Simply Money

Episode Transcript

(00:06):
Tonight, it is that time ofthe year. We have a we would
say, really important message for collegegraduates as you are embarking on this new
phase of yes your financial lives.You're listening to Simply Money, presented by
all Worth Financial Imami Wagner along withSteve Ruby. This is an emotional time.
I know this because I don't havea child embarking on the world after

(00:28):
college, but I do have onewho graduated from high school this year,
and this week I have been allover the place emotionally. I can see
her as a three year old stilland here she is going out into the
world. But we do what wedo when we like to talk about money
and making smart money decisions. AndI hope that my eighteen year old,

(00:49):
in any high school or college graduateswho are listening or their families can understand
there are some things that can begame changers if you get them right at
this age and stage of your life, and then you stick to them moving
forward. Is going to be thedifference between a life of taking financial control

(01:11):
and being able to retire and retirewell in a life where there's all kinds
of stress due to money. Yeah, we're talking about helping children or grandchildren
with creating that solid financial foundation rightout the gate, right after high school,
right after college. Whatever they're doingis they enter into the world on
their own, no longer under yourguidance to the level that you have been

(01:33):
when they're in your household. Sofirst and foremost, in no particular order,
but helping protect credit score. Soa credit score obviously can make it
easier and cheaper for people to takeout loans, by cars, rent an
apartment in some states. Good creditcan even help save money on your insurance
premium. If the child in yourlife that is just entering adulthood doesn't have

(01:59):
a credit score, yet, easyway to establish one is to encourage them
to open a credit card and useit responsibly. I'm talking about making those
regular payments to not carry a balance, not going too high on the credit
utilization ratio, which means just usinga little bit of it as opposed to
the max each month. If theyalready do have a credit score, then

(02:20):
doing what they can to protect itwith with smart credit management practices like paying
bills on time, for example.I think if you can pass on nothing
else to your kids, it's understandinghow to use credit cards as a tool
and the importance of maintaining a goodcredit score. My dad, Gary Wagner,
a pretty mild manner guy, like, not super passionate about preaching about

(02:44):
anything, but man, I'm tellingyou, before I went off to college,
she got on a soapbox of allsoapboxes and said, you will never
ever put too much on a creditcard that you can't pay off every month.
If you don't have that money inyour account, you don't buy it
because you cannot afford it. Well, fast forward a few weeks. I'm
a freshman on the care at theUniversity of Kentucky. Everywhere you go at
this time there are tents set up. You could have this credit card and

(03:06):
a free water bottle, this creditcard and a free Frisbee, this credit
card and a free tishirt. Theywere everywhere, and I could see people
that I knew going from tent totent to tent. Give me all the
credit cards I knew. Right fromGary Wagner, I was not about to
do that. I also think though, a few months down the road,
I had this friend that I metfrom Saint Louis, and she was great,

(03:28):
and we started hanging out all thetime. And then I started to
get jealous of her. She hadbrand new clothes on all the time,
and I just kept thinking, like, her parents must give her so much
money to buy clothes, until Iended up in her dorm room one night
and she was in a ball oftears on the floor, and I say,
gosh, what happened? Did youget a bed great on a final?

(03:49):
You know, boyfriend? Break upwith you? No, I have
eight thousand dollars in credit card debt. Eight thousand dollars. She wrapped this
up with just a few months ofcollege starting. It gives me hives now
just thinking about it. Please pleasemake sure your children understand how to use

(04:09):
credit cards and the importance of thenusing those credit cards to establish a good
credit score. Man, she neededa Gary on Assunia, she really did.
So you can be that Gary tothe younger individuals in your life and
make sure you coach them to notdoing what Amy's friend did. Instead do
it Amy did, which is notabuse credit cards. To add to that,

(04:31):
making a budget and sticking to it. Budget is a dirty word.
It's something that isn't particularly fun formany people. But coming out into the
world and having these solid financial foundationsand good habits can carry them through life.
And what we've talked about before isthe fifty thirty twenty rule. So

