance.
Speaker 4 (20:12):
It's also important to note that churning can lead to
a harmed credit score, especially in the short term. Over
over time, if you have a bunch of credit cards
open and you have a high credit limit, then it
might actually improve your score, but especially in the short term,
it can ding it. And if you're trying to get
credit soon, that can be a problem. If you're trying
to use your credit right to get a loan or
(20:33):
something like that and your score is diminished, that can
be that can be an issue. And the stakes are
higher than ever two now when we're talking about the
premium credit cards that come with like the super duper
high fees top of the line Amex and Chase options,
their annual fees are not much under one thousand dollars now,
Matt it's insane. That's a that's a really big annual fee.
(20:55):
To overcome you have to get a lot of perks
from that credit card that your dad's annual feedel. No, no,
it's not like a ninety five dollars annual fee. Now
feels like child's play. Seems like a steal. Yeah, and
those cards do come with like significant potential benefits, but
you often have to work really hard to get the
benefits to make them matter and jump through some hoops
or even some of them. It's like, oh, you want
(21:16):
the full hotel credit, Well you got to do the
hotel stay in the first half of the year and
the second half of the year, which, yeah, you just
have to really pay attention to the fine print. And
sometimes they want you to spend in ways that you
otherwise would not have spent, which means you're like manufacturing spending.
And so is that actually is this card the best
for your Is it actually encouraging you to spend in
ways you would not have otherwise? Oh, and City just
(21:39):
launched a new high end card. But it turns out
they don't know what they're doing apparently in this space,
and so the strata elites fighting words I mean they
was going after City. People were locked out of their
accounts for weeks without explanation, and so City was like
trying to get this game, like we're gonna chasing AMX,
We're coming for you, and then they completely screwed the
(22:02):
pooch on the launch.
Speaker 2 (22:02):
They put up the ball man.
Speaker 3 (22:03):
Yeah, okay, let's talk u about the rising costs of
health care coverage. We touched on that last week. But
it's going to cause many folks out there to opt
for high deductible.
Speaker 2 (22:13):
Plans this year.
Speaker 3 (22:15):
That being said, at the same time, folks with bronze
or folks with more of the catastrophic plans that are
available through the exchange will also be HSA eligible.
Speaker 2 (22:26):
Now this is great, man.
Speaker 3 (22:27):
Hsas are truly going mainstream, and if you have access
to one, certainly use it to save on taxes, to
be able to reduce the out of pocket costs that
you might have associated with medical expenses.
Speaker 2 (22:39):
But if you are able.
Speaker 3 (22:41):
Take full advantage by paying for healthcare costs out of
pocket and then investing within the HSA, that's the ultimate
way to use that account.
Speaker 2 (22:49):
It's not going to solve the high cost of health.
Speaker 3 (22:51):
Care in your life, but it can help to dull
the pain a bit as you got more more of
your wealth building for the future.
Speaker 4 (22:56):
And we're basically an open enrollment season or almost there
for most people who are listening Matt and so the
AHSA and FSA maybe depending on which one you have
available to you, do not forget to take advantage of
those and look into the specifics of how you can
use them effectively, not just to save on taxes, but
to grow your wealth. We've got more information about those
(23:19):
accounts up on our site at how to money dot com.
We got more money saving information to get to.
Speaker 1 (23:25):
You're listening to KFI AM six forty on demand.
Speaker 4 (23:33):
Forget to sign up for the how to Money newsletter.
You can find that up at how to money dot
com slash newsletter.
Speaker 3 (23:38):
It is now time for the Facebook Question of the Week,
and this one is from David, who writes, how does
everyone save for their next car purchase? I currently shouldn't
need another car for a while, got a twenty seventeen
with ninety two thousand miles twenty eighteen with ninety two
five hundred, but I would like to either pay cash
or put down a very large down payment. Basically, if
(23:59):
you had five plus years. Do you just put your
quote unquote payment into a high yield account or do
you actually invest the money and then take it out
and pay some gains on it later. Joel, what would
you do?
Speaker 4 (24:10):
I gotta say love this goal of paying cash for
your next car because and this is the kind of
planning that it takes to get their math that most
people don't do. They're like, yeah, it would be nice,
but even while they're driving something new ish and their
payment has subsided.
Speaker 2 (24:26):
They don't know anything about it.
