August 17, 2025 • 32 mins
Joel's battle with Peloton's silly fees. Also, the housing market has slowed dramatically. Where do things go from here?
Ask HTM: A parent wants to know if they should be investing in their kids 529 plan...or if it's overrated.
In a policy reversal, medical debt is going to start impacting credit reports again soon.
Ask HTM: Listener wants to know if he should pay off his credit card debt with a HELOC.
Ask HTM: A parent wants to know if they should be investing in their kids 529 plan...or if it's overrated.
In a policy reversal, medical debt is going to start impacting credit reports again soon.
Ask HTM: Listener wants to know if he should pay off his credit card debt with a HELOC.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Kf I AM six forty. You're listening to how to
Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel lars Guard and Matt.
Speaker 3 (00:18):
Altmes KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 1 (00:43):
This is how to Money. I am one of your hosts,
Joelarsgard and I am Matt Alt Mixed. By the way,
you can always find more money saving information over at
howtomoney dot com real quick. So we bought a used
Peloton bike for Emily. She's like, we have this little
sun room that's right off are. That was your project
for this summer was to reclaim the sun room. The
(01:06):
kids had taken it over and we had to declutter,
and we wanted it to be more of a room
that that she and I get to used. I've got
my little sona tent in there, She's got I've got
my rolling machines, she's got a little peloton.
Speaker 4 (01:16):
I feel like the first thing that's going to break
on your portable sauna tent is the zipper. Yeah, so
far as held up surprisingly well. I can totally see
you go into unzip it or today and it's just
going to pull off, and you say, that's also.
Speaker 1 (01:29):
Why I got it a Costco because I was I
was looking at once on Amazon, but I was like,
got I got at Costco because the return policy is
much better.
Speaker 4 (01:35):
But would you feel how long, how many uses had
p would you put it through before you would feel
bad about taking it back? Because we've talked about it,
this is why we can't have my states at Costco
anymore because people abuse it. I'm probably getting to that
point where, yeah, if it broke today, that's my nine
months birthday, so yeah, not really that long six months,
So if it broke today, I'd be morally questionable. Yeah, okay,
(01:57):
sorry Peloton.
Speaker 1 (01:58):
So Peloton bought a used Peloton on Facebook marketplace for somebody.
Even though Peloton we talked about this, has their own
site for reselling used Pelotons now, but they're way more
expensive than buying it from the slew of people who
are selling their Pelotons on Facebook. The price has gone
down dramatically because everyone's trying to get rid of their
glorified code hanger that that is their Peloton.
Speaker 4 (02:18):
They're like, I've been tired of looking at this thing
for the press four years, so that I got back
in twenty one.
Speaker 1 (02:22):
Yes, when Emily's the age, she's been using it. She's
been enjoying it. But the one thing I was surprised
by and a little bit frustrated about when we bought
the used Peloton. You know what Peloton is trying to
do to siphon money from users. If you buy a
used bike, they want to charge you a one hundred
(02:43):
dollars activation fee for switching that bike over to another account.
Speaker 4 (02:48):
It is an activation fee.
Speaker 1 (02:50):
Yeah, so it was already activated by somebody else being used,
and you're trying to switch it over to be.
Speaker 4 (02:56):
Suited your name Apple. It's like you selling your phone
and being like, yep, i've wiped it here. Yeah, this
one's a totally factory reset, and the Apple being like, no, no, no,
we get a cut of that because somebody else is
going to know use it. It would be exactly like that.
Speaker 1 (03:08):
That's so stupid, Like, hey, I'm gonna sell my book
and then the author gets actually gets paid.
Speaker 4 (03:13):
We get more royal taste. Yeah no, that's not how
it works. How they use market works, man, utterally ridiculous. Yeah, totally.
Speaker 1 (03:18):
This is the kind of thing that only a brand
like Peloton could get away with where they've they're just
banking on rich customers who don't care about money, and
they're like, I guess this is just part of doing business, but.
Speaker 4 (03:28):
That's not what you did. Okay, give me the advocate
or yeah, some gravocate success story.
Speaker 1 (03:35):
You got to call in an advocate for yourself. This is,
by the way, if you want like a nerdy economist term,
it's called rent seeking. And this is totally that this
would be a great definition of rent seeking by Peloton
saying listen, we've already like got we've landed our hooks
into this territory and it's a way we can just
make extra money just fleecing people who don't deserve to
be fleeced. And it's pretty unethical also, but so I
(03:58):
called Peloton. I'm like, listen, we don't on a pain
his fee, Like, what in the world do we do
to avoid this thing? And it took talking to a
couple of different representatives. You just kind of have to
keep pushing the envelope to get them to finally agree.
Speaker 4 (04:10):
Love talking to customer service people.
Speaker 1 (04:12):
It's not my favorite I wish it was you're willing
to do it, but I'm willing to do it, especially
for a hundred bucks.
Speaker 4 (04:17):
So it was just a one time so you got
a waved Goda waved. Nice. Yeah, very nice dude. All right,
Well for all the folks. This is for obviously for
everyone other there who's thinking about getting the second hand peloton,
or you can just jump on the bike that you
already have m hm, right out there. The tradition, I
like prefer to ride on the street, the traditional bike
in the wild scenario or the winds blowing through your hair.
(04:39):
Emily and I differ in this regard. I bike. I
ride on my real bike. She ride. You get the
passion neighbors have a conversation with them, cuts down on
a missions because you're not driving your vehicle. Combine it
with needing to run an errand not to mention the
cost savings of the aforementioned benefits. I'll I'll let you
talk to my wife about it. Hey, I'll do it. Also,
maybe one of the things you're talking about with your
neighbors as you're riding past their houses, Oh, what do
(05:02):
you think about the so and so's over there? They
got their house listed for sales been sitting on the
market forever. There's one in our neighborhood. There's literally a
conversation I had with one of our neighbors, like what's
going on with it? It's like, Oh, hasn't been renovated recently?
You think the uh it's overpriced? Well, I think it is.
And I think that's one of the questions a lot
of folks are wondering, is like, has there been a
housing like bubble essentially and is it about to pop?
(05:24):
And I would say that it's it seems more like
a slow leak as like versus just like like a
sudden popping right less two thousand and nine, More its
own things exactly.
Speaker 2 (05:33):
Yeah.
Speaker 4 (05:33):
Yeah, numbers from almost every corner of the market out
there are showing asking price decreases. There is showing more
sellar concessions, inventory decreases as well. Home inventory increases more
I'm sorry on the market. Yeah, more homes are are
on the market, which, to be honest though, it's also
just returning back to like pre pandemic norm norms. Essentially,
(05:54):
we saw a significant decline and that was in large
part why why there was such an increase in housing prices,
but we're also seeing more cancellations after houses are going
under contract. Folks are basically getting cold feet during due diligence.
And this is such a far cry, dude, from a
few years ago. Home Owners obviously don't love seeing this,
(06:16):
and sellers, of course are not pleased. You know, like
back when there was an open house and buyers were
lined up around the block just to be able to
get in and see the place. It's not like that.
Speaker 1 (06:26):
You remember those calls for highest and best like two
years ago, three years ago, and the insanity of how
much people are willing to pay and bid up the price.
It was really unseen. I don't remember a time at
least in my life where.
Speaker 4 (06:39):
That was the case. Yeah, So I want to put
a note out there for a lot of folks who
have been thinking about purchasing a home because I think, dude,
this is my personal opinion. I think now is the
time to strike personally. So by okay, I do because
I don't think. I don't think we're going to continue
to see declient. So I this morning, I pretended to
be a chart analyst and I pulled up the I
was gonna say, how did you come what am I
(07:00):
basing this on? And I pulled up some data from
the FED. I was looking at the chart, and if
you look at just the trend, So if you look
at the median home price in the US from starting
from around nine twenty ten, and if you follow that
up to prepans so like around twenty nineteen, there's a
pretty consistent line U And then of course what you
saw slight decrease, but then you see it shoot up. Specifically,
(07:22):
a lot of folks are thinking about the last fifteen
years as when we saw these massive price increases. I
think all that was just kind of catching back up
to where things needed to be after the housing crisis.