(04:55):
fifty percent of what you're bringing homethis is what's going to cover your needs.
Do you have a mortgage now orare you paying rents? What are
your food bills, your utility bills, your car, your insurance, those
kinds of things, right, thingsthat aren't going to change. Thirty percent
of this is okay, have fun, travel, go out to eat,
go to happy hour with your friends. Twenty percent of this though, and

(05:18):
I would say this is the mostimportant part. So I don't know why
we talk about this. One lastis are you saving twenty percent of what
you're bringing home? Are you investingthat? Have you established an emergency fund?
Have you started to put money intothat four oh one k? Have
you maxed out the company match thatyou could be getting. You start this
in your early twenties, when youget that first job, and then you

(05:39):
just kind of get into the habitof living this way. This is a
game changer. I wish there wasa booth on college campuses instead of selling
credit cards to brand new freshmen,they would say, hey, maybe you
should save twenty percent or whatever incomeyou're bringing in. Let's start some kind
of account for you that's going toballoon and create real wealth, you know,
thirty years down the road from now, because starting safe is another thing

(06:00):
that you need to be talking aboutwith these people. Any kind of extra
cash in the sidelines, opening aseparate savings account maybe from your checking account,
and getting those dollars working with alittle bit of interest with the high
interest rate environment that we're in.Better yet, if they're employed, maybe
leverage their four to one K plan. If they're not eligible, start a
roth IRA, start putting some ofthat money in the markets. If it's

(06:21):
wroth and it's going to grow taxfree for them for the rest of their
lives. There is real opportunity,no matter how young you are, to
get started with investing because that thecompounding interest is their best friend. It's
like a snowball rolling down a hill. It might start small, but it
will be get very large eventually,and it gives you. It gives your
money an opportunity to make money,and that money makes more money for you.

(06:42):
Yeah, and if you start savingand investing in your twenties, that
can be when heck of a largesnowball when you get ready to retire.
You're listening to Simply Money, presentedby all Worth Financial. I Meanan Wagner
along with Steve Ruby, as wethink back to Gosh, what I wish
I would have known? What Iwish I would have done when I graduated
from college. For those new graduates, congratulations to you. What an incredibly

(07:03):
exciting time. If you're taking anythingfrom the show and applying it to your
life, I think you're going tobe far better off for it. Parents,
grandparents, if there's someone that youlove who's graduating, please find this
podcast, find the show, shareit with them. We think these are
the kinds of things that have doneand done well can make a huge difference.

(07:24):
Steve, one of the things Ithink for most people graduating right now
that they are dealing with over anythingelse when it comes to money, is
figuring out how to manage debt.Coming out of school and they've got student
loan debt, maybe they have somecredit card debt. That first paycheck is
coming in and it's like where doI even begin? Yeah, it can

(07:46):
be very daunting. I was oneof them. I finished college with forty
thousand dollars in student loan debt.It took a long time to pay off,
but I got it done, andit's a matter of finding a balance.
So obviously there's different approaches to payingdown credit card and loan debt,
and that involves starting either with thesmallest one so you feel like you're making
progress. I mean, you aremaking progress, But personally, I'm more
of a fan of attacking the highinterest rate credit card debt first, or

(08:09):
student loan debt, whatever that mightbe, because it's going to have more
of a monetary impact. But there'salways an opportunity for considering refinancing. For
example, private student loans, theycan have different interest rates and different due
dates. If you consider refinancing andyou lump them all into one, then
you have more control over what thatterm is going to look like and what
those interest rates are going to looklike. I think this debt can be

(08:33):
overwhelming. I met with someone recentlyin their mid thirties and these I've been
paying on these debts for over tenyears, and I feel like the needle
has hardly moved, if at all. Right, making this priority one,
tackling this debt, getting out fromunder it so that you can then start
to say, Okay, do Iwant to save for a down payment on
a house? What other things canI do with this money? So yes,

