March 30, 2025 • 33 mins
The world happiness report just came out.
Ask HTM: Zane wants to know if cashing out his pension makes sense. Also, should a pension be factored into net worth calculations?
Insurance costs are on the rise. But bigger price hikes could be on the horizon for Tesla owners because of recent acts of vandalism.
Ask HTM: Jose wants to know if he should pay off his mortgage or not.
Ask HTM: Zane wants to know if cashing out his pension makes sense. Also, should a pension be factored into net worth calculations?
Insurance costs are on the rise. But bigger price hikes could be on the horizon for Tesla owners because of recent acts of vandalism.
Ask HTM: Jose wants to know if he should pay off his mortgage or not.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
K if I Am six forty. You're listening to how
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel Lar's Guard and Matt Aultmix.
Speaker 1 (00:59):
K IF I Am six forty Live everywhere on the
iHeartRadio app.
Speaker 3 (01:03):
This is how to Money.
Speaker 4 (01:04):
I'm Joe Larsgard and I am Matt Altmix. If you
are over on Facebook and you want to join a
group of like minded folks who have money questions and insight,
please go ahead and join the how to Money Facebook group.
Speaker 1 (01:16):
But now let's get to the Ludacros headline of the week.
This one comes from the Free Press and the headline reads,
the World Happiness Report is a sham and did you
see that come out this week? And all the headlines right,
I did? I did, and I was. I don't really
care about this stuff much, but this article was super
fascinating because it was basically saying, hey, this World Happiness
(01:37):
Report is complete bunk, and they talked about the methodology
behind it. I think it's worth covering here largely because
of like the how much news coverage you got. But
the Scandinavian countries, of course, we're again at the top
of the heap. Finland topped the list for the third
year in a row. I am of Norwegians descent, so
I like to believe that my people are happier, but
I don't know that that's actually true. So the US
(01:59):
moved down the list. We now said at twenty fourth
in world happiness, which, yeah, it perpetuates. I think a stereotype,
both negatively of US and positively of some of those
Scandinavian countries. But this Free Press author dug into the
methodology to see what was going on behind the scenes,
like why is this happening? And he found that there
was essentially zero sophistication to this survey, that the sample
(02:22):
size is tiny, and it's one single, poorly worded question
is used in an attempt to determine how happy people
are in a given country.
Speaker 3 (02:32):
You should read the piece for full details. We'll link
to it in the show notes. It does not seem
very robust, No, like that's that's what we're to say
the least.
Speaker 1 (02:39):
But so if I say to say, I think our
conceptions of Scandinavia, maybe aren't the same as reality. And
you know, when we think, oh, they're so much happier
than we are, I think it creates this comparison game,
and I think a deeper dive would probably reveal a
much smaller disparity.
Speaker 4 (02:54):
Yeah, I think a more specific assessment would deliver perhaps
different results that might not fit are the preconceived notions
that we already hold. So we're kind of like stepping
up to the plate for America here for a second,
is what we're doing in this report.
Speaker 3 (03:08):
It just gets so much press without having much rigor
behind it.
Speaker 5 (03:11):
That.
Speaker 4 (03:11):
Having said, it's probably worth discussing though, the relationship between
money and happiness for a second, because inhabitants of richer countries, well,
they do tend to express higher levels of happiness than
folks in poorer countries. However, there are loads of unhappy
rich folks, and there's also a slew of really happy
non wealthy people, and vice versa. Growing national wealth, it
(03:33):
doesn't necessarily mean that the happiness line is just going
to go up into the right. How wealth actually impacts
happiness is really hard to pin down. I think, if
you want our view in a nutshell, I think having
more money. It can buy you more freedom. We're all
about talking about financial independence and optionality. It allows you
to be more generous as well, but it's not.
Speaker 1 (03:54):
Talked about with Derek recently on the show. Yeah yeah,
how much happiness that kid?
Speaker 4 (03:58):
How much good can you do you? Yeah, with that money.
But it's not going to change the core of who
you already are. It's more of an amplifier of the
things that you already believe. So that being said, if
you think you're going to be happier when you double
your income or when you double your net worth, I
think this is highly unlikely. It doesn't mean that these
aren't good goals to have, but just don't pursue them
(04:19):
to the exclusion of the real things that truly produce happiness.
And one key insight from the World Happiness Report that
I can totally one hundred percent get behind man.
Speaker 3 (04:28):
Here's a quote.
Speaker 4 (04:29):
Those who share more meals with others report significantly higher
levels of life satisfaction. This is true across ages, genders, countries, cultures,
and regions, which, oh my gosh, yes, like what it
is that we spend our money on, that's what matters, right,
You continue to spend your money on cheap crap from
the internet that you're that's going to end up in
(04:51):
the trash. Yeah, no, wonder you aren't happy that that
is not leading to higher levels of happiness. But when
you spend your money on things that provide more community.
For instance, you know, we come down hard on going
out to eat, but let's say you're going out to
eat with some friends, or you're meeting up for drinks,
or you're even just getting coffee.
Speaker 3 (05:07):
That's even more affordable.
Speaker 4 (05:08):
Things that enrich community, joining us social club or going
on a vacation together. We were just jold talking last
night with a friend of ours who is going on
vacation with another couple. So pump for them. I'm like,
you've got to go on this, don't. They're a little
worried about the kids and how they're gonna feel about
them leaving, you know, just anxiety things like that.
Speaker 3 (05:27):
But like, those are great.
Speaker 4 (05:28):
Things to spend money on. And it totally aligns too
with the Harvard Happiness Study. Eighty five years of data
points to the fact that the number one factor that
leads to higher levels of happiness in these in these
individuals that they've been studying and they've expanded this out
to also their families, So it's not just these original guys.
Are the friendships that they're able to have and maintain,
(05:49):
So keep that in mind.
Speaker 3 (05:50):
Yeah, it could be.
Speaker 1 (05:51):
Going out to you, but it could just be inviting
someone over to your house for a meal. That's a
whole lot cheaper to cook. Yeah, even if you're cooking
for someone else, or a hike, a walk. I mean,
those kinds of things are free. Yes, it can be
so basic, but yeah, it's amazing how connection with others.
Speaker 3 (06:04):
There's even a Box article.
Speaker 1 (06:06):
Out right this week, Matt about how introverts should force
themselves to become extroverts a little more frequently because it's
gonna it's gonna increase their happiness levels. Like they're may
be a little anxious about it on the front end,
but afterwards they do report higher levels of happiness. I
believe it because relational connection. It's it's the secret sauce
(06:26):
behind happiness.
Speaker 3 (06:26):
So important.
Speaker 1 (06:27):
Not that money doesn't play a role, but I think
its role is a little overstated.
Speaker 3 (06:32):
Totally agree.
Speaker 6 (06:34):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (06:41):
If you have a money question, We'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com forward slash ask.
Speaker 1 (06:54):
Now we get to the Facebook question of the week.
This one comes from Zaan. He said, I almost wish
I did. I didn't learn this, but I found out
recently that there is an option to cash out my pension.
Not attractive option, but it does bring up a question.
Is there any reason to include that value when I'm
listing personal assets such as for a loan application or
when calculating net worth?
Speaker 3 (07:15):
Oh, time to cash out?
Speaker 4 (07:17):
Well, this is something I feel like you can speak
to this a little bit when it comes to You've
got some personal experience when it comes to some very
recent pension.
Speaker 1 (07:25):
Yeah, yeah, yeah, So, I mean I think it's interesting.
Zane basically said, it's not an attractive option, but it
might be an attractive option. It's worth at least thinking
through the pros and the cons and running the numbers.
And so I did that recently because I got sent
a letter from my former employer about my pension and
they basically said, hey, you can take this lump sum
(07:45):
or here's what you would get paid when you turn
sixty five on a monthly, ongoing monthly basis. And because
I had the option of rolling that into a traditional
ira or into a roth ira and then paying a
little bit of that paying the tax, I decided the
best thing for me was to roll it into a roth,
get more money into the roth, pay the tax now,
and then hopefully watch that money grow to become substantially
(08:08):
more than what it otherwise would have become had I
just waited for that pension payment to start right twenty
five years down the line. But I think, Matt, a
lot of people who opt for a pension lump sum.
Maybe there's a lot of hoops you have to jump through,
and you have to do it the right way, and
you have to make sure you get it into the
right account, and you have to know what is possible
(08:29):
from a tax perspective when you take that lump sum.
If you don't do it properly, you could be creating
more of a financial headache for yourself of a liability, yeah,
than a benefit.
Speaker 4 (08:40):
Yeah yeah, I think I mean one of the reasons
you do this is because yes, it could perform better
in your capable hands, and so actually run the numbers
see what it could do. A reasonable goal would be
that your lump sum if you, let's say, invested in
a total stock market or an SP five hundred fund
earning average returns, whether or not it would lead to
more income and retirement. I think that's a good goal
(09:01):
for you to have for that money. Granted, this is
a return that's not guaranteed, which is unlike your pension,
and so I would want to think through the pros
and cons there. Like these are the two schools of
thought that I'd be bouncing back and forth between.