Speaker 1 (07:33):
Price back in seven eight nine exactly like in twenty eleven, you.
Speaker 4 (07:37):
Could get a house for not much money. Yeah, and
so I think all that was relatively healthy growth. But
what we saw basically in the two years twenty to
twenty two, we saw a massive increase. It was COVID.
It all comes back to COVID. And if you draw
that line basically from nine to nineteen we are about
where prices should be. We saw it spike where we
(07:59):
got way ahead of the curve. And for the past
couple of years, two three years, we've seen prices basically plato.
They're starting to decline just a little bit, and it
depends on local markets. It depends on local markets, but
financing as well, and so I think personally, my personal
opinion is I would not be surprised if we see
mortgage rates come down. Right, if the Fed lowers rates,
(08:19):
which there is talk about that potentially happening next month
in September, I think that could be the first that
could be the starting line of the market opening back up.
Speaker 1 (08:28):
If mortgage rates go down, I think that will increase
buyer interest. I think you're probably right, and then maybe
the instead of declining prices, we do start to see
prices go up again, but just at a far less
accelerated pace.
Speaker 4 (08:40):
It will not be at the pace that we've seen
because that was just unsustainable. Yeah, totally agree.
Speaker 5 (08:46):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (08:53):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter.
Speaker 1 (08:58):
Let's hear from a listener who loves as kids, but
isn't sure he wants to save for them. Hey, guys,
thanks for taking my call.
Speaker 6 (09:05):
So my situation is I've got a high school junior
and a high school freshman, and course, like many adults parents,
we didn't start saving as soon as we could in
the five twenty nine, which I did start recently, But now,
because of my sense that the market is volatile, I'm
not sure if that's the best option.
Speaker 4 (09:27):
So I want to get your thoughts on that.
Speaker 6 (09:28):
But more importantly, I guess what I'm wondering is I'm
going back and forth between the idea of whether or
not to start saving as much as I can, in
other words, stop maybe putting as much in my retirement account,
which is pretty aggressive in that regard, So I think
if I pulled back a little bit, it wouldn't, you know,
be a traumatic thing. But thinking that maybe what I
(09:50):
could do is basically just have her pay for it
and use that extra money to continue to go aggressively
in the market, thinking that it's better to take out
a loan and probably pay it off at a lower
interest rate than the money I could extra money I
could make when my retirement account and just start pulling
(10:13):
that out. I'm sixty one, so it's not like I
would suffer any penalties in a few years if I
start pulling out other than just the regular taxes. So
that's in a nutshell, just kind of want to figure
out what's my best option at this late stage in
the game.
Speaker 4 (10:28):
All right, Thanks, all right, Joe, Let's get to Scott
and one of the things that he said, I think
he said something like, my sense is that the market
is volatile right now, and I think it is going
to be okay for him to pull back on how
much he's putting into the market. If he's been investing
a pretty large percentage of his income for a long time.
I just don't want to see him reducing his contributions
(10:48):
just because he's worried about a pullback because he's reading
the news, the headlines he's thinking about Like when you're
younger and you're just building up that wealth, you probably
aren't paying too much attention to what's going on, what's
the news and markets like Howard Tarriffs impacting the stock market.
But as you get closer to needing that money like
he is. He said he's got a freshman as well
as a junior, you start thinking about, oh, how oh,
(11:11):
what does that mean for this what does it mean
for that, Well, I missioned terrafs specifically, I'm thinking aback
to all the headline predictions about tariffs and the impact
of those on the economy. And you know, we're still
not fans of terriffs in general. I do think they
will certainly slow down growth. But the twenty percent pullback
that we experienced back when, back Liberation day, Joel, do
(11:31):
you remember this seems like it seems like it was
so long ago. Remember the fun signage that was held
out hier President. It was based on trade deficits, but
that pullback was I don't know, I feel like it
bounced back so quickly, and we've recently reached record highs.
This happens all the time. The volatility Scott that you're experiencing,
(11:53):
that is just the price of admission, And the higher
returns are just the reward that you get for dealing
with these greater levels of risk. And so I'm just
here to say, I don't know if this time, like
everyone always says, this time is different, I don't. I'm
proposing the idea that this time isn't really all that
different from all the other previous times.
Speaker 1 (12:12):
Yeah, And like will the stock market bounce back in
no time flat, like it did with COVID and like
it did with tariffs. No, maybe not, like there will
probably be downturns in the stock market and in the economy,
the last longer than what we've experienced recently, but still
like just pointing to being like, oh, it feels like
the market's more volatile than normal.
Speaker 4 (12:33):
I don't think it is.
Speaker 1 (12:34):
I think maybe it's it's easy as an investor who's
got your finger on the pulse to feel like that,
but I don't necessarily think that makes it true. Yeah,
And I really do think it's the older you get
to and the closer you start eyeing some of your
retirement goals or in this case, goals for his kid,
you start thinking about it a little more where you're
just like, well, shoot, actually, do I actually want to
take all the risk that is available, all the riskless
(12:55):
on the table? I used to say yes, give me, gimme, gimme,
but now it's just like, oh, maybe you know to
say no to seconds and he kind of likes slide
back from the table a little bit.
Speaker 4 (13:03):
At some point that's a smart idea to d risk.
Speaker 1 (13:06):
Right as you're getting closer to needing that money, which
brings me to the question at hand about saving for
your kids. I first just want to tell Scott not
to beat himself up for not starting a five to
twenty nine plan sooner. And this this might sound harsh
to other listeners, but saving for your kids really should
be a lower priority than your own personal retirement accounts.
And no, it's not because you don't love your kids,
(13:28):
but it's because there are so many other ways to
pay for a higher education. You know, we talked with
with Jocelyn Pearson back in episode eight sixty about getting scholarships,
and that's only one episode. We've had multiple episodes, many
episodes on paying for college. Ron Leber from The New
York Times on the show, there are so many different
ways to reduce the cost of college, to find other
(13:50):
ways to pay for college that aren't just like personal
investments in a five to twenty nine plan. But when
it comes to your retirement, sorry, that stuff doesn't exist,
and so that is priority, and it's not selfish to
suggest that. We just don't suggest making meaningful contributions to
five twenty nine accounts for your kids until you reach
money Gear's number seven, which if you look at them
(14:10):
on our website. That's the last money gear. So it's
very far along in the order of operations. If you
haven't done basically all the other priorities first, like you
shouldn't be doing it. There's just too many other financial
goals that take precedent.
Speaker 4 (14:23):
Yeah, let's take a minute two to talk about five
twenty nine accounts than just how much better those plans
have gotten. First of all, they have become more flexible.
You can even in time turn some of the contributions
into roth Ira dollars for them if it's in fact
not needed for their schooling. So because of that, we
like five twenty nine's more than we used to and
(14:45):
many of them come with just incredibly low cost investments.
But not every parent cares about that. Not every parent
wants to say for their kids retirement. And to be honest,
in your case, Scott, you don't want to invest the
dollars that you are contributing anyway because of how quickly
it is that you are most likely going to need
these dollars for your kids higher education.
Speaker 1 (15:03):
That's a good point you're talking about, like Scott getting
closer to needing the money he's sticking in his retirement accounts.
I mean, hopefully he's still got decades of retirement left.
But for his kids, we're talking about spending that money
actually in the fairly near future. You said your kids
are in high school, right, junior and freshmen, Well, that
means that investing that money would be too much of
a gamble, especially for that junior if you're gonna need
(15:25):
that money in a couple of years, or at least
some of that.
Speaker 4 (15:28):
Money, right, Yeah, freshman, maybe you can take some more
risks there, but yeah, definitely of the junior, right exactly.
Speaker 1 (15:34):
Yeah, I think with the freshman you might be able
to do a conservative mix of investments because you have
more years that you can let those investments ride. But
needing those funds in short order means investing doesn't make
much sense, and which means the five twenty nine account
doesn't make as much sense right now. I think the
only way I'd prioritize it is if you felt like
you were really ahead of the game as far as
(15:55):
your own personal and workplace retirement accounts, like, hey, I've
crushed it so well, that didn't though my kids are
this far along in high school, I guess I can
take my foot off the pedal and toss some money
in there. And the only other reason I would consider
it is if your state offers a sweet tax deduction.
