August 24, 2025 • 33 mins
Alternative investment companies tout that you can "invest like the 1%!" Sadly, many are losing money hand over fist.
Ask HTM: Question about borrowing money for a car and how that impacts a credit score.
Older Americans are renting in greater numbers. That's not necessarily a bad thing!
Ask HTM: Katie wants to know if Social Security will be there for her when she reaches retirement age.
Ask HTM: Question about borrowing money for a car and how that impacts a credit score.
Older Americans are renting in greater numbers. That's not necessarily a bad thing!
Ask HTM: Katie wants to know if Social Security will be there for her when she reaches retirement age.
Mark as Played
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 Larsgard and Matt altmics.
Speaker 1 (00:44):
K IF I Am six forty live everywhere on the
iHeartRadio app.
Speaker 3 (00:48):
This is how to Money. 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 ahead and enjoying
the how to Money Facebook group.
Speaker 1 (01:02):
Time you get to the ludicrous headline of the week.
This one comes from CNBC when invest like the one
percent fails, how Yield treats real estate bets left customers
with massive losses. I think, first, I just want to
say I really hate to see individual investors lose money,
and just I felt for the people in the article
(01:22):
who had invested with Yield Street seeing the promised returns
and they were like, yeah, this seems like yeah, I'm
trying to do the right thing for my future. Maybe
you even listen to a podcast like how to money,
and I don't know, maybe only we were listening with
one ear because we would throw shade at companies like this.
But you're like, I'm investing from my future. This is
a great thing. We're not talking these the people who
(01:43):
invested in Yield treat that this is not the upper
crust who were giving money to Bernie made Off or
anything like that. It's normy people and it just sucks
to see them lose money. So Yield Street, this company
that invests in real estate crowdfunded real estate site, promised
that real estate investing in private credit would be democratized,
(02:04):
and I'm so tired of seeing that word in the
money space. We're going to democratize everything. Well, they certainly
made losing money available to all. Matt They said, we'll
democratize you actually losing your life savings.
Speaker 4 (02:17):
How about that.
Speaker 1 (02:18):
Well, so they had thirty something opportunities available on their site,
investments that you could participate in. Four of those thirty
opportunities have been declared total losses, which means not just
that you didn't make money on your investment, but that
your capital is completely gone. So if you invested a
hundred k, guess what one hunter k gone wiped out.
Not even the twenty percent returns weren't great. They were
(02:39):
a little overeflated. I got like ten percent returns. It's
like your money's gone.
Speaker 4 (02:43):
Yeah.
Speaker 1 (02:43):
Twenty three of those investments are on a watch list.
They potentially need to raise more money from investors to
keep those investments afloat, and for those investors it could
be throwing good money after bad Those could also go
belly up too at some point. So we talked about
the event availability the greater levels of availability of alternative
assets in retirement accounts last week. This is the perfect
(03:06):
example of why we prefer investing in publicly traded companies
and biling a slew of them in index funds. Yep,
the risks are just too great. Go with a tried
and true yeah. So the Yield Street mission was to
create financial independence for millions, and they did just the opposite.
I'll note here though, that many private real estate funds
have had a tough time, especially for investments that were
(03:27):
made in the different boom towns like Austin is one
that comes to mind where prices have come down back
to earth, and the reason being many of these investment
firms had loans with short term interest rate fluctuations, making
it basically impossible for them to stay afloat as rates rose,
and then what do we see.
Speaker 3 (03:44):
We saw rents decline. So these part of these because
they got hit with a double whammy.
Speaker 1 (03:48):
Essentially, their projections didn't involve much conservative conservatism. They involved
a lot of optimism. And so they're like, well, if
friends keep going up like this, yeah, and well that's
when mortgage rates stay kind of where they are, we're
going to crush.
Speaker 4 (04:00):
If everything is perfect. Yeah, then, and that's what they were.
Speaker 3 (04:03):
That's what essentially what they were auditioned out when it
came to the different pitches and the sales flyers and
things like that. Yeah, that rate of return, it sounded amazing.
But our advice is this, dear clear of sites that
are promising that you can invest like the one percent,
and the easier availability of these alternative investments in general
is likely going to get more investors in trouble in
(04:23):
the coming years. It just all comes down to how
it is other spun the different it's the new flavor
of the day, basically, like, however they're going to choose
to market it when instead we want you to stay
with the tried and true index.
Speaker 1 (04:34):
Funds, and it can sound enticing, and some of the
prospectus or the prognostications can be Man, oh wow, I can't.
I don't know if I can beat that in this
and B five hundred fund that Matt and Joel talk about.
But you your due diligence is required at much greater
levels than it is investing in something like an index one. Now,
let's talk about another financial product. This one's making you comeback.
(04:55):
Adjustable rate mortgages applications have risen twenty five percent. They
make up something like one in ten mortgages that are
being taken out right now, and they're the highest they've
been since in the past few years. This is according
to the Mortgage Bankers Association. And you might, depending on
how old you are and your how much you remember
(05:15):
two thousand and eight, two thousand and nine, you might
see red blinking lights when you hear that you're worried
that adjustable rate mortgages are a bad product. Hey, weren't
they a big part of the reason that the Great
Recession even happened in the first place. Well, I would
say adjustable rate mortgages are not quite the same as
they were leading up to the mortgage meltdown in eight
They have fundamentally changed in a lot of ways, although
(05:37):
there's still a lot that you need to know before
you sign up for one. You know, most adjustable rate
mortgages come with longer interro rates these days, five seven
or ten years. You get a lower rate, and I
want to caveat that because you might not, but typically
you get a lower rate than you would on a
thirty year mortgage, which means you're going to pay down
principle faster. These mortgages, I think they have the potential
(05:57):
to be a decent choice, but the details are crucial.
And right now, the interest rate disparity has actually shrunk,
which makes thirty ye loans more attractive. So it is
kind of surprising to me, Matt, that adjust worry mortgage
is on the uptick when that kind of gap between
interest rates on arms and fixed rate mortgages is smaller.
Speaker 4 (06:17):
I think it's two reasons.
Speaker 3 (06:18):
I think folks are trying to get shave off whatever
they can off of the mortgage rate that they're getting.
But also I think some folks were thinking, well, there's
a chance that rates are going to come down, right
like they're looking ahead to the potential rate cuts. I
think that might be leading to to why it is
we're seeing more applications for arms. But a lot of
it I think comes down to how long you're going
to be in the actual home that you're purchasing, but
(06:39):
also the mortgage that you're taking on as well, because
the average person stays in a home for twelve years,
but then on the mortgage side, the average person refinance
is every seven to ten years, and so a seven
to one or a ten to one ARM isn't actually
as risky a product.
Speaker 4 (06:55):
As many have made it sound.
Speaker 3 (06:57):
Yes, the interest rate can fluctuate after or ten years,
but are you going to be in the same home.
Are you gonna have the same mortgage at that point
in time? So it's important to run the numbers, see
how much you stand to say, compare that to a
thirty thirty or fix, because if the ARM rate isn't
much better that then I would say just locking that
thirty year and avoid the ARM altogether.
Speaker 1 (07:18):
Yeah, and also just know how risky you're willing to get,
because the ARM does have a slightly greater risk factor.
Could say the shorter the term is right and typically
after that first correction can be up to two percentage
points higher if rates have gone that much higher. But
do you think that's gonna happen. I mean that there's
a lot of variables in whether or not you choose
an ARM. But my last mortgage, for the first time ever, Matt,
(07:39):
was an adjustable rate mortgage because I significant amount And
would I do it again, Yeah, if the savings were
significant enough. And I think another part of that is
that it might allow you to save up more money
or to pay down your mortgage faster, which are other
good things. But if you're just gonna like consume with
the difference, might not be the best idea.
Speaker 2 (07:58):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:05):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter.
Speaker 3 (08:11):
It is now time for the Facebook Question of the Week.
Wish this week is by somebody named authentic elk. Well,
you can post nicknames now, apparently in the Facebook group.
I didn't realize this until this week. So are they
following the anonymous Google user where it's just like busy beaver.
Speaker 1 (08:28):
I don't know, because I don't know if you get
to choose the nickname or if it's assigned to you.
Speaker 3 (08:31):
But well, you know, I'm pretty sure on Google, if
it's an anonymous user, like on a shared spreadsheet or something,
I'm sure a lot of folks know what we're talking about.
Speaker 4 (08:37):
I think those are just like randomly astart parks and yeah,
stuff like that.
Speaker 3 (08:40):
Yeah, but this person posted buying a new car soon
and we are gifted funds to help with payment. How
long do the new funds need to be in our
account to see a boost in our credit score. There's
a couple different things that I think are being asked here, Joel, So.