(08:56):
paying down that debt I think isa major focus. Also starting an
emergency fund. It's just a matterof time until you need a new car,
until that new house that you boughtneeds an HVAC, whatever it is
it's going to happen. Do youhave the money available to you to pay
that off? Or then are yougoing to have to look at should I

(09:18):
put this on a credit card?Should I pull money out of a four
to one k? Right? Nothaving this money forces you to make some
really bad financial decisions. Emergency fundsare incredibly evaluable because it's just cash sitting
there ready to deploy so that youdon't have to take on debt, so
that you don't have to cash outretirement accounts. Emergency funds are I would

(09:39):
put that on the top of alist as far as recommendations are concerned,
because it creates that real solid financialfoundation. And then watching out for lifestyle
creep. This is something that affectsmany of us when as you start earning
more money, it can be very, very tempting to increase your discretionary spending,
especially if you've been on a tightbudget with limited opportunity to spend on

(10:03):
discretionary expenses. There are opportunities asyou start to make more money to pivot
how that more money is being usedthat can really create a better future for
you, and that would be savingwith those dollars. I mean, don't
not live for today. Financial planningis about making sure that you're finding a

(10:26):
balance between maintaining a standard of livingthat you've grown used to and being able
to continue that to and through retirement. So I'm saying I'm not saying don't
spend any of your money on funstuff, but what I'm saying is find
a balance so that you're not justincreasing discretionary spending as soon as you get
more money. I remember a phonecall I had with a good friend of
mine. We were in our latetwenties, and we happen to be on

(10:46):
the phone talking about money, andshe was like, you know, my
husband was just making this point tome that we're actually doing pretty well financially
considering where we were five or sixyears ago. We've both gotten some promotions
and we've gotten some raises. Theproblem is we just buy more expensive things.
We go on nicer vacations now,so we don't really have more money

(11:07):
even though we have more money comingin. And I paused and I said,
do you know what that's called?She said, what are you talking
about. I said, there's aterm for it. It's called lifestyle creep.
And she was like, oh,like blown away. She thought it
was just them and this was justhappening to them, and I was like,
no, this phenomenon actually happens toa lot of people. It's called

(11:28):
lifestyle creep. I think a lotof it can be fed by social media.
You get on that Facebook feed andyou see what this person I went
to college with has this kind ofcar, or they went on a European
vacation. I should be doing thatnow. You can't really afford it,
but you end up doing it anyway. So I think you make an excellent
point. When more money starts tocome in, if you are intentional about

(11:48):
what you do with that money,your future self is going to thank you
so too. The class of twentytwenty four, congratulations, there's so much
to look forward to make sure thatyou are setting yourself up well for small
a smooth, strong financial future.Here's the all Worth advice. The sooner
you adopt these kind of tried andtrue money management principles, the sooner you're

(12:11):
going to experience a world with alittle more financial freedom. Coming up next
Memorial Day weekend, how much doesit cost? Plus we'll examine the cost
of living the rest of your dayson a cruise ship. You're listening to
Simply Money, presented by all WorthFinancial. Here on fifty five KRC,
the talk station. You're listening toSimply Money presented by all Worth Financial.

(12:37):
I mean you Wagner along with SteveRuey. If you can't listen to our
show every night, you do nothave to miss the thing. We've got
a daily podcast for you. Justsearch Simply Money right there on the iHeart
app or wherever you get your podcasts. Coming up at six forty three,
we're gonna get to the root ofsome myths when it comes to retirement.
We're playing a little retirement fact orfiction. All right, So as you're

(12:58):
listening, you might be on theheading out from Memorial Day weekend. We
hope you have fun and stay safe. But you know this is a money
show. So let's talk about MemorialDay. How much it's going to cost
you. Yeah, people are shollingout quite a bit. Memorial Day airfare
is about two hundred and sixty dollarsper ticket. That is down nine point
five percent from last year to abouttwenty nineteen levels. By the way,

