Simply Money

Episode Transcript

(00:05):
Tonight, we've got a hot inflationreport, So what does that mean?
And an entire show dedicated to improvingyour financial literacy and why we think that's
so very important. You're listening toSimply Money, presented by all Worth Financial
Ammi Wagner along with Steve Ruby.I will remind you we are in this
upside down, topsy turvy world wheregood financial news can actually also be bad

(00:32):
financial news. Yeah, so whatAmy's talking about here is a headline inflation
report. You know, jobs numberscome out, they look good. Consumer
price index comes in and it rowsfaster than expected in March, so indicating
that obviously inflation here is remaining alittle bit more stubbornly higher. That could

(00:52):
impact the Federal Reserve's decision on whatto do with interest rates. Now they're
not going to hike him again,it's just more or less how much longer
will they pause at this point?And a reminder, coming into twenty twenty
four, there were a lot ofeconomists who were predicting we could have seven
rate cuts this year. Right nowwe're in April, and the more and

(01:15):
more economic data that comes in pointingto the fact that inflation is moving in
the wrong direction. The more andmore it appears very very likely we're you're
not going to see anywhere near thoseseven rate cuts. But it almost becomes
when you know, when does thateven happen? And at what point does
the Fed? I don't even know, maybe look at pivoting and we're nowhere

(01:36):
close to that now. But Ido think we have to pause on days
like today and say, this isdefinitely not what the Federal Reserve was hoping
to see with these numbers. Andit also is starting to feel like a
trend when you have three months whereinflation is not moving in the right direction.
Well, the expectation has been setfor a long time. We've been

(01:57):
talking about it, the Fed's beentalking about it, that it's going to
be very dificult to get across thefinish line. There's always a pause,
wait and see what's going to happen, digest the information, and there's a
lot of information that they're looking at. In fact, I just saw that
what caused this round of inflation notto drop as much as maybe people were
expecting was insurance rates. Yeah,car insurance, right, yeah. And

(02:17):
to be more specific here about thenumbers, By the way economists surveyed by
Dow Jones. They had been lookingfor about a three tenths of a percent
gain, but it went up fourtenths of a percent. So we're not
talking about earth shattering numbers here.The news might be loud and noisy about
this one. The markets probably aren'tgonna like it in the short term because

(02:38):
it is a surprise. But it'snot like interest rates rose a ton like
they had or inflation rose a tonlike it had been last year and the
year before. Core inflation. Rememberthat excludes more volatile underlying components like food
and energy that went up four tenthsof a percent. Yeah, and I
think it's important to say, andI think you kind of made this point.

(03:00):
It's not a huge miss. Itis a miss, and it's unfortunately
a miss in the wrong direction.You know, you talked about auto insurance
being one of the main contributors.Housing remains stubbornly high for a number of
reasons. Gas prices as well latelyhave been on the rise, and all
of those things together point to inflationmoving in the wrong direction. You know,

(03:23):
that coupled with the jobs report,and as I said, that job's
report, you know, on itsface would be great news. It's just
not good news right now. Asthe Federal Reserve is trying, it's with
all its might, right everything thatit can to bring down inflation by raising
interest rates, you know, andit's like it looked like, I don't

(03:44):
know, in December of last year, okay, like everything that needs to
be done has been done, andthe hope was that we would see then
this kind of steady falling of inflationrate, you know, throughout the year,
and we haven't seen exactly that,so remains to be seen what the
Federal Reserve ends up doing as theresult of this. But yeah, I
would say safe news to say thisis not what they were hoping to see.

(04:06):
And speaking of remains to be seen, there's still two months of inflation
data that's going to come out beforethe Fed's meeting in June, which is
a lifetime of economic news. Itreally really is. A lot can change,
a lot of new data can comein. Yes, we're not going
to see seven decreases and interest ratesthis year, but we still don't know

(04:28):
what's going to happen in June.For sure. There's, like you said,
there's an eternity between now and thenas far as economic news is concerned.
Now, when you think about it, over the last year, we
have seen major economic news come outon a Thursday or a Friday, and
by the following Wednesday, the Fedis doing something completely different than what had
been expected prior to that news.So yeah, I mean, there's so
much that will come out in thenext two months, and of course we'll