Oh yeah, because if you live in a state without
any tax income tax benefits, I just don't really see
the point of putting money in a five twenty nine
(16:17):
hunt but account. But if you do, you can just
like literally consider it as a tax evasion vehicle and evasion.
Speaker 4 (16:23):
Yeah, I don't miss This is how you launder money, Scott.
It's it's a very legal way.
Speaker 1 (16:27):
But like we did that with some of Emily's yeah,
some emies grad school. We just like stuck it in
and took it out pretty quickly. It goes in here,
it sits there for a day. Yeah, that it goes
out of.
Speaker 4 (16:37):
Because we had to actually pay the school bill. That's right, buddy.
Speaker 5 (16:41):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (16:48):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group.
Speaker 4 (16:57):
A couple of years ago, I think it was back
in twenty three, Joel we talked about how medical debt
below a certain threshold wouldn't affect your credit. Well that's
no longer the case. So originally, back under the Biden administration,
the CFPP, the Consumer Financial Protection Bureau, they instituted a
medical debt rule that benefited millions of Americans out there
(17:17):
by not penalizing the credit for small medical debts. Yeah
less than five hundred bucks, right, Yeah, that's right. That
was recently overturned by a judge. But even still, credit
bureaus they have the ability to factor medical debt in
different ways, and all three are still not including bounces
below five hundred bucks, So that's good. It's not legally mandated,
(17:38):
but a choice that they're making. It's like a yeah,
And there's there's a lot of that actually that we're
going to cover today in different in varying ways where
there are there have been different recommendations perhaps or even
an executive order that's not necessarily enforceable by law because
it's not something that Congress is taking any action on.
But there's also a one year grace period before overdue
medical debt gets reported. So want we're putting this out
(18:01):
there as a nice little PSA. We want folks to
be aware and specifically as a want to go back
and listen to some of the different episodes that where
we've discussed negotiating medical debts. If you are finding yourself
in a situation where you're like, oh, my gosh, got
hit with medical bill that I was not expecting. We
don't have the money on hand for that. Even if hey,
even if you do have the money on hand like
Joel does, when it comes to some different fees that
(18:22):
these companies are hitting you with, it is always worth
negotiating and see if you can push back.
Speaker 1 (18:27):
I could pay Peloton hundred bucks, but I'm not going to.
And it's basically, well, it's been said to Matt on
the Credit Core Credit coore front that you are the
average of the five people you spend the most time with.
And I think there's a lot of truth to that,
right that we rub off on each other, I've learned
a lot being your friend. I think, I my what
my life would look like would be different if we
(18:47):
didn't hang out so much. It wouldn't be nearly as cool.
Speaker 4 (18:50):
Well, that's true, that's definitely true. And first, I wouldn't
know half of the Great musical artists that I know
because of you, as you're sitting there wearing your brand
new billy strings. And I'm sorry that I have not
even commented. I know you're excited about Glorious. I commented
on the one they had on yesterday. I wear a
lot of but this one it's purple. Yeah, it is
not a lot of men out there are rock and
(19:11):
purple purple tieie baby, I'm all for it.
Speaker 1 (19:15):
Uh yeah, Especial's not scared, especially when I'm supporting the
best guitarist of all time. Okay, but credit scores. This
new Harvard study of twenty five million people found that
financial habits are similar to other people who grow up
in an environment like yours. So you rub shoulders with
folks for eighteen years, and you're likely to have similar
(19:36):
credit scores and loan delinquency rates. And that's actually not
terribly surprising to me. There are, of course, like individual
examples of folks rising above their circumstances. But I see
this as another reason to get on the ground personal
finance education into neighborhoods that need it most, because one
of the toughest things about doing what you and I do,
(19:58):
Matt is realizing that there's a bunch of people who
grew up without any helpful personal finance advice and they're
probably not like on their podcast saying what is like
a good personal finance podcast that can help me out
at this point in time, it's just kind of off
their radar. Yeah, and so I think it's a good
call for us to surround ourselves with folks who encourage
us on money journey. But also it's just kind of
(20:20):
discouraging in some ways too to realize that there are
some people who are going to be more difficult to help.
It's going to be harder to find those people.
Speaker 4 (20:27):
I think a lot of those folks it's less the
advice and it's more that there's also just nobody in
their life who has lived it out essentially, right, Like
oftentimes we look to mentors or just others that we
can look up to. Actually, on that note, do you
see the report by USAA about gen Z. Everyone likes
to pick on gen Z and they're saying that like
half a gen Z's don't even know what their credit
(20:49):
score is or even like what can constitutes their credit score. Yeah,
they don't know how it's made up. And I appreciate
that USA is trying to shine light on the younger generations, right,
because like that's kind of what you were speaking to
as well, like making sure that we are doing what
we can to help those around us, and maybe to
a certain extent, USAA is doing that as well. But
also half of you gen Z, the gen Z generation
(21:11):
are like middle schoolers and high schoolers. So there's a
part of that too where I'm just like, I'm not
I'm also not going to necessarily expect a middle schooler
or a high schooler to know what their credit score
is because it's like, well, you probably don't really have
a credit I don't know. I didn't dive into that
study in depth, but I think there is a large
part of that generation who they're just getting started, right,
(21:31):
And just like we back in the day, what did
we do? We focused on being cheap. You actually are
seeing gen Z doing more of that sort of stuff.
Embracing being frugal is something that I saw reported recently.
Speaker 1 (21:42):
I couldn't have told you much about credit scores or
credit reports when I was in middle school either, so exactly.
Speaker 4 (21:46):
Yeah, So I think we all just need to kind
of play our part to educating the next generation of
financial savvy Americans.
Speaker 1 (21:52):
Yeah, I mean I think though, as you get older
and the credit scord is a big part of our
financial lives, and so no knowing what your credit score is,
knowing how your credit score comes about, like the factors
that make it up is important. We've got information on
that at our website, howdomoney dot com. Matt, let's talk
about executive a new executive order for a second. That
(22:15):
actually makes it more likely that your workplace retirement account
is going to have access to even more investment options.
That sounds like a good thing, including alternative assets cryptocurrency.
The basically, the how this was worded in the executive
order is that the Department of Labor is supposed to
revisit fiduciary guidelines. And when you kind of pull the
(22:37):
curtain up on that, that the only way that they
can make this or that this executive order can push
retirement accounts in this direction to offer more alternative assets
and cryptocurrency is to say that the fiduciary standard isn't
as big of a deal. And so I don't love that, Matt,
because I don't necessarily think that people need access two
(23:00):
alternative investments and more cryptocurrency inside of their four oh
one ks. And kind of on another point, like all
the you know, working on a smart selection that doesn't
overwhelm folks, there's not sixty two different versions of ketchup
and all day, there's like two, right, And so I
think most people already get overwhelmed when trying to choose
what to invest in, like which fund makes sense for them.
(23:21):
And then a lot of the funds that could become
available in the aftermath of this executive order, they're inferior
in so many ways. Right, They're more illiquid, they come
with higher fees, and then the kicker they don't produce
higher returns on average. So I don't know how effective
this executive order is going to be. And when you
might start seeing some of these different funds available in
(23:42):
your four to one K. Is this like months down
the road or years down the road? I don't know,
But it doesn't matter to me. Like I think index
funds the thing that we talk about all the time,
it doesn't matter if like eighty two funds are added
to your roster of choices tomorrow, it's still shouldn't change
what you pick.
Speaker 4 (23:58):
Yeah, I see what you're doing here. You are putting
head to head my love of aldi and the lack
of options there with my desire for libertarian options right
and for the market to decide, because on one hand,
I'm with you, I don't want there to be more
options for folks to kind of muddy the waters. But
at the same time, I want the market to decide,
and I want the market to say, is this something
that's valuable or not? And if it is, it will
(24:20):
succeed and do well. If it isn't, then it's something
that hopefully well In most cases, most of these cases,
hopefully it'll just end up dying on the vine as
opposed to being something that more and more folks get
pulled into.
Speaker 1 (24:30):
Yeah, I couldn't agree more. All Right, We've got more
to get to. On today's show.