Speaker 4 (24:28):
They just incorporate right that the money they would have
spent on that car payment back into their spending. They
funnel it somewhere else. They're not putting it into savings specifically
for the next vehicle they will need at some point
in the future. Most people are just a little too
short sighted for that. And so David, you're a champ
like you are thinking about this right and your cars
they're both babies, I would say, maybe they're like, they're
(24:51):
not even preteens. Math, they're very young. They're very young,
and so you should have many more years with these cars.
Speaker 3 (24:55):
They're about to be preteens. He's close to one hundred
thousand mark. You know that's winning preteens.
Speaker 2 (25:00):
I don't know.
Speaker 3 (25:00):
It feels like when the acne kicks in, you're like,
oh man, now I got a leg, go replace the
timing belt. True, there's some more headaches, there's more close,
there's more drama involved in doting one hundred thousand plus
mile vehicle.
Speaker 2 (25:09):
That's all I'm saying. Joys you and I well know
at this point.
Speaker 4 (25:12):
But you know, if you start saving for your next
car purchase with hey, hey, maybe if you're lucky, you
can wait till like twenty thirty five. Let's say you
wait a decade, you will easily be able to pay
cash without really having to do it and stretch yourself
out by saving too much. I'm not sure what your
other goals are and what savings you have on hand,
but you could start setting aside, I don't know, like
five hundred bucks a month, six thousand bucks a year,
(25:33):
which let's say you make it eight years, not even
ten before you have to replace those cars. That's forty
eight thousand dollars in cash alone that you saved. Very nice,
and that's you know, depending on your tasting cars, I
think I could buy two pretty nice ones.
Speaker 3 (25:46):
And that is actually before what you would earn on
that cash. If you would save it right straight into savings,
you'd have more than fifty four thousand dollars at today's
savings rate.
Speaker 2 (25:56):
But let's run the numbers here. Let's say you invested
those dollars.
Speaker 3 (25:59):
You're looking at closer to seventy thousand dollars depending on
the specific rate of return, which is far more than
the cost of your average used car these days. Granted
this is off. In the future, everything's going to be
more expensive most likely. But that being said, I think
these numbers will help you to aim properly. And maybe
you want to upgrade to a nicer car when the
time comes, or if you feel like you need to
replace it sooner, like let's say like in five years
(26:22):
instead of eight. We'll just run the numbers with those
parameters in mind, essentially kind of like back into it,
and you might need to make some adjustments. Maybe you
double your monthly savings to a thousand in order to
avoid taking on car debt in the future. But either way,
I think it's worth man, it's worth saving more, It's
worth lowering your expectations to never have a car loan.
(26:42):
I think that is just it's just a highly underrated
personal finance move to not have a car payment.
Speaker 4 (26:48):
I love the suggestion of lowering your expectations, Matt. I
think so many times people like Buck when they hear
that though, they're like, what do you mean? No? I
want what I want? Man, And the truth is cool,
you can want what you want. It just comes with
there's an impact of that.
Speaker 2 (27:02):
Right.
Speaker 4 (27:03):
So if the thing you want is a brand new
car and you can't afford it, well, then that comes
with debt, and that comes with a lack of independence
and choice in your life. So what do you value more?
And so, yeah, what kind of car will make you happy?
What can you get by with? I think is a
good question. The medium household income is something like seventy
thousand dollars, Matt, and the average car payment is something
(27:25):
like six hundred and fifty dollars a month. That's not sustainable. Like,
that's more than ten percent of your income on one
car in your driveway, which is crazy. It's a lot, Yeah,
and it often just prevents people from being able to
reach the freedom they want to reach. The car in
their driveway I think is a big, big part of it.
If you're doing all the other stuff, right, go ahead,
(27:45):
buy a nice car with the cash you've saved, but
not until then. And at the risk of sounding harsh,
I just think a car is not a fixed necessity.
I do think cars are more of an optional luxury,
and I am, oh, yeah, taking my own medicine over here, Matt.
I have the last two cars that I have personally
owned are We're both from two thousand and six. The
car I drive right now, it's in six, and I
(28:06):
love it. It's not vintage, it's not cool, but it gives
me where I need to go and I enjoy driving
in it. So I just think that could I justify
spending more money on a fancier car, Yeah, I could,
but I don't want to because I value other things
in life a whole lot more than the car that's
in my trapway.