(04:50):
hope you digested and let you knowwhat we think it's going to mean.
But yeah, a lot remains tobe seen. Here. You're listening to
Simply Money Present of all Worth Financial. I along with Steve Ruby, as
we look at the latest inflation numbers, and I think we can safely say
this was a miss. This isnot what the Federal Reserve was hoping to
see. But sometimes we talk aboutWall Street and we should be focusing on

(05:13):
main streets. And I think it'simportant to say when we talk about inflation
coming down that being the goal.If you expect that when you go to
the grocery store, the cost ofthat bill is going to go down,
that may not be the case.When we look at inflation rates, it's
how much prices are going up yearover year. When we talk about bringing

(05:34):
inflation down, It does not necessarilymean that the price of everything you pay
is going to go down. Itjust means the price isn't going to go
up as quickly as it has been. Yeah, remember that some inflation is
good. That's why there it's atarget goal. It is very healthy.
That's why the FED has a targetgoal of two point five percent modern inflation.

(05:57):
It's a sign of economic growth.Sustained otter inflation that is stable can
prolong that growth. Is because whenthis happens, when the prices go up
weight and is, they're naturally goingto increase in tandem, which gives consumers
more money to spend, which isa major driver in the economy. And
Nit, I remind you when wetalk about this two two and a half

(06:18):
percent goal, where it even camefrom, because I love this story and
I think it's so interesting. Inthe eighties, the head of the Central
Bank for New Zealand went on atalk show and was asked, Hey,
what's the goal, And he,literally, on live TV, with maybe
no preparation, just threw out likea number that came to him out of

(06:40):
the air, right two percent.In somehow, that number then became kind
of the gold standard for all centralbanks across the globe to say, okay,
yeah, two percent makes sense,and it does make sense, right,
It does show kind of the healthygrowth of an economy. No inflation
means there's no growth, and toomuch inflation means it's growing too quickly and

(07:00):
we can't possibly keep up with that. We just can't possibly keep up with
that. But if we have somemoderate growth and how much we're paying for
things. The goal is that wehave moderate growth and how much we're getting
paid, and so we can affordthose things, and that is healthy.
And as the Federal Reserve tries tobring it down closer to that two percent,
they have actually been very very clearon the fact that they knew it

(07:20):
was going to get more and morestubborn the closer they got to that goal.
Whether this is more stubborn than theyhad hoped for, I don't know.
We're not a part of those meetings. No, we're sure or not,
And I'm glad I'm not these things, Thank you, We too.
Very difficult conversations and decisions those peoplegot to make. It is a tight
rope that they are walking right now. Yeah, it sure is. Because

(07:41):
this obviously it affects us here onMain Street, not just Wall Street.
You know, when could things startto cost less? I mean at this
point there's specific items that may dropas inflation throughout the economy moderates. Those
ten have items that are pushed higherdue to constraints and supply rather than increased
demand. So for example, wewere having conversations about eggs last year,

(08:05):
and that was because of an avianflu operate that wiped out farmers flocks.
Eggs got I eat eggs about everymorning. That that is something that Steve
and I talked about that got frustrated. It was nine dollars for a carton
of eggs. It's crazy. Yeah. And supply chain obviously issues have improved
there, so it's not as terribleas it was then. I think that's
a great point. You have toseparate supply chain issues in other weird you

(08:31):
know. I mean, we've hadthe price of citrus going up in the
past because there has been an issuewith citrus crops, or we talked about
just a few weeks ago the costof chocolate going up exorbitantly, not because
of anything to do with inflation necessarily, but because there were issues weather in
West Africa, weather in West Africaexactly, things beyond our control that can

(08:52):
have a short term impact on movingthe needle on certain prices of certain goods.
The problem when we were dealing witheggs, as we were dealing with
those costs on top of everything elsebeing highed due to inflation. So individual
items, if there were supply chainissues like cars, right, we saw
cars becoming so expensive. Well,one of the reasons was because the chips

(09:13):
to go in the cars we couldn'tfind. There weren't enough. A lot
of factories shut down that produced thoseduring the pandemic, and then people were
out there was a huge demand tobuy cars and not enough chips to go
in them. Okay, that isthe cost that you can expect to go
down, but the average normal inflationcosts aren't going to go down. You
think about the fact that we talkeda lot about Chipotle during the pandemic,