Speaker 3 (09:15):
Schwab.
Speaker 4 (09:16):
They actually have a pretty awesome calculator that will link
to in the show notes for this episode that will
help you to get an idea of the rate of
return that you would need to get investing on your
own in order to make cashing out worth it.
Speaker 1 (09:28):
Yeah, and then you asked the question, should use your
pension in your net worth calculations?
Speaker 3 (09:32):
I think you can.
Speaker 1 (09:33):
I never did, but mine was also small, like right,
it wasn't some epic amount. Others might want to depending
on how much their pension is worth. I think the
best way to do that is to figure out what
your likely annual pension amount will be and then to
multiply it by twenty five. I think that's roughly what
it's going to be from a net worth perspective for
you down the road. You should certainly factor it in
(09:56):
for retirement planning. But they're also downsides, I think to
including your pension in your net worth right because you
might overestimate your assets, you might underprepare in other ways.
Speaker 3 (10:04):
That's that's what worries me. Yeah, is thinking baking on
this thing, and yeah, maybe it doesn't pay.
Speaker 4 (10:09):
Out the way well, And just how I think about
net worth, it has to do with how much money
I have now, Like I'm less interested in my future
net worth because like that may or may not happen
depending on what the market's gonna do.
Speaker 3 (10:19):
And so counting them chickens for the hatch, Yes, exactly.
Speaker 4 (10:21):
And so if I were going personally, if I was
going to consider a pension, I would consider the lump
sum cash out for my net worth calculations in the
here and now.
Speaker 3 (10:31):
But and even then I would only assume the most.
Speaker 4 (10:34):
Conservative of projections when it comes to you know, what
that number might be well, because the truth is, unlike
money you've saved up in retirement accounts, now, the pension
is not liquid, right, It's gonna it's gonna pay out
monthly as stated once you reach retirement age, and if
your employer has financial issues, your pension amount could be reduced,
So you might be counting a chicken that doesn't hatch.
Speaker 1 (10:53):
And so yeah, that's also something to keep in mind
if your employer is struggling. Not that that's a possible ability,
and that's just I think another reason that to at
least consider taking the lump stone pension amount if it's
offered to you, Matt, you use the term capable hands.
I like that, like if you if you feel like
you are capable of using that money effectively and investing
(11:15):
it for your own future, you'll likely perform better and
do better than the pension would on your behalf.
Speaker 4 (11:20):
Yeah, and the other thing he mentioned too is that
should he list this out like when like, for instance,
with a loan application. I I don't see the advantage
of doing that either, because, like, if anything, what that
might do is cause a lender to think that you
are more credit worthy because of the fact that maybe
you've got additional assets on the books, and I think
there might be a slight temptation to borrow more than
(11:42):
you should because, like bottom line, I think a good
rule of thumb is to borrow less than whatever than
what any lender is say that you are, that you're
good for, and so by having more, you know, more
on paper, it's like, oh, actually, you know, let's just
say it's for a home or something like that. Actually,
you are going to be approved for six hundred and
fifty thousand dollars loan. I was gonna bump that thing
(12:02):
up to eight hundred because we see that you've no no, no,
see I don't like yeah, yeah, I don't.
Speaker 3 (12:06):
I don't like that. Although I would.
Speaker 4 (12:08):
I think this is just a there's a small chance
that this would happen because typically they're looking at your income.
They don't really look at like what you're asked like, yeah,
they should be looking.
Speaker 3 (12:16):
At your assets usually decked income ratio.
Speaker 4 (12:18):
Yeah, that's exactly like you wanna you want to credit
limit increase on your credit cards? What are they asking about?
They're asking about your income. Actually, they ask about your
if you own a home too, and what your primary
mortgage is. Oftentimes, but they should be considering your assets,
because I feel like that's more indicative of your capacity
to sacrifice, to defer, pleasure, to invest in, to sock
(12:38):
away money. But instead they just care about what you're
going to earn that year. They're using a more basic metric.
They're just looking at the near short term. Yeah, but
even if they do take that into account, I think
it can only have the potential to get you in trouble.
Speaker 3 (12:51):
Agreed.
Speaker 1 (12:51):
All right, let's get to another question. This one comes
from TJ in the how to Money Facebook group. He said,
frugal are cheap churning Jim free trial memberships with no
intention of signing up. I like the community aspect of
working out in a class with other people, but I
also work for a nonprofit where I don't take home
much money, So I'm good with just running jump roping
and doing workout routines from dareb dot com, which I've
(13:13):
not heard of before. I've heard of them in my bedroom. Well,
of course you have. So is that frugal or cheap?
Speaker 3 (13:19):
From TJ? It completely comes down to how he goes
about doing this.
Speaker 4 (13:23):
Okay, you know, like you know what it makes immediately
makes me think of it makes me think of the
free samples at costco, the taste tests, and if you
walk up to that nice person there manning that little booth,
that little table, the little card table there with a
little air fryer or what or whatever it is that
they're doing, and if you like look them down in
the eyes and you're like, I'm not going to buy
any of this, but let me have a taste, that's
(13:44):
like a total jerk thing to do. You might be
thinking that, but you can't say it out loud, right.
And the reason I think it's okay to think that
is because it is up to them to convince you otherwise.
Like if there are free samples, if there's a free
taste test or something like that, it means that that
manufacturer or that business owner, whoever it is, they believe
enough in their product to convince you otherwise when you
(14:06):
have made up your mind that this is not something
that you're going to partake in, but they're willing to.
Speaker 3 (14:10):
Give you a little taste of it for free.
Speaker 4 (14:12):
Knowing that, well, in this case of the gym, knowing that, man,
our members are so awesome, you're gonna want to come back.
Our coaching is so top notch, that you're not going
to be able to live without it. Whatever it is
that they think they're gonna be able to attract you
in with is up to them to sway you. And
so you might think that there's no way I'm not
going to join the stupid it's so expensive, or I
(14:33):
do this stuff at home for free, but you can't
say that out loud, and it's up to them to
convince you otherwise.
Speaker 3 (14:38):
See that's what I think.
Speaker 1 (14:39):
That's exactly where I was going to be ready to answer,
because I think that's the whole reason people off for
free trials, just because they think you're gonna love the
thing enough that you're gonna stick with it. And so
you might say, I'm going to sign up for the
Netflix seven day free trial, but I'm not giving them
my money, and then you might get hooked on I
don't know, it's good game or something like that, whatever
they're showing.
Speaker 3 (14:58):
I don't have Netflix these days.
Speaker 1 (14:59):
I've had Netflix on long time, whatever it is, And
I think that's true. Like TJ has to be ready
to one either cancel the free trial in time before
he gets charged if he's not interested in sticking around.
That would be I think cheap if he wasn't. But
on top of that, be ready to fall in love
with the thing that you're checking out because it might happen.
Because it might happen, yeah, and it might be worth
(15:20):
the money, even though right now you don't think it is.
I remember signing up for a Discover bank account map
because there for like a three hundred dollars bonus, and
I was like, oh, this is really easy, Like the
hoops are not that significant. I just have to like
have the account open for sixty days with a certain
amount of money in. It was like all they want
is my first name, that's right. It was so easy,
and I was like, three hundred bucks, this is great.
It's way easier than like some of the big physical
(15:41):
banks want, Like I don't know, you have to go
into the branch. It's so annoying. And then I ended
up saying, well, this is a great interface. Yeah, this
is a good bank. And I've been with Discover from
many years since. So what I thought was playing the
system that was gonna be temporary. I got played, but
not in a bad way because it's a great product,
but that costing you anything, But it might end up
costing TJ.
Speaker 4 (16:02):
Right, And that's the thing I think, like, I like
what you said about being prepared to potentially pay, and
you might think, well, guys, because he mentioned that he
works for a nonprofit, and he's like, hey, I can't
afford that, but you might love it so much. You
might get creative with your expenses. You might do some
budget rearranging because now all of a sudden.
Speaker 3 (16:18):
This is such a high priority for you.
Speaker 4 (16:19):
You you found your people. It kind of reminds me.
You remember, at some point we talked about I think
it was on a Friday flight, about a girl who
hasn't paid for eating out, hasn't paid a restaurant bill
in like two years, and it's because she goes on.
Speaker 3 (16:33):
Dates for free.
Speaker 4 (16:35):
They're not free dates that well, I mean, I guess
technically they are, but she goes on dates and they
pay for dinner. And I think it was a fouler
cheap then, because it kind of feels deceptive, right, But
I remember, even at that point in time, I remember
thinking the same thing. It's like you might be thinking
or saying to yourself that there's no way I'm going
to be into this dude. But in fact, after meeting him. Oh,
he's got a great since of humor. But you get
(16:56):
to know him and then all of a sudden, that's
what happened with my wife. Then you get tricked. Yeah,
and you've been married for fifteen years.