(13:22):
as you consider your plans for therest of the summer, price conscious travelers
should aim to fly out on Saturdayand return on Tuesday. Have you heard
that before? Yes, But it'sfunny because I think things change, you
know, It's like, oh,then you have to fly out on Wednesday
and come back on Sunday. Thisresearch is being done all the time.
I don't know how stuck I giveit, give it, but I definitely

(13:43):
think it's worth checking in a fewtimes and making sure that you think you're
getting the best price. Also,where you're going matters. International trips to
some major destinations the Caribbean, Europe, Asia are actually less expensive right now.
Flights to Canada or in the Caribbeanare about four hundred dollars on average
for a round trip ticket. Wehaven't seen prices like this, you know,

(14:05):
in several years, probably pre pandemic. So if you are looking to
do maybe a larger trip and you'vewaited, maybe now's the time to go
ahead and get that planned. Yeah, European trip is about one thousand dollars
per round trip ticket with ticket It'ssound two percent from last year, but
still unfortunately significantly higher than in twentynineteen. Last summer, actually, cost

(14:26):
a flight to Europe reached its highestlevel in six years, with tickets averaging
about twelve hundred dollars per pop fora round trip that is. Yeah.
Hotel stays averaging about two hundred andtwelve dollars a night this year. Saturday,
of course the most expensive night tostay, so you get the lowest
rate if you're going somewhere and stayingSunday through Tuesday. Car rentals and gas

(14:46):
car rentals for the long weekend aboutforty three dollars on average per day.
Right now, the average price isa gallon of gas here in the state
of Ohio three fifty six. Sopeople travel this weekend. You know,
travel costs. I'm glad to seethat some of the cost of lights down
from what we've seen last summer,because man, it was brutal for a
while there. Speaking of travel,what if you want to travel in retirement,

(15:09):
What if you want to travel andnever come back in retirement. Apparently
that's an option. You can justget aboard a cruise ship and never come
home again. Yeah, there's anew program called Endless Horizons from one particular
provider of cruises that offers you theopportunity to live on its ships and travel
the world for a flat sum.And it actually can be more economical than

(15:33):
keeping a home. This is becauseat this point in time, a one
time payment for single occupancy three hundredthousand dollars for double occupancy cabin price increases
to five hundred thousand dollars. Nowthere is a little bit of urgency here
though, because you have to buyit by next Thursday. Yes, May

(15:54):
thirtieth is when this deal runs out. There's like a seven continent I'm sure
the ship is currently ducked in Belfast, Northern Ireland. And this company you
know, has a major pr pushfor this. Right now, they said,
you've got lifetime access and it's cateringto individuals who just envision your retirement

(16:15):
years as a time for exploration andpersonal growth. Sounds kind of nice,
I think on the face of it, it's like, Wow, I mean
I'm taking care of for the restof my retirement and the costs for just
me three hundred thousand, or forboth of us five hundred thousand, until
you decide like I need dramamine allthe time, or get me off the
ship, I'm tired of this,or I'm sick, or like there's just

(16:38):
a lot of things. On theface of it, I think it sounds
great. I hate to be aDebbie Downer, but I would say,
really, really think through this.Maybe try like a two week a cruise
before you spend this for the restof your life. Yes, yeah,
I've never been on a cruise,but they sure do. They sure to
do a good job selling the ideaof this, because they're saying that there's

(16:59):
more than fifty active interest groups rangingfrom things like culinary arts to fitness and
purposeful exploration whatever that means. Isat just a guided tour. I mean,
I don't know, but they're marketingit quite well and it seems like
it would be a ton of fun. But if you've never been on a
cruise like me, maybe don't takethe five hundred thousand dollars plunge before you've