(09:37):
Right, they raised prices. Oneof the reasons why they raised prices,
yes, was because of some ofthe ingredients, but also because the cost
of higher talent that was going toshow up for work every day increased.
Well, people aren't going to suddenlystart going to work for less money,
you know, So some of theseinflationary prices that were paying become the new
norm. We adjust to them.What we hope is that they don't continue

(10:00):
at a nine percent year over yearrate, because that's when it becomes nearly
impossible to afford. Yeah, that'swhen the Fed steps in and raises interest
rates like they did to help normalizethings, and it will take a while
to get across the finish line.Now, keep in mind that when we
talk about inflation here, Yes,too high is a huge problem. Too
low. On the other side,deflation, that's why they have this sweet
spot two two and a half percent. Deflation is actually when prices decrease too

(10:24):
much, and that can be catastrophicfor an economy because when prices keep falling,
consumers, businesses they put their spendingon hold. They sit on cash,
hoping to defer until prices fall evenlower, and when that spending slows,
economics growth will stall. That isa terrible thing because at that point

(10:45):
company profit strength and unemployment rises.Yeah, it becomes a vicious cycle.
It sounds good at first, right, of course, I want to pay
less for something. What you don'tthink about is how that plays throughout the
economy. When businesses aren't able tosell things that they were selling them for
before. Right their profit margin shrink. That means they have to let people
go. People are worried about theirjobs, they're spending less and hence the

(11:07):
cycle. And that is definitely onethat we don't need to be or want
to be part of. One thing. I think that's also worth mentioning during
this conversation of inflation and interest rates, is you better bet that the presidential
election will largely be centered on thisconversation. I will remind you that many
times on the show we have saidthat the American economy is larger than whoever

(11:31):
is in that oval office. Butduring a presidential election year, you either
take blame or you assign blame.You take credit, or you assign blame
based on what party you're in.So just keep an eye out for that
because that will definitely play out.Here's the all Worth advice. One takeaway
here is if you have emergency cashlying around right now, get those dollars

(11:52):
into a high savings account because itlooks like interest rates may stay higher at
least for a little bit longer.Coming up next, we've got a dash
course we hope will make you aLittle Smarter about Money. You're listening to
Simply Money, presented by all WorthFinancial. Here in fifty five KRC the
talk station you're listening too Simply Money, presented by all Worth Financial. I

(12:13):
me Me Wagner along with Steve Ruby. If you have to miss our show
one day, you don't have tomiss a thing that we talk about,
because we have a daily podcast foryou. Just search Simply Money. It's
on the iheartapp or wherever you getyour podcasts. Certain months have certain things
to celebrate. Many of them Ipay zero attention to. But April I
do pay attention to because it's actuallysomething that I and I would say we

(12:37):
all of us at all Worth areincredibly passionate about. April is a financial
literacy month, and so you know, I think that when I go out
and I speak to big groups ofpeople. Steve, one of my major
takeaways is that many of us didnot grow up in homes where people were
talking about money, smart things todo with money. We obviously many of
us didn't go to high schools orcolleges where these things were taught. You

(12:58):
know, we didn't take classes onthis. So if this is something you
haven't necessarily been brought up in it'snot in your DNA. You're not alone.
No, you're not. Financial knowledgeobviously it matters. According to FINRA,
there was a survey recently done thatshowed that those that scored above the
median on a seven question financial literacyquiz were more likely to make ends meet

(13:20):
than those with lower financial literacy.Essentially, understanding money matters, right,
it matters in a big way.That is not a surprising finding to me.
Of course, if you have moreliteracy, you're going to be better
off. But they actually kind ofput a monetary figure to this, which
is a little scary. Americans alack of knowledge about the personal financial personal

(13:41):
finances cost them an average of abouttwelve hundred dollars per person. Twelve hundred
dollars per person, that's a surveydowne of fifteen hundred people released last month
by the National Financial Educator's Council.Nearly one in five estimated that their lack
and know how costs them twenty fivehundred dollars or more per year. Yeah,
not knowing can cost you. Ialways say knowledge is power, and

(14:03):
I guess you could also say knowledgeis money. When we looked at these
questions that people don't know. There'ssome common questions, some common themes that
just aren't necessarily clear. Some ofthe questions that we're asked as part of
this survey. Which of the followingstatements describes the main function of the stock
market. One of the answers,It brings people who want to buy stocks

(14:26):
together with people who want to sellstocks. One of the answers, The
stock market helps predict stock earnings.Another one see another option here. The
stock market results in an increase inthe price of stocks. None of the
above. Not sure. You know, we look at this and we're like,
ay a, people are buying andselling stocks. It's a stock exchange.

