May 6, 2025 • 22 mins
Find "Your Fiscal Physical" the book on Amazon at: rb.gy/3shpfk
If you have suggestions or feedback, please email us at: Podcast@AlchemyWealth.com
And, as always, STAY THE COURSE!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:33):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
My name is Aaron Hoisington.
I am here with my good buddy,ryan Nelson.
Ryan, what's happening with youtoday, my man?
Ryan Nelson (00:46):
Not too much new on my end.
What's happening with you Same?
Aaron Hoisington (00:49):
same same stuff.
You know new day we're workingwith here and a new episode of
the Fiscal Physical, sohopefully you guys are getting
your weekly dose of this.
Appreciate all the listenerschecking us out Tuesday mornings
, you know.
Get those things downloaded.
We're excited to hear what youguys' thoughts are on the last.
At this point we're almost 70episodes deep, so that's pretty
(01:13):
wild to think about.
Speaker 1 (01:14):
That is.
Aaron Hoisington (01:16):
It's funny how time kind of gets away from you
, but hopefully you guys have 20minutes to spare to come check
us out every week.
We really appreciate it.
And this week's topic, I think,is pretty relatable.
Most people will be able to atleast have an idea on this or
have come across this conundrum,if you will, of cash versus
credit.
So I'll break that down alittle bit, because I wouldn't
(01:39):
say it's an age-old debate, butmaybe it is, maybe I don't know
how old it is or whatever, but Ithink it's appropriate to bring
up about, kind of discuss thedifferent times when it might be
best to use cash, best to usecredit.
And I really want to plug that.
We are not trying to givefinancial advice with this here.
That's not what we're trying todo, but we're just trying to
(02:00):
prompt people to think about andconsider their options when
they come across the situation.
So, um, ryan, I'm going to goahead and let you take it away
on the uh, cash versus creditdebate, sure.
Ryan Nelson (02:10):
Yeah, what's, what's your gut?
Tell you when, when, when.
Aaron Hoisington (02:13):
maybe use cash versus when you know it's funny
, I was thinking about this too.
Grow growing up like my parents, kind of instilled with me to
just use cash.
If I had cash, like to use that, if I had cash to use that.
My dad still carries hundredsof dollars in his wallet just
because he likes to use cash.
Sure, yeah, I tend to nowadaysuse credit more than anything.
I would say You're adisappointment to your father.
Ryan Nelson (02:33):
I am in more ways than one.
Aaron Hoisington (02:38):
But I would say I think he's still proud of
me.
But I would say that just thethought process on what was kind
of ingrained on, hey, use cashor continue to have cash, don't
get credit cards, these kind ofthings, and I think that's
really shifted once you kind offigure out exactly where they
can be used in the differentscenarios.
But I would say I'd lean moretowards cash, I suppose.
(02:59):
But I'd be curious what youwould say.
Ryan Nelson (03:01):
Yeah, I mean, I think, like most things right,
it's not that cash is betterthan credit or credit is better
than cash.
Again, they have different prosand different cons.
Yeah, I really don't think oneis better than the other.
I do see people run into someissues, but so one of the things
I would say like right off thebat is you know, like carrying
(03:24):
cash versus carrying a creditcard and stuff, there's some
interesting just differences inconvenience.
So if you lose your wallet with$500 cash in it, you're
probably gone.
Yeah, you lose your wallet witha credit card in it, you can
call your credit card companyand cancel it.
Yep, that's interesting.
Definitely you know, if there's.
Yeah, so I don't.
There's just some interestingdifferences even just there,
(03:46):
from just a carrying standpointand security.
If you pay for a service withcash and the service or product
doesn't get delivered or isn'tdelivered suitably, you're kind
of out of luck.
If you have a credit card, youcan do a charge back and you can
(04:06):
, like, file it as fraud.
If it truly is fraud and um,then the credit card company
will take it upon themselves tobasically claw the money back
from that vendor or you know.
Um, so there's some interestingbenefits of credit, right?
Um?
That said, there's also peoplewho end up racking up thousands
and thousands and thousands ofdollars of, let's say, credit
card debt, who buying thingsthey can't afford, and then they
(04:30):
have this compounding issue of20, 30% interest rate on top of
that and they can barely makethe the, just the interest
payments.
And you know they they're inthis spiral that they just can't
claw themselves out of becauseof the high interest rates,
right?
So I think clearly you can seethere's some good and some bad
as far as utilizing credit goes.
(04:51):
My first thoughts when I hear aquestion like this would be
Probably my, maybe the first andmost important thought would be
let's say we're going to go buya car and let's say you have
$30,000 you've saved for thiscar.
So then you could take that$30,000 and buy the car outright
, or you could still finance it,right, and I would say what's
(05:13):
interesting is, as you're makingthat decision, you would want
to be comparing your interestrate, and so if the interest
rate you're going to get is apromotional rate of 0.9% or
something, the interest rateyou're going to get is a
promotional rate of 0.9% orsomething, you might say, gosh,
this company will let me borrowthis money at 0.9%.
I could just go buy a CD withthis money at a very low rate.
(05:35):
That's almost guaranteed.
Aaron Hoisington (05:38):
Certificate of deposit right, yep, not like an
actual compact disc.
Yeah, yeah, yeah, I don't thinkthat'd be a very good.
That's not a good return.
Ryan Nelson (05:47):
No, no, no, no, no, no.
But yeah.
So if they're offering you a0.9%, that might change your
mind and you might say, well,heck, I have the 30 grand, but
maybe I'll just finance itanyways.