Speaker 7 (17:03):
Right.
Speaker 4 (17:04):
See, that's that's what these these gyms are banking on
TJ and so I don't think it's it's cheap at all.
Speaker 3 (17:10):
I think it's a frugal move. But yeah, like Joel.
Speaker 4 (17:12):
Said, be prepared to start to start paying a monthly
fee in order to access those services, no doubt.
Speaker 1 (17:18):
All right, Hey, we got more money saving information to
get to.
Speaker 6 (17:22):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (17:28):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group. Let's talk about cars for a second,
Matt and car insurance as well, because analysts in the
insurance space they're warning that insurance costs are about to rise.
Obviously that's already happening, but we're not just talking about
(17:49):
general inflation related price hike. Stat is something that we've
seen anybody who owns a home or a car has
gotten a notice from their insurance company and they're like,
ex's defensive. Well, Tesla owners specifically will be paying more
because of the vandalism that's been happening at Tesla dealerships
and Tesla cars across the country, just to individual owners.
(18:11):
I heard someone Matt recently talk say that they got
stopped by someone and they were like knocked on the window.
Speaker 3 (18:17):
He rolled down the window and they're like, you need to.
Speaker 1 (18:18):
Get rid of that car man, like in like a
threatening way, which is just kind of difficult to imagine
someone you don't know doing that to you. Elon Musket
Horse has not made himself a subject of empathy in
this country. Quite the opposite. I think his seeming neglect
of his company too. It's led to a massive decline
in market value. And then other electric car manufacturers, like
(18:42):
BYD in China, they're announcing amazing innovations, and it just
seems like Elon's taking his eye off the ball a
little bit here. I think what BYD says they can
charge their evs in five minutes now, which is insane, but.
Speaker 3 (18:55):
Five minutes gets you two hundred and fifty miles. Yeah,
that's crazy. Yeah, but like that in the US, Yeah,
I know, right, But Elon.
Speaker 1 (19:01):
And then Tesla by proxy, they've drawn the ire of
Americans who don't like what Doach is doing, and the
consequences are piling up in Some of those consequences for Tesla.
Speaker 3 (19:09):
Owners in particular, could be higher insurance rates.
Speaker 4 (19:12):
Yeah, it seems like all the currents are currently against
Tesla right now, and also Tesla owners, you know, because
it's not just the shure rooms, but private owners are
having their Tesla cars burned, painted the faced and evs
are already more expensive to ensure because of the high
cost of replacing the batteries. But if your Tesla is
also seen as a political symbol, there is a higher
(19:33):
likelihood of.
Speaker 3 (19:33):
It being vandalized, which could lead to an insurance claim.
Speaker 4 (19:36):
Insurance companies are likely to, I mean, we'll see I
guess like they are likely to raise premiums higher on
Tesla owners, specifically to deal with an increase in expensive claims.
But as we've seen with the way that insurance markets work,
it's something that has passed on to everyone at a
certain point.
Speaker 3 (19:53):
And it's one thing for Elon's.
Speaker 4 (19:54):
Actions to have personal financial and business consequences. But it
just sucks to see folk who just went out there
and you know, they bought a Model three for environmental
or economic reasons. Kind of they've been forced into the
public the political fray to a certain extent.
Speaker 3 (20:09):
I think a lot of those like, they're like, I
didn't even I'm not trying.
Speaker 4 (20:12):
To make a statement here, guys, I just wanted to
aw some car, right exactly most people, and we've talked
about the financial realities of buying a Model three versus
even something like a Toyota Corolla, and the Toyota Corol
used to be the cheapest car in the United States
essentially to own and operate, and the Model three has
kind of become that, even though it's got a higher
initial sticker price, and so a lot of people are saying,
oh cool, this is going to lower on a monthly costs.
Speaker 1 (20:33):
I'm not paying for gas, and it's a good ride.
I like driving, and they are kind of fun to drive.
They just weren't assuming that it was going to draw
you know, political eyeballs because of what's happening in Washington
right now. Matt, we should talk to while we're on
the car note about tariffs, and we've talked about tariffs
before on the show, but now the President introduced twenty
five percent tariffs against imported cars into this country, and
(20:58):
this is supposed to.
Speaker 3 (20:58):
Take effect to April three third.
Speaker 1 (21:00):
It's kind of hard to know, I guess in some
ways how to talk about tariffs on the show, because
there were tariffs that came into being that got drawn
back quickly or that were announced that we're pulled back
before they've been implemented.
Speaker 3 (21:12):
And that stents made to certain companies or certain sectors.
Speaker 1 (21:15):
A lot of tariff whiplash going on because and that's
been really hard for businesses to figure out, well, how
do I what do I do when when tariffs are
being touted but then not necessarily brought to bear. And
some estimates are saying that price hikes on new cars
could be in the six to twelve thousand dollars range.
Speaker 3 (21:36):
If if these tariffs come through.
Speaker 1 (21:39):
And as a friend of the show Kyla Scanlon put it,
she put she said, chaos is expensive, and I think
we're bearing the fruit of some of that political chaos,
political chaos, and how much it's it could cost us
if these tariffs actually do come through, we are going
to see not just higher prices on new vehicles, but
second and third order effects of those tariffs, which could
which is going to mean more people instead of going
(22:01):
to the new vehicle, they're going to the used market.
Used card prices are going to go up to and
then even think about folks working in the auto sector,
we could see more layoffs or furloughs of employees too
in that space. So we'll see. I don't know if
these terrorists are actually going to be implemented, but if
they are, or if they're just threats.
Speaker 3 (22:18):
Stuff to know.
Speaker 4 (22:19):
And I think it depends on which side of the
aisle you've fall into as to whether or not you
think that these are going to be a good thing
or not. But I don't know from an economist state,
and we've talked about this, right but from most economists
are like, no, this is going to be pretty terrible
for the economy.
Speaker 3 (22:31):
Prices will go up. Tariffs.
Speaker 1 (22:33):
Are economists on both sides of the aisle ten to
agree they're a terrible thing for consumers?
Speaker 3 (22:39):
Yeah.
Speaker 4 (22:39):
One thing most politicians though, are agreeing on right now
are rate caps on credit cards. Politicians on both sides
of the aisle. They tend to think that curbing credit
card interest rates to a maximum of ten percent, that
that will help they're hurting constituents. But they are wrong,
because while this sounds kind and nice, it's going to
be bad on so many levels. The unintended consequences. The
(23:02):
negative outcomes could be significant, including no credit card access
for folks who don't have high credit scores, leaving others
to lean on even worse lending products. CNBC reported that
ninety five percent of subprime borrowers wouldn't have access to
a credit card anymore because somebody.
Speaker 3 (23:20):
Let that go.
Speaker 4 (23:21):
You know, yeah, they go to paid loans, and they
go to worse title loans.
Speaker 3 (23:25):
Yeah, like, come on, they don't want that.
Speaker 4 (23:27):
Credit Card companies would likely increase other fees as well,
and so this is again something that would impact everybody. So,
you know, what sounds like kind of a nice thing
to do would do real damage to the economy. So
I'm hoping that this effort at bipartisanship actually fails, because yes,
I am not a fan of a twenty five percent
credit card. I don't want you paying that, but a
(23:47):
ten percent rate cap could surprisingly to many.
Speaker 3 (23:51):
I think it could actually be worse.
Speaker 1 (23:52):
And I think that's the thing that doesn't get discussed
after it, is the downstream effects of a decision like that,
because it is something that sounds coming out of a
politician's mouth. Yeah, Hey, I've got credit card debt and
I'm paying twenty three percent of visa MasterCard. This sucks
and it's gonna take me forever to pay off this debt.
Speaker 4 (24:09):
Because of that, everything has a tertiary effect or secondary effect,
Like there are things that was is the butterfly effect,
butterfly effect, I've never I've never watched that movie. But
when that all about like one small thing, like is
a long time the beat of a butterfly race, Like
the difference in that and just the downstream effects are significant.
Speaker 3 (24:24):
And I think if we're.
Speaker 4 (24:26):
Gonna say temper political scorekeeping that everyone is engaged in,
like all they want to do are they just want
to get the wins and here and now, and they're
not at all looking at our country or at the
economy more holistically.
Speaker 1 (24:36):
Yeah, I couldn't agree more. All Right, We've got more
to get to On today's show.
Speaker 6 (24:40):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (24:46):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (24:51):
All right, let's get to another question. This one is
about paying off a mortgage.
Speaker 7 (24:56):
Hey Joeln Matt, this is Jose Gonzalez from Wilmington, California,
small neighborhood in southern California.
Speaker 3 (25:03):
I had a question.