(17:19):
tested the waters a little bit.Kudos to Villa Vie on their fantastic marketing
efforts. Please think through this beforeyou sign up, but definitely an interesting
way to spend your retirement. EverySunday, you're gonna find our all Worth
Advice in the Cincinnati Inquire on Friday, we give you a preview. The
first question is from Michael and Harrison. He says, I was told that

(17:41):
if I claim Social Security early thatmy benefit will eventually still increase. Is
this true? Well, there's multipleways to look at the question. So
if you collect it early, keepin mind that full retirement age for most
of us at sixty seven years old, and if you collect before sixty seven,
your benefit will be permanently reduced forlife. It's not going to increase

(18:04):
when you reach full retirement age.So if you go to SSA Doug OFV
and you see a little report thatsays sixty two through seventy and the different
amounts that you can collect at thosetime frames, you can't just collect at
sixty two and then say hey,I'm sixty seven, give me more.
It does not work that way.But there are small, little cost of
living adjustments that most retirees are familiarwith. At this point, I'm talking
you know, it can be afew percent a year. Three point two

(18:26):
percent is what we're looking at forthis year. So if you're getting one
thousand and fifty dollars a month,I mean that bumps into one thousand and
eighty four months. So sure,if you claim social Security you get small
increases, but if you claim early, you're not going to get it bumped
up when you hit full retirement age. Yeah, and one little caveat about
Social Security and these cost of livingadjustments. Just from a practical standpoint,
many people who get to this ageare like, oh great, a cost

(18:48):
of living adjustment. Also, yourMedicare premiums will likely go up, so
it's like, yes, you're gettingmore money for the good call, they're
taking more money away from you atthe same time. Not something I would
say you should count on to makea huge different in your fixed three time
and income. Next question from dsand Mason. I own some stock that
recently split. Does this matter tome at all if you own the stock

(19:11):
already, Probably not. You're justgoing to get more shares that you're going
to keep the same value. It'slike a pie cutting it into more pieces.
You still have the same amount ofpie. You just have more pieces,
so it's not really going to havean effect on you. What it
does is creates an easier entry pointfor investors that maybe the stock was too
expensive and now it's going to bereduced per share and price. So if

(19:33):
you already hold the stock, notreally a big deal. But if you're
looking to get in and there wasin barrier ventury based on that price,
then sure it's a good change foryou. Coming up next, he is
someone who is as meticulous as we'veever seen when it comes to money.
Did he though just commit financial infidelity? We'll get into that next. You're
listening to Simply Money presented by allWorth Financial here on fifty five krs the

(19:56):
talk station. You're listening to SimplyMoney. For that, I'm all Worth
Financial, I mean Wagner along withSteve Ruby. Research out there shows at
about a third of all couples havesome sort of financial infidelity going on,
whether it's a credit card someone doesn'tknow about, some purchases right, it

(20:18):
can run the spectrum. But tonight, our good friend Alriddick from Game Time
Budgeting, the man who was moremeticulous about money than anyone I have ever
met in my life claims it,maybe he could be guilty of financial infidelity.
Tell me, mister Ridick, what'dyou do with that fifty cents?
Because I don't believe it was anymore than that. My friends, so

(20:41):
you too may recall that my wifeand I we pay our sales a monthly
allowance, which is considered our funmoney for the month. Yeah, so
our agreement is that neither spouse cancomment on how the other spouse uses that
money. So recently I noticed thatmy wife's automatic transfer from the joint account

(21:02):
to her personal account it had notbeen made. So, since that's her
personal money, I didn't say anythingbecause technically it was none of my business
right then, and then I thoughtto myself, I said, you know,
it might be kind of intriguing justto see how long it would take
her to notice she was missing herallowance. Now, to my surprise,

(21:27):
it took thirty six days. Sothen I began to wonder, because I
was withholding the truth, right,did I commit financial infidelity? I'm gonna
I was about yeah, ten yardpenalty that I think that qualifies. You