Speaker 4 (08:58):
Which one do you want to start with.
Speaker 1 (08:59):
Let's let's clear through this one, Matt. This is not
like buying a house where funds need to season, right,
because typically in that case, if your parents were super generous, Matt,
you were buying a new house and they said, here's
one hundred thousand dollars, Matty, you would have to declare
that to the bank unless your parents had the foresight
or to give it to you, like more than sixty
days in advance. So if that money sits in your
(09:22):
account for a while. Then you don't need to go
through the process of documenting the gift, which can be annoying.
So that's seasoning of funds. But that's in buying a
house and with a car purchase, the requirements are not
the same, right, so not typically the same.
Speaker 4 (09:38):
So it's going to very lender to lender.
Speaker 1 (09:40):
Some will want you to document a lump sum that
recently came into your account. Others won't really care. But yeah,
typically that seasoning thing. It's when we're talking about home lands.
Speaker 3 (09:49):
That's right, So you addressed the how long do the
new funds need to sit or wait part of the question.
I'm going to talk about the credit score side of
the question that I guess here give a specific asking
about the impact on his credit score, and guess what.
It doesn't make a difference the credit here is they
aren't privy to what is in your savings account. They
(10:10):
look at how well you pay your debts, your payments, right,
whether or not you pay your car payment in full
and all time every month, whether or not you make
your your credit card statement payments. That is going to
improve your score. Not keeping a lump sum in your
account for longer sounds kind of backwards, But lenders they
don't care how much money you actually have. They just
want to see consistent behavior. Essentially, it's amazing.
Speaker 1 (10:33):
It doesn't matter if you had a ten million dollars
net worth, it would not raise your credit score. Like
that's just not one of the factors they consider. Keep talking, Jill,
You're gonna start ended up sounding like Dave Ramsey over here.
Speaker 4 (10:43):
If I could buy the dealership and I wouldn't be
able to get a car.
Speaker 1 (10:47):
I mean, that's what he says, there is or what
he used to say to your truth to that, but
it's true.
Speaker 4 (10:52):
Yeah.
Speaker 3 (10:52):
So I've got to say this though, speaking of having
cash on hand to buy whatever it is you.
Speaker 4 (10:57):
Want to buy, I'm not sure where you are in.
Speaker 3 (11:00):
This whole car purchase process authentic ELK, But could that
cash gift and what you have on hand just allow
you to actually buy this car in cash? It sounds
like I don't know, maybe I should just assume that
when they said they were gifted funds to help with
the payment, to not think payment like car payment, but
(11:21):
in fact to pay for the vehicle, like as far
as cash down. But that's I think a route that
we should be looking at here, Hey, use that cash
on hand to actually purchase a vehicle. Maybe I'm just
going to assume that that was, in fact what you're thinking,
because you're a part of the how to money nation.
Speaker 4 (11:37):
Yeah, I mean I.
Speaker 1 (11:39):
Assumed too that this don't like it not doing it
for me. I'm assuming as well that this is Hey, well,
we're gonna have payments and this gift is going to
help help us with those payments.
Speaker 4 (11:51):
But maybe not.
Speaker 1 (11:52):
Yeah, let's put it. Yeah, let's assume the best out
of authentic ELK, because truly, having no car payment is
such a gift. It's one of the greatest special gifts
you can give to yourself. You and I'm att were
I'm not allergic to gluten. Of course we drink good beer.
I am allergic to car payments, and so I would
prefer to spread this allergy through this microphone into the
earbuts of everyone listening. I don't want anybody to be like,
(12:14):
car payment's totally fine, no big deal, because they are
a big deal, and it's surprising how much financial progress
you can make if you avoid them altogether.
Speaker 3 (12:22):
Yeah, by the way, allergies don't spread, they're not contagious Jrol.
I know, but I want viruses do though, I want
this allergy. So we want car payments to feel like
a virus. Okay for an aversion to car payments to
feel like a super content, Like, what's the.
Speaker 4 (12:35):
Most contagious thing? Ebola? Is it?
Speaker 3 (12:37):
I was gonna say, pink eye. You're thinking much darker
than much more drastic outcomes than I guess, pink eye.
But all right, let's get to our next one from Caden,
who wrote, my wife and I are currently trying to
say for a down payment on our first house. I've
been debating this for a while now, but is it
worth it to take the extra two to three years
to save up a twenty percent down payment or would
(13:00):
it make more sense to just go with an fah
loan for three and a half percent down ended up
paying PMI.
Speaker 4 (13:06):
Private Morgan's Insurance.
Speaker 3 (13:07):
Part of me doesn't want to pay the extra one
hundred to two hundred dollars a month, but then we
would have to way longer to have more money for
the down payment, thanks which I think, Buddy.
Speaker 4 (13:18):
Well.
Speaker 1 (13:19):
When I first read this question, it made me think
about the questions we were getting as housing prices were
rising quickly over the past few years, and folks were
worried that taking longer to say it would mean that
they wouldn't be able to afford the house right that
they wanted, that their needed down payment was a moving
target that they'd never hit. Hey, guess what the house
I wanted two years ago? Well, it was five hundred
(13:40):
thousand dollars. Now it's seven hundred thousand dollars. Constantly feels
just out of reach. Yes, yes, our advice. And this
was hard to say, Matt at the time because it
felt like it felt like we just like weren't with
it and we weren't hip to the fact that housing
prices were going to escalate forever an eternity, and so
we had to get it on the ground floor now
or we're.
Speaker 4 (13:58):
Idiots, right.
Speaker 1 (13:59):
Well, our dice was patience, and that real estate prices
couldn't continue at that upward clip in perpetuity. That was
hard for a lot of people to believe. And I
think I'm sure some people bought a house that maybe
they regret because they were trying to time it right. Fortunately,
we have seen price increases start to chill out, and
many markets we're seeing home prices decline, so for the
(14:21):
first time in something like fifteen years. Maybe waiting longer
will actually mean that you can buy the home you
want for less money. Sure, there's a chance, it's not guaranteed.
It's hard to know what's going to happen with the
housing market, but I love to see at least a
plateau where people aren't and especially younger buyers, are not
worried about just prices continuing to escalate and run away.
Speaker 3 (14:40):
I think it can feel like you can finally try
to catch your breath a little bit. So hopefully that's
the case that you're finding yourself in Caden. And I
think the problem with putting less money down and buying
sooner is that you're going to have less skin in
the game as well. So essentially you're ramping up the
level of risk that you're taking on. Your payment's going
to be higher. And then if you lost your job
or if you're forced to sell, if you had to move,
(15:01):
you would then have to bring money to the closing table,
especially when you're looking at something.
Speaker 4 (15:05):
Like with only three and a half percent down.
Speaker 3 (15:08):
This is a part of why we don't feel comfortable
with smaller down payments, and then of course, the yeah,
the debt that you're going to be taking on will
be at a higher interest rate these days as well,
compared to what you would score with twenty percent down
on a conventional loan.
Speaker 1 (15:22):
Also, on conventional loans, you can typically get rid of
private mortgage insurance after you reach the seventy eight percent
loan to value thresholds. On an FAHA loans, though, where
you put down less than ten percent, typically you pay
that mortgage insurance for the life of the loan. So
it doesn't matter, right, how quickly you pay down on
(15:42):
the loan. It's stuck with you, right, It's like glue,
And so nobody wants to wait longer be told to
wait longer, but that's what we do. And so I
think maybe in the opposite way, this could actually light
a fire under you to increase your savings rate so
that you can shorten the timeline to home ownership, because
it sounds like this is a really important goal of yours.
But our suggestion would be to not skip over what
(16:05):
we see as pretty much a necessity to save up
a bigger down payment. Matt, I just couldn't stomach saying
I really want the house now, and so I'm going
to sign up for the bigger payment and the potential
perils that come along with that alongside mortgage insurance in perpetuity,
because I just got to have the thing immediately. It Yeah,
similar to buy now, pay later. It's like I want
(16:27):
the thing before I actually have the money to really
afford it, and it can create problems.
Speaker 2 (16:33):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (16:39):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (16:44):
All right, let's talk about renting for a second matt.
Older Americans, it seems, are actually more willing to rent
these days. You often think about older Americans as they've
got houses by now they own a house, and it's
the younger folks who are out there renting those apartments
and two bedroom home. But Americans who are fifty five
and older, they're the fastest growing rent demographic in the country.