But keep the 30 grand, go putit into certificate of deposit
who knows, 4% at that time, 5%,who knows?
And then at the end of the dayyou can now pay back that 0.9%
(06:07):
and you still netted 4% more.
So now you have your car and alittle bit extra cash, right?
If they come back to you andthey say, hey, the interest rate
is going to be 8%, you mightsay, gosh, it would be nice just
to avoid 8%.
Why don't I just pay for thiscar outright in cash, right?
So comparing that interest ratewould be interesting and then
comparing it to what yourexpected returns in the quote
(06:28):
unquote market is.
Whatever that is, if you'regetting a three or five-year
loan for a vehicle, you may nothave the same risk tolerance, so
you may not want to invest itas aggressively and therefore
plan for as high of returns inthe market.
So if you're buying a vehiclewith a three-year loan, you
might only be comfortableputting that money into a CD,
and so your expected returnsmight be lower If you're buying
(06:49):
a home with a 30-year mortgage.
The time horizon is longer, mayincrease your risk tolerance
and you may be able to assumehigher expected returns.
And so, as you're comparingagainst the interest rate, you
may make a different decisionversus buying a home, versus
buying a car.
You may make a differentdecision versus buying a home,
versus buying a car.
But what I find, and what thedangerous thing is, is, if you
go to buy a car, so maybe thatexample I gave, where you have
(07:10):
30,000 cash and you want to buya $30,000 car, that's like the
ideal world.
Sure, a lot of people don'tlive in that ideal world, and so
maybe they have $10,000, butthey want to go buy a car and
they're looking and trying todetermine what car to buy.
And so they are looking andthey say, okay, here's a used
car off of Craigslist for 10grand.
That's one option.
Or I go to the dealershiphere's a nicer car, it's a used
(07:32):
car, it's 20 grand.
Or I'm at the dealership, I'mlike this is an even nicer car,
it's a brand new car, it's 50grand.
And you're trying to decidewhich one to buy.
And so then you're talking tothe car salesman and they're
like well, if you buy this$50,000 car, you put 10 grand
down.
Your payments are going to bewe finance it over eight years.
Your payments are going to bewhatever $600 a month.
And you say, oh, I can afford$600.
(07:54):
Okay, you don't even know whatthe interest rate is.
Maybe, and what I would argueis, you just bought a car you
can't afford.
You could afford a $10,000 car.
You just bought a a $50,000 car.
You bought a car you can'tafford and you're using credit
to do so, and so, I love the God, what is that saying?
I don't even know.
(08:15):
I've probably used it in one ofthe previous podcasts, but it's
about like you can either usecredit to your you can use
interest to your advantage orhave interest used against you.
Aaron Hoisington (08:25):
Oh yeah, like uses you or.
Ryan Nelson (08:27):
Right, if you go buy like in my first example, if
you had $30,000 cash and youbuy a $30,000 car and they're
giving it to you at 0.9% and yougo reinvest it at 4%, you're
taking advantage of interest.
Sure, you're leaving thesituation when it's all said and
done, with a car and extramoney that you generated in
interest, the bank let you haveit at 0.9%.
If, instead, you're doing thereverse of this, you have 10
(08:50):
grand, you buy a $50,000 car,and so you had to finance that
$40,000 gap.
You're now paying interest.
So the question is always areyou receiving interest or are
you paying interest?
And so, again, this can applyto a house too.
If your mortgage rate on yourhouse is 2.9% and you think you
could get long-term returns inthe market of 7% by taking the
(09:10):
credit, so by using a mortgageand investing the difference,
you're receiving a net positiveinterest rate, right?
Whereas the flip side of thatis, if you have a credit card,
that's 30 grand and it's a20-something percent interest
rate and you say, oh no, that'sgreat because I'm investing the
money.
Speaker 1 (09:27):
Well, if you're investing at a 7% and you're
owing 20, you're at net negative13,.
Ryan Nelson (09:32):
You're, on average, paying interest, right.
So I think it really comes downto are you receiving interest
or are you paying interest?
We typically want to avoidpaying interest.
I typically like receivinginterest, Definitely.
So that'd be one thing toconsider.
Another thing to consider wouldbe is the asset you're buying an
appreciating asset or adepreciating asset?
Ooh, big piece right there.
So if you buy a house or abusiness, that could be an
(09:57):
appreciating asset.
If you're buying a car or aboat, that'd be a depreciating
asset.
Right, I'd be pretty hesitantor a little more scared to
finance a depreciating assetbecause it's heading to zero,
right.
Its value is going to zero andif you still owe something on it
, you would be what's calledupside down, in that you would
owe more than the product isworth.
Then the you know it's.
A lot of people go upside downin their cars.
They buy a car, drive it offthe lot.
(10:19):
They now owe more for that carthan they could sell it for, so
they're kind of trapped in thecar.
If the car gets totaled, theycould be in a bad spot because
they can't sell the car for asmuch as it's worth.
So that'd be another thing toconsider.
Are you buying an appreciatingor depreciating asset?
Again, comparing the interestrates.
And again, I think I'd alwayscome back to making sure you're
buying something you can affordand don't get sold or tricked
(10:41):
into thinking you can affordsomething you can't.
So again, if you have 10 grandand you're buying a $50,000 car,
just because you're looking atthe payments, the payments could
feel reasonable.
Again, that doesn't mean youcan really afford that.
What I would argue is the morefinancially responsible decision
would be buy the 10,000.
If they tell you, hey, thepayments for this car are going
(11:03):
to be 600 bucks a month, youcould go buy that car.