(21:52):
totally used your wife as a researchyou know, you were like, I
am going to see if she realizes. So let's take a little more deeply
into it. Is it that shejust didn't have the money or march for
anything that month? Did she haveplenty in her account already and just didn't
miss it? Like what's going onhere? Yeah? So so yes,

(22:12):
and yes, she didn't really haveanything that she wanted to purchase. Plus
I think that she has quite abit of money in her account. In
addition to that, I kind ofthink that both of our allowances are count
on the high end. But youknow, that's the story for another time,
right. But the funny thing thathappened, and I'll never forget this

(22:34):
day. So I'm sitting in heroffice because she works at home, so
she has a desk facing one wall, and when I decide to work at
home, I have a desk facein the other wall. So all of
a sudden, I hear her say, she said, my money is getting
kind of low. Right. Thenthe next minute she says, wait a
minute, I didn't get my allowansthis month, And then she said,

(22:56):
hold up, I didn't get itlast month, because keep in mind,
it took thirty six days, right. So I turned around and I just
burst out laughing because I was like, oh my gosh, I couldnot believe
it took you this long to figureout you did not get your money.
So of course we had a goodlaugh about it. But she laughing?

(23:17):
Did she laugh at you when youknew that she was two months behind?
Was she laughing? Well? Sheshe said, I can't believe you didn't
tell me. And then I said, well, the agreement, like I
said earlier, is that we can'tsay anything about how each other spends that
money. So technically it was noneof my business technical literal interpretation of the

(23:37):
rules. I would have been like, okay, when we both worked from
home, my desk is in thisroom and your desk is outside in the
yard for a few days, misterriddick. But first of all, was
there some kind of a glitch?What happened that she wasn't getting her money?
So this is what we assume happened, Like at the end of every
year, when we were talking aboutour plans for the next twelve months,

(24:00):
we set up various transfers that occurevery month, so we don't have to
think about it, right, SoI'm assuming and she assumes this as well.
When she set up her automatic transferto her personal account. She must
have selected a date that ended tooearly, or maybe she just selected just
do this for two months and that'sit. So of course, you know,

(24:23):
we did laugh about it, butI just thought it was hilarious because
I conducted my own little experiment.You know, any other emotions outside of
humor that your wife felt after youexplained that she was kind of an experiment.
You know, she did not getupset with me, because, good
for you, She's been with mefor so long. She understands how I

(24:48):
am and how intrigued I am bydifferent financial situations. So she was cool
with it. And even the otherday, matter of fact, was yesterday,
she was just walking around the houseand then all of a sudden she
said, So. I was like, I thought she needed me to do
something. Then she said, I'mcounting my money, just so you know.
I was like, Okay, that'sgood. I'm going to meet your
wife someday. Such a good sportyou're listening to. Simply Money presented my

(25:12):
all worth financial I Memi Wagner alongwith Steve Ruby as one of our favorite
people, our good friend already fromGame Time Budgeting joins us tonight, joking
that he realized that his wife's sortof fun money was not put into her
accounts as they have kind of setthat up, and he sort of had
a little experiment to see how longit took her to realize that. You

(25:33):
know, I want to back upfrom this a little bit more, because
there is no one that I haveever met who is more intentional with their
money than you and your wife.Talk briefly about the fact that you do
annual meetings with financial goals, youdo monthly meetings, and that you really
make sure that every single dime,every single penny that's coming into that home

(25:56):
is put to good use. Yes, ma'am. So this is something that
we've been doing. Heck, I'vebeen married now twenty one year, so
going on twenty two as soon asmy next anniversary hits. But every year
we sit down and we talk aboutsome of the goals that we have for
the next year, and then wejust start planning how to make those goals

(26:17):
happen, because, as you twoboth know, it takes money to get
anything done these days, right,So once we set like what that big
goal is and attach a dollar valueto it, then we just start stashing
money in different areas to make surethat we can pay for some of these
things in well, really everything incash by the time the do date rolls