(17:06):
Some people in that demographic, they've found that's selling their
big house only to buy a smaller one when downsizing
it doesn't really make much financial sense because of elevated
interest rates. So like, yeah, why do you trade in
the sweet mortgage rate when for a much larger one
of selling that home and then renting instead can be
really enticing given kind of where home values are, Like
(17:28):
you mentioned, Matt, also just I think the costs and
the headaches of maintaining a home can as you're entering
your golden ears, be kind of annoying or frustrating, And
buying a home it's not a slam dunk smart move
for everyone at all times, and neither is renting. There's
just a lot of factors to consider, including that bigger
gap between the average monthly mortgage payment and the rent
(17:48):
that you would pay for a similar home. And I
do think, I actually think this is a good thing.
It's interesting to see. I think it can free up
Let's say you are one of those older Americans who
is who has a paidoff home, or who has a
home that's gone up a lot in value and a
lot of you have a lot of equity in there. Well,
maybe it does make sense to sell and to rent.
You've got more money to do other things that you
(18:09):
that you're interested in doing with your life. Whether it's
that's true, travel or I mean, yeah, I think home
ownership is thought to be the end all be all,
and I just think this is is kind of an
interesting shift that I welcome.
Speaker 3 (18:20):
Yeah, I certainly get it though, right because as you
are entering into those retired years, you are looking to
stabilize your expenses and you're you're looking for more knowns
as opposed to the unknowns, like there's enough uncertainty in life, Rachel. True,
but that's one of my concerns though, with renters, or
with retirees being rent more likely to rent these days,
is that similar to the Arm conversation, like you do
(18:42):
need to look off into the future a little bit
and to sort of weigh the pros and cons and
to think, Okay, what are rents likely going to do?
And it kind of depends on what you're willing to rent,
because I foresee, like we've seen softer rents. But when
it comes to single family homes that are in great
neighborhoods and desirable cities to live in that are very walkable,
like that supply isn't fluctuating. But you compare that to apartments,
(19:04):
and if you're willing to live in a condo or
an apartment unit or a multi family, the supply there
is much more elastic. And so you'll see more supply
come on like we have seen in some of these boomtowns.
So what does that do to rent well that it
dries it down. I think if you have that flexibility,
you're willing to pivot, you know, move over to a
new complex, a new unit, perhaps that's going to be
(19:25):
more affordable.
Speaker 4 (19:26):
Then I certainly think there's a financial advantage there.
Speaker 3 (19:28):
But when it comes to yeah, I still see ownership
being great for some of those single family homes. If
you have a very particular spot in mind, like if
you pick picture of your retired years to be a
certain way, for it to have a certain flavor, I
could see I can certainly see purchasing making the lessonse.
And so much depends on the way you want to
(19:48):
live your retired years, right, And if you were like,
actually we're on a downsize with a smaller home base
while renting, look at the disparity renting, there's a lot
more sense, and we're going to be gone half the
time in if that allows you to in fact do
a whole lot of time traveling, yeah, yeah, one hand,
I pictured a retired couple who's like doing all the
travel that they never did in their earlier years and
they're just like doing years and years of traveling. On
the other hand, I see like an older couple who's
(20:10):
just like walking around the neighborhoods, you know, like hanging
out with like their younger neighbors, being a part of
a thriving community. And I think those are the kind
of pros and cons you got away.
Speaker 1 (20:19):
And it can be jar angel to leave a home
that you've been in for years and decades.
Speaker 4 (20:24):
Sure, so I get it. You got a factor that.
Speaker 3 (20:25):
Into Hey, So, speaking of buying a home, lease purchase
agreements are actually on the rise. As well as mortgage rates,
home prices have stayed elevated, borrowers are finding that they
might not qualify for a loan on the home or
their dreams, which is in turn leading to a higher
number of lease purchase agreements. This is according to Pew
(20:45):
Pew Research, and at least agreements they sound awesome, right, yeah,
rit the place you want to buy while you are
building up your nest egg. You'll have the option to
buy at a later date, but until then, it's.
Speaker 4 (20:57):
Like getting your foot in the door, which sounds nice. Yeah,
it's like, oh, I know, I've got It's the inside track.
The problem is the problem on your foot. Here's the deal.
Speaker 3 (21:07):
Even while you are renting, oftentimes you shoulder the responsibilities
of a homeowner. You are paying the property taxes, and
if you don't pay your rent on time, it can
derail your chances at buying the place. And on top
of that, there is a legal uncertainty too. Almost no
states have laws for these sorts of agreements. It's like
a it's a legal gray zone. It's like the legal
(21:29):
framework isn't there. And so this might sound like a
good option if you are a perpetual renter who really
wants to own a home, But in my opinion, it's
not and I would say I wouldn't do this.
Speaker 4 (21:39):
I think if you if.
Speaker 1 (21:40):
As a landlord it's mostly upside right, But as a tenant.
Speaker 3 (21:45):
Who feels like there's too many downsides, it feels like
there's way too many potential gotchas. And if you have
a nice landlord who is interested in selling that you
might be able to find an amicable agreement. But there's
I think that's a cleaner way of approaching it too, Right,
Like if it's a home and you have been renting
there for a while and you're like, hey, would you
ever consider find out if they would be open to
possibly selling it. And then on top of that, hey,
(22:05):
maybe you can find a price that you agree to
off market. You're saving costs there, so they're getting a
little bit more, you're paying less. And then you just
find a closing attorney.
Speaker 1 (22:14):
You just have to be so careful about the terms.
And the truth is, some of those contracts I'm blown
up in people's face because they said, oh, if you pay.
Speaker 4 (22:22):
Rent one day even one day late, then the whole.
Speaker 1 (22:25):
Least purchas agreement is gone. And you've been paying extra
extra every single month as part of that down payment.
Speaker 4 (22:31):
Of the privilege. That's right. Yeah, And so then.
Speaker 1 (22:33):
You're like, oh, man, just like literally one tiny, tiny,
tiny mistake and now I don't get the home iuse one.
Speaker 4 (22:39):
And that's a big problem.
Speaker 1 (22:40):
So when there's no legal recourse for you, that makes
these things incredibly risky. So ye, yeah, you could talk
to your landlord about buying the place, that's one thing.
Speaker 4 (22:49):
But entering into a least purchase agreements.
Speaker 3 (22:51):
All these purchase agreements me no, alike, Yeah, agreed.
Speaker 2 (22:55):
You're listening to how to Money with Joel Larsgard on
demand from k A six forty.
Speaker 1 (23:01):
Let's get to our next question. This one comes from
a listener who is worried about social security not being
there in her future.
Speaker 5 (23:10):
Hey, Matt Angel, this is Katie Colin from Ithaca, New York.
Beautiful area. If you guys ever wanted to come visit.
There's a lot of beer tasting and wine tasting opportunities
here and some beautiful hiking and waterfalls.
Speaker 4 (23:27):
I am a newer listener.
Speaker 5 (23:28):
I've learned so much from you guys, and I'm really
appreciative of that. I have a question specifically about social security.
So you guys were talking about social security, you know,
and the trust running out in the mid twenty thirties,
but then after that there's still being funds available because
(23:49):
you know, workers continue to pay into that system. I'm
wondering if you folks could talk a little bit about
fluctuation in population and.
Speaker 4 (24:03):
Numbers of folks.
Speaker 5 (24:05):
In the workforce and how that will change the way
social security works, or if you could talk about what
your your thoughts about that.
Speaker 3 (24:12):
Are you ever been to Ithica? No, No, I was
gonna say. Kay is a part of the How to
Money Nation. Now she's a newer listener. Okay, so she
recalled that before the HTM nation.
Speaker 4 (24:22):
Yeah, should we do that? I don't know.
Speaker 3 (24:24):
Does it feel too browie? I don't feel good about it. Really,
You're like, I feel a little ichy when it's our besties.
Speaker 4 (24:30):
You know that's true. Yeah, that's better. There are buns.
Speaker 1 (24:32):
Let's talk about soci security because yeah, this is this
is a problem, right, The Social Security Trust Fund talked
about it in that episode, and actually, if you look
at the numbers, it's gotten worse. So the Social Security
Trust Fund is set to run out in roughly eight years,
twenty thirty three, I think is the last estimate I saw.
Speaker 4 (24:51):
Yeah, used to be not that, I'm pretty sure.
Speaker 3 (24:54):
Maybe the first time we talked about it on the show,
they're like, it's totally fine until twenty thirty five.
Speaker 4 (24:59):
The use it's gotten shorter.
Speaker 1 (25:01):
That's right, that's right, and it sounds like a ways away,
but it's not really right. So this, this game of
chicken is kind of starting to get scary in my book,
and it's hard to fathom how no adult in power
has been willing to veer the car away from impending disaster.
They're just like, nothing to see here, and they get
(25:22):
their hands locked on the wheel keeping it straight ahead.