(14:46):
It's a stock market. That's whyit's called that for inten boomers.
These are the people who are retiringright now who hopefully have been invested in
the stock market. They got thatright. Also, millennials got it right
on the other end of the spectrum. Huge miss. And this is a
foundational kind of thing. You haveto understand understand money. Yeah, absolutely,

(15:11):
And which here's another question that wasasked in the survey, which provides
a safer return buying a single companystock or a mutual fund, A single
company stock B mutual funds CE notsure they gave you a lifeline. They're
not sure this one. Two thirdsof boomers got it right. About half
of millennials answered the question right.It's a mutual fund. It casts a

(15:33):
large net. A single company stockcan go away. Yeah, it can
go away. That's very surprising me. People that have been around longer have
seen situations where company stocks have goneto zero or at least gotten absolutely rocked
and kicked in the teeth in thisarea. Check for locals. Yeah,
exactly, ge is exactly what Iwas going to bring up. A mutual
fund, on the other hand,that casts a large net and touches a

(15:56):
lot of different companies all at thesame time, that, of course is
owing to be less risky inherently thana single company stock. We've spent a
lot of time that you're talking aboutthe Magnificent seven, right, these seven
major kind of technology stocks that youknow, we're up, up, up
up, Well, now the market'sa little down, and they're going down
more swiftly than any of the otherstocks. You know, things like Tesla

(16:19):
and Navidia. There's headlines all overthe place about Navidia heading toward correction territory.
You know, that is the price, that is the risk of individual
stocks. If you can spread outthat risk among a number of companies,
you're going to be far greater off. You know another thing that a lot
of people aren't really clear about,and this is surprising. I don't know

(16:40):
if it's surprising to me. Itmakes me want to pull my hair out.
And this is a question about creditcards? Should you pay them off
each month? Six and ten people, so sixty percent said yeah, you
should. There's forty percent who didn'tget that rights who thought that. I
guess paying interest every month makes alot of sense. That makes zero sense

(17:02):
to me. No, it doesn'tmake any sense at all. You don't
want to pay interest to a creditcard company when you don't have to.
You know, we are proponents ofhaving a credit card as long as you're
using it in the way that youshould be, which is capturing the benefits
that it offers, getting points,getting rewards, and then paying it off
every month so that you're not givingthese credit card companies interests. They have

(17:23):
a lot of money already, theydon't need your money. But forty percent
of people I guess are given itto them. You know another thing that
people aren't super clear on four oneks whether contributions are taxed or not taxed
until withdrawal. You know a traditionalfour to one k, Yes, they
are taxed when you take that moneyout. Only forty percent four and ten

(17:45):
got that correct. These are basics, and when you have the basics down,
it's like personal finance one oh one. You build on that knowledge.
Money is a tool, and themore you understand, the more that you
can take advantage of that. Recentlyran across a woman who's brilliant, brilliant
at what she does and from theoutside would appear to have it all together,

(18:08):
to have a great salary, tojust be incredibly successful. You dig
a little deeper and there's a tonof debt there. When you look at
the situation, there are options,but you know, if you don't have
a grasp of these kind of fundamentalsof investing and saving and getting yourself out
of debt, you can get yourselfinto a huge hole. So that's why

(18:30):
we're incredibly passionate about making sure thatnot only that you will understand money,
but that you're having these conversations andyour relationships with your children. We make
fun of me all the time,but this is a conversation I have.
Even when I'm out with friends,I'm such a I'm always the life of
the party. As your financial nerd. That's a good thing. It's good

(18:51):
to have somebody like you around,Amy. I think that part of the
reason why these conversations are so importanthaving some level of financial literacy is because
things have changed. More specifically,people used to get pensions. Yes,
pensions are few and far between atthis point. So as long as you
put your head down, did youwork, you could retire and get a
significant chunk of your income for therest of your life. Social Security isn't