Or you could say, well, let mejust buy this $10,000 car that I
can actually afford now.
But you just told me you couldafford $600 a month.
So why don't you start saving$600 a month and at the end of
year one you'll have $7,200saved up, plus maybe some
returns.
You do that for three or fiveyears.
(11:24):
All of a sudden you got $30,000, $40,000, $5050,000 saved and
you could actually go at thattime go and buy that car.
So if you think you can afford a$600 payment again, why don't
you buy the card you can affordtoday?
Start saving $600 a month.
Three, four or five years lateryou actually will be able to go
afford that $50,000 car.
But what you just did is thatwhole time, while you were
(11:45):
saving that 600 bucks a month,you're saving, you're investing
that or putting it in a CD orusing bank interest, and so
again you're gaining interest onthis money as opposed to
getting a loan early and payinginterest right.
So just by being a littlepatient in saving ahead of time,
again you can use interest toyour benefit as opposed to
having to pay that interest.
Yeah.
Aaron Hoisington (12:06):
I think that that's a phenomenal example, and
also we were talking about thisoff air a little bit ago about
like the spreadsheet answer andthe real life answer because
sometimes you get into thosedealerships I've been there
myself.
You're like.
They're like hey, you can buy,you can afford.
You know the $500 a monthpayment or whatever.
You're like you know what Icould afford a $500 payment you
know, and you're looking andthey're like, okay, cool, you
(12:28):
know it's a 6%, 7% interest rateand just like that, just kind
of gloss.
You just gloss over that kindof thing, cause you're like 500
bucks a month, I could drive offthe lot with this new car.
And then you're like is thatthe most financially responsible
thing to do?
Probably not, but sure Darn itDo I want that new car kind of
thing too, so like absolutely.
We're all human.
I think in the end you're justlike the idea and I think it's a
(12:50):
common pitfall that people haveof like.
You start doing the math andyou're like, well, yeah, if I
just save the 600 and then I go,well, I got a 600 extra dollars
a month, I might spend it here,I might do it here I might
spend this and suddenly you'rejust like, well, did I come out
(13:11):
ahead at all here?
But I think that there's theopportunity there to really sit
back and live within your meansand we're going to cover certain
ones on a future podcastepisode as well too, of
lifestyle creep and thesecertain things of getting in
there and how to best managethat.
But I think that a car is avery, very common example where
you see this for sure.
Because you go in there, you'relike $600 a month.
I could do that For six years.
(13:32):
You're paying this.
At what rate?
In that $50,000 car, you mightbe paying $70,000 on it, right,
absolutely Easy.
But anyway, cash versus credit,once again, with a lot of
things depends.
Ryan Nelson (13:44):
One other quick question for you, so kind of in
the same vein but a slightlydifferent take, since there's so
many different applications.
Just curious what your initialthoughts would be around using
credit card day to day.
You mentioned your dad carriedaround the X number of dollars
of cash.
You more carry a credit card.
It sounds like what's kind ofyour rationale, or what do you
think is better?
Aaron Hoisington (14:05):
This is for me .
Sometimes I find things thatI'm like oh yeah, if this is
used right, it's like a hack.
I think of the 401k or an HSA.
We've covered those on Roth IRAor an HSA account.
We've done episodes on that.
Please go check them out.
Now, looking at this, I'm justlike holy smokes.
(14:28):
If this is used correctly, I'mgoing to get all these returns
tax-free.
Speaker 1 (14:34):
That can't be right kind of thing, and it is.
Aaron Hoisington (14:40):
And I think that the same thing goes with
credit cards.
I look at that because you cansign up for your credit cards
that give you X amount of milesfor every purchase that you do,
and so I tend to use my creditcards more day to day.
However, I'm very cognizant andvery aware that I try to pay
them off every month, becausethen I get the benefits of the
rewards, of the cash back thatcomes with it, and I feel like
I'm using that credit to thebest of my ability.
(15:02):
Sometimes it doesn't work.
Then they get away from me,though, so I would say that
that's kind of my rationale oflike it's just more convenient
to have their credit cards, andif I stay on top of it, I feel
like it just ends up working outbetter.
I'm taking advantage of thingsthat I could.
Ryan Nelson (15:19):
Yeah, exactly.
Yeah, I figured that's whereyou'd go with the credit card
rewards.
Yeah, so I think what'sinteresting about that?
Obviously the credit cardcompanies aren't losing money.
They're incentivizing you to usethese credit cards for a reason
because, on average, people aregoing to have a balance and be
paying them interest, right.
So that's how they can affordto give everybody rewards, right
.
And so what I would say is I'mthe same way.
(15:40):
I use a credit card for almostevery transaction I do, but I
pay it off every single month.
I've never paid a single pennyin interest to any credit card
company.
Oh, awesome, good for you.
Yeah, thank you, thank you.
But so I would say that youknow, for somebody like myself,
I've never had again paid apenny of interest to any credit
card company.
It's clearly a tool that, withmy lifestyle and personality,
(16:02):
I'm able to use without abusing.
Also, I think it's importantjust to sort of take index of
your personality, and if you'reone of the people who runs up a
credit card and sees it as atool to buy something you can't
afford, then all of a sudden youstart paying this 20%, 25%
interest back to a credit cardcompany.
(16:23):
It can be a very dangerous andslippery slope, so it can be a
very dangerous tool to use right.
And so I do think credit cards,they have some great advantages
.
Credit card rewards are prettycool If you're not paying them
any amount in interest andyou're just taking advantage of
rewards.
Heck, that's pretty awesome,right.