Speaker 5 (24:34):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (24:41):
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.
Speaker 1 (24:52):
Forward slash ask. This next one is about moving dead around.
Is it just moving chairs around on the Titanic? Could
it make sense to swap one debt for another?
Speaker 4 (25:02):
Yes, Kevin.
Speaker 7 (25:03):
Here, my question is would it be smart to pull
out a fifty thousand dollars he lock on my home
with an eight point two interest rate, which is basically
going to payoff my travel trailer, a personal loan, and
(25:23):
a couple of credit cards that equal a little over
one thousand dollars a month, and my payment for the
helock is going to be four thirty to four fifty
a month for fifteen years. Is that a good idea?
Or should I just bite the bullet?
Speaker 4 (25:43):
Whether or not he should bite the bullet and just
pay off the debts he currently has, I think is
what he's asking their cool versus trying to diminish it. Yeah,
make yeah, make it happen. And I get this.
Speaker 1 (25:54):
I totally get how you might in the initial thought
is turning credit card debt that's I don't know what
twenty twenty one twenty two percent right now into maybe
higher less offensive eight point two percent debt that that
kind of squares upon your initial observation, and you're like,
why wouldn't I do this?
Speaker 4 (26:10):
Well, especially given to how many different mortgage servicers have
been sending out the different mailers and emails saying, Hey,
wouldn't you like to tap your home for some some
home equity? To think about all that you could do
perhaps with all this money that you've all this equity
that you've accrued over the passage.
Speaker 1 (26:27):
And of course your mortgage servicer do you know what
they know? They know roughly what your home is worth,
and they know how much you owe, and so they
you know what they do. They give you a specific
number so that you might get that mailer and they
might say, hey, Kevin, you've got two hundred and nineteen
thousand dollars and twenty two cents of home equity that
you can.
Speaker 4 (26:47):
Tap right now. Yeah, the specific number, you start thinking about, Oh,
I could totally see that amount of money, am I? Well,
you went, and it's a helox, so it's not like
a home equity loan, right, So but I feel like
a lot of folks would see that no, and they
would just immediately just like move that over to their
savings account or the check account and be like, oh,
that would look nice sitting over there.
Speaker 1 (27:06):
It comes out all that I could do with that
there's a reason they send the mailers out, and it's
because it works.
Speaker 4 (27:10):
I think it's effective. Yeah, but this isn't as easy
as that, Kevin. I'm going to say, first of all,
be careful overly focusing on just the monthly payment. Yes,
it is going to be nicer to lower the interest
rate and the monthly payment amount, keeping your monthly payment
in check, providing more breathing room every single month, but
doing so it could keep you in debt longer than
(27:32):
you otherwise would be. It's sort of like, let's say
you've owned a home for ten years and you're like,
you know what, let's go ahead to refinance this thing.
It's going to make things a bit easier. But guess what,
now you just hit the You just reset the clock
on another thirty years.
Speaker 1 (27:43):
So it's then instead of paying until you're sixty on
that house, you're paying till you're seventy.
Speaker 4 (27:46):
Yeah, you're seventy years old. And so I think it
could also help you to feel more comfortable taking on
even more debt. Right, So this is it could potentially
be a behavioral thing. You're like, oh, you got that
cleaned up, and maybe you're used to the amount that
was going out every month to service that debt. All
of a sudden, he hadn't changed a thing. Yeah, and
now you uh yeah, you've got more more debt to boot.
Speaker 1 (28:06):
And I think this happens a lot, mat I think
this is a tactic that the people take, which is,
if I can just get that monthly amount lower, even
if it means let's say a higher interest rate or
worse terms, then that is going to give me some
breathing room. And what ends up happening with that breathing
room is typically that it gets spent. So for a
(28:26):
lot of people it is now you're you're paying off
that debt item for a longer period of time, and
then you also take on other obligations with the extra
money that you would have had in your budget instead
have gone towards saving or investing. So maybe, if you're
incredibly disciplined, you can make this payoff, but most people aren't.
Speaker 4 (28:43):
Yeah, except you said if with worse terms, like a
higher interest rate. That's the thing though with in Kevin's case,
he's like, man, this is so much better, guys. Truly,
this is a slam dunk, right, And that's where we're
even going to push back a little bit on them.
Speaker 1 (28:55):
Yeah, I think it's also important to mention here, Matt,
that the eight point two percent rate, it's not bad, right,
it's not terrible in today's environment, But that rate is
also subject to change, and so it's true your your
rates could go up, your payment could go up. At
the same time. The biggest, one of the biggest risk
factors here is you're taking unsecured debt. You're turning into
secured debt against your home, and if you're unable to
(29:17):
pay your he lock, well, you'd be risking losing your home.
And so there's this a massive difference between not paying
your credit card bill, which is an ideal, but the
risks just aren't the same because American Express they don't
have the power too forecloses on you to essentially kick
you out and take the roof from over your head,
whereas your mortgage service provider does because they've got this
interest in the property if you're not paying on it.
Speaker 4 (29:39):
Yeah, I think at the end of the day, this
answer comes down to you knowing yourself, Kevin, because yeah,
this really might be the best decision, but only if
you are motivated to pay off that balance as quickly
as possible if you are disciplined in your approach, like
the fact that he was willing to to say, hey,
I'm going to be locked into this for the next
fifteen years. Like what that tells me, though, is that
(30:02):
he doesn't have the ability to quickly or to easily
eliminate the sort of collection of debt that he has, right,
And so that's another benefit of the helock is just
to clean things up. Like right now, it feels like
he's got like this rats nest of debts going out
every single month. It feels like an organizational tool of sorts. Yeah,
and I totally get that, But the behavioral side of things,
(30:23):
I think is incredibly important because if you, yeah, if
you consolidate all that debt onto the helock and you
stretch that out for fifteen years, and then you take
that additional savings that I think he said it was
around one thousand per month and he's getting it down
to like four hundred for something. Yeah, so basically he's
got like six hundred dollars worth of savings. I would
I think I would be very willing and very okay
(30:44):
with Kevin saying all right, I'm gonna consolidate, We're gonna
do the helock and now I'm gonna take that additional
six hundred dollars. How about instead of locking into the
fifteen years, how about we start paying down extra every
single month, putting that towards the principle, Because then he's
not going to be in that that debt for a
full fifteen years. He's going to get out of that
thing way sooner, four to five years, maybe so much faster.
(31:05):
I think that is more of sort of the again,
he can't like go after it crazy right now, based
on how he was talking about, like, yeah, I'm kind
of resigning myself to the fifteen year thing, but you
also don't have to do the whole fifteen year thing
that I said that weird. You also don't have to
resign yourself to the full fifteen years, right like, you
have the ability to find somewhere there in the middle,
and I think that's where I.
Speaker 1 (31:24):
Would I'd love to see you, Kevin, and especially at
an eight plus percent rate, holding on to that for
fifteen years isn't going to be the best thing for
your finance. Is trying to get rid of it as
quickly as possible would be the goal. But yeah, I
think This isn't as much of a no brainer as
it might seem on the surface to a lot of people.
And that behavioral side of your right matter is what
you do with that additional money, what you do with
the additional money. And also, are you now, once you've
(31:46):
got all your credit card debts wiped away, well, what
about the habits that led you into credit card debt
in the first place? Are you going to have this
he lock debt that it's going to take potentially fifteen
years to pay off? And then are you also going
to crew more credit card debt? The habits have to
change or else the strategy, even this heelock strategy isn't
gonna work. It's actually gonna blow up in your face. Yeah,
you totally need to commit to that.
Speaker 4 (32:04):
Yeah, I guess I wanted to say that because I
feel like we're downplaying the interest rate thing, because as
I was thinking at three, I'm like, geez, yeah, twenty
going from twenty two to twenty four percent down to
eight something like that is a massive difference, especially if
you are looking out over the years, over the even decades. Yeah,
if you're looking at a short term, like a short
period of time where you're just going to attack it.
The rate doesn't matter that much because you're talking about
(32:26):
what maybe one year's worth the payments, maybe two years.
But when you stretch it out like that, gosh, that
is a ton of money going to interest. But like
Joe said, yeah, we want to make sure that you address.