Speaker 7 (25:04):
Regarding a mortgage loan on a rental property. My question
is should I pay it off or should I continue
to collect the rent and let itself pay off. I
currently have savings of three hundred and thirty seven thousand
in low cost ETFs and have been saving for quite
(25:25):
some time now, hoping to buy a home here in Southern.
Speaker 3 (25:29):
California one day.
Speaker 5 (25:30):
However, I don't like the idea of the debt hanging over.
Speaker 7 (25:35):
My head during this process.
Speaker 5 (25:37):
I currently have about one hundred and ninety three leftover
in the mortgage, so i'd have enough to pay for
it and get rid of that debt. As you know,
homes in so cal are expensive, so that's why I
have such a big chunk of change. I just signed
a twelve month lease and I am being very very patient.
(26:00):
So I guess the idea of renting has had me
thinking of buying soon. Anyways, I love the show. Thanks
for everything, guys.
Speaker 4 (26:10):
Okay, so when he said he's got savings of three
hundred and thirty seven thousand dollars, I was like, what, Jose,
But then he quickly followed that up with that they're
in low cost ETFs.
Speaker 3 (26:22):
He's got that money invested.
Speaker 4 (26:23):
He's calling it his savings, but he has invested those dollars.
Speaker 3 (26:28):
That looks a lot different. But there is a lot
to discuss with your question, Jose.
Speaker 4 (26:32):
So let's start off by discussing mortgage payoff, because we've
been pretty consistent advocates for not paying off your mortgage
if you have a locked.
Speaker 3 (26:41):
In low rate.
Speaker 4 (26:43):
I think he mentioned that he purchased this one back
in twenty nineteen, so yeah, he's locked in hopefully at thirty.
Speaker 3 (26:49):
Years for a really nice low rate.
Speaker 4 (26:51):
Yeah, and inflation and higher savings rates are only making
that low cost debt.
Speaker 3 (26:55):
Look better by the day.
Speaker 4 (26:57):
And there's also lots of value to be had by
my having morequidity as well.
Speaker 6 (27:01):
Well.
Speaker 3 (27:01):
I think we'll address all these things I just touched
on here.
Speaker 1 (27:04):
Yeah, yeah, no, I agree, And yeah, the only exception
to that answer of not paying off the mortgage is
typically if that money was going to blow a hole
in your pocket otherwise. But that doesn't sound like it's
the case for Jose, And I guess like there are
certain other reasons you might want to pay off your mortgage. Really,
if it's it's a personal preference, so as well, it's
just not our personal preference, and so we highlight that
(27:26):
because it's our show. But it also sounds like you're
in the wealth building phase of your life, Jose. If
you were in your sixties, right and you wanted more
financial certainty as you entered your retirement years, the discussion
would also be different. We might, you know, push you
a little more towards mortgage payoff just because of where
you're at in the grand scheme of things. But you've
likely got so many years ahead of you to make
savvy financial moves to grow your net worth, including buying
(27:49):
that primary home. And so if you pay off this mortgage,
you might find your ability to grow your net worth
it's actually hurt by prioritizing debt payoff.
Speaker 4 (27:58):
Yeah, that's right. And if you decide to pay off
that debt, it would increase your cash flow. That's that's
certainly a nice perk. But if let's say another investment
deal came along, something that you were made privy to,
well you might not have the capital to jump on it.
Speaker 3 (28:12):
Imagine.
Speaker 4 (28:13):
So sounds like so his first property ever purchased was
an investment property he's been renting. Imagine if you come
across like the perfect house hack. Let's say you came
across just this sweet duplex or triplex or a quadplex,
and your you know, the dollar signs are in your eyes,
not only because you see the potential, but also because
it costs you a whole lot of money.
Speaker 3 (28:31):
Oh but too bad.
Speaker 4 (28:32):
You used all the money that you had in order
to pay down that previous mortgage, and now you don't
have enough on hand for a competitive down payment or
even something above and beyond in order to make you
look like a more attractive buyer to the potential seller.
These are all things that you want to want to
keep in mind. That's the liquidity aspect that I touched
on earlier. But another downside of paying off this debt
(28:53):
would be paying tax. And it sounds like the money
that you'd be using is in a taxable brokerage account
and it's highly likely that you would have to pay
capital gains tax in order to access that money to
pay more to the mortgage company. This is a situation
we're trying to diminish your debt where it could lead
to an unnecessary tax bill and likely just I mean
(29:15):
a fairly substantial tax bill as well as he's trying
to get his hands on those funds in an attempt
to alleviate this debt.
Speaker 3 (29:23):
That isn't all that terrible.
Speaker 1 (29:24):
Yeah, Yeah, And again we don't know the exact mortgage
interest rate. We're assuming that you have a mortgage rate
that starts with a three, right, And if that's the case,
then that's our advice for people Matt who took out
a mortgage within the last year and their mortgage rates
upper six is low sevens. Like, there's different advices, a
different story.
Speaker 3 (29:44):
Yeah, that's not what I'm hearing though, No, And I.
Speaker 1 (29:46):
Think part of what makes real estate also a compelling
investment is the ability to use leverage Wisely, if you
had to save up and fork over one hundred percent
cash to buy a rental property, the investment just wouldn't
be nearly as attractive, and almost nobody would partake. It
would take forever to save up, and your profit potential
would be greatly diminished. And on the flip side, many
(30:07):
real estate investors have taken on too much leverage and
they've hurt their finances because of it. Right, They got
out over their skis and their debt load is just
it's too heavy of a burden for them. So there
is it's important to highlight both risk and reward when
using leverage. But Hose, that's not you, right, Like paying
off the mortgage would mean you're going the de leveraging route,
(30:29):
and I just don't think you need to do that,
given where things stand with your finances and how smart
you've been in building up wealth. It's not like your
your asset poor, it's not like your light on cash
and the only way to have some liquidity is to
sell this place. You've made a bunch of other smart moves. So, yeah,
de leveraging, there are pros and cons to going that route.
(30:52):
I just don't think you're maybe at the place in
your financial journey where it makes sense to deleverage.
Speaker 3 (30:58):
Yeah, I don't want to hold on to that low
cost debt for now.
Speaker 5 (31:00):
Yeah.
Speaker 4 (31:00):
Well, especially because I didn't hear him say anything about
retirement accounts. It would be different if he also came
in and said and said, hey, guys, I've got this.
You know, my net worth is at this level. I've
been maxing out my four one K my roth iray
for this many years, for a couple of decades. Even
that would be a different story. I would have a
different answer. But I didn't hear him saying anything about that.
(31:23):
He sounds financially savvy, like I got a feeling that
he's he sounds debt averse, like he doesn't want to
have debt on him. But I don't hear him saying
he's risk averse. So I don't hear him not investing
those dollars. I mean, well, he is investing those dollars.
He mentioned the low cost ETF, so I think he
has plenty of money socked aside. I assume he's maxing
out his retirement accounts. But Jose, if you're not absolutely
(31:45):
do that first. Those are table stakes. And instead of
having to jump through these hoops of buying a property
that may or may not go up in value, that
where you can or can't find a tenant who's willing
to sign for twelve months for a tenant who might
be a nightmare tenant.
Speaker 3 (32:02):
Like these are all prerequisites to get you.
Speaker 4 (32:04):
To the point to where you might see an average
or slightly higher than average return on your money.
Speaker 3 (32:09):
But you don't have to do any of those things, zero.
Speaker 4 (32:12):
Prerequisites in order to experience that kind of return by
just simply investing in the market.
Speaker 1 (32:16):
Yeah, I think when it comes down to it, don't
pay off the debt is what we would suggest, but
also don't spend that money, leave it investing for the
time being. And you might want to even slow down
your investing for now in order to enlarge your cash
cushion if that home purchase is a high priority.
Speaker 5 (32:31):
Right.
Speaker 1 (32:31):
I'm not sure how much you have in liquid savings, right,
that's not invested, but that's the bucket I think you
want to prioritize for the next house purchase, so that
I don't know, maybe you could avoid selling some of
those positions at some point.
Speaker 3 (32:42):
At a potentially an opportune time, right.
Speaker 1 (32:45):
Right, Yeah, the more cash you have on hand, the
more likely you will be able to keep those investments
in place. And obviously, Matt, everybody knows this. Home prices
in southern California can be incredibly expensive. Buying instead of
renting there is going to cost you quite a bit
more on a monthly basis, especially these days.
Speaker 3 (33:01):
So factor that in.
Speaker 1 (33:02):
You'll also get to participate, yes, in the upside of
appreciation in that market. But buying it's ultimately a personal choice.
I just want Jose to know it's not a necessity
for wealth building. He said, he just signed a new lease,
and if owning that home is not a massive priority,
he might be able to build more wealth overall by
continuing to rent, if he's so inclined, and then just
(33:25):
investing more in the market and in other potential endeavors.