The fact that, if we mentionedearlier, if there's a fraudulent
charge, you can call them.
They basically take on the onusof reversing it and stuff for
(16:45):
you.
That's a pretty sweet benefit.
I like that.
If I lose it, the ability tojust cancel it and request a new
one.
That's pretty convenient, right.
So there's lots of conveniences.
Again, the slippery slope isunderstand, on average, these
credit card companies are makingmoney.
So if you ever find yourself inthat position where, yeah,
you're paying more in interestthan you're getting in rewards,
(17:06):
you need to kind of reevaluateand say, okay, this isn't
working for me, I need to changesomething.
And maybe moving to cash orbeing more cognizant would be a
tool you could use to again comeout sort of net ahead at the
end.
Aaron Hoisington (17:20):
Excellent.
Love the breakdown, ryan, asalways.
Hopefully that gives some foodfor thought for our listeners to
kind of just examine how you'reusing cash versus credit and
what works best for you.
And obviously no judgment onour end here as far as that goes
, and everybody has their ownreasons.
But just being a little bitmore financially and fiscally
aware of why and how you mightbe doing these things is always
(17:43):
a good thing, I would say.
But anyway, hang tight with ushere.
We'll be right back with thelittle personal section for you.
Speaker 1 (17:49):
And now to put the personal in personal finance.
Aaron Hoisington (17:56):
Welcome back everybody this side of the
Fiscal Physical Podcast.
I have a question for my friend, ryan here.
We've kind of covered a similarone in the past about people
you'd want to have dinner withover the history of time or
whatever.
But this one, ryan, is firstoff.
You host some great parties,the things that I look forward
to yearly, I'm like I try to atleast once a quarter.
(18:18):
Hopefully we're doing somethingthat you're hosting.
I think it's awesome.
But who is a celebrity or afamous person that you'd want to
attend either your birthdayparty or one of your parties?
Ryan Nelson (18:30):
just in general, yeah, I mean, I don't know, I'm
not a big starstruck guy.
I don't know.
We mentioned on a coupleepisodes ago that I don't listen
to that much music and stuffand I don't watch that many TV
shows.
So I'm not up to date on theactors or musicians.
Um, I think I think, if Iremember right, the question
before was something about likewho I would want like at a
(18:51):
dinner, or something like threepeople from history, like like
at dinner, something like thatand so, yeah, I mean, I don't
even know how famous this personis.
Probably nobody that's listeningeven knows who this person is,
but, uh, I mentioned on thatepisode, but p Peter Atiyah, I
think he's the longevity doctor.
I just think he'd be.
Oh yeah, in a lot of ways Ithink he's very similar to me.
In a lot of ways.
(19:11):
He was an engineer, he was infinance, then he went into being
a doctor, but we've had similarsports interests in the past
and stuff, and, just when Ilistened to him, just a lot of
similarities, and I think thatcould be fun.
The reality is, though, I'dprobably rather just have, like
my friends attend my party thana celebrity.
I like would actually yeah, Iwould have more fun with just
like my friends, probably thanany celebrity.
Aaron Hoisington (19:33):
So what about you?
No, that's a.
That's a great answer and,honestly, I'm thinking about
changing my answer, cause I'dprobably have more common with
my friends than a celebrity butI do think it'd be kind of
interesting to think about theoverall people and pick their
brains in certain thingsAbsolutely.
And I keep going back to I'mlike do I do a sports figure?
(19:53):
Do I do a-.
Yeah right, and I think I'dprobably want a president there,
a previous president, whetherit be George W Bush, barack
Obama, bill Clinton, trump, Ireally don't care.
I think it'd be reallyinteresting to have a president
come to your birthday party oryour dinner party and just kind
of talk to them and see whatthey're like on a personal level
(20:16):
.
I think about a shotgun and abeer with.
Ryan Nelson (20:20):
George W, plus you're getting kind of two for
the price of one, because thenyou know some Secret Service is
going to be there, exactlyYou're like, hey, this party's
going to be well-protected, kindof thing.
Aaron Hoisington (20:31):
So I think I'd have to choose a president.
I honestly any of the livingones.
I think the most recent livingone is Bill Clinton.
I think he's the only one left,who's I don't know if or what
do you mean the most or sorry,the last, the oldest living
president, I think is, or likethe last, yeah, yeah, I think so
.
I think he was the last personto serve, like I think was bill
clinton.
But um, honestly, just just tokind of see, like you know, you
(20:53):
see these people on tv givespeeches, how they're wired, and
just see like what that wouldbe like in person.
Like is it would it be just abusiness dinner kind of thing,
or would they be able to letloose?
And you see interactions atdifferent, honestly, funerals,
when people go to a funeral andpeople interacting with each
other and joking around, and I'mlike, oh, you don't really get
to see that side of people veryoften at that kind of level.
(21:15):
So I'd choose a president Idon't know which one.
Honestly, if any of them came,I'd be pretty excited about it.
Yeah, that'd be fun.
That excited about it.
Heck, yeah, that'd be fun,that'd be interesting.
Plus, I'd probably get more ofmy friends to show up if.
Speaker 1 (21:25):
I got a president at my party too.
Aaron Hoisington (21:28):
That'd be kind of fun.
I'll have to be vetted, somaybe I wouldn't get many
actually.
Anyway thank you everybody forlistening, tuning in, putting up
with us.
We really appreciate it here.
I'll leave it up to you, Ryan,to give it the final words, as
always.
Stay the course.