You got to nip it in the bud. We're not
just gonna gloss over the surface.
Speaker 1 (32:38):
Yeah, that's exactly right. We've got a lot more to
get to on today's show. 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.
Kf I AM six forty. You're listening to how to
Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel lars Guard and Matt.
Speaker 3 (00:18):
Altmes KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 1 (00:43):
This is how to Money. I am one of your hosts,
Joelarsgard and I am Matt Alt Mixed. By the way,
you can always find more money saving information over at
howtomoney dot com real quick. So we bought a used
Peloton bike for Emily. She's like, we have this little
sun room that's right off are. That was your project
for this summer was to reclaim the sun room. The
(01:06):
kids had taken it over and we had to declutter,
and we wanted it to be more of a room
that that she and I get to used. I've got
my little sona tent in there, She's got I've got
my rolling machines, she's got a little peloton.
Speaker 4 (01:16):
I feel like the first thing that's going to break
on your portable sauna tent is the zipper. Yeah, so
far as held up surprisingly well. I can totally see
you go into unzip it or today and it's just
going to pull off, and you say, that's also.
Speaker 1 (01:29):
Why I got it a Costco because I was I
was looking at once on Amazon, but I was like,
got I got at Costco because the return policy is
much better.
Speaker 4 (01:35):
But would you feel how long, how many uses had
p would you put it through before you would feel
bad about taking it back? Because we've talked about it,
this is why we can't have my states at Costco
anymore because people abuse it. I'm probably getting to that
point where, yeah, if it broke today, that's my nine
months birthday, so yeah, not really that long six months,
So if it broke today, I'd be morally questionable. Yeah, okay,
(01:57):
sorry Peloton.
Speaker 1 (01:58):
So Peloton bought a used Peloton on Facebook marketplace for somebody.
Even though Peloton we talked about this, has their own
site for reselling used Pelotons now, but they're way more
expensive than buying it from the slew of people who
are selling their Pelotons on Facebook. The price has gone
down dramatically because everyone's trying to get rid of their
glorified code hanger that that is their Peloton.
Speaker 4 (02:18):
They're like, I've been tired of looking at this thing
for the press four years, so that I got back
in twenty one.
Speaker 1 (02:22):
Yes, when Emily's the age, she's been using it. She's
been enjoying it. But the one thing I was surprised
by and a little bit frustrated about when we bought
the used Peloton. You know what Peloton is trying to
do to siphon money from users. If you buy a
used bike, they want to charge you a one hundred
(02:43):
dollars activation fee for switching that bike over to another account.
Speaker 4 (02:48):
It is an activation fee.
Speaker 1 (02:50):
Yeah, so it was already activated by somebody else being used,
and you're trying to switch it over to be.
Speaker 4 (02:56):
Suited your name Apple. It's like you selling your phone
and being like, yep, i've wiped it here. Yeah, this
one's a totally factory reset, and the Apple being like, no, no, no,
we get a cut of that because somebody else is
going to know use it. It would be exactly like that.
Speaker 1 (03:08):
That's so stupid, Like, hey, I'm gonna sell my book
and then the author gets actually gets paid.
Speaker 4 (03:13):
We get more royal taste. Yeah no, that's not how
it works. How they use market works, man, utterally ridiculous. Yeah, totally.
Speaker 1 (03:18):
This is the kind of thing that only a brand
like Peloton could get away with where they've they're just
banking on rich customers who don't care about money, and
they're like, I guess this is just part of doing business, but.
Speaker 4 (03:28):
That's not what you did. Okay, give me the advocate
or yeah, some gravocate success story.
Speaker 1 (03:35):
You got to call in an advocate for yourself. This is,
by the way, if you want like a nerdy economist term,
it's called rent seeking. And this is totally that this
would be a great definition of rent seeking by Peloton
saying listen, we've already like got we've landed our hooks
into this territory and it's a way we can just
make extra money just fleecing people who don't deserve to
be fleeced. And it's pretty unethical also, but so I
(03:58):
called Peloton. I'm like, listen, we don't on a pain
his fee, Like, what in the world do we do
to avoid this thing? And it took talking to a
couple of different representatives. You just kind of have to
keep pushing the envelope to get them to finally agree.
Speaker 4 (04:10):
Love talking to customer service people.
Speaker 1 (04:12):
It's not my favorite I wish it was you're willing
to do it, but I'm willing to do it, especially
for a hundred bucks.
Speaker 4 (04:17):
So it was just a one time so you got
a waved Goda waved. Nice. Yeah, very nice dude. All right,
Well for all the folks. This is for obviously for
everyone other there who's thinking about getting the second hand peloton,
or you can just jump on the bike that you
already have m hm, right out there. The tradition, I
like prefer to ride on the street, the traditional bike
in the wild scenario or the winds blowing through your hair.
(04:39):
Emily and I differ in this regard. I bike. I
ride on my real bike. She ride. You get the
passion neighbors have a conversation with them, cuts down on
a missions because you're not driving your vehicle. Combine it
with needing to run an errand not to mention the
cost savings of the aforementioned benefits. I'll I'll let you
talk to my wife about it. Hey, I'll do it. Also,
maybe one of the things you're talking about with your
neighbors as you're riding past their houses, Oh, what do
(05:02):
you think about the so and so's over there? They
got their house listed for sales been sitting on the
market forever. There's one in our neighborhood. There's literally a
conversation I had with one of our neighbors, like what's
going on with it? It's like, Oh, hasn't been renovated recently?
You think the uh it's overpriced? Well, I think it is.
And I think that's one of the questions a lot
of folks are wondering, is like, has there been a
housing like bubble essentially and is it about to pop?
(05:24):
And I would say that it's it seems more like
a slow leak as like versus just like like a
sudden popping right less two thousand and nine, More its
own things exactly.
Speaker 2 (05:33):
Yeah.
Speaker 4 (05:33):
Yeah, numbers from almost every corner of the market out
there are showing asking price decreases. There is showing more
sellar concessions, inventory decreases as well. Home inventory increases more
I'm sorry on the market. Yeah, more homes are are
on the market, which, to be honest though, it's also
just returning back to like pre pandemic norm norms. Essentially,
(05:54):
we saw a significant decline and that was in large
part why why there was such an increase in housing prices,
but we're also seeing more cancellations after houses are going
under contract. Folks are basically getting cold feet during due diligence.
And this is such a far cry, dude, from a
few years ago. Home Owners obviously don't love seeing this,
(06:16):
and sellers, of course are not pleased. You know, like
back when there was an open house and buyers were
lined up around the block just to be able to
get in and see the place. It's not like that.
Speaker 1 (06:26):
You remember those calls for highest and best like two
years ago, three years ago, and the insanity of how
much people are willing to pay and bid up the price.
It was really unseen. I don't remember a time at
least in my life where.
Speaker 4 (06:39):
That was the case. Yeah, So I want to put
a note out there for a lot of folks who
have been thinking about purchasing a home because I think, dude,
this is my personal opinion. I think now is the
time to strike personally. So by okay, I do because
I don't think. I don't think we're going to continue
to see declient. So I this morning, I pretended to
be a chart analyst and I pulled up the I
was gonna say, how did you come what am I
(07:00):
basing this on? And I pulled up some data from
the FED. I was looking at the chart, and if
you look at just the trend, So if you look
at the median home price in the US from starting
from around nine twenty ten, and if you follow that
up to prepans so like around twenty nineteen, there's a
pretty consistent line U And then of course what you
saw slight decrease, but then you see it shoot up. Specifically,
(07:22):
a lot of folks are thinking about the last fifteen
years as when we saw these massive price increases. I
think all that was just kind of catching back up
to where things needed to be after the housing crisis.
Speaker 1 (07:33):
Price back in seven eight nine exactly like in twenty eleven, you.
Speaker 4 (07:37):
Could get a house for not much money. Yeah, and
so I think all that was relatively healthy growth. But
what we saw basically in the two years twenty to
twenty two, we saw a massive increase. It was COVID.
It all comes back to COVID. And if you draw
that line basically from nine to nineteen we are about
where prices should be. We saw it spike where we
(07:59):
got way ahead of the curve. And for the past
couple of years, two three years, we've seen prices basically plato.