(26:41):
around, so to speak. Soas an example, I think I may
have mentioned in another show that becausewe're having a big birthday this year,
we wanted to spend more money.So of course I started playing a long
time ago, because when my wifetells me she wants to do something big,
I already know that's gonna be alot of dollars, right exactly,

(27:02):
So I just started funneling more moneyto the vacation account. So now the
latest thing is that she wants toremodel the bathroom. So once I figure
out what her vision is, thenof course we'll figure out how to make
the money match the vision. Butin addition to those, like annual year
end reviews, we also just planhow the money will behave every month.

(27:23):
And because we've been married for solong and we realize what we enjoy as
a couple, you know, wekind of do the same things over and
over. Like most people. Youknow, we love to travel, we
love going to shows, we likegoing to plays, we like outdoor jazz
concerts and things of that nature.So we just always make sure that we
stay ahead of any events that maybe coming through town so that we can

(27:47):
go ahead and build it into thebudget instead of waiting till like a week
before specific event and then trying tofind the money because typically nothing really works
out well when you are in acrisis mode with money. Does that make
sense? It makes a lot ofsense. So, as a result of
this experiment, were you able tosuccessfully lower your wife's allowance? No?

(28:07):
I was not. Yeah, thatwasn't even a thought. That was not
d But you know what I didlearn. Remember back in the day when
we had the conversation about my wifewanted to increase her allowance, that experiment
let me know that she didn't reallyneed the extra money, She just wanted
it because it would be nice.So I'm like, hey, whatever works

(28:27):
for you. You know, welearned so much from you in the way
that you and your wife budget.And I'm telling you, if anyone is
ever behind the eight ball like youlive, and you give your money a
job the way that you guys have, and then you can get yourself out
of any situation. We always appreciateyour insights. My friend, you're listening

(28:49):
to simply money presented by all worthfinancial Here in fifty five KRC, the
talk station you're listening to Simply Moneypresented by All Words Financial Imbe Wagner along
with Steve Rebe. If you've gota financial questions keeping you up at night,
there's a red button you can clickon while you're listening to the show.
It's right there on the iHeart Operacord. Your question and it's coming

(29:12):
straight to us and straight ahead.We're gonna arm you with some negotiating power
the next time you go car shopping, maybe something you haven't thought about before.
Time to play fact or fiction.And there's really no play about the
fact that people all the time hearsomething about money and it's an absolute myth

(29:33):
and they make a bad decision basedon it. So this is something that
we're really passionate about, is separatingfact from fiction. So you know better,
I'm gonna go with the first onehere, fact or fiction, mister
Ruby. A Wroth conversion and abackdoor Roth conversion. Same thing fiction.
A Roth conversion. You can takeany amount of money that you have in
a traditional or a pre tax iraor four one ka and convert that to

(29:57):
Roth. It doesn't matter what yourincome is there's no caps on what you're
earning to make this happen. Well, let me correct that it does matter
what your income is, because thehigher your income, the more taxes you're
going to pay on that conversion.But nothing, there's no rules stopping you
from doing it. A roth backdoorconversion is when you make too much money
to make a roth Ira contribution,so you contribute to a traditional ira on

(30:22):
an after tax basis, funnel thatmoney through into the roth ira. Sort
of confusing, but that's capped thatwhat the irs limits are for a contribution
in that year. There are incomelimits for putting money into a roth ira.
I have a friend who is abrilliant and be well compensated for her
brilliancy right, and so several yearsago we were talking about because you know,

(30:44):
I'm so cool when I go out, We're talking about how we invest
our money planning for retirement, andshe made the comment that she and her
husband couldn't put money into a rothira because they make above the income liment.
And I said, well, youcan backdoor a wroth and she said
that is not a thing, andI said, actually it is. And
it's funny because she works for alarge financial services firm. She wasn't aware
that this was a strategy, andit's essentially kind of a something that happens