Speaker 1 (21:47):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
podcast to ensure you never missan episode, and consider
(22:09):
leaving us a rating and reviewon your favorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
just that personal.
(22:29):
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:33):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
My name is Aaron Hoisington.
I am here with my good buddy,ryan Nelson.
Ryan, what's happening with youtoday, my man?
Ryan Nelson (00:46):
Not too much new on my end.
What's happening with you Same?
Aaron Hoisington (00:49):
same same stuff.
You know new day we're workingwith here and a new episode of
the Fiscal Physical, sohopefully you guys are getting
your weekly dose of this.
Appreciate all the listenerschecking us out Tuesday mornings
, you know.
Get those things downloaded.
We're excited to hear what youguys' thoughts are on the last.
At this point we're almost 70episodes deep, so that's pretty
(01:13):
wild to think about.
Speaker 1 (01:14):
That is.
Aaron Hoisington (01:16):
It's funny how time kind of gets away from you
, but hopefully you guys have 20minutes to spare to come check
us out every week.
We really appreciate it.
And this week's topic, I think,is pretty relatable.
Most people will be able to atleast have an idea on this or
have come across this conundrum,if you will, of cash versus
credit.
So I'll break that down alittle bit, because I wouldn't
(01:39):
say it's an age-old debate, butmaybe it is, maybe I don't know
how old it is or whatever, but Ithink it's appropriate to bring
up about, kind of discuss thedifferent times when it might be
best to use cash, best to usecredit.
And I really want to plug that.
We are not trying to givefinancial advice with this here.
That's not what we're trying todo, but we're just trying to
(02:00):
prompt people to think about andconsider their options when
they come across the situation.
So, um, ryan, I'm going to goahead and let you take it away
on the uh, cash versus creditdebate, sure.
Ryan Nelson (02:10):
Yeah, what's, what's your gut?
Tell you when, when, when.
Aaron Hoisington (02:13):
maybe use cash versus when you know it's funny
, I was thinking about this too.
Grow growing up like my parents, kind of instilled with me to
just use cash.
If I had cash, like to use that, if I had cash to use that.
My dad still carries hundredsof dollars in his wallet just
because he likes to use cash.
Sure, yeah, I tend to nowadaysuse credit more than anything.
I would say You're adisappointment to your father.
Ryan Nelson (02:33):
I am in more ways than one.
Aaron Hoisington (02:38):
But I would say I think he's still proud of
me.
But I would say that just thethought process on what was kind
of ingrained on, hey, use cashor continue to have cash, don't
get credit cards, these kind ofthings, and I think that's
really shifted once you kind offigure out exactly where they
can be used in the differentscenarios.
But I would say I'd lean moretowards cash, I suppose.
(02:59):
But I'd be curious what youwould say.
Ryan Nelson (03:01):
Yeah, I mean, I think, like most things right,
it's not that cash is betterthan credit or credit is better
than cash.
Again, they have different prosand different cons.
Yeah, I really don't think oneis better than the other.
I do see people run into someissues, but so one of the things
I would say like right off thebat is you know, like carrying
(03:24):
cash versus carrying a creditcard and stuff, there's some
interesting just differences inconvenience.
So if you lose your wallet with$500 cash in it, you're
probably gone.
Yeah, you lose your wallet witha credit card in it, you can
call your credit card companyand cancel it.
Yep, that's interesting.
Definitely you know, if there's.
Yeah, so I don't.
There's just some interestingdifferences even just there,
(03:46):
from just a carrying standpointand security.
If you pay for a service withcash and the service or product
doesn't get delivered or isn'tdelivered suitably, you're kind
of out of luck.
If you have a credit card, youcan do a charge back and you can
(04:06):
, like, file it as fraud.
If it truly is fraud and um,then the credit card company
will take it upon themselves tobasically claw the money back
from that vendor or you know.
Um, so there's some interestingbenefits of credit, right?
Um?
That said, there's also peoplewho end up racking up thousands
and thousands and thousands ofdollars of, let's say, credit
card debt, who buying thingsthey can't afford, and then they
(04:30):
have this compounding issue of20, 30% interest rate on top of
that and they can barely makethe the, just the interest
payments.
And you know they they're inthis spiral that they just can't
claw themselves out of becauseof the high interest rates,
right?
So I think clearly you can seethere's some good and some bad
as far as utilizing credit goes.
(04:51):
My first thoughts when I hear aquestion like this would be
Probably my, maybe the first andmost important thought would be
let's say we're going to go buya car and let's say you have
$30,000 you've saved for thiscar.
So then you could take that$30,000 and buy the car outright
, or you could still finance it,right, and I would say what's
(05:13):
interesting is, as you're makingthat decision, you would want
to be comparing your interestrate, and so if the interest
rate you're going to get is apromotional rate of 0.9% or
something, the interest rateyou're going to get is a
promotional rate of 0.9% orsomething, you might say, gosh,
this company will let me borrowthis money at 0.9%.
I could just go buy a CD withthis money at a very low rate.
(05:35):
That's almost guaranteed.
Aaron Hoisington (05:38):
Certificate of deposit right, yep, not like an
actual compact disc.
Yeah, yeah, yeah, I don't thinkthat'd be a very good.
That's not a good return.
Ryan Nelson (05:47):
No, no, no, no, no, no.
But yeah.
So if they're offering you a0.9%, that might change your
mind and you might say, well,heck, I have the 30 grand, but
maybe I'll just finance itanyways.
But keep the 30 grand, go putit into certificate of deposit
who knows, 4% at that time, 5%,who knows?