(19:17):
going to cut it. That's whywe need to have solid financial foundations and
understanding some of the vehicles that areavailable to us to save in like a
four oh one K through your employer, like iras. If you don't get
one through your employer, we needto take personal responsibility for saving for our
own retirement. So this financial literacy, this is concerning to me seeing these

(19:37):
figures. If you don't know andyou're not saving, the thing here is
you've got no one else to blameabout yourself. Right, So knowledge is
power coming up next, speaking offinancial literacy, this is one of the
coolest stories that we've been able totell in a long time. A local
school competing on a national level becauseof Yes financial planning. You're listening to

(20:00):
Simply Money presented by all Worth Financialhere on fifty five KRC, the talk
station. You're listening to Simply Moneypresented by all Worth Financial. I Memi
Wagnerre along with Steve Ruby. Asyou know, we are incredibly passionate about
financial literacy, and many of usgrew up and went to high schools where

(20:22):
we didn't take these classes. Sorecently I came across something that stood out
as different and exciting, and wewant to bring it to you tonight.
There is a national personal finance competitionand a school right here in the Trice
State actually ranked number one in thestate of Kentucky. Joining us tonight is
Bridget Kaiser Monday. She is ateacher. It's Saint Henry District High School

(20:47):
in northern Kentucky, and three studentson our personal finance team, Ryan Hartman,
John Luber, and Gabe Thielen.Missus Kaiser Monday, I want to
start with you you and I havetalked about this. We know there is
not a law in Kentucky yet requiringthat kids have exposure to personal finance,
but this is something that you areincredibly passionate about. How'd you learn about

(21:10):
this competition? I feel so passionatethat I sign up for a lot of
emails from different groups and different organizationsthat promote education about personal finance for students.
And one of those emails came acrossa couple months ago with this particular
competition, the Kentucky State Personal FinanceChallenge, that was going to be hosted

(21:30):
at NKU, and I thought,well, it's right in our backyard.
We really have no excuse to dothis, And even though it was during
spring break, my brain immediately wentto one of my students, John Labert,
and I have him in class andI know he's very much interested in
finance. And then I reached outto a couple of my colleagues at school

(21:51):
to talk to them and see ifthey had any ideas, and John brought
Gabe with us. And then Ryanis in one of my government classes and
was asking some really pointing cluck questions, and I thought, I need to
get this kid on this team too, and so it was kind of a
joint effort as just one person bringingone and then another and then another,
and here we are today, andit's great. They did a great job,

(22:14):
And what did you do to preparethem? So my understanding is the
first round was a written test.You know, obviously this isn't something they're
learning in the classroom, So whatdo you do to prepare them? I
think some of them are getting thisfrom home. I think some of them
are getting this because of interest.I know two of the boys are currently
in an accounting class. Ryan ittook personal finance at his previous school,

(22:38):
and so they came with a reallygreat base level. They read a lot
of stuff going in. They studieda little bit before taking the written test.
They did a great job on thewritten test. They scored one of
the top four teams in the stateof Kentucky. But they really shined when
it came to the presentation. Ryan, I want to turn to you now,

(23:00):
when you took that written test,were you confident going into it?
Were there certain parts that were reallydifficult or how did you feel about what
that looked like. I'll be honestwith being a year moved from a personal
finance class and them being in theaccounting two class. I felt like I
was a little bit behind the eightball, so I acted confident. Probably
wasn't that confident, but I readsome books, did some research, talk

(23:23):
to my mom a little bit toprepare, and by the time it came,
I was more confident, but Ididn't know exactly where it was.
But then that's going pretty well.You guys did well enough that you got
to go to the state competition.Explain what that was, What was the
scenario that you guys were presented with, and what was the recommendation that you
guys made. So what it wasfor the state competition was a fictional family

(23:48):
that was given to us, andwe had to create a financial plan for
them and try and carry them totheir goals, making them financially stable,
etc. So we spent two hoursfor about a week over spring break every
morning working on our plan for thisfamily and how we're going to help set

(24:11):
them up for their future. Soit was kind of a joint effort and
we came in and knew we hadto work hard for it, but we
got through it and it turned outwell. John, what were some of
the major recommendations that were part ofwhat you said. Okay, this family
is in a financial crisis, ina bad situation, here's what we recommend