What's going to happen is kind of as you noted, Katie,
benefits are automatically going to get cut by twenty three
percent roughly at that time if nothing is done to
change the system.
Speaker 4 (25:34):
Also, more retirees.
Speaker 1 (25:35):
Have been claiming at an earlier age because of the
troubled social Security system they keep reading about, which compounds
the problem. And still still there seems to be zero
political will to address this elephant in the rumor, to
even acknowledge it exists. It's like nothing to see here,
Everything's fine, social Security rocks.
Speaker 3 (25:54):
These aren't the funds that you're looking for. This does
make sense, though, because honestly, I feel like, as a kind,
like voters, we have lost our stomach to hear the
hard news, right to deal with the hard stuff. But
still it is shocking. Just tell me what I want
to hear, please. Yeah, that's basically how it works in
politics now. But what Katie is asking though, is could
things get worse? So we're gonna go full doomsday on
(26:16):
Katie here, let's go htm nation. We got to stop
saying that the projections now are based on a bunch
of assumptions about how much payroll tax will likely be collected,
and so yeah, birth rates are factoring into this analysis
as well. So yes, the drop dead date, it has
reflected these negative trends in the past few years, and
(26:38):
it gets reassessed by the Trustees of Social Security annually,
and it, yes, most definitely could get worse because if
unemployment numbers, let's say they meaningfully increase, or let's say
the birth rate decline. Let's say it doesn't taper. Let's
say what if it just even speeds up at a
faster pace. Let's say Elon Musk stops having Davies. Matt,
I mean, compared to most the typical American, you and
(27:00):
I are both outliers as well.
Speaker 4 (27:02):
We have too many kids.
Speaker 1 (27:03):
Know if I'm an outlier at three because what two
point one is the birth No, it's like one point seven?
Is it one point seven?
Speaker 4 (27:08):
Now?
Speaker 3 (27:08):
Now yeah, it's below it's below replacement, right, Like two
point one is replacement? Right, Yeah, that's right because to
account for death. Unfortunately, You're right, I'm prolific, you are.
And four is just like, man, We've got friends who
have like seven kids.
Speaker 4 (27:21):
They are like, what could do they belong to you.
Speaker 1 (27:23):
I have friends who had like ten siblings growing up,
and I'm like, what was that?
Speaker 4 (27:27):
Like, I'm curious.
Speaker 3 (27:28):
It's a different time, man. But all that to say, yes,
if there's few folks paying in well, payroll tax collections
would decline, meaning that it would essentially speed up the Yeah,
it's just like smashing the gas pedal on the accelerator
towards this social security cliff even more so it could
in fact get worse.
Speaker 1 (27:49):
You sitting Adam Sandler movie where that family is heading
towards the cliff and the car hits a banana rules?
Speaker 4 (27:55):
Yeah? Is that? Uh, Billy Madison? Was it? Okay?
Speaker 1 (27:58):
Yeah, well so that's what makes you think. It's like
it's the banana peel that could just accelerate everything and
the Yeah, it's one relief to know that things could
get worse.
Speaker 3 (28:07):
You are such you're a big Adam Taylor fan back
in the day. Yeah but yeah, oh wait, no, I'm
getting him confused. Jim, carry him carry That's who you're
a big fan.
Speaker 4 (28:14):
I like that, respectable. I haven't watched Happy Gillmore too,
but that's what I was asking. I'm curious.
Speaker 3 (28:19):
It did really well opening weekend and was all online too,
wasn't it. I think it was just on Flix Netflix only. Yeah,
pretty amazing. Yeah, okay, so what do you do with
this information? This slightly depressing information that if people won't
start having more babies, and we're trying to put a
positive spin on it, but right like that, at the
end of the day, this is sad news.
Speaker 4 (28:36):
Hopefully.
Speaker 3 (28:37):
Yeah, he's like, guys, why are y'all laughing so much
and making jokes? We got to do something, Cat's true.
Speaker 1 (28:41):
Yeah, get y'all through this in the face of impending disaster.
If you don't, don't retain your sense of humor, what
kind of person are you? Right, But for for younger listeners,
I think it should be a wake up call to
elect folks who actually tell us the truth. So maybe
on a political side, nonpart is in political side, that's
something you've taken into consideration. Don't just tell me what
I want to hear. Ask the hard questions, what are
you going to do about the impending disaster that social
(29:03):
security is? Even if it's not fun. I want politicians
who are going to tell me what's up. That authenticity
I think builds trust. Also another thing you can do
practically on the personal finance side of thing, increase your
WROTH in foural one k contributions, more money in your
roth IRA, more in your one K because I think
a lot of people assume that they're going to get
more more Social Security than they are. And guess what
(29:24):
if you're making assumptions based on what it says on
social Security dot gov when you log in, Well, that
assumption could be improper, uh, and it could lead you
to underinvesting and not having as much as you hoped
or as much as you need in retirement. And I
do think Matt, you, you and I believe that Congress
will do something one of these days.
Speaker 4 (29:42):
It's the word, well speak for yourself. Man. You don't
think that you don't think anything will be done.
Speaker 3 (29:45):
I honestly like at this point, I really don't because
of the fact that the American like that as a
nation we've lost like again, we like, we don't want
to be told no.
Speaker 4 (29:54):
We all want our cake and to be able to
eat it too.
Speaker 3 (29:56):
We all want our candy, Joel, and also to be
super fit and strong and to tip the muzzle because well,
think about it. The default action by Congress and legislators
were they to not take any action, is that things
are going to have to change. So who is going to,
like in the right mind, go out there and put
their neck on the chopping block, or who's gonna put
their neck out on the line to say and be
the bearer of bad news? But with by default it's
(30:18):
gonna happen anyway.
Speaker 1 (30:20):
When the Social Security checks get cut, seniors are going
to be riled up, and those are the seniors vote.
So I do think at some point someone's gonna have
to do something, sure, and that will mean changes to
the system. I think that could mean payouts decrease slightly,
maybe not twenty three percent. If there's a change, man,
I think it can mean that dates for being able
to claim Social Security go up, which should have happened already.
(30:41):
Payroll taxes could rise. There are all sorts of changes
that can be made to the system to give it
some longevity, maybe some legs. But yeah, where the political
will is to make that happen, That's that's a good question.
Speaker 4 (30:53):
Yeah, we have to take it.
Speaker 1 (30:54):
Will it is not there, So it's more incumbent on
us as individuals to say for ourselves, yes, the government
is going to short up social Security.
Speaker 3 (31:01):
System, That's the thing I think as as legislators are
looking at it, they're like, why are we looking to
prolong what is the inevitable death of this terrible program?
Like if you look at Social Security as like, what's
the ROI on that is terrible? Yeah, Like if you
if someone came to me and said, hey, I'm thinking
about investing in this.
Speaker 4 (31:18):
ETF it's called SS and Social Security.
Speaker 3 (31:22):
Yes, but I'm also contrasting it and comparing it to
this other one that's VU, I would say, why are
you even considering SS?
Speaker 4 (31:30):
It is terrible. But the fact is we all have to.
Speaker 3 (31:33):
We all like essentially we are forced to pay into
peril taxes faika. This is why I think that legislator
like nobody is excited because the outcomes have been so
dismal that as I try to put myself in the
shoes of a legislator, I'm thinking, yeah, like, nobody wants
to touch this because it's just a sorry it's unfortunately,
it's a sorry product. And as more folks, like you said,
(31:54):
are investing more for themselves, there is a shift that's
taking place of where it is that retirees are turning
for their money. Yes, you've got folks who are most
definitely in retirement who are going to be negatively impacted.
But you also have I mean, how much has retirement
wealth in this country on an individual level grown over
the past ten twenty thirty years. It's skyrocketed, and so
(32:16):
there are more and more folks who are looking to
rely less on social Security for the vast majority of
the retirements, and.
Speaker 1 (32:23):
Younger generations have gotten the message yes, and they're saving
it higher percentage rates than their parents were at because
they realize that it is more incumbent upon them. And
I think that's a message that just has to get
hammered home from shows like ours.
Speaker 4 (32:35):
That's why we talk about it.
Speaker 1 (32:36):
Yeah, yep, you gotta do it because this thing ain't guaranteed.
So it does it should factor in to your analysis.
Thank you, as always for listening to the show. We
appreciate your time and attention. You can always find more
money saving information up on our website at howtomoney dot com.
Speaker 4 (32:52):
We'll see you back here next week.
Speaker 1 (32:54):
You've been listening to How to Money with Joel Larsgard.
You can always hear us live on KFI AM six
four thirty 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 Larsgard and Matt altmics.
Speaker 1 (00:44):
K IF I Am six forty live everywhere on the
iHeartRadio app.