Speaker 3 (33:29):
That's right, man, all right, that is going to do
it for today.
Speaker 4 (33:31):
Thank you for listening. We appreciate your time and attention.
We'll see you back here next week.
Speaker 1 (33:36):
You've been listening to How To Money with Joel Larsgard.
You can always hear us live on KFI AM six
forty twelve pm to two pm on Sunday and anytime
on demand on the iHeartRadio app.
K if I Am six forty. You're listening to how
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel Lar's Guard and Matt Aultmix.
Speaker 1 (00:59):
K IF I Am six forty Live everywhere on the
iHeartRadio app.
Speaker 3 (01:03):
This is how to Money.
Speaker 4 (01:04):
I'm Joe Larsgard and I am Matt Altmix. If you
are over on Facebook and you want to join a
group of like minded folks who have money questions and insight,
please go ahead and join the how to Money Facebook group.
Speaker 1 (01:16):
But now let's get to the Ludacros headline of the week.
This one comes from the Free Press and the headline reads,
the World Happiness Report is a sham and did you
see that come out this week? And all the headlines right,
I did? I did, and I was. I don't really
care about this stuff much, but this article was super
fascinating because it was basically saying, hey, this World Happiness
(01:37):
Report is complete bunk, and they talked about the methodology
behind it. I think it's worth covering here largely because
of like the how much news coverage you got. But
the Scandinavian countries, of course, we're again at the top
of the heap. Finland topped the list for the third
year in a row. I am of Norwegians descent, so
I like to believe that my people are happier, but
I don't know that that's actually true. So the US
(01:59):
moved down the list. We now said at twenty fourth
in world happiness, which, yeah, it perpetuates. I think a stereotype,
both negatively of US and positively of some of those
Scandinavian countries. But this Free Press author dug into the
methodology to see what was going on behind the scenes,
like why is this happening? And he found that there
was essentially zero sophistication to this survey, that the sample
(02:22):
size is tiny, and it's one single, poorly worded question
is used in an attempt to determine how happy people
are in a given country.
Speaker 3 (02:32):
You should read the piece for full details. We'll link
to it in the show notes. It does not seem
very robust, No, like that's that's what we're to say
the least.
Speaker 1 (02:39):
But so if I say to say, I think our
conceptions of Scandinavia, maybe aren't the same as reality. And
you know, when we think, oh, they're so much happier
than we are, I think it creates this comparison game,
and I think a deeper dive would probably reveal a
much smaller disparity.
Speaker 4 (02:54):
Yeah, I think a more specific assessment would deliver perhaps
different results that might not fit are the preconceived notions
that we already hold. So we're kind of like stepping
up to the plate for America here for a second,
is what we're doing in this report.
Speaker 3 (03:08):
It just gets so much press without having much rigor
behind it.
Speaker 5 (03:11):
That.
Speaker 4 (03:11):
Having said, it's probably worth discussing though, the relationship between
money and happiness for a second, because inhabitants of richer countries, well,
they do tend to express higher levels of happiness than
folks in poorer countries. However, there are loads of unhappy
rich folks, and there's also a slew of really happy
non wealthy people, and vice versa. Growing national wealth, it
(03:33):
doesn't necessarily mean that the happiness line is just going
to go up into the right. How wealth actually impacts
happiness is really hard to pin down. I think, if
you want our view in a nutshell, I think having
more money. It can buy you more freedom. We're all
about talking about financial independence and optionality. It allows you
to be more generous as well, but it's not.
Speaker 1 (03:54):
Talked about with Derek recently on the show. Yeah yeah,
how much happiness that kid?
Speaker 4 (03:58):
How much good can you do you? Yeah, with that money.
But it's not going to change the core of who
you already are. It's more of an amplifier of the
things that you already believe. So that being said, if
you think you're going to be happier when you double
your income or when you double your net worth, I
think this is highly unlikely. It doesn't mean that these
aren't good goals to have, but just don't pursue them
(04:19):
to the exclusion of the real things that truly produce happiness.
And one key insight from the World Happiness Report that
I can totally one hundred percent get behind man.
Speaker 3 (04:28):
Here's a quote.
Speaker 4 (04:29):
Those who share more meals with others report significantly higher
levels of life satisfaction. This is true across ages, genders, countries, cultures,
and regions, which, oh my gosh, yes, like what it
is that we spend our money on, that's what matters, right,
You continue to spend your money on cheap crap from
the internet that you're that's going to end up in
(04:51):
the trash. Yeah, no, wonder you aren't happy that that
is not leading to higher levels of happiness. But when
you spend your money on things that provide more community.
For instance, you know, we come down hard on going
out to eat, but let's say you're going out to
eat with some friends, or you're meeting up for drinks,
or you're even just getting coffee.
Speaker 3 (05:07):
That's even more affordable.
Speaker 4 (05:08):
Things that enrich community, joining us social club or going
on a vacation together. We were just jold talking last
night with a friend of ours who is going on
vacation with another couple. So pump for them. I'm like,
you've got to go on this, don't. They're a little
worried about the kids and how they're gonna feel about
them leaving, you know, just anxiety things like that.
Speaker 3 (05:27):
But like, those are great.
Speaker 4 (05:28):
Things to spend money on. And it totally aligns too
with the Harvard Happiness Study. Eighty five years of data
points to the fact that the number one factor that
leads to higher levels of happiness in these in these
individuals that they've been studying and they've expanded this out
to also their families, So it's not just these original guys.
Are the friendships that they're able to have and maintain,
(05:49):
So keep that in mind.
Speaker 3 (05:50):
Yeah, it could be.
Speaker 1 (05:51):
Going out to you, but it could just be inviting
someone over to your house for a meal. That's a
whole lot cheaper to cook. Yeah, even if you're cooking
for someone else, or a hike, a walk. I mean,
those kinds of things are free. Yes, it can be
so basic, but yeah, it's amazing how connection with others.
Speaker 3 (06:04):
There's even a Box article.
Speaker 1 (06:06):
Out right this week, Matt about how introverts should force
themselves to become extroverts a little more frequently because it's
gonna it's gonna increase their happiness levels. Like they're may
be a little anxious about it on the front end,
but afterwards they do report higher levels of happiness. I
believe it because relational connection. It's it's the secret sauce
(06:26):
behind happiness.
Speaker 3 (06:26):
So important.
Speaker 1 (06:27):
Not that money doesn't play a role, but I think
its role is a little overstated.
Speaker 3 (06:32):
Totally agree.
Speaker 6 (06:34):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (06:41):
If you have a money question, We'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com forward slash ask.
Speaker 1 (06:54):
Now we get to the Facebook question of the week.
This one comes from Zaan. He said, I almost wish
I did. I didn't learn this, but I found out
recently that there is an option to cash out my pension.
Not attractive option, but it does bring up a question.
Is there any reason to include that value when I'm
listing personal assets such as for a loan application or
when calculating net worth?
Speaker 3 (07:15):
Oh, time to cash out?
Speaker 4 (07:17):
Well, this is something I feel like you can speak
to this a little bit when it comes to You've
got some personal experience when it comes to some very
recent pension.
Speaker 1 (07:25):
Yeah, yeah, yeah, So, I mean I think it's interesting.
Zane basically said, it's not an attractive option, but it
might be an attractive option. It's worth at least thinking
through the pros and the cons and running the numbers.
And so I did that recently because I got sent
a letter from my former employer about my pension and
they basically said, hey, you can take this lump sum
(07:45):
or here's what you would get paid when you turn
sixty five on a monthly, ongoing monthly basis. And because
I had the option of rolling that into a traditional
ira or into a roth ira and then paying a
little bit of that paying the tax, I decided the
best thing for me was to roll it into a roth,
get more money into the roth, pay the tax now,
and then hopefully watch that money grow to become substantially
(08:08):
more than what it otherwise would have become had I
just waited for that pension payment to start right twenty
five years down the line. But I think, Matt, a
lot of people who opt for a pension lump sum.
Maybe there's a lot of hoops you have to jump through,
and you have to do it the right way, and
you have to make sure you get it into the
right account, and you have to know what is possible
(08:29):
from a tax perspective when you take that lump sum.
If you don't do it properly, you could be creating
more of a financial headache for yourself of a liability, yeah,
than a benefit.
Speaker 4 (08:40):
Yeah yeah, I think I mean one of the reasons
you do this is because yes, it could perform better
in your capable hands, and so actually run the numbers
see what it could do. A reasonable goal would be
that your lump sum if you, let's say, invested in
a total stock market or an SP five hundred fund
earning average returns, whether or not it would lead to
more income and retirement. I think that's a good goal
(09:01):
for you to have for that money. Granted, this is
a return that's not guaranteed, which is unlike your pension,
and so I would want to think through the pros
and cons there. Like these are the two schools of
thought that I'd be bouncing back and forth between.