(24:33):
that they do. So we startedoff by paying paying off the major debts
with the highest interest rates. That'sa pretty good rule to generally follow.
You want to pay off things thataren't going to build over time, so
we took that into consideration. Theyhad pretty high credit card debt, so
we paid that off first, andwe kind of just took it step by

(24:55):
step, paying off things that weknew needed to get done quickly, and
then saved other stuff or down theroad, like other loans and stuff.
Did you feel pretty confident when youguys were finished that you had done really
well? I think so. Ithink we came in there and we were
already confident, just because we knewwe had worked so hard on it that
all that was left was for usto showcase what we knew, and I

(25:19):
think after we sat down, weknew we were in a pretty good spot.
Number one in the state of Kentucky. Congratulations you guys gave. If
you were to sum up what youthink you've kind of learned in this process
so far, what would you say, what are your takeaways? So I
think we learned a lot on howto like budget. So we set up

(25:41):
a budget with a bunch of variableand six expenses. And that's a good
real life skill it had to learnbecause we were able to set up monthly
budgets and then take our greatest incomeand subtractive part expensive minor net income.
And that's just a good skill forus to learn because we can use that
later in life when we're planning outour monthly expenses and how we want to

(26:03):
invest and now if we want toinvest a certain income that we have left
over intoight braw bire rays and stuff. That's a good skill to be able
to learn for us to be ableto use in the future. So you
guys head to the national competition inCleveland next month. Any idea what that's
going to entail and what are youguys doing to prepare for that. So

(26:26):
we know right now that it's Ithink May nineteenth, so just right before
graduation, and we will be sowe won't actually know the prompt until the
day of the competition. So we'llhave there's four options right now that we
know of, and they'll be oneof those four, and then we will
have two hours after we hear aboutit to build our presentation. So as
of now, we're probably going tolook into all four possibilities, maybe do

(26:48):
a little blueprint for those, andthen once we find out the actual prompt
then we'll dive deeper into it.But we know it's going to be a
lot harder obviously better competition, sowe got to step up our game just
as much more. Missus Kuyser Monday, I was talking to some colleagues about
this. When we hear about schoolstalking about investing in personal finance, many
times it's a stock market game,right, a stock market challenge where students

(27:12):
are picking individual stocks, which isn'tsomething that we would even say is necessarily
the best long term plan. This, though, is focused on financial planning.
I just wanted to get your takeon that from an educator standpoint.
I think it's so important that thisis something real that students understand that this

(27:33):
can and should affect you long term. What you learn today can make a
difference for the rest of your life. And it's something that I learned fairly
early because I knew I wanted tobe a teacher. I knew I wanted
to be financially stable. I knewI wanted to work that all out,
So what does that look like forme on a teacher salary? And I
think that is so crucial that weteach people young, especially in high school,

(27:57):
when they're having jobs, are makingtheir own money, Like, what
can you do with that that's goingto pay dividends? Maybe not tomorrow with
that purchase that you make at Targetor Walmart, but what you're going to
do with it when you're thirty,forty to fifty years old and you're buying
a house or you're saving towards retirement. Those are big questions that these kids
need to have too, huge concepts, right, life changers, game changers

(28:21):
when it comes to starting out theirlives in building wealth. Is this something
that you anticipate Saint Henry will beinvolved in the future. Oh, most
definitely. We're going to be doingthis for a long long time. I
think the energy and the enthusiasm andthe excitement is there, and we are
so thrilled about what this was ableto accomplish. And I think it's just

(28:41):
going to snowball from here and we'regoing to go and do big things with
it. I'm glad to hear it. My son will be a freshman there
next year. I will point himin your direction. All of you congratulations.
Will you come back on the showafter you do nationals and let us
know how it goes. You wouldbe happy to awesome, fantastic once again.