And then at the end of the dayyou can now pay back that 0.9%
(06:07):
and you still netted 4% more.
So now you have your car and alittle bit extra cash, right?
If they come back to you andthey say, hey, the interest rate
is going to be 8%, you mightsay, gosh, it would be nice just
to avoid 8%.
Why don't I just pay for thiscar outright in cash, right?
So comparing that interest ratewould be interesting and then
comparing it to what yourexpected returns in the quote
(06:28):
unquote market is.
Whatever that is, if you'regetting a three or five-year
loan for a vehicle, you may nothave the same risk tolerance, so
you may not want to invest itas aggressively and therefore
plan for as high of returns inthe market.
So if you're buying a vehiclewith a three-year loan, you
might only be comfortableputting that money into a CD,
and so your expected returnsmight be lower If you're buying
(06:49):
a home with a 30-year mortgage.
The time horizon is longer, mayincrease your risk tolerance
and you may be able to assumehigher expected returns.
And so, as you're comparingagainst the interest rate, you
may make a different decisionversus buying a home, versus
buying a car.
You may make a differentdecision versus buying a home,
versus buying a car.
But what I find, and what thedangerous thing is, is, if you
go to buy a car, so maybe thatexample I gave, where you have
(07:10):
30,000 cash and you want to buya $30,000 car, that's like the
ideal world.
Sure, a lot of people don'tlive in that ideal world, and so
maybe they have $10,000, butthey want to go buy a car and
they're looking and trying todetermine what car to buy.
And so they are looking andthey say, okay, here's a used
car off of Craigslist for 10grand.
That's one option.
Or I go to the dealershiphere's a nicer car, it's a used
(07:32):
car, it's 20 grand.
Or I'm at the dealership, I'mlike this is an even nicer car,
it's a brand new car, it's 50grand.
And you're trying to decidewhich one to buy.
And so then you're talking tothe car salesman and they're
like well, if you buy this$50,000 car, you put 10 grand
down.
Your payments are going to bewe finance it over eight years.
Your payments are going to bewhatever $600 a month.
And you say, oh, I can afford$600.
(07:54):
Okay, you don't even know whatthe interest rate is.
Maybe, and what I would argueis, you just bought a car you
can't afford.
You could afford a $10,000 car.
You just bought a a $50,000 car.
You bought a car you can'tafford and you're using credit
to do so, and so, I love the God, what is that saying?
I don't even know.
(08:15):
I've probably used it in one ofthe previous podcasts, but it's
about like you can either usecredit to your you can use
interest to your advantage orhave interest used against you.
Aaron Hoisington (08:25):
Oh yeah, like uses you or.
Ryan Nelson (08:27):
Right, if you go buy like in my first example, if
you had $30,000 cash and youbuy a $30,000 car and they're
giving it to you at 0.9% and yougo reinvest it at 4%, you're
taking advantage of interest.
Sure, you're leaving thesituation when it's all said and
done, with a car and extramoney that you generated in
interest, the bank let you haveit at 0.9%.
If, instead, you're doing thereverse of this, you have 10
(08:50):
grand, you buy a $50,000 car,and so you had to finance that
$40,000 gap.
You're now paying interest.
So the question is always areyou receiving interest or are
you paying interest?
And so, again, this can applyto a house too.
If your mortgage rate on yourhouse is 2.9% and you think you
could get long-term returns inthe market of 7% by taking the
(09:10):
credit, so by using a mortgageand investing the difference,
you're receiving a net positiveinterest rate, right?
Whereas the flip side of thatis, if you have a credit card,
that's 30 grand and it's a20-something percent interest
rate and you say, oh no, that'sgreat because I'm investing the
money.
Speaker 1 (09:27):
Well, if you're investing at a 7% and you're
owing 20, you're at net negative13,.
Ryan Nelson (09:32):
You're, on average, paying interest, right.
So I think it really comes downto are you receiving interest
or are you paying interest?
We typically want to avoidpaying interest.
I typically like receivinginterest, Definitely.
So that'd be one thing toconsider.
Another thing to consider wouldbe is the asset you're buying an
appreciating asset or adepreciating asset?
Ooh, big piece right there.
So if you buy a house or abusiness, that could be an
(09:57):
appreciating asset.
If you're buying a car or aboat, that'd be a depreciating
asset.
Right, I'd be pretty hesitantor a little more scared to
finance a depreciating assetbecause it's heading to zero,
right.
Its value is going to zero andif you still owe something on it
, you would be what's calledupside down, in that you would
owe more than the product isworth.
Then the you know it's.
A lot of people go upside downin their cars.
They buy a car, drive it offthe lot.
(10:19):
They now owe more for that carthan they could sell it for, so
they're kind of trapped in thecar.
If the car gets totaled, theycould be in a bad spot because
they can't sell the car for asmuch as it's worth.
So that'd be another thing toconsider.
Are you buying an appreciatingor depreciating asset?
Again, comparing the interestrates.
And again, I think I'd alwayscome back to making sure you're
buying something you can affordand don't get sold or tricked
(10:41):
into thinking you can affordsomething you can't.
So again, if you have 10 grandand you're buying a $50,000 car,
just because you're looking atthe payments, the payments could
feel reasonable.
Again, that doesn't mean youcan really afford that.
What I would argue is the morefinancially responsible decision
would be buy the 10,000.
If they tell you, hey, thepayments for this car are going
(11:03):
to be 600 bucks a month, youcould go buy that car.
Or you could say, well, let mejust buy this $10,000 car that I
can actually afford now.
But you just told me you couldafford $600 a month.