Speaker 3 (09:15):
Schwab.
Speaker 4 (09:16):
They actually have a pretty awesome calculator that will link
to in the show notes for this episode that will
help you to get an idea of the rate of
return that you would need to get investing on your
own in order to make cashing out worth it.
Speaker 1 (09:28):
Yeah, and then you asked the question, should use your
pension in your net worth calculations?
Speaker 3 (09:32):
I think you can.
Speaker 1 (09:33):
I never did, but mine was also small, like right,
it wasn't some epic amount. Others might want to depending
on how much their pension is worth. I think the
best way to do that is to figure out what
your likely annual pension amount will be and then to
multiply it by twenty five. I think that's roughly what
it's going to be from a net worth perspective for
you down the road. You should certainly factor it in
(09:56):
for retirement planning. But they're also downsides, I think to
including your pension in your net worth right because you
might overestimate your assets, you might underprepare in other ways.
Speaker 3 (10:04):
That's that's what worries me. Yeah, is thinking baking on
this thing, and yeah, maybe it doesn't pay.
Speaker 4 (10:09):
Out the way well, And just how I think about
net worth, it has to do with how much money
I have now, Like I'm less interested in my future
net worth because like that may or may not happen
depending on what the market's gonna do.
Speaker 3 (10:19):
And so counting them chickens for the hatch, Yes, exactly.
Speaker 4 (10:21):
And so if I were going personally, if I was
going to consider a pension, I would consider the lump
sum cash out for my net worth calculations in the
here and now.
Speaker 3 (10:31):
But and even then I would only assume the most.
Speaker 4 (10:34):
Conservative of projections when it comes to you know, what
that number might be well, because the truth is, unlike
money you've saved up in retirement accounts, now, the pension
is not liquid, right, It's gonna it's gonna pay out
monthly as stated once you reach retirement age, and if
your employer has financial issues, your pension amount could be reduced,
So you might be counting a chicken that doesn't hatch.
Speaker 1 (10:53):
And so yeah, that's also something to keep in mind
if your employer is struggling. Not that that's a possible ability,
and that's just I think another reason that to at
least consider taking the lump stone pension amount if it's
offered to you, Matt, you use the term capable hands.
I like that, like if you if you feel like
you are capable of using that money effectively and investing
(11:15):
it for your own future, you'll likely perform better and
do better than the pension would on your behalf.
Speaker 4 (11:20):
Yeah, and the other thing he mentioned too is that
should he list this out like when like, for instance,
with a loan application. I I don't see the advantage
of doing that either, because, like, if anything, what that
might do is cause a lender to think that you
are more credit worthy because of the fact that maybe
you've got additional assets on the books, and I think
there might be a slight temptation to borrow more than
(11:42):
you should because, like bottom line, I think a good
rule of thumb is to borrow less than whatever than
what any lender is say that you are, that you're
good for, and so by having more, you know, more
on paper, it's like, oh, actually, you know, let's just
say it's for a home or something like that. Actually,
you are going to be approved for six hundred and
fifty thousand dollars loan. I was gonna bump that thing
(12:02):
up to eight hundred because we see that you've no no, no,
see I don't like yeah, yeah, I don't.
Speaker 3 (12:06):
I don't like that. Although I would.
Speaker 4 (12:08):
I think this is just a there's a small chance
that this would happen because typically they're looking at your income.
They don't really look at like what you're asked like, yeah,
they should be looking.
Speaker 3 (12:16):
At your assets usually decked income ratio.
Speaker 4 (12:18):
Yeah, that's exactly like you wanna you want to credit
limit increase on your credit cards? What are they asking about?
They're asking about your income. Actually, they ask about your
if you own a home too, and what your primary
mortgage is. Oftentimes, but they should be considering your assets,
because I feel like that's more indicative of your capacity
to sacrifice, to defer, pleasure, to invest in, to sock
(12:38):
away money. But instead they just care about what you're
going to earn that year. They're using a more basic metric.
They're just looking at the near short term. Yeah, but
even if they do take that into account, I think
it can only have the potential to get you in trouble.
Speaker 3 (12:51):
Agreed.
Speaker 1 (12:51):
All right, let's get to another question. This one comes
from TJ in the how to Money Facebook group. He said,
frugal are cheap churning Jim free trial memberships with no
intention of signing up. I like the community aspect of
working out in a class with other people, but I
also work for a nonprofit where I don't take home
much money, So I'm good with just running jump roping
and doing workout routines from dareb dot com, which I've
(13:13):
not heard of before. I've heard of them in my bedroom. Well,
of course you have. So is that frugal or cheap?
Speaker 3 (13:19):
From TJ? It completely comes down to how he goes
about doing this.
Speaker 4 (13:23):
Okay, you know, like you know what it makes immediately
makes me think of it makes me think of the
free samples at costco, the taste tests, and if you
walk up to that nice person there manning that little booth,
that little table, the little card table there with a
little air fryer or what or whatever it is that
they're doing, and if you like look them down in
the eyes and you're like, I'm not going to buy
any of this, but let me have a taste, that's
(13:44):
like a total jerk thing to do. You might be
thinking that, but you can't say it out loud, right.
And the reason I think it's okay to think that
is because it is up to them to convince you otherwise.
Like if there are free samples, if there's a free
taste test or something like that, it means that that
manufacturer or that business owner, whoever it is, they believe
enough in their product to convince you otherwise when you
(14:06):
have made up your mind that this is not something
that you're going to partake in, but they're willing to.
Speaker 3 (14:10):
Give you a little taste of it for free.
Speaker 4 (14:12):
Knowing that, well, in this case of the gym, knowing that, man,
our members are so awesome, you're gonna want to come back.
Our coaching is so top notch, that you're not going
to be able to live without it. Whatever it is
that they think they're gonna be able to attract you
in with is up to them to sway you. And
so you might think that there's no way I'm not
going to join the stupid it's so expensive, or I
(14:33):
do this stuff at home for free, but you can't
say that out loud, and it's up to them to
convince you otherwise.
Speaker 3 (14:38):
See that's what I think.
Speaker 1 (14:39):
That's exactly where I was going to be ready to answer,
because I think that's the whole reason people off for
free trials, just because they think you're gonna love the
thing enough that you're gonna stick with it. And so
you might say, I'm going to sign up for the
Netflix seven day free trial, but I'm not giving them
my money, and then you might get hooked on I
don't know, it's good game or something like that, whatever
they're showing.
Speaker 3 (14:58):
I don't have Netflix these days.
Speaker 1 (14:59):
I've had Netflix on long time, whatever it is, And
I think that's true. Like TJ has to be ready
to one either cancel the free trial in time before
he gets charged if he's not interested in sticking around.
That would be I think cheap if he wasn't. But
on top of that, be ready to fall in love
with the thing that you're checking out because it might happen.
Because it might happen, yeah, and it might be worth
(15:20):
the money, even though right now you don't think it is.
I remember signing up for a Discover bank account map
because there for like a three hundred dollars bonus, and
I was like, oh, this is really easy, Like the
hoops are not that significant. I just have to like
have the account open for sixty days with a certain
amount of money in. It was like all they want
is my first name, that's right. It was so easy,
and I was like, three hundred bucks, this is great.
It's way easier than like some of the big physical
(15:41):
banks want, Like I don't know, you have to go
into the branch. It's so annoying. And then I ended
up saying, well, this is a great interface. Yeah, this
is a good bank. And I've been with Discover from
many years since. So what I thought was playing the
system that was gonna be temporary. I got played, but
not in a bad way because it's a great product,
but that costing you anything, But it might end up
costing TJ.
Speaker 4 (16:02):
Right, And that's the thing I think, like, I like
what you said about being prepared to potentially pay, and
you might think, well, guys, because he mentioned that he
works for a nonprofit, and he's like, hey, I can't
afford that, but you might love it so much. You
might get creative with your expenses. You might do some
budget rearranging because now all of a sudden.
Speaker 3 (16:18):
This is such a high priority for you.
Speaker 4 (16:19):
You you found your people. It kind of reminds me.
You remember, at some point we talked about I think
it was on a Friday flight, about a girl who
hasn't paid for eating out, hasn't paid a restaurant bill
in like two years, and it's because she goes on.
Speaker 3 (16:33):
Dates for free.
Speaker 4 (16:35):
They're not free dates that well, I mean, I guess
technically they are, but she goes on dates and they
pay for dinner. And I think it was a fouler
cheap then, because it kind of feels deceptive, right, But
I remember, even at that point in time, I remember
thinking the same thing. It's like you might be thinking
or saying to yourself that there's no way I'm going
to be into this dude. But in fact, after meeting him. Oh,
he's got a great since of humor. But you get
(16:56):
to know him and then all of a sudden, that's
what happened with my wife. Then you get tricked. Yeah,
and you've been married for fifteen years.