They're starting to decline just a little bit, and it
depends on local markets. It depends on local markets, but
financing as well, and so I think personally, my personal
opinion is I would not be surprised if we see
mortgage rates come down. Right, if the Fed lowers rates,
(08:19):
which there is talk about that potentially happening next month
in September, I think that could be the first that
could be the starting line of the market opening back up.
Speaker 1 (08:28):
If mortgage rates go down, I think that will increase
buyer interest. I think you're probably right, and then maybe
the instead of declining prices, we do start to see
prices go up again, but just at a far less
accelerated pace.
Speaker 4 (08:40):
It will not be at the pace that we've seen
because that was just unsustainable. Yeah, totally agree.
Speaker 5 (08:46):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (08:53):
Don't forget to sign up for the how to Money
newsletter over at how tomoney dot com slash newsletter.
Speaker 1 (08:58):
Let's hear from a listener who loves as kids, but
isn't sure he wants to save for them. Hey, guys,
thanks for taking my call.
Speaker 6 (09:05):
So my situation is I've got a high school junior
and a high school freshman, and course, like many adults parents,
we didn't start saving as soon as we could in
the five twenty nine, which I did start recently, But now,
because of my sense that the market is volatile, I'm
not sure if that's the best option.
Speaker 4 (09:27):
So I want to get your thoughts on that.
Speaker 6 (09:28):
But more importantly, I guess what I'm wondering is I'm
going back and forth between the idea of whether or
not to start saving as much as I can, in
other words, stop maybe putting as much in my retirement account,
which is pretty aggressive in that regard, So I think
if I pulled back a little bit, it wouldn't, you know,
be a traumatic thing. But thinking that maybe what I
(09:50):
could do is basically just have her pay for it
and use that extra money to continue to go aggressively
in the market, thinking that it's better to take out
a loan and probably pay it off at a lower
interest rate than the money I could extra money I
could make when my retirement account and just start pulling
(10:13):
that out. I'm sixty one, so it's not like I
would suffer any penalties in a few years if I
start pulling out other than just the regular taxes. So
that's in a nutshell, just kind of want to figure
out what's my best option at this late stage in
the game.
Speaker 4 (10:28):
All right, Thanks, all right, Joe, Let's get to Scott
and one of the things that he said, I think
he said something like, my sense is that the market
is volatile right now, and I think it is going
to be okay for him to pull back on how
much he's putting into the market. If he's been investing
a pretty large percentage of his income for a long time.
I just don't want to see him reducing his contributions
(10:48):
just because he's worried about a pullback because he's reading
the news, the headlines he's thinking about Like when you're
younger and you're just building up that wealth, you probably
aren't paying too much attention to what's going on, what's
the news and markets like Howard Tarriffs impacting the stock market.
But as you get closer to needing that money like
he is. He said he's got a freshman as well
as a junior, you start thinking about, oh, how oh,
(11:11):
what does that mean for this what does it mean
for that, Well, I missioned terrafs specifically, I'm thinking aback
to all the headline predictions about tariffs and the impact
of those on the economy. And you know, we're still
not fans of terriffs in general. I do think they
will certainly slow down growth. But the twenty percent pullback
that we experienced back when, back Liberation day, Joel, do
(11:31):
you remember this seems like it seems like it was
so long ago. Remember the fun signage that was held
out hier President. It was based on trade deficits, but
that pullback was I don't know, I feel like it
bounced back so quickly, and we've recently reached record highs.
This happens all the time. The volatility Scott that you're experiencing,
(11:53):
that is just the price of admission, And the higher
returns are just the reward that you get for dealing
with these greater levels of risk. And so I'm just
here to say, I don't know if this time, like
everyone always says, this time is different, I don't. I'm
proposing the idea that this time isn't really all that
different from all the other previous times.
Speaker 1 (12:12):
Yeah, And like will the stock market bounce back in
no time flat, like it did with COVID and like
it did with tariffs. No, maybe not, like there will
probably be downturns in the stock market and in the economy,
the last longer than what we've experienced recently, but still
like just pointing to being like, oh, it feels like
the market's more volatile than normal.
Speaker 4 (12:33):
I don't think it is.
Speaker 1 (12:34):
I think maybe it's it's easy as an investor who's
got your finger on the pulse to feel like that,
but I don't necessarily think that makes it true. Yeah,
And I really do think it's the older you get
to and the closer you start eyeing some of your
retirement goals or in this case, goals for his kid,
you start thinking about it a little more where you're
just like, well, shoot, actually, do I actually want to
take all the risk that is available, all the riskless
(12:55):
on the table? I used to say yes, give me, gimme, gimme,
but now it's just like, oh, maybe you know to
say no to seconds and he kind of likes slide
back from the table a little bit.
Speaker 4 (13:03):
At some point that's a smart idea to d risk.
Speaker 1 (13:06):
Right as you're getting closer to needing that money, which
brings me to the question at hand about saving for
your kids. I first just want to tell Scott not
to beat himself up for not starting a five to
twenty nine plan sooner. And this this might sound harsh
to other listeners, but saving for your kids really should
be a lower priority than your own personal retirement accounts.
And no, it's not because you don't love your kids,
(13:28):
but it's because there are so many other ways to
pay for a higher education. You know, we talked with
with Jocelyn Pearson back in episode eight sixty about getting scholarships,
and that's only one episode. We've had multiple episodes, many
episodes on paying for college. Ron Leber from The New
York Times on the show, there are so many different
ways to reduce the cost of college, to find other
(13:50):
ways to pay for college that aren't just like personal
investments in a five to twenty nine plan. But when
it comes to your retirement, sorry, that stuff doesn't exist,
and so that is priority, and it's not selfish to
suggest that. We just don't suggest making meaningful contributions to
five twenty nine accounts for your kids until you reach
money Gear's number seven, which if you look at them
(14:10):
on our website. That's the last money gear. So it's
very far along in the order of operations. If you
haven't done basically all the other priorities first, like you
shouldn't be doing it. There's just too many other financial
goals that take precedent.
Speaker 4 (14:23):
Yeah, let's take a minute two to talk about five
twenty nine accounts than just how much better those plans
have gotten. First of all, they have become more flexible.
You can even in time turn some of the contributions
into roth Ira dollars for them if it's in fact
not needed for their schooling. So because of that, we
like five twenty nine's more than we used to and
(14:45):
many of them come with just incredibly low cost investments.
But not every parent cares about that. Not every parent
wants to say for their kids retirement. And to be honest,
in your case, Scott, you don't want to invest the
dollars that you are contributing anyway because of how quickly
it is that you are most likely going to need
these dollars for your kids higher education.
Speaker 1 (15:03):
That's a good point you're talking about, like Scott getting
closer to needing the money he's sticking in his retirement accounts.
I mean, hopefully he's still got decades of retirement left.
But for his kids, we're talking about spending that money
actually in the fairly near future. You said your kids
are in high school, right, junior and freshmen, Well, that
means that investing that money would be too much of
a gamble, especially for that junior if you're gonna need
(15:25):
that money in a couple of years, or at least
some of that.
Speaker 4 (15:28):
Money, right, Yeah, freshman, maybe you can take some more
risks there, but yeah, definitely of the junior, right exactly.
Speaker 1 (15:34):
Yeah, I think with the freshman you might be able
to do a conservative mix of investments because you have
more years that you can let those investments ride. But
needing those funds in short order means investing doesn't make
much sense, and which means the five twenty nine account
doesn't make as much sense right now. I think the
only way I'd prioritize it is if you felt like
you were really ahead of the game as far as
(15:55):
your own personal and workplace retirement accounts, like, hey, I've
crushed it so well, that didn't though my kids are
this far along in high school, I guess I can
take my foot off the pedal and toss some money
in there. And the only other reason I would consider
it is if your state offers a sweet tax deduction.
Oh yeah, because if you live in a state without
any tax income tax benefits, I just don't really see
the point of putting money in a five twenty nine
(16:17):
hunt but account. But if you do, you can just
like literally consider it as a tax evasion vehicle and evasion.