So why don't you start saving$600 a month and at the end of
year one you'll have $7,200saved up, plus maybe some
returns.
You do that for three or fiveyears.
(11:24):
All of a sudden you got $30,000, $40,000, $5050,000 saved and
you could actually go at thattime go and buy that car.
So if you think you can afford a$600 payment again, why don't
you buy the card you can affordtoday?
Start saving $600 a month.
Three, four or five years lateryou actually will be able to go
afford that $50,000 car.
But what you just did is thatwhole time, while you were
(11:45):
saving that 600 bucks a month,you're saving, you're investing
that or putting it in a CD orusing bank interest, and so
again you're gaining interest onthis money as opposed to
getting a loan early and payinginterest right.
So just by being a littlepatient in saving ahead of time,
again you can use interest toyour benefit as opposed to
having to pay that interest.
Yeah.
Aaron Hoisington (12:06):
I think that that's a phenomenal example, and
also we were talking about thisoff air a little bit ago about
like the spreadsheet answer andthe real life answer because
sometimes you get into thosedealerships I've been there
myself.
You're like.
They're like hey, you can buy,you can afford.
You know the $500 a monthpayment or whatever.
You're like you know what Icould afford a $500 payment you
know, and you're looking andthey're like, okay, cool, you
(12:28):
know it's a 6%, 7% interest rateand just like that, just kind
of gloss.
You just gloss over that kindof thing, cause you're like 500
bucks a month, I could drive offthe lot with this new car.
And then you're like is thatthe most financially responsible
thing to do?
Probably not, but sure Darn itDo I want that new car kind of
thing too, so like absolutely.
We're all human.
I think in the end you're justlike the idea and I think it's a
(12:50):
common pitfall that people haveof like.
You start doing the math andyou're like, well, yeah, if I
just save the 600 and then I go,well, I got a 600 extra dollars
a month, I might spend it here,I might do it here I might
spend this and suddenly you'rejust like, well, did I come out
(13:11):
ahead at all here?
But I think that there's theopportunity there to really sit
back and live within your meansand we're going to cover certain
ones on a future podcastepisode as well too, of
lifestyle creep and thesecertain things of getting in
there and how to best managethat.
But I think that a car is avery, very common example where
you see this for sure.
Because you go in there, you'relike $600 a month.
I could do that For six years.
(13:32):
You're paying this.
At what rate?
In that $50,000 car, you mightbe paying $70,000 on it, right,
absolutely Easy.
But anyway, cash versus credit,once again, with a lot of
things depends.
Ryan Nelson (13:44):
One other quick question for you, so kind of in
the same vein but a slightlydifferent take, since there's so
many different applications.
Just curious what your initialthoughts would be around using
credit card day to day.
You mentioned your dad carriedaround the X number of dollars
of cash.
You more carry a credit card.
It sounds like what's kind ofyour rationale, or what do you
think is better?
Aaron Hoisington (14:05):
This is for me .
Sometimes I find things thatI'm like oh yeah, if this is
used right, it's like a hack.
I think of the 401k or an HSA.
We've covered those on Roth IRAor an HSA account.
We've done episodes on that.
Please go check them out.
Now, looking at this, I'm justlike holy smokes.
(14:28):
If this is used correctly, I'mgoing to get all these returns
tax-free.
Speaker 1 (14:34):
That can't be right kind of thing, and it is.
Aaron Hoisington (14:40):
And I think that the same thing goes with
credit cards.
I look at that because you cansign up for your credit cards
that give you X amount of milesfor every purchase that you do,
and so I tend to use my creditcards more day to day.
However, I'm very cognizant andvery aware that I try to pay
them off every month, becausethen I get the benefits of the
rewards, of the cash back thatcomes with it, and I feel like
I'm using that credit to thebest of my ability.
(15:02):
Sometimes it doesn't work.
Then they get away from me,though, so I would say that
that's kind of my rationale oflike it's just more convenient
to have their credit cards, andif I stay on top of it, I feel
like it just ends up working outbetter.
I'm taking advantage of thingsthat I could.
Ryan Nelson (15:19):
Yeah, exactly.
Yeah, I figured that's whereyou'd go with the credit card
rewards.
Yeah, so I think what'sinteresting about that?
Obviously the credit cardcompanies aren't losing money.
They're incentivizing you to usethese credit cards for a reason
because, on average, people aregoing to have a balance and be
paying them interest, right.
So that's how they can affordto give everybody rewards, right
.
And so what I would say is I'mthe same way.
(15:40):
I use a credit card for almostevery transaction I do, but I
pay it off every single month.
I've never paid a single pennyin interest to any credit card
company.
Oh, awesome, good for you.
Yeah, thank you, thank you.
But so I would say that youknow, for somebody like myself,
I've never had again paid apenny of interest to any credit
card company.
It's clearly a tool that, withmy lifestyle and personality,
(16:02):
I'm able to use without abusing.
Also, I think it's importantjust to sort of take index of
your personality, and if you'reone of the people who runs up a
credit card and sees it as atool to buy something you can't
afford, then all of a sudden youstart paying this 20%, 25%
interest back to a credit cardcompany.
(16:23):
It can be a very dangerous andslippery slope, so it can be a
very dangerous tool to use right.
And so I do think credit cards,they have some great advantages
.
Credit card rewards are prettycool If you're not paying them
any amount in interest andyou're just taking advantage of
rewards.
Heck, that's pretty awesome,right.
The fact that, if we mentionedearlier, if there's a fraudulent
charge, you can call them.
They basically take on the onusof reversing it and stuff for
(16:45):
you.