Speaker 7 (17:03):
Right.
Speaker 4 (17:04):
See, that's that's what these these gyms are banking on
TJ and so I don't think it's it's cheap at all.
Speaker 3 (17:10):
I think it's a frugal move. But yeah, like Joel.
Speaker 4 (17:12):
Said, be prepared to start to start paying a monthly
fee in order to access those services, no doubt.
Speaker 1 (17:18):
All right, Hey, we got more money saving information to
get to.
Speaker 6 (17:22):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (17:28):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group. Let's talk about cars for a second,
Matt and car insurance as well, because analysts in the
insurance space they're warning that insurance costs are about to rise.
Obviously that's already happening, but we're not just talking about
(17:49):
general inflation related price hike. Stat is something that we've
seen anybody who owns a home or a car has
gotten a notice from their insurance company and they're like,
ex's defensive. Well, Tesla owners specifically will be paying more
because of the vandalism that's been happening at Tesla dealerships
and Tesla cars across the country, just to individual owners.
(18:11):
I heard someone Matt recently talk say that they got
stopped by someone and they were like knocked on the window.
Speaker 3 (18:17):
He rolled down the window and they're like, you need to.
Speaker 1 (18:18):
Get rid of that car man, like in like a
threatening way, which is just kind of difficult to imagine
someone you don't know doing that to you. Elon Musket
Horse has not made himself a subject of empathy in
this country. Quite the opposite. I think his seeming neglect
of his company too. It's led to a massive decline
in market value. And then other electric car manufacturers, like
(18:42):
BYD in China, they're announcing amazing innovations, and it just
seems like Elon's taking his eye off the ball a
little bit here. I think what BYD says they can
charge their evs in five minutes now, which is insane, but.
Speaker 3 (18:55):
Five minutes gets you two hundred and fifty miles. Yeah,
that's crazy. Yeah, but like that in the US, Yeah,
I know, right, But Elon.
Speaker 1 (19:01):
And then Tesla by proxy, they've drawn the ire of
Americans who don't like what Doach is doing, and the
consequences are piling up in Some of those consequences for Tesla.
Speaker 3 (19:09):
Owners in particular, could be higher insurance rates.
Speaker 4 (19:12):
Yeah, it seems like all the currents are currently against
Tesla right now, and also Tesla owners, you know, because
it's not just the shure rooms, but private owners are
having their Tesla cars burned, painted the faced and evs
are already more expensive to ensure because of the high
cost of replacing the batteries. But if your Tesla is
also seen as a political symbol, there is a higher
(19:33):
likelihood of.
Speaker 3 (19:33):
It being vandalized, which could lead to an insurance claim.
Speaker 4 (19:36):
Insurance companies are likely to, I mean, we'll see I
guess like they are likely to raise premiums higher on
Tesla owners, specifically to deal with an increase in expensive claims.
But as we've seen with the way that insurance markets work,
it's something that has passed on to everyone at a
certain point.
Speaker 3 (19:53):
And it's one thing for Elon's.
Speaker 4 (19:54):
Actions to have personal financial and business consequences. But it
just sucks to see folk who just went out there
and you know, they bought a Model three for environmental
or economic reasons. Kind of they've been forced into the
public the political fray to a certain extent.
Speaker 3 (20:09):
I think a lot of those like, they're like, I
didn't even I'm not trying.
Speaker 4 (20:12):
To make a statement here, guys, I just wanted to
aw some car, right exactly most people, and we've talked
about the financial realities of buying a Model three versus
even something like a Toyota Corolla, and the Toyota Corol
used to be the cheapest car in the United States
essentially to own and operate, and the Model three has
kind of become that, even though it's got a higher
initial sticker price, and so a lot of people are saying,
oh cool, this is going to lower on a monthly costs.
Speaker 1 (20:33):
I'm not paying for gas, and it's a good ride.
I like driving, and they are kind of fun to drive.
They just weren't assuming that it was going to draw
you know, political eyeballs because of what's happening in Washington
right now. Matt, we should talk to while we're on
the car note about tariffs, and we've talked about tariffs
before on the show, but now the President introduced twenty
five percent tariffs against imported cars into this country, and
(20:58):
this is supposed to.
Speaker 3 (20:58):
Take effect to April three third.
Speaker 1 (21:00):
It's kind of hard to know, I guess in some
ways how to talk about tariffs on the show, because
there were tariffs that came into being that got drawn
back quickly or that were announced that we're pulled back
before they've been implemented.
Speaker 3 (21:12):
And that stents made to certain companies or certain sectors.
Speaker 1 (21:15):
A lot of tariff whiplash going on because and that's
been really hard for businesses to figure out, well, how
do I what do I do when when tariffs are
being touted but then not necessarily brought to bear. And
some estimates are saying that price hikes on new cars
could be in the six to twelve thousand dollars range.
Speaker 3 (21:36):
If if these tariffs come through.
Speaker 1 (21:39):
And as a friend of the show Kyla Scanlon put it,
she put she said, chaos is expensive, and I think
we're bearing the fruit of some of that political chaos,
political chaos, and how much it's it could cost us
if these tariffs actually do come through, we are going
to see not just higher prices on new vehicles, but
second and third order effects of those tariffs, which could
which is going to mean more people instead of going
(22:01):
to the new vehicle, they're going to the used market.
Used card prices are going to go up to and
then even think about folks working in the auto sector,
we could see more layoffs or furloughs of employees too
in that space. So we'll see. I don't know if
these terrorists are actually going to be implemented, but if
they are, or if they're just threats.
Speaker 3 (22:18):
Stuff to know.
Speaker 4 (22:19):
And I think it depends on which side of the
aisle you've fall into as to whether or not you
think that these are going to be a good thing
or not. But I don't know from an economist state,
and we've talked about this, right but from most economists
are like, no, this is going to be pretty terrible
for the economy.
Speaker 3 (22:31):
Prices will go up. Tariffs.
Speaker 1 (22:33):
Are economists on both sides of the aisle ten to
agree they're a terrible thing for consumers?
Speaker 3 (22:39):
Yeah.
Speaker 4 (22:39):
One thing most politicians though, are agreeing on right now
are rate caps on credit cards. Politicians on both sides
of the aisle. They tend to think that curbing credit
card interest rates to a maximum of ten percent, that
that will help they're hurting constituents. But they are wrong,
because while this sounds kind and nice, it's going to
be bad on so many levels. The unintended consequences. The
(23:02):
negative outcomes could be significant, including no credit card access
for folks who don't have high credit scores, leaving others
to lean on even worse lending products. CNBC reported that
ninety five percent of subprime borrowers wouldn't have access to
a credit card anymore because somebody.
Speaker 3 (23:20):
Let that go.
Speaker 4 (23:21):
You know, yeah, they go to paid loans, and they
go to worse title loans.
Speaker 3 (23:25):
Yeah, like, come on, they don't want that.
Speaker 4 (23:27):
Credit Card companies would likely increase other fees as well,
and so this is again something that would impact everybody. So,
you know, what sounds like kind of a nice thing
to do would do real damage to the economy. So
I'm hoping that this effort at bipartisanship actually fails, because yes,
I am not a fan of a twenty five percent
credit card. I don't want you paying that, but a
(23:47):
ten percent rate cap could surprisingly to many.
Speaker 3 (23:51):
I think it could actually be worse.
Speaker 1 (23:52):
And I think that's the thing that doesn't get discussed
after it, is the downstream effects of a decision like that,
because it is something that sounds coming out of a
politician's mouth. Yeah, Hey, I've got credit card debt and
I'm paying twenty three percent of visa MasterCard. This sucks
and it's gonna take me forever to pay off this debt.
Speaker 4 (24:09):
Because of that, everything has a tertiary effect or secondary effect,
Like there are things that was is the butterfly effect,
butterfly effect, I've never I've never watched that movie. But
when that all about like one small thing, like is
a long time the beat of a butterfly race, Like
the difference in that and just the downstream effects are significant.
Speaker 3 (24:24):
And I think if we're.
Speaker 4 (24:26):
Gonna say temper political scorekeeping that everyone is engaged in,
like all they want to do are they just want
to get the wins and here and now, and they're
not at all looking at our country or at the
economy more holistically.
Speaker 1 (24:36):
Yeah, I couldn't agree more. All Right, We've got more
to get to On today's show.
Speaker 6 (24:40):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (24:46):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (24:51):
All right, let's get to another question. This one is
about paying off a mortgage.
Speaker 7 (24:56):
Hey Joeln Matt, this is Jose Gonzalez from Wilmington, California,
small neighborhood in southern California.
Speaker 3 (25:03):
I had a question.
Speaker 7 (25:04):
Regarding a mortgage loan on a rental property. My question
is should I pay it off or should I continue
to collect the rent and let itself pay off. I
currently have savings of three hundred and thirty seven thousand
in low cost ETFs and have been saving for quite
(25:25):
some time now, hoping to buy a home here in Southern.