Speaker 2 (28:25):
That's right, buddy.
Speaker 3 (28:26):
Let's hear now from anonymous who writes anyone have experience
with credit repair. I've been paying my student loans religiously
since twenty nineteen, but it was recently transferred to a
new loan servicer. My loan amount is not too high,
and I did not notice that the auto payment was
not transferred They emailed me once during this time, but
I didn't see it. Three months later, my bank notified
(28:47):
me that my credit score had changed. When I realized
what had happened, I became current and I set up
the auto payment again. I called the new loan servicer,
no help there, and submitted credit disputes to the credit bureaus.
I also submitted a CFPB complaint. I've probably done everything
that can be done, but I wanted to check if
someone else had a different experience to make matters worse.
I am in the middle of a loan application and
(29:09):
this came completely out of the blue. Yeah, it felt
like you just got kicked while he was down.
Speaker 2 (29:13):
That's the wrong time.
Speaker 4 (29:14):
Wrong time to have a credit score glitch, right, is
when you actually need to use it, because, like I think,
most of the time, we're kind of the credit score
doesn't really have that much impact on our lives until
we need it to have a ton of impact, whether
we're running an apartment or a house, or trying to
buy a house, or trying to buy a car and
get a loan that kind of stuff. That's when like
(29:35):
the credit score matters a ton, and it just sucks
to have this glitch happen and not notice it and
then watch your credit score plummets. It is a good
reminder to check your accounts and your credit card statements
on a monthly basis. It's hard to say. I think
if the Consumer Financial Protection Bureau or the credit bureaus
are going to be able to help you out on
this front. I think it's worth asking, it's worth barking
(29:56):
up the tree. But you might have to claw your
score back up on your own after this mistake. And
the truth is, if this is like your sole credit
mistake and you handle things properly moving forward, I don't
think it's It might be severe, but it shouldn't be
long lasting.
Speaker 2 (30:11):
That's right.
Speaker 3 (30:12):
But they asked about credit repair, which is not something
we would recommend. There are so many for profit companies
out there in that space, in the credit repair space,
that charge a lot to do things that you can
do on your own, sort of like what you've already done, basically,
like you've disputed the items on your credit report. They
sometimes they can get something temporarily removed which boosts your
(30:34):
score for a bit and hopefully you're like, oh, it worked.
Speaker 2 (30:35):
Hopefully you don't see that as.
Speaker 3 (30:36):
Like I guess the selling point, but these companies are
never worth the time of day or the money that
you would fork over to them. This is definitely something
we would recommend to DIY and honestly continue to pay
close attention to what makes up your credit score, the
basics here, the fundamentals, and then do everything you can
to write the ship, continue to make all your payments
on time, minimize your credit utilization. But above all, I
(30:59):
think you're just gonna have to take your time with it,
like you need to be patient. It takes time, but
it is better than you forking out the money and
not getting the results, which is the alternative here.
Speaker 4 (31:10):
Yeah, it's like good money after bad but it's like
good money after credit score plumbt And you don't want
to do that. And if you really feel like you
need the help of a pro, you can contact like
a nonprofit like Money Management International or the National Foundation
for Credit Counseling. I hate that you're currently trying to
take out a loan. I know this is making it
harder to get the terms that you want and that
(31:31):
truly you deserve based on the way that you've handled
credit over a long period of time.
Speaker 2 (31:36):
If this is for a house.
Speaker 4 (31:37):
It really is a big deal and you're I don't know,
maybe that's something that you can talk with the loan
officeerch or credit union about. But if it's you know,
and if it's for a car, this could be a
good thing. It could prevent you from taking on more
debt than you probably should that you probably should be avoiding.
So I really do sympathize with this poster.
Speaker 2 (31:53):
Max.
Speaker 4 (31:53):
I know it's frustrating to feel like one mistake sets
you back on the credit score front, but I think
this is just a good warning for all of us
because the credit score, it's important when we need it,
and we have to be paying attention to where our
score is at and monitoring to make sure that we're
not making small mistakes that lead to drops in that score. Yeah, okay,
(32:14):
thank you as always for listening to the show. We
appreciate your time and attention. You can always find more
money saving information up on our website at howtomoney dot com.
We'll see you back here next week. You're listening to
How To Money on KFI AM six forty
Speaker 1 (32:29):
KFI AM six forty on demand
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