Speaker 3 (00:48):
This is how to Money. 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 ahead and enjoying
the how to Money Facebook group.
Speaker 1 (01:02):
Time you get to the ludicrous headline of the week.
This one comes from CNBC when invest like the one
percent fails, how Yield treats real estate bets left customers
with massive losses. I think, first, I just want to
say I really hate to see individual investors lose money,
and just I felt for the people in the article
(01:22):
who had invested with Yield Street seeing the promised returns
and they were like, yeah, this seems like yeah, I'm
trying to do the right thing for my future. Maybe
you even listen to a podcast like how to money,
and I don't know, maybe only we were listening with
one ear because we would throw shade at companies like this.
But you're like, I'm investing from my future. This is
a great thing. We're not talking these the people who
(01:43):
invested in Yield treat that this is not the upper
crust who were giving money to Bernie made Off or
anything like that. It's normy people and it just sucks
to see them lose money. So Yield Street, this company
that invests in real estate crowdfunded real estate site, promised
that real estate investing in private credit would be democratized,
(02:04):
and I'm so tired of seeing that word in the
money space. We're going to democratize everything. Well, they certainly
made losing money available to all. Matt They said, we'll
democratize you actually losing your life savings.
Speaker 4 (02:17):
How about that.
Speaker 1 (02:18):
Well, so they had thirty something opportunities available on their site,
investments that you could participate in. Four of those thirty
opportunities have been declared total losses, which means not just
that you didn't make money on your investment, but that
your capital is completely gone. So if you invested a
hundred k, guess what one hunter k gone wiped out.
Not even the twenty percent returns weren't great. They were
(02:39):
a little overeflated. I got like ten percent returns. It's
like your money's gone.
Speaker 4 (02:43):
Yeah.
Speaker 1 (02:43):
Twenty three of those investments are on a watch list.
They potentially need to raise more money from investors to
keep those investments afloat, and for those investors it could
be throwing good money after bad Those could also go
belly up too at some point. So we talked about
the event availability the greater levels of availability of alternative
assets in retirement accounts last week. This is the perfect
(03:06):
example of why we prefer investing in publicly traded companies
and biling a slew of them in index funds. Yep,
the risks are just too great. Go with a tried
and true yeah. So the Yield Street mission was to
create financial independence for millions, and they did just the opposite.
I'll note here though, that many private real estate funds
have had a tough time, especially for investments that were
(03:27):
made in the different boom towns like Austin is one
that comes to mind where prices have come down back
to earth, and the reason being many of these investment
firms had loans with short term interest rate fluctuations, making
it basically impossible for them to stay afloat as rates rose,
and then what do we see.
Speaker 3 (03:44):
We saw rents decline. So these part of these because
they got hit with a double whammy.
Speaker 1 (03:48):
Essentially, their projections didn't involve much conservative conservatism. They involved
a lot of optimism. And so they're like, well, if
friends keep going up like this, yeah, and well that's
when mortgage rates stay kind of where they are, we're
going to crush.
Speaker 4 (04:00):
If everything is perfect. Yeah, then, and that's what they were.
Speaker 3 (04:03):
That's what essentially what they were auditioned out when it
came to the different pitches and the sales flyers and
things like that. Yeah, that rate of return, it sounded amazing.
But our advice is this, dear clear of sites that
are promising that you can invest like the one percent,
and the easier availability of these alternative investments in general
is likely going to get more investors in trouble in
(04:23):
the coming years. It just all comes down to how
it is other spun the different it's the new flavor
of the day, basically, like, however they're going to choose
to market it when instead we want you to stay
with the tried and true index.
Speaker 1 (04:34):
Funds, and it can sound enticing, and some of the
prospectus or the prognostications can be Man, oh wow, I can't.
I don't know if I can beat that in this
and B five hundred fund that Matt and Joel talk about.
But you your due diligence is required at much greater
levels than it is investing in something like an index one. Now,
let's talk about another financial product. This one's making you comeback.
(04:55):
Adjustable rate mortgages applications have risen twenty five percent. They
make up something like one in ten mortgages that are
being taken out right now, and they're the highest they've
been since in the past few years. This is according
to the Mortgage Bankers Association. And you might, depending on
how old you are and your how much you remember
(05:15):
two thousand and eight, two thousand and nine, you might
see red blinking lights when you hear that you're worried
that adjustable rate mortgages are a bad product. Hey, weren't
they a big part of the reason that the Great
Recession even happened in the first place. Well, I would
say adjustable rate mortgages are not quite the same as
they were leading up to the mortgage meltdown in eight
They have fundamentally changed in a lot of ways, although
(05:37):
there's still a lot that you need to know before
you sign up for one. You know, most adjustable rate
mortgages come with longer interro rates these days, five seven
or ten years. You get a lower rate, and I
want to caveat that because you might not, but typically
you get a lower rate than you would on a
thirty year mortgage, which means you're going to pay down
principle faster. These mortgages, I think they have the potential
(05:57):
to be a decent choice, but the details are crucial.
And right now, the interest rate disparity has actually shrunk,
which makes thirty ye loans more attractive. So it is
kind of surprising to me, Matt, that adjust worry mortgage
is on the uptick when that kind of gap between
interest rates on arms and fixed rate mortgages is smaller.
Speaker 4 (06:17):
I think it's two reasons.
Speaker 3 (06:18):
I think folks are trying to get shave off whatever
they can off of the mortgage rate that they're getting.
But also I think some folks were thinking, well, there's
a chance that rates are going to come down, right
like they're looking ahead to the potential rate cuts. I
think that might be leading to to why it is
we're seeing more applications for arms. But a lot of
it I think comes down to how long you're going
to be in the actual home that you're purchasing, but
(06:39):
also the mortgage that you're taking on as well, because
the average person stays in a home for twelve years,
but then on the mortgage side, the average person refinance
is every seven to ten years, and so a seven
to one or a ten to one ARM isn't actually
as risky a product.
Speaker 4 (06:55):
As many have made it sound.
Speaker 3 (06:57):
Yes, the interest rate can fluctuate after or ten years,
but are you going to be in the same home.
Are you gonna have the same mortgage at that point
in time? So it's important to run the numbers, see
how much you stand to say, compare that to a
thirty thirty or fix, because if the ARM rate isn't
much better that then I would say just locking that
thirty year and avoid the ARM altogether.
Speaker 1 (07:18):
Yeah, and also just know how risky you're willing to get,
because the ARM does have a slightly greater risk factor.
Could say the shorter the term is right and typically
after that first correction can be up to two percentage
points higher if rates have gone that much higher. But
do you think that's gonna happen. I mean that there's
a lot of variables in whether or not you choose
an ARM. But my last mortgage, for the first time ever, Matt,
(07:39):
was an adjustable rate mortgage because I significant amount And
would I do it again, Yeah, if the savings were
significant enough. And I think another part of that is
that it might allow you to save up more money
or to pay down your mortgage faster, which are other
good things. But if you're just gonna like consume with
the difference, might not be the best idea.
Speaker 2 (07:58):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:05):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter.
Speaker 3 (08:11):
It is now time for the Facebook Question of the Week.
Wish this week is by somebody named authentic elk. Well,
you can post nicknames now, apparently in the Facebook group.
I didn't realize this until this week. So are they
following the anonymous Google user where it's just like busy beaver.
Speaker 1 (08:28):
I don't know, because I don't know if you get
to choose the nickname or if it's assigned to you.
Speaker 3 (08:31):
But well, you know, I'm pretty sure on Google, if
it's an anonymous user, like on a shared spreadsheet or something,
I'm sure a lot of folks know what we're talking about.
Speaker 4 (08:37):
I think those are just like randomly astart parks and yeah,
stuff like that.
Speaker 3 (08:40):
Yeah, but this person posted buying a new car soon
and we are gifted funds to help with payment. How
long do the new funds need to be in our
account to see a boost in our credit score. There's
a couple different things that I think are being asked here, Joel, So.
Speaker 4 (08:58):
Which one do you want to start with.
Speaker 1 (08:59):
Let's let's clear through this one, Matt. This is not
like buying a house where funds need to season, right,
because typically in that case, if your parents were super generous, Matt,
you were buying a new house and they said, here's
one hundred thousand dollars, Matty, you would have to declare
that to the bank unless your parents had the foresight
or to give it to you, like more than sixty
days in advance. So if that money sits in your
(09:22):
account for a while. Then you don't need to go
through the process of documenting the gift, which can be annoying.
So that's seasoning of funds. But that's in buying a
house and with a car purchase, the requirements are not
the same, right, so not typically the same.
Speaker 4 (09:38):
So it's going to very lender to lender.