(29:03):
This is a personal finance competition,the Kentucky State Challenge, and the
number one team in the state ofKentucky was Saint Henry District High School.
The brilliant members of that team andtheir coach joining us here tonight and we
will check back with them in amonth. You're listening to Simply Money presented
by all Worth Financial here on fiftyfive KRC, the talk station. Listening

(29:30):
to Simply Money presented by all WorthFinancial, I mean New Wagner along with
Steve Ruby. If you've got afinancial question keeping you up at night,
maybe you think you're right and yourspouse is wrong. We can help settle
that dispute for you. There's ared button you can click them while you're
listening to the show right there onthe iHeart app. Record your question and
it's coming straight to us. We'retalking about financial literacy and when it comes

(29:52):
to retirement and money. I amalways amazed at how many myths are out
there, just bad information. Well, one of the most important segments we
can do is to separate fact fromfiction. So let's get right to it,
Steve Factor fiction with this one.With a wroth ira, you contribute
with pre tax dollars, so youpay tax when you make withdrawals. Attention

(30:15):
to detail. This one is afiction roth Ira. Money is funded with
after tax dollars and you do notpay any taxes when you take the distributions
as long as the money has beentucked to weigh in that account for five
years and you're at least fifty nineand a half years or older. And
the key here to understand is Ilike having money in both pre tax and

(30:38):
after tax buckets because it gives youmore flexibility, more options when you get
your retirement, so you have tobuy a car, do you want to
have to take out additional money andpay the taxes on that at the time
you're buying that car, or doyou pay with wroth dollars or you've already
paid taxes. So I think understandingthat having money and both kinds of accounts

(30:59):
can actually make a lot of sense. Here's the next one factor fiction.
When interest rates rise, bond pricesfall, and vice versa. Exactly.
Yes, this is fact. Thereis an inverse relationship between bond prices and
interest rates. Most bonds teeter totter. Yeah, that bonds, most of
them pay a fixed interest rate thatbecomes more attractive if interest rates fall,
driving up the demand and the priceof the bond. On the flip side

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of that, if interest rates rise, then investors no longer prefer the lower
fixed interest that you will be receivingin that bond, which results in a
decline in the price that people willpay for it in the secondary market.
Great, give me a bond thatmakes me more money, and if you
have a bond that makes me lessmoney, I'm less excited in that.
So then the value of that bondgoes down. So yes, teeter totter.

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Interest rates go up, bond pricesgo down. Factor fiction. A
fifteen year mortgage typical requires typically requireshigher monthly payments than a thirty year mortgage
bond. Total interest over the lifeof that loan will be less e fact.
Yeah, so, especially if it'sfor the same dollar amounts for that
term fifteen or thirty years because youhave to pay it off in less time.

(32:12):
But less time also means less chancefor interest to build up. So
it is going to save you moneyon interest over that time period, as
long as you can foot the billfor the higher payments. Another thing to
think here is and I love afifteen year mortgage if it's something that you
can handle. I think the thirtyyear becoming standard. It just means we're
paying way more in interest than maybewe need to. If you can afford

(32:35):
the cost of an extra payment ortwo a year, right when you get
a bonus or something like that,then you're essentially paying more toward that balance,
toward that principle, and then you'repaying less over the lifetime of that
loan. So you can not necessarilylock yourself into that fifteen year rate,
but you can bring it down overthe course of time. Just check and

(32:57):
make sure that that's an option toyou with your particular mortgage contract. Factor
fiction Buying a single company stock usuallyprovides a safer return than a stock mutual
fund. Hey, we talked aboutthis today. This is worth repeating.
Yeah, it is worth repeating.So buying a single company stock does not
provide a safer return than a mutualfund. This gives you higher risk than

(33:22):
casting a larger net. A singlecompany stock technically can go to zero,
whereas a mutual fund that's almost nevergonna happen because it has investments and investments
all over the place, much morediversified than owning just one company stock.
If you have a mutual fund thatgoes to zero, you've got bigger problems

(33:43):
and we all get than just thestock market at that point. Yeah.
No, it just makes so muchsense to spread out your risk. I
would say our rule, and thisis the rule that we sort of live
and die by when it comes toyour money and your investments, is if
you are incredibly passionate about particular company, we would say, if you're looking
at your entire portfolio into more thanten percent of that should be an individual

(34:07):
stocks. And that doesn't mean tenpercent of it in this stock and ten
percent of it in that stock,No, ten percent total in individual stocks
and beyond that. Yes, mutualfunds, indexes, datfs spread out your
risk where huge fans of diversification andhistory shows right, that makes the most
sense. Here's another one for you, fact or fiction. Closing a long