Speaker 4 (16:23):
Yeah, I don't miss This is how you launder money, Scott.
It's it's a very legal way.
Speaker 1 (16:27):
But like we did that with some of Emily's yeah,
some emies grad school. We just like stuck it in
and took it out pretty quickly. It goes in here,
it sits there for a day. Yeah, that it goes
out of.
Speaker 4 (16:37):
Because we had to actually pay the school bill. That's right, buddy.
Speaker 5 (16:41):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (16:48):
If you're on Facebook, by the way, you want to
join a group of like minded folks who have money questions,
who have money insights, please go join the how to
Money Facebook group.
Speaker 4 (16:57):
A couple of years ago, I think it was back
in twenty three, Joel we talked about how medical debt
below a certain threshold wouldn't affect your credit. Well that's
no longer the case. So originally, back under the Biden administration,
the CFPP, the Consumer Financial Protection Bureau, they instituted a
medical debt rule that benefited millions of Americans out there
(17:17):
by not penalizing the credit for small medical debts. Yeah
less than five hundred bucks, right, Yeah, that's right. That
was recently overturned by a judge. But even still, credit
bureaus they have the ability to factor medical debt in
different ways, and all three are still not including bounces
below five hundred bucks, So that's good. It's not legally mandated,
(17:38):
but a choice that they're making. It's like a yeah,
And there's there's a lot of that actually that we're
going to cover today in different in varying ways where
there are there have been different recommendations perhaps or even
an executive order that's not necessarily enforceable by law because
it's not something that Congress is taking any action on.
But there's also a one year grace period before overdue
medical debt gets reported. So want we're putting this out
(18:01):
there as a nice little PSA. We want folks to
be aware and specifically as a want to go back
and listen to some of the different episodes that where
we've discussed negotiating medical debts. If you are finding yourself
in a situation where you're like, oh, my gosh, got
hit with medical bill that I was not expecting. We
don't have the money on hand for that. Even if hey,
even if you do have the money on hand like
Joel does, when it comes to some different fees that
(18:22):
these companies are hitting you with, it is always worth
negotiating and see if you can push back.
Speaker 1 (18:27):
I could pay Peloton hundred bucks, but I'm not going to.
And it's basically, well, it's been said to Matt on
the Credit Core Credit coore front that you are the
average of the five people you spend the most time with.
And I think there's a lot of truth to that,
right that we rub off on each other, I've learned
a lot being your friend. I think, I my what
my life would look like would be different if we
(18:47):
didn't hang out so much. It wouldn't be nearly as cool.
Speaker 4 (18:50):
Well, that's true, that's definitely true. And first, I wouldn't
know half of the Great musical artists that I know
because of you, as you're sitting there wearing your brand
new billy strings. And I'm sorry that I have not
even commented. I know you're excited about Glorious. I commented
on the one they had on yesterday. I wear a
lot of but this one it's purple. Yeah, it is
not a lot of men out there are rock and
(19:11):
purple purple tieie baby, I'm all for it.
Speaker 1 (19:15):
Uh yeah, Especial's not scared, especially when I'm supporting the
best guitarist of all time. Okay, but credit scores. This
new Harvard study of twenty five million people found that
financial habits are similar to other people who grow up
in an environment like yours. So you rub shoulders with
folks for eighteen years, and you're likely to have similar
(19:36):
credit scores and loan delinquency rates. And that's actually not
terribly surprising to me. There are, of course, like individual
examples of folks rising above their circumstances. But I see
this as another reason to get on the ground personal
finance education into neighborhoods that need it most, because one
of the toughest things about doing what you and I do,
(19:58):
Matt is realizing that there's a bunch of people who
grew up without any helpful personal finance advice and they're
probably not like on their podcast saying what is like
a good personal finance podcast that can help me out
at this point in time, it's just kind of off
their radar. Yeah, and so I think it's a good
call for us to surround ourselves with folks who encourage
us on money journey. But also it's just kind of
(20:20):
discouraging in some ways too to realize that there are
some people who are going to be more difficult to help.
It's going to be harder to find those people.
Speaker 4 (20:27):
I think a lot of those folks it's less the
advice and it's more that there's also just nobody in
their life who has lived it out essentially, right, Like
oftentimes we look to mentors or just others that we
can look up to. Actually, on that note, do you
see the report by USAA about gen Z. Everyone likes
to pick on gen Z and they're saying that like
half a gen Z's don't even know what their credit
(20:49):
score is or even like what can constitutes their credit score. Yeah,
they don't know how it's made up. And I appreciate
that USA is trying to shine light on the younger generations, right,
because like that's kind of what you were speaking to
as well, like making sure that we are doing what
we can to help those around us, and maybe to
a certain extent, USAA is doing that as well. But
also half of you gen Z, the gen Z generation
(21:11):
are like middle schoolers and high schoolers. So there's a
part of that too where I'm just like, I'm not
I'm also not going to necessarily expect a middle schooler
or a high schooler to know what their credit score
is because it's like, well, you probably don't really have
a credit I don't know. I didn't dive into that
study in depth, but I think there is a large
part of that generation who they're just getting started, right,
(21:31):
And just like we back in the day, what did
we do? We focused on being cheap. You actually are
seeing gen Z doing more of that sort of stuff.
Embracing being frugal is something that I saw reported recently.
Speaker 1 (21:42):
I couldn't have told you much about credit scores or
credit reports when I was in middle school either, so exactly.
Speaker 4 (21:46):
Yeah, So I think we all just need to kind
of play our part to educating the next generation of
financial savvy Americans.
Speaker 1 (21:52):
Yeah, I mean I think though, as you get older
and the credit scord is a big part of our
financial lives, and so no knowing what your credit score is,
knowing how your credit score comes about, like the factors
that make it up is important. We've got information on
that at our website, howdomoney dot com. Matt, let's talk
about executive a new executive order for a second. That
(22:15):
actually makes it more likely that your workplace retirement account
is going to have access to even more investment options.
That sounds like a good thing, including alternative assets cryptocurrency.
The basically, the how this was worded in the executive
order is that the Department of Labor is supposed to
revisit fiduciary guidelines. And when you kind of pull the
(22:37):
curtain up on that, that the only way that they
can make this or that this executive order can push
retirement accounts in this direction to offer more alternative assets
and cryptocurrency is to say that the fiduciary standard isn't
as big of a deal. And so I don't love that, Matt,
because I don't necessarily think that people need access two
(23:00):
alternative investments and more cryptocurrency inside of their four oh
one ks. And kind of on another point, like all
the you know, working on a smart selection that doesn't
overwhelm folks, there's not sixty two different versions of ketchup
and all day, there's like two, right, And so I
think most people already get overwhelmed when trying to choose
what to invest in, like which fund makes sense for them.
(23:21):
And then a lot of the funds that could become
available in the aftermath of this executive order, they're inferior
in so many ways. Right, They're more illiquid, they come
with higher fees, and then the kicker they don't produce
higher returns on average. So I don't know how effective
this executive order is going to be. And when you
might start seeing some of these different funds available in
(23:42):
your four to one K. Is this like months down
the road or years down the road? I don't know,
But it doesn't matter to me. Like I think index
funds the thing that we talk about all the time,
it doesn't matter if like eighty two funds are added
to your roster of choices tomorrow, it's still shouldn't change
what you pick.
Speaker 4 (23:58):
Yeah, I see what you're doing here. You are putting
head to head my love of aldi and the lack
of options there with my desire for libertarian options right
and for the market to decide, because on one hand,
I'm with you, I don't want there to be more
options for folks to kind of muddy the waters. But
at the same time, I want the market to decide,
and I want the market to say, is this something
that's valuable or not? And if it is, it will
(24:20):
succeed and do well. If it isn't, then it's something
that hopefully well In most cases, most of these cases,
hopefully it'll just end up dying on the vine as
opposed to being something that more and more folks get
pulled into.
Speaker 1 (24:30):
Yeah, I couldn't agree more. All Right, We've got more
to get to. On today's show.
Speaker 5 (24:34):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (24:41):
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.
Speaker 1 (24:52):
Forward slash ask. This next one is about moving dead around.
Is it just moving chairs around on the Titanic? Could
it make sense to swap one debt for another?