Speaker 1 (09:40):
Some will want you to document a lump sum that
recently came into your account. Others won't really care. But yeah,
typically that seasoning thing. It's when we're talking about home lands.
Speaker 3 (09:49):
That's right, So you addressed the how long do the
new funds need to sit or wait part of the question.
I'm going to talk about the credit score side of
the question that I guess here give a specific asking
about the impact on his credit score, and guess what.
It doesn't make a difference the credit here is they
aren't privy to what is in your savings account. They
(10:10):
look at how well you pay your debts, your payments, right,
whether or not you pay your car payment in full
and all time every month, whether or not you make
your your credit card statement payments. That is going to
improve your score. Not keeping a lump sum in your
account for longer sounds kind of backwards, But lenders they
don't care how much money you actually have. They just
want to see consistent behavior. Essentially, it's amazing.
Speaker 1 (10:33):
It doesn't matter if you had a ten million dollars
net worth, it would not raise your credit score. Like
that's just not one of the factors they consider. Keep talking, Jill,
You're gonna start ended up sounding like Dave Ramsey over here.
Speaker 4 (10:43):
If I could buy the dealership and I wouldn't be
able to get a car.
Speaker 1 (10:47):
I mean, that's what he says, there is or what
he used to say to your truth to that, but
it's true.
Speaker 4 (10:52):
Yeah.
Speaker 3 (10:52):
So I've got to say this though, speaking of having
cash on hand to buy whatever it is you.
Speaker 4 (10:57):
Want to buy, I'm not sure where you are in.
Speaker 3 (11:00):
This whole car purchase process authentic ELK, But could that
cash gift and what you have on hand just allow
you to actually buy this car in cash? It sounds
like I don't know, maybe I should just assume that
when they said they were gifted funds to help with
the payment, to not think payment like car payment, but
(11:21):
in fact to pay for the vehicle, like as far
as cash down. But that's I think a route that
we should be looking at here, Hey, use that cash
on hand to actually purchase a vehicle. Maybe I'm just
going to assume that that was, in fact what you're thinking,
because you're a part of the how to money nation.
Speaker 4 (11:37):
Yeah, I mean I.
Speaker 1 (11:39):
Assumed too that this don't like it not doing it
for me. I'm assuming as well that this is Hey, well,
we're gonna have payments and this gift is going to
help help us with those payments.
Speaker 4 (11:51):
But maybe not.
Speaker 1 (11:52):
Yeah, let's put it. Yeah, let's assume the best out
of authentic ELK, because truly, having no car payment is
such a gift. It's one of the greatest special gifts
you can give to yourself. You and I'm att were
I'm not allergic to gluten. Of course we drink good beer.
I am allergic to car payments, and so I would
prefer to spread this allergy through this microphone into the
earbuts of everyone listening. I don't want anybody to be like,
(12:14):
car payment's totally fine, no big deal, because they are
a big deal, and it's surprising how much financial progress
you can make if you avoid them altogether.
Speaker 3 (12:22):
Yeah, by the way, allergies don't spread, they're not contagious Jrol.
I know, but I want viruses do though, I want
this allergy. So we want car payments to feel like
a virus. Okay for an aversion to car payments to
feel like a super content, Like, what's the.
Speaker 4 (12:35):
Most contagious thing? Ebola? Is it?
Speaker 3 (12:37):
I was gonna say, pink eye. You're thinking much darker
than much more drastic outcomes than I guess, pink eye.
But all right, let's get to our next one from Caden,
who wrote, my wife and I are currently trying to
say for a down payment on our first house. I've
been debating this for a while now, but is it
worth it to take the extra two to three years
to save up a twenty percent down payment or would
(13:00):
it make more sense to just go with an fah
loan for three and a half percent down ended up
paying PMI.
Speaker 4 (13:06):
Private Morgan's Insurance.
Speaker 3 (13:07):
Part of me doesn't want to pay the extra one
hundred to two hundred dollars a month, but then we
would have to way longer to have more money for
the down payment, thanks which I think, Buddy.
Speaker 4 (13:18):
Well.
Speaker 1 (13:19):
When I first read this question, it made me think
about the questions we were getting as housing prices were
rising quickly over the past few years, and folks were
worried that taking longer to say it would mean that
they wouldn't be able to afford the house right that
they wanted, that their needed down payment was a moving
target that they'd never hit. Hey, guess what the house
I wanted two years ago? Well, it was five hundred
(13:40):
thousand dollars. Now it's seven hundred thousand dollars. Constantly feels
just out of reach. Yes, yes, our advice. And this
was hard to say, Matt at the time because it
felt like it felt like we just like weren't with
it and we weren't hip to the fact that housing
prices were going to escalate forever an eternity, and so
we had to get it on the ground floor now
or we're.
Speaker 4 (13:58):
Idiots, right.
Speaker 1 (13:59):
Well, our dice was patience, and that real estate prices
couldn't continue at that upward clip in perpetuity. That was
hard for a lot of people to believe. And I
think I'm sure some people bought a house that maybe
they regret because they were trying to time it right. Fortunately,
we have seen price increases start to chill out, and
many markets we're seeing home prices decline, so for the
(14:21):
first time in something like fifteen years. Maybe waiting longer
will actually mean that you can buy the home you
want for less money. Sure, there's a chance, it's not guaranteed.
It's hard to know what's going to happen with the
housing market, but I love to see at least a
plateau where people aren't and especially younger buyers, are not
worried about just prices continuing to escalate and run away.
Speaker 3 (14:40):
I think it can feel like you can finally try
to catch your breath a little bit. So hopefully that's
the case that you're finding yourself in Caden. And I
think the problem with putting less money down and buying
sooner is that you're going to have less skin in
the game as well. So essentially you're ramping up the
level of risk that you're taking on. Your payment's going
to be higher. And then if you lost your job
or if you're forced to sell, if you had to move,
(15:01):
you would then have to bring money to the closing table,
especially when you're looking at something.
Speaker 4 (15:05):
Like with only three and a half percent down.
Speaker 3 (15:08):
This is a part of why we don't feel comfortable
with smaller down payments, and then of course, the yeah,
the debt that you're going to be taking on will
be at a higher interest rate these days as well,
compared to what you would score with twenty percent down
on a conventional loan.
Speaker 1 (15:22):
Also, on conventional loans, you can typically get rid of
private mortgage insurance after you reach the seventy eight percent
loan to value thresholds. On an FAHA loans, though, where
you put down less than ten percent, typically you pay
that mortgage insurance for the life of the loan. So
it doesn't matter, right, how quickly you pay down on
(15:42):
the loan. It's stuck with you, right, It's like glue,
And so nobody wants to wait longer be told to
wait longer, but that's what we do. And so I
think maybe in the opposite way, this could actually light
a fire under you to increase your savings rate so
that you can shorten the timeline to home ownership, because
it sounds like this is a really important goal of yours.
But our suggestion would be to not skip over what
(16:05):
we see as pretty much a necessity to save up
a bigger down payment. Matt, I just couldn't stomach saying
I really want the house now, and so I'm going
to sign up for the bigger payment and the potential
perils that come along with that alongside mortgage insurance in perpetuity,
because I just got to have the thing immediately. It Yeah,
similar to buy now, pay later. It's like I want
(16:27):
the thing before I actually have the money to really
afford it, and it can create problems.
Speaker 2 (16:33):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (16:39):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (16:44):
All right, let's talk about renting for a second matt.
Older Americans, it seems, are actually more willing to rent
these days. You often think about older Americans as they've
got houses by now they own a house, and it's
the younger folks who are out there renting those apartments
and two bedroom home. But Americans who are fifty five
and older, they're the fastest growing rent demographic in the country.
(17:06):
Some people in that demographic, they've found that's selling their
big house only to buy a smaller one when downsizing
it doesn't really make much financial sense because of elevated
interest rates. So like, yeah, why do you trade in
the sweet mortgage rate when for a much larger one
of selling that home and then renting instead can be
really enticing given kind of where home values are, Like
(17:28):
you mentioned, Matt, also just I think the costs and
the headaches of maintaining a home can as you're entering
your golden ears, be kind of annoying or frustrating, And
buying a home it's not a slam dunk smart move
for everyone at all times, and neither is renting. There's
just a lot of factors to consider, including that bigger
gap between the average monthly mortgage payment and the rent
(17:48):
that you would pay for a similar home. And I
do think, I actually think this is a good thing.
It's interesting to see. I think it can free up
Let's say you are one of those older Americans who
is who has a paidoff home, or who has a
home that's gone up a lot in value and a
lot of you have a lot of equity in there. Well,
maybe it does make sense to sell and to rent.