Speaker 3 (25:29):
California one day.
Speaker 5 (25:30):
However, I don't like the idea of the debt hanging over.
Speaker 7 (25:35):
My head during this process.
Speaker 5 (25:37):
I currently have about one hundred and ninety three leftover
in the mortgage, so i'd have enough to pay for
it and get rid of that debt. As you know,
homes in so cal are expensive, so that's why I
have such a big chunk of change. I just signed
a twelve month lease and I am being very very patient.
(26:00):
So I guess the idea of renting has had me
thinking of buying soon. Anyways, I love the show. Thanks
for everything, guys.
Speaker 4 (26:10):
Okay, so when he said he's got savings of three
hundred and thirty seven thousand dollars, I was like, what, Jose,
But then he quickly followed that up with that they're
in low cost ETFs.
Speaker 3 (26:22):
He's got that money invested.
Speaker 4 (26:23):
He's calling it his savings, but he has invested those dollars.
Speaker 3 (26:28):
That looks a lot different. But there is a lot
to discuss with your question, Jose.
Speaker 4 (26:32):
So let's start off by discussing mortgage payoff, because we've
been pretty consistent advocates for not paying off your mortgage
if you have a locked.
Speaker 3 (26:41):
In low rate.
Speaker 4 (26:43):
I think he mentioned that he purchased this one back
in twenty nineteen, so yeah, he's locked in hopefully at thirty.
Speaker 3 (26:49):
Years for a really nice low rate.
Speaker 4 (26:51):
Yeah, and inflation and higher savings rates are only making
that low cost debt.
Speaker 3 (26:55):
Look better by the day.
Speaker 4 (26:57):
And there's also lots of value to be had by
my having morequidity as well.
Speaker 6 (27:01):
Well.
Speaker 3 (27:01):
I think we'll address all these things I just touched
on here.
Speaker 1 (27:04):
Yeah, yeah, no, I agree, And yeah, the only exception
to that answer of not paying off the mortgage is
typically if that money was going to blow a hole
in your pocket otherwise. But that doesn't sound like it's
the case for Jose, And I guess like there are
certain other reasons you might want to pay off your mortgage. Really,
if it's it's a personal preference, so as well, it's
just not our personal preference, and so we highlight that
(27:26):
because it's our show. But it also sounds like you're
in the wealth building phase of your life, Jose. If
you were in your sixties, right and you wanted more
financial certainty as you entered your retirement years, the discussion
would also be different. We might, you know, push you
a little more towards mortgage payoff just because of where
you're at in the grand scheme of things. But you've
likely got so many years ahead of you to make
savvy financial moves to grow your net worth, including buying
(27:49):
that primary home. And so if you pay off this mortgage,
you might find your ability to grow your net worth
it's actually hurt by prioritizing debt payoff.
Speaker 4 (27:58):
Yeah, that's right. And if you decide to pay off
that debt, it would increase your cash flow. That's that's
certainly a nice perk. But if let's say another investment
deal came along, something that you were made privy to,
well you might not have the capital to jump on it.
Speaker 3 (28:12):
Imagine.
Speaker 4 (28:13):
So sounds like so his first property ever purchased was
an investment property he's been renting. Imagine if you come
across like the perfect house hack. Let's say you came
across just this sweet duplex or triplex or a quadplex,
and your you know, the dollar signs are in your eyes,
not only because you see the potential, but also because
it costs you a whole lot of money.
Speaker 3 (28:31):
Oh but too bad.
Speaker 4 (28:32):
You used all the money that you had in order
to pay down that previous mortgage, and now you don't
have enough on hand for a competitive down payment or
even something above and beyond in order to make you
look like a more attractive buyer to the potential seller.
These are all things that you want to want to
keep in mind. That's the liquidity aspect that I touched
on earlier. But another downside of paying off this debt
(28:53):
would be paying tax. And it sounds like the money
that you'd be using is in a taxable brokerage account
and it's highly likely that you would have to pay
capital gains tax in order to access that money to
pay more to the mortgage company. This is a situation
we're trying to diminish your debt where it could lead
to an unnecessary tax bill and likely just I mean
(29:15):
a fairly substantial tax bill as well as he's trying
to get his hands on those funds in an attempt
to alleviate this debt.
Speaker 3 (29:23):
That isn't all that terrible.
Speaker 1 (29:24):
Yeah, Yeah, And again we don't know the exact mortgage
interest rate. We're assuming that you have a mortgage rate
that starts with a three, right, And if that's the case,
then that's our advice for people Matt who took out
a mortgage within the last year and their mortgage rates
upper six is low sevens. Like, there's different advices, a
different story.
Speaker 3 (29:44):
Yeah, that's not what I'm hearing though, No, And I.
Speaker 1 (29:46):
Think part of what makes real estate also a compelling
investment is the ability to use leverage Wisely, if you
had to save up and fork over one hundred percent
cash to buy a rental property, the investment just wouldn't
be nearly as attractive, and almost nobody would partake. It
would take forever to save up, and your profit potential
would be greatly diminished. And on the flip side, many
(30:07):
real estate investors have taken on too much leverage and
they've hurt their finances because of it. Right, They got
out over their skis and their debt load is just
it's too heavy of a burden for them. So there
is it's important to highlight both risk and reward when
using leverage. But Hose, that's not you, right, Like paying
off the mortgage would mean you're going the de leveraging route,
(30:29):
and I just don't think you need to do that,
given where things stand with your finances and how smart
you've been in building up wealth. It's not like your
your asset poor, it's not like your light on cash
and the only way to have some liquidity is to
sell this place. You've made a bunch of other smart moves. So, yeah,
de leveraging, there are pros and cons to going that route.
(30:52):
I just don't think you're maybe at the place in
your financial journey where it makes sense to deleverage.
Speaker 3 (30:58):
Yeah, I don't want to hold on to that low
cost debt for now.
Speaker 5 (31:00):
Yeah.
Speaker 4 (31:00):
Well, especially because I didn't hear him say anything about
retirement accounts. It would be different if he also came
in and said and said, hey, guys, I've got this.
You know, my net worth is at this level. I've
been maxing out my four one K my roth iray
for this many years, for a couple of decades. Even
that would be a different story. I would have a
different answer. But I didn't hear him saying anything about that.
(31:23):
He sounds financially savvy, like I got a feeling that
he's he sounds debt averse, like he doesn't want to
have debt on him. But I don't hear him saying
he's risk averse. So I don't hear him not investing
those dollars. I mean, well, he is investing those dollars.
He mentioned the low cost ETF, so I think he
has plenty of money socked aside. I assume he's maxing
out his retirement accounts. But Jose, if you're not absolutely
(31:45):
do that first. Those are table stakes. And instead of
having to jump through these hoops of buying a property
that may or may not go up in value, that
where you can or can't find a tenant who's willing
to sign for twelve months for a tenant who might
be a nightmare tenant.
Speaker 3 (32:02):
Like these are all prerequisites to get you.
Speaker 4 (32:04):
To the point to where you might see an average
or slightly higher than average return on your money.
Speaker 3 (32:09):
But you don't have to do any of those things, zero.
Speaker 4 (32:12):
Prerequisites in order to experience that kind of return by
just simply investing in the market.
Speaker 1 (32:16):
Yeah, I think when it comes down to it, don't
pay off the debt is what we would suggest, but
also don't spend that money, leave it investing for the
time being. And you might want to even slow down
your investing for now in order to enlarge your cash
cushion if that home purchase is a high priority.
Speaker 5 (32:31):
Right.
Speaker 1 (32:31):
I'm not sure how much you have in liquid savings, right,
that's not invested, but that's the bucket I think you
want to prioritize for the next house purchase, so that
I don't know, maybe you could avoid selling some of
those positions at some point.
Speaker 3 (32:42):
At a potentially an opportune time, right.
Speaker 1 (32:45):
Right, Yeah, the more cash you have on hand, the
more likely you will be able to keep those investments
in place. And obviously, Matt, everybody knows this. Home prices
in southern California can be incredibly expensive. Buying instead of
renting there is going to cost you quite a bit
more on a monthly basis, especially these days.
Speaker 3 (33:01):
So factor that in.
Speaker 1 (33:02):
You'll also get to participate, yes, in the upside of
appreciation in that market. But buying it's ultimately a personal choice.
I just want Jose to know it's not a necessity
for wealth building. He said, he just signed a new lease,
and if owning that home is not a massive priority,
he might be able to build more wealth overall by
continuing to rent, if he's so inclined, and then just
(33:25):
investing more in the market and in other potential endeavors.
Speaker 3 (33:29):
That's right, man, all right, that is going to do
it for today.
Speaker 4 (33:31):
Thank you for listening. We appreciate your time and attention.
We'll see you back here next week.
Speaker 1 (33:36):
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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