(34:28):
held credit card account can hurt yourcredit score absolutely fact here and this is
one that really catches people off ofguard. Here's why you can easily think,
Okay, the less credit cards Ihave opened, right, better my
credit score could be. One ofthe things that your credit score is made
up of is the history that youhave been responsible with credits. And so

(34:51):
when you close those longer accounts thatyou've had, you're actually closing that window.
And also you're closing down some ofthe credit that's available to you.
And credit utilization is a big partof that. So there are some people
kind of in our world, Steve, who will say no credit cards.
We're not strong believers in that.We believe they are a good tool to
help you build good credit if youunderstand how best to do that when used

(35:15):
properly, I think is the keythere. Not letting debt get out of
hand, not paying more interest ratethan you need to, capturing the benefits
of using the credit card, notdestroying it. I think that that is
not something that you want to do. Coming up next, advice from who
could be the most financially literate humanbeing on the earth. Words to live
by you're listening to simply Money presentedby all Worth Financial. Here on fifty

(35:37):
five KRC, the talk station you'relistening to you simply Money presented by all
Worth Financial. I mean you Wagneralong with Steve Ruby. Okay, there
are the financially literate, right,and that's what we're kind of talking about
in the show today, and thenthere's next level. And next level I
would say as a Warren Buffett fangirlis Warren Buffett. This dude is a

(36:00):
legend. And the thing about himis he makes it so understandable and so
simple. You know, you liketo think. I think so many people
like to think that to really besuccessful and to build a lot of money,
there are secrets, there are tricks. He makes it so clearly,
Hey, just be smart about it, be a long term investor, understand
what you're investing in. And that'sreally the trick, which isn't so tricky.

(36:23):
Yeah. So one of his firstquotes that we're going to shine some
light on today is rule number oneis never lose money. Rule number two
is never forget Rule number one highlight. Now, the way that I look
at this is there's a different mindsetinvestor in investors who view the stock market
as gambling and those that view itas a tool to build wealth over a

(36:44):
long period of time. So whatthis quote really means is when you eliminate
decisions that expose your portfolio of loss, what's left is more likely to be
games. Another one that he says, and it is so so true,
but it is so difficult for somany of us when we come to a
behavioral finance kind of a situation,attempt to be fearful when others are greedy,

(37:07):
and to be greedy when others arefearful. So if people are selling
in the stock market, many ofus we tend to think something is wrong.
We need to get out too.What that means is that stocks are
on sale, and if you havemoney on the sidelines, we would say
you should buy it. And Iremember, you know, many times doing
the show with Steve Sprovak before heretired, and there would be days when

(37:28):
the stock market was way down,headlines were terrible, and we would get
off the show and we'd be walkingout to the studio and we would say,
we're going to put our money inthe stock market today, right like
we know that that's the best timeto do it. It feels counterintuitive,
but it is, you know,it is what pays off over the long
term. Buy things when they areon sale. The way that an everyday

(37:50):
investor can do this, by theway, is rebalancing your portfolio. When
you have a diversified mix, sayin your four oh one k, for
example, the entire portfolio was gonnago up at the same time, you're
going to have some investments that domore poorly than others. And what you
do in that case is you sellthe ones that have done better and you
buy the ones that have done poorly. In that situation, you are doing
exactly what Buffett would recommend, whichis kind of a contrary and behavior and

(38:13):
capitalizing on some of those market fluctuationsanother one that he has said, and
I just love this, after all, you only find out who is swimming
naked when the tide goes out.When the tide is high. When the
markets are high, everyone looks brilliant, everyone feels brilliant. When you are
checking your four h one k monthafter month, quarter after quarter, whatever

(38:36):
it is, and it's going up, up, up, you can easily
think you are just if got itall figured out, a genius. When
the water goes down when the marketgoes down, that's when the real kinks
in the plan. Or if you'reswimming naked, that's when that's exposed.
So lots of words to live by, and if you can live by these,
you're going to be better off.Thanks for listening. We hope you're

(38:57):
going to tune in tomorrow. We'retalking about an investing principle that is ringing
especially true this week. We liketo say we told you so, even
listening to Simply Money presented by allWorth Financial. Here in fifty five KRC,
the talk station