You've got more money to do other things that you
(18:09):
that you're interested in doing with your life. Whether it's
that's true, travel or I mean, yeah, I think home
ownership is thought to be the end all be all,
and I just think this is is kind of an
interesting shift that I welcome.
Speaker 3 (18:20):
Yeah, I certainly get it though, right because as you
are entering into those retired years, you are looking to
stabilize your expenses and you're you're looking for more knowns
as opposed to the unknowns, like there's enough uncertainty in life, Rachel. True,
but that's one of my concerns though, with renters, or
with retirees being rent more likely to rent these days,
is that similar to the Arm conversation, like you do
(18:42):
need to look off into the future a little bit
and to sort of weigh the pros and cons and
to think, Okay, what are rents likely going to do?
And it kind of depends on what you're willing to rent,
because I foresee, like we've seen softer rents. But when
it comes to single family homes that are in great
neighborhoods and desirable cities to live in that are very walkable,
like that supply isn't fluctuating. But you compare that to apartments,
(19:04):
and if you're willing to live in a condo or
an apartment unit or a multi family, the supply there
is much more elastic. And so you'll see more supply
come on like we have seen in some of these boomtowns.
So what does that do to rent well that it
dries it down. I think if you have that flexibility,
you're willing to pivot, you know, move over to a
new complex, a new unit, perhaps that's going to be
(19:25):
more affordable.
Speaker 4 (19:26):
Then I certainly think there's a financial advantage there.
Speaker 3 (19:28):
But when it comes to yeah, I still see ownership
being great for some of those single family homes. If
you have a very particular spot in mind, like if
you pick picture of your retired years to be a
certain way, for it to have a certain flavor, I
could see I can certainly see purchasing making the lessonse.
And so much depends on the way you want to
(19:48):
live your retired years, right, And if you were like,
actually we're on a downsize with a smaller home base
while renting, look at the disparity renting, there's a lot
more sense, and we're going to be gone half the
time in if that allows you to in fact do
a whole lot of time traveling, yeah, yeah, one hand,
I pictured a retired couple who's like doing all the
travel that they never did in their earlier years and
they're just like doing years and years of traveling. On
the other hand, I see like an older couple who's
(20:10):
just like walking around the neighborhoods, you know, like hanging
out with like their younger neighbors, being a part of
a thriving community. And I think those are the kind
of pros and cons you got away.
Speaker 1 (20:19):
And it can be jar angel to leave a home
that you've been in for years and decades.
Speaker 4 (20:24):
Sure, so I get it. You got a factor that.
Speaker 3 (20:25):
Into Hey, So, speaking of buying a home, lease purchase
agreements are actually on the rise. As well as mortgage rates,
home prices have stayed elevated, borrowers are finding that they
might not qualify for a loan on the home or
their dreams, which is in turn leading to a higher
number of lease purchase agreements. This is according to Pew
(20:45):
Pew Research, and at least agreements they sound awesome, right, yeah,
rit the place you want to buy while you are
building up your nest egg. You'll have the option to
buy at a later date, but until then, it's.
Speaker 4 (20:57):
Like getting your foot in the door, which sounds nice. Yeah,
it's like, oh, I know, I've got It's the inside track.
The problem is the problem on your foot. Here's the deal.
Speaker 3 (21:07):
Even while you are renting, oftentimes you shoulder the responsibilities
of a homeowner. You are paying the property taxes, and
if you don't pay your rent on time, it can
derail your chances at buying the place. And on top
of that, there is a legal uncertainty too. Almost no
states have laws for these sorts of agreements. It's like
a it's a legal gray zone. It's like the legal
(21:29):
framework isn't there. And so this might sound like a
good option if you are a perpetual renter who really
wants to own a home, But in my opinion, it's
not and I would say I wouldn't do this.
Speaker 4 (21:39):
I think if you if.
Speaker 1 (21:40):
As a landlord it's mostly upside right, But as a tenant.
Speaker 3 (21:45):
Who feels like there's too many downsides, it feels like
there's way too many potential gotchas. And if you have
a nice landlord who is interested in selling that you
might be able to find an amicable agreement. But there's
I think that's a cleaner way of approaching it too, Right,
Like if it's a home and you have been renting
there for a while and you're like, hey, would you
ever consider find out if they would be open to
possibly selling it. And then on top of that, hey,
(22:05):
maybe you can find a price that you agree to
off market. You're saving costs there, so they're getting a
little bit more, you're paying less. And then you just
find a closing attorney.
Speaker 1 (22:14):
You just have to be so careful about the terms.
And the truth is, some of those contracts I'm blown
up in people's face because they said, oh, if you pay.
Speaker 4 (22:22):
Rent one day even one day late, then the whole.
Speaker 1 (22:25):
Least purchas agreement is gone. And you've been paying extra
extra every single month as part of that down payment.
Speaker 4 (22:31):
Of the privilege. That's right. Yeah, And so then.
Speaker 1 (22:33):
You're like, oh, man, just like literally one tiny, tiny,
tiny mistake and now I don't get the home iuse one.
Speaker 4 (22:39):
And that's a big problem.
Speaker 1 (22:40):
So when there's no legal recourse for you, that makes
these things incredibly risky. So ye, yeah, you could talk
to your landlord about buying the place, that's one thing.
Speaker 4 (22:49):
But entering into a least purchase agreements.
Speaker 3 (22:51):
All these purchase agreements me no, alike, Yeah, agreed.
Speaker 2 (22:55):
You're listening to how to Money with Joel Larsgard on
demand from k A six forty.
Speaker 1 (23:01):
Let's get to our next question. This one comes from
a listener who is worried about social security not being
there in her future.
Speaker 5 (23:10):
Hey, Matt Angel, this is Katie Colin from Ithaca, New York.
Beautiful area. If you guys ever wanted to come visit.
There's a lot of beer tasting and wine tasting opportunities
here and some beautiful hiking and waterfalls.
Speaker 4 (23:27):
I am a newer listener.
Speaker 5 (23:28):
I've learned so much from you guys, and I'm really
appreciative of that. I have a question specifically about social security.
So you guys were talking about social security, you know,
and the trust running out in the mid twenty thirties,
but then after that there's still being funds available because
(23:49):
you know, workers continue to pay into that system. I'm
wondering if you folks could talk a little bit about
fluctuation in population and.
Speaker 4 (24:03):
Numbers of folks.
Speaker 5 (24:05):
In the workforce and how that will change the way
social security works, or if you could talk about what
your your thoughts about that.
Speaker 3 (24:12):
Are you ever been to Ithica? No, No, I was
gonna say. Kay is a part of the How to
Money Nation. Now she's a newer listener. Okay, so she
recalled that before the HTM nation.
Speaker 4 (24:22):
Yeah, should we do that? I don't know.
Speaker 3 (24:24):
Does it feel too browie? I don't feel good about it. Really,
You're like, I feel a little ichy when it's our besties.
Speaker 4 (24:30):
You know that's true. Yeah, that's better. There are buns.
Speaker 1 (24:32):
Let's talk about soci security because yeah, this is this
is a problem, right, The Social Security Trust Fund talked
about it in that episode, and actually, if you look
at the numbers, it's gotten worse. So the Social Security
Trust Fund is set to run out in roughly eight years,
twenty thirty three, I think is the last estimate I saw.
Speaker 4 (24:51):
Yeah, used to be not that, I'm pretty sure.
Speaker 3 (24:54):
Maybe the first time we talked about it on the show,
they're like, it's totally fine until twenty thirty five.
Speaker 4 (24:59):
The use it's gotten shorter.
Speaker 1 (25:01):
That's right, that's right, and it sounds like a ways away,
but it's not really right. So this, this game of
chicken is kind of starting to get scary in my book,
and it's hard to fathom how no adult in power
has been willing to veer the car away from impending disaster.
They're just like, nothing to see here, and they get
(25:22):
their hands locked on the wheel keeping it straight ahead.
What's going to happen is kind of as you noted, Katie,
benefits are automatically going to get cut by twenty three
percent roughly at that time if nothing is done to
change the system.
Speaker 4 (25:34):
Also, more retirees.
Speaker 1 (25:35):
Have been claiming at an earlier age because of the
troubled social Security system they keep reading about, which compounds
the problem. And still still there seems to be zero
political will to address this elephant in the rumor, to
even acknowledge it exists. It's like nothing to see here,
Everything's fine, social Security rocks.