That's a pretty sweet benefit.
I like that.
If I lose it, the ability tojust cancel it and request a new
one.
That's pretty convenient, right.
So there's lots of conveniences.
Again, the slippery slope isunderstand, on average, these
credit card companies are makingmoney.
So if you ever find yourself inthat position where, yeah,
you're paying more in interestthan you're getting in rewards,
(17:06):
you need to kind of reevaluateand say, okay, this isn't
working for me, I need to changesomething.
And maybe moving to cash orbeing more cognizant would be a
tool you could use to again comeout sort of net ahead at the
end.
Aaron Hoisington (17:20):
Excellent.
Love the breakdown, ryan, asalways.
Hopefully that gives some foodfor thought for our listeners to
kind of just examine how you'reusing cash versus credit and
what works best for you.
And obviously no judgment onour end here as far as that goes
, and everybody has their ownreasons.
But just being a little bitmore financially and fiscally
aware of why and how you mightbe doing these things is always
(17:43):
a good thing, I would say.
But anyway, hang tight with ushere.
We'll be right back with thelittle personal section for you.
Speaker 1 (17:49):
And now to put the personal in personal finance.
Aaron Hoisington (17:56):
Welcome back everybody this side of the
Fiscal Physical Podcast.
I have a question for my friend, ryan here.
We've kind of covered a similarone in the past about people
you'd want to have dinner withover the history of time or
whatever.
But this one, ryan, is firstoff.
You host some great parties,the things that I look forward
to yearly, I'm like I try to atleast once a quarter.
(18:18):
Hopefully we're doing somethingthat you're hosting.
I think it's awesome.
But who is a celebrity or afamous person that you'd want to
attend either your birthdayparty or one of your parties?
Ryan Nelson (18:30):
just in general, yeah, I mean, I don't know, I'm
not a big starstruck guy.
I don't know.
We mentioned on a coupleepisodes ago that I don't listen
to that much music and stuffand I don't watch that many TV
shows.
So I'm not up to date on theactors or musicians.
Um, I think I think, if Iremember right, the question
before was something about likewho I would want like at a
(18:51):
dinner, or something like threepeople from history, like like
at dinner, something like thatand so, yeah, I mean, I don't
even know how famous this personis.
Probably nobody that's listeningeven knows who this person is,
but, uh, I mentioned on thatepisode, but p Peter Atiyah, I
think he's the longevity doctor.
I just think he'd be.
Oh yeah, in a lot of ways Ithink he's very similar to me.
In a lot of ways.
(19:11):
He was an engineer, he was infinance, then he went into being
a doctor, but we've had similarsports interests in the past
and stuff, and, just when Ilistened to him, just a lot of
similarities, and I think thatcould be fun.
The reality is, though, I'dprobably rather just have, like
my friends attend my party thana celebrity.
I like would actually yeah, Iwould have more fun with just
like my friends, probably thanany celebrity.
Aaron Hoisington (19:33):
So what about you?
No, that's a.
That's a great answer and,honestly, I'm thinking about
changing my answer, cause I'dprobably have more common with
my friends than a celebrity butI do think it'd be kind of
interesting to think about theoverall people and pick their
brains in certain thingsAbsolutely.
And I keep going back to I'mlike do I do a sports figure?
(19:53):
Do I do a-.
Yeah right, and I think I'dprobably want a president there,
a previous president, whetherit be George W Bush, barack
Obama, bill Clinton, trump, Ireally don't care.
I think it'd be reallyinteresting to have a president
come to your birthday party oryour dinner party and just kind
of talk to them and see whatthey're like on a personal level
(20:16):
.
I think about a shotgun and abeer with.
Ryan Nelson (20:20):
George W, plus you're getting kind of two for
the price of one, because thenyou know some Secret Service is
going to be there, exactlyYou're like, hey, this party's
going to be well-protected, kindof thing.
Aaron Hoisington (20:31):
So I think I'd have to choose a president.
I honestly any of the livingones.
I think the most recent livingone is Bill Clinton.
I think he's the only one left,who's I don't know if or what
do you mean the most or sorry,the last, the oldest living
president, I think is, or likethe last, yeah, yeah, I think so
.
I think he was the last personto serve, like I think was bill
clinton.
But um, honestly, just just tokind of see, like you know, you
(20:53):
see these people on tv givespeeches, how they're wired, and
just see like what that wouldbe like in person.
Like is it would it be just abusiness dinner kind of thing,
or would they be able to letloose?
And you see interactions atdifferent, honestly, funerals,
when people go to a funeral andpeople interacting with each
other and joking around, and I'mlike, oh, you don't really get
to see that side of people veryoften at that kind of level.
(21:15):
So I'd choose a president Idon't know which one.
Honestly, if any of them came,I'd be pretty excited about it.
Yeah, that'd be fun.
That excited about it.
Heck, yeah, that'd be fun,that'd be interesting.
Plus, I'd probably get more ofmy friends to show up if.
Speaker 1 (21:25):
I got a president at my party too.
Aaron Hoisington (21:28):
That'd be kind of fun.
I'll have to be vetted, somaybe I wouldn't get many
actually.
Anyway thank you everybody forlistening, tuning in, putting up
with us.
We really appreciate it here.
I'll leave it up to you, Ryan,to give it the final words, as
always.
Stay the course.
Speaker 1 (21:47):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
podcast to ensure you never missan episode, and consider
(22:09):
leaving us a rating and reviewon your favorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
just that personal.
(22:29):
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
Popular Podcasts
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
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.