Speaker 4 (25:02):
Yes, Kevin.
Speaker 7 (25:03):
Here, my question is would it be smart to pull
out a fifty thousand dollars he lock on my home
with an eight point two interest rate, which is basically
going to payoff my travel trailer, a personal loan, and
(25:23):
a couple of credit cards that equal a little over
one thousand dollars a month, and my payment for the
helock is going to be four thirty to four fifty
a month for fifteen years. Is that a good idea?
Or should I just bite the bullet?
Speaker 4 (25:43):
Whether or not he should bite the bullet and just
pay off the debts he currently has, I think is
what he's asking their cool versus trying to diminish it. Yeah,
make yeah, make it happen. And I get this.
Speaker 1 (25:54):
I totally get how you might in the initial thought
is turning credit card debt that's I don't know what
twenty twenty one twenty two percent right now into maybe
higher less offensive eight point two percent debt that that
kind of squares upon your initial observation, and you're like,
why wouldn't I do this?
Speaker 4 (26:10):
Well, especially given to how many different mortgage servicers have
been sending out the different mailers and emails saying, Hey,
wouldn't you like to tap your home for some some
home equity? To think about all that you could do
perhaps with all this money that you've all this equity
that you've accrued over the passage.
Speaker 1 (26:27):
And of course your mortgage servicer do you know what
they know? They know roughly what your home is worth,
and they know how much you owe, and so they
you know what they do. They give you a specific
number so that you might get that mailer and they
might say, hey, Kevin, you've got two hundred and nineteen
thousand dollars and twenty two cents of home equity that
you can.
Speaker 4 (26:47):
Tap right now. Yeah, the specific number, you start thinking about, Oh,
I could totally see that amount of money, am I? Well,
you went, and it's a helox, so it's not like
a home equity loan, right, So but I feel like
a lot of folks would see that no, and they
would just immediately just like move that over to their
savings account or the check account and be like, oh,
that would look nice sitting over there.
Speaker 1 (27:06):
It comes out all that I could do with that
there's a reason they send the mailers out, and it's
because it works.
Speaker 4 (27:10):
I think it's effective. Yeah, but this isn't as easy
as that, Kevin. I'm going to say, first of all,
be careful overly focusing on just the monthly payment. Yes,
it is going to be nicer to lower the interest
rate and the monthly payment amount, keeping your monthly payment
in check, providing more breathing room every single month, but
doing so it could keep you in debt longer than
(27:32):
you otherwise would be. It's sort of like, let's say
you've owned a home for ten years and you're like,
you know what, let's go ahead to refinance this thing.
It's going to make things a bit easier. But guess what,
now you just hit the You just reset the clock
on another thirty years.
Speaker 1 (27:43):
So it's then instead of paying until you're sixty on
that house, you're paying till you're seventy.
Speaker 4 (27:46):
Yeah, you're seventy years old. And so I think it
could also help you to feel more comfortable taking on
even more debt. Right, So this is it could potentially
be a behavioral thing. You're like, oh, you got that
cleaned up, and maybe you're used to the amount that
was going out every month to service that debt. All
of a sudden, he hadn't changed a thing. Yeah, and
now you uh yeah, you've got more more debt to boot.
Speaker 1 (28:06):
And I think this happens a lot, mat I think
this is a tactic that the people take, which is,
if I can just get that monthly amount lower, even
if it means let's say a higher interest rate or
worse terms, then that is going to give me some
breathing room. And what ends up happening with that breathing
room is typically that it gets spent. So for a
(28:26):
lot of people it is now you're you're paying off
that debt item for a longer period of time, and
then you also take on other obligations with the extra
money that you would have had in your budget instead
have gone towards saving or investing. So maybe, if you're
incredibly disciplined, you can make this payoff, but most people aren't.
Speaker 4 (28:43):
Yeah, except you said if with worse terms, like a
higher interest rate. That's the thing though with in Kevin's case,
he's like, man, this is so much better, guys. Truly,
this is a slam dunk, right, And that's where we're
even going to push back a little bit on them.
Speaker 1 (28:55):
Yeah, I think it's also important to mention here, Matt,
that the eight point two percent rate, it's not bad, right,
it's not terrible in today's environment, But that rate is
also subject to change, and so it's true your your
rates could go up, your payment could go up. At
the same time. The biggest, one of the biggest risk
factors here is you're taking unsecured debt. You're turning into
secured debt against your home, and if you're unable to
(29:17):
pay your he lock, well, you'd be risking losing your home.
And so there's this a massive difference between not paying
your credit card bill, which is an ideal, but the
risks just aren't the same because American Express they don't
have the power too forecloses on you to essentially kick
you out and take the roof from over your head,
whereas your mortgage service provider does because they've got this
interest in the property if you're not paying on it.
Speaker 4 (29:39):
Yeah, I think at the end of the day, this
answer comes down to you knowing yourself, Kevin, because yeah,
this really might be the best decision, but only if
you are motivated to pay off that balance as quickly
as possible if you are disciplined in your approach, like
the fact that he was willing to to say, hey,
I'm going to be locked into this for the next
fifteen years. Like what that tells me, though, is that
(30:02):
he doesn't have the ability to quickly or to easily
eliminate the sort of collection of debt that he has, right,
And so that's another benefit of the helock is just
to clean things up. Like right now, it feels like
he's got like this rats nest of debts going out
every single month. It feels like an organizational tool of sorts. Yeah,
and I totally get that, But the behavioral side of things,
(30:23):
I think is incredibly important because if you, yeah, if
you consolidate all that debt onto the helock and you
stretch that out for fifteen years, and then you take
that additional savings that I think he said it was
around one thousand per month and he's getting it down
to like four hundred for something. Yeah, so basically he's
got like six hundred dollars worth of savings. I would
I think I would be very willing and very okay
(30:44):
with Kevin saying all right, I'm gonna consolidate, We're gonna
do the helock and now I'm gonna take that additional
six hundred dollars. How about instead of locking into the
fifteen years, how about we start paying down extra every
single month, putting that towards the principle, Because then he's
not going to be in that that debt for a
full fifteen years. He's going to get out of that
thing way sooner, four to five years, maybe so much faster.
(31:05):
I think that is more of sort of the again,
he can't like go after it crazy right now, based
on how he was talking about, like, yeah, I'm kind
of resigning myself to the fifteen year thing, but you
also don't have to do the whole fifteen year thing
that I said that weird. You also don't have to
resign yourself to the full fifteen years, right like, you
have the ability to find somewhere there in the middle,
and I think that's where I.
Speaker 1 (31:24):
Would I'd love to see you, Kevin, and especially at
an eight plus percent rate, holding on to that for
fifteen years isn't going to be the best thing for
your finance. Is trying to get rid of it as
quickly as possible would be the goal. But yeah, I
think This isn't as much of a no brainer as
it might seem on the surface to a lot of people.
And that behavioral side of your right matter is what
you do with that additional money, what you do with
the additional money. And also, are you now, once you've
(31:46):
got all your credit card debts wiped away, well, what
about the habits that led you into credit card debt
in the first place? Are you going to have this
he lock debt that it's going to take potentially fifteen
years to pay off? And then are you also going
to crew more credit card debt? The habits have to
change or else the strategy, even this heelock strategy isn't
gonna work. It's actually gonna blow up in your face. Yeah,
you totally need to commit to that.
Speaker 4 (32:04):
Yeah, I guess I wanted to say that because I
feel like we're downplaying the interest rate thing, because as
I was thinking at three, I'm like, geez, yeah, twenty
going from twenty two to twenty four percent down to
eight something like that is a massive difference, especially if
you are looking out over the years, over the even decades. Yeah,
if you're looking at a short term, like a short
period of time where you're just going to attack it.
The rate doesn't matter that much because you're talking about
(32:26):
what maybe one year's worth the payments, maybe two years.
But when you stretch it out like that, gosh, that
is a ton of money going to interest. But like
Joe said, yeah, we want to make sure that you address.
You got to nip it in the bud. We're not
just gonna gloss over the surface.
Speaker 1 (32:38):
Yeah, that's exactly right. We've got a lot more to
get to on today's show. 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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