Speaker 3 (25:54):
These aren't the funds that you're looking for. This does
make sense, though, because honestly, I feel like, as a kind,
like voters, we have lost our stomach to hear the
hard news, right to deal with the hard stuff. But
still it is shocking. Just tell me what I want
to hear, please. Yeah, that's basically how it works in
politics now. But what Katie is asking though, is could
things get worse? So we're gonna go full doomsday on
(26:16):
Katie here, let's go htm nation. We got to stop
saying that the projections now are based on a bunch
of assumptions about how much payroll tax will likely be collected,
and so yeah, birth rates are factoring into this analysis
as well. So yes, the drop dead date, it has
reflected these negative trends in the past few years, and
(26:38):
it gets reassessed by the Trustees of Social Security annually,
and it, yes, most definitely could get worse because if
unemployment numbers, let's say they meaningfully increase, or let's say
the birth rate decline. Let's say it doesn't taper. Let's
say what if it just even speeds up at a
faster pace. Let's say Elon Musk stops having Davies. Matt,
I mean, compared to most the typical American, you and
(27:00):
I are both outliers as well.
Speaker 4 (27:02):
We have too many kids.
Speaker 1 (27:03):
Know if I'm an outlier at three because what two
point one is the birth No, it's like one point seven?
Is it one point seven?
Speaker 4 (27:08):
Now?
Speaker 3 (27:08):
Now yeah, it's below it's below replacement, right, Like two
point one is replacement? Right, Yeah, that's right because to
account for death. Unfortunately, You're right, I'm prolific, you are.
And four is just like, man, We've got friends who
have like seven kids.
Speaker 4 (27:21):
They are like, what could do they belong to you.
Speaker 1 (27:23):
I have friends who had like ten siblings growing up,
and I'm like, what was that?
Speaker 4 (27:27):
Like, I'm curious.
Speaker 3 (27:28):
It's a different time, man. But all that to say, yes,
if there's few folks paying in well, payroll tax collections
would decline, meaning that it would essentially speed up the Yeah,
it's just like smashing the gas pedal on the accelerator
towards this social security cliff even more so it could
in fact get worse.
Speaker 1 (27:49):
You sitting Adam Sandler movie where that family is heading
towards the cliff and the car hits a banana rules?
Speaker 4 (27:55):
Yeah? Is that? Uh, Billy Madison? Was it? Okay?
Speaker 1 (27:58):
Yeah, well so that's what makes you think. It's like
it's the banana peel that could just accelerate everything and
the Yeah, it's one relief to know that things could
get worse.
Speaker 3 (28:07):
You are such you're a big Adam Taylor fan back
in the day. Yeah but yeah, oh wait, no, I'm
getting him confused. Jim, carry him carry That's who you're
a big fan.
Speaker 4 (28:14):
I like that, respectable. I haven't watched Happy Gillmore too,
but that's what I was asking. I'm curious.
Speaker 3 (28:19):
It did really well opening weekend and was all online too,
wasn't it. I think it was just on Flix Netflix only. Yeah,
pretty amazing. Yeah, okay, so what do you do with
this information? This slightly depressing information that if people won't
start having more babies, and we're trying to put a
positive spin on it, but right like that, at the
end of the day, this is sad news.
Speaker 4 (28:36):
Hopefully.
Speaker 3 (28:37):
Yeah, he's like, guys, why are y'all laughing so much
and making jokes? We got to do something, Cat's true.
Speaker 1 (28:41):
Yeah, get y'all through this in the face of impending disaster.
If you don't, don't retain your sense of humor, what
kind of person are you? Right, But for for younger listeners,
I think it should be a wake up call to
elect folks who actually tell us the truth. So maybe
on a political side, nonpart is in political side, that's
something you've taken into consideration. Don't just tell me what
I want to hear. Ask the hard questions, what are
you going to do about the impending disaster that social
(29:03):
security is? Even if it's not fun. I want politicians
who are going to tell me what's up. That authenticity
I think builds trust. Also another thing you can do
practically on the personal finance side of thing, increase your
WROTH in foural one k contributions, more money in your
roth IRA, more in your one K because I think
a lot of people assume that they're going to get
more more Social Security than they are. And guess what
(29:24):
if you're making assumptions based on what it says on
social Security dot gov when you log in, Well, that
assumption could be improper, uh, and it could lead you
to underinvesting and not having as much as you hoped
or as much as you need in retirement. And I
do think Matt, you, you and I believe that Congress
will do something one of these days.
Speaker 4 (29:42):
It's the word, well speak for yourself. Man. You don't
think that you don't think anything will be done.
Speaker 3 (29:45):
I honestly like at this point, I really don't because
of the fact that the American like that as a
nation we've lost like again, we like, we don't want
to be told no.
Speaker 4 (29:54):
We all want our cake and to be able to
eat it too.
Speaker 3 (29:56):
We all want our candy, Joel, and also to be
super fit and strong and to tip the muzzle because well,
think about it. The default action by Congress and legislators
were they to not take any action, is that things
are going to have to change. So who is going to,
like in the right mind, go out there and put
their neck on the chopping block, or who's gonna put
their neck out on the line to say and be
the bearer of bad news? But with by default it's
(30:18):
gonna happen anyway.
Speaker 1 (30:20):
When the Social Security checks get cut, seniors are going
to be riled up, and those are the seniors vote.
So I do think at some point someone's gonna have
to do something, sure, and that will mean changes to
the system. I think that could mean payouts decrease slightly,
maybe not twenty three percent. If there's a change, man,
I think it can mean that dates for being able
to claim Social Security go up, which should have happened already.
(30:41):
Payroll taxes could rise. There are all sorts of changes
that can be made to the system to give it
some longevity, maybe some legs. But yeah, where the political
will is to make that happen, That's that's a good question.
Speaker 4 (30:53):
Yeah, we have to take it.
Speaker 1 (30:54):
Will it is not there, So it's more incumbent on
us as individuals to say for ourselves, yes, the government
is going to short up social Security.
Speaker 3 (31:01):
System, That's the thing I think as as legislators are
looking at it, they're like, why are we looking to
prolong what is the inevitable death of this terrible program?
Like if you look at Social Security as like, what's
the ROI on that is terrible? Yeah, Like if you
if someone came to me and said, hey, I'm thinking
about investing in this.
Speaker 4 (31:18):
ETF it's called SS and Social Security.
Speaker 3 (31:22):
Yes, but I'm also contrasting it and comparing it to
this other one that's VU, I would say, why are
you even considering SS?
Speaker 4 (31:30):
It is terrible. But the fact is we all have to.
Speaker 3 (31:33):
We all like essentially we are forced to pay into
peril taxes faika. This is why I think that legislator
like nobody is excited because the outcomes have been so
dismal that as I try to put myself in the
shoes of a legislator, I'm thinking, yeah, like, nobody wants
to touch this because it's just a sorry it's unfortunately,
it's a sorry product. And as more folks, like you said,
(31:54):
are investing more for themselves, there is a shift that's
taking place of where it is that retirees are turning
for their money. Yes, you've got folks who are most
definitely in retirement who are going to be negatively impacted.
But you also have I mean, how much has retirement
wealth in this country on an individual level grown over
the past ten twenty thirty years. It's skyrocketed, and so
(32:16):
there are more and more folks who are looking to
rely less on social Security for the vast majority of
the retirements, and.
Speaker 1 (32:23):
Younger generations have gotten the message yes, and they're saving
it higher percentage rates than their parents were at because
they realize that it is more incumbent upon them. And
I think that's a message that just has to get
hammered home from shows like ours.
Speaker 4 (32:35):
That's why we talk about it.
Speaker 1 (32:36):
Yeah, yep, you gotta do it because this thing ain't guaranteed.
So it does it should factor in to your analysis.
Thank you, as always for listening to the show. We
appreciate your time and attention. You can always find more
money saving information up on our website at howtomoney dot com.
Speaker 4 (32:52):
We'll see you back here next week.
Speaker 1 (32:54):
You've been listening to How to Money with Joel Larsgard.
You can always hear us live on KFI AM six
four thirty twelve pm to two pm on Sunday and
anytime on demand on the iHeartRadio app.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
New Heights with Jason & Travis Kelce
Football’s funniest family duo — Jason Kelce of the Philadelphia Eagles and Travis Kelce of the Kansas City Chiefs — team up to provide next-level access to life in the league as it unfolds. The two brothers and Super Bowl champions drop weekly insights about the weekly slate of games and share their INSIDE perspectives on trending NFL news and sports headlines. They also endlessly rag on each other as brothers do, chat the latest in pop culture and welcome some very popular and well-known friends to chat with them. Check out new episodes every Wednesday. Follow New Heights on the Wondery App, YouTube or wherever you get your podcasts. You can listen to new episodes early and ad-free, and get exclusive content on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. And join our new membership for a unique fan experience by going to the New Heights YouTube channel now!
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.