(31:07):
on paper. But you put themoney into a traditional IRA, then you
immediately pay the taxes on that andconvert it into a wroth IRA. This
can be done. A wroth conversionhappens at any point, not just when
that money goes into an IRA.But this is traditional IRA money, money
that you haven't paid taxes on yet. And it's a strategy that can make
a lot of sense. But thetiming of these two things would look very

(31:32):
different. There are important caveats aswell, so you speak to a financial
planner or a CPA before you pullthe trigger on anything like this. Fact
or fiction. I'm going to giveyou one. I can do it.
If you're choosing to get deferred compensation, you want to invest it as conservatively
as possible. I think fiction.I'm going to agree with you. I

(31:52):
think fiction on this because for manypeople, this is sort of another version
of a four to one K.It is a retirement vehicle that you're using,
So if you're years away from retiring, you don't necessarily want that money
to be conservative. Now, let'stalk about what deferred compensation looks like.
It's often for highly compensated vehicles.People like executives in companies, and they

(32:15):
can say, listen, I don'tneed all of this money. Now,
you keep this money back, youinvest it, and I will take it
likely as a lump sum upon retirement. Right. It's money that's going to
come to me later. Often though, you don't have a ton of choices,
and sometimes your choice is more companystock. Yeah, sometimes your choices
you get kicked in the teeth withtaxes when you retire, because sometimes it's

(32:37):
just a lump sum payout of thesedollars that have been tax deferred. Sometimes
it's a three year payout, sometimesit's a five year payout. But the
benefit there is that you have moretax deferred money growing. It's not counting
as towards your income when you receiveit into that account. So yeah,
I mean you invest with it basedon the time horizon until you'll need it,

(33:00):
not the fact that it's a differentcompensation any It is an investment vehicle
for retirement, just like a fouralon and K. So if your foural
on and K is eighty percent stock, that's what this should be right.
Just because it is a different wayof saving doesn't mean you invest it differently.
Let me give you the next one. Fact or fiction. In general,
social security This is an easy one. Surely make up about forty percent

(33:21):
of someone's income. Sure fact?Yeah, I mean, soci security isn't
meant to replace all of your income. Social security is a safety net,
a security blanket for those that don'thave anything else. So you do not
want to count on social security tofloat you through retirement. You want to

(33:43):
expect it to be some kind ofa cash flow on the side. Almost.
I want to give you another onequickly. Fact or fiction. Owning
one hundred stocks makes a portfolio diversified? Oh, I don't like this one.
It depends. I mean, there'sarguments out there that you can create
a diversified portfolio with literally twenty tothirty stocks. There's plenty of people that

(34:07):
feel that that is the reality.But if you have one hundred tech stocks,
are you diversified? The answer isnot. You need to be spread
out across multiple different sectors, differentsized companies, domestic, international. You
could do that with twenty five orthirty stocks, but with one hundred depending
on where they're invested. Yeah,this one sure fiction depending on XYS.

(34:30):
It hurts my brain to think aboutchoosing one hundred different stocks and making sure
that I've got emerging markets in smallcaps and large cap growth stocks and large
cap There's so much to take intoaccount to be truly diversified. I would
not recommend trying this one. Comingup next, we're breaking down a situation

(34:50):
into car dealership where you actually havethe leverage what you need to know.
You're listening to simply money presented byall Worth Financial here in fifty five KRC
thes. You're listening to simply moneyfor some of my all Worth Financial.
I mean, why you're along withSteve Ruby. One of the things I
will never forget about when we weregoing through the pandemic is car lots.

(35:15):
I don't know if you bought anycars during that time or drove by lots,
Steve, but you get used tolike the norm of like all the
balloons outside and all the cars inthe parking lot, and because you couldn't
get chips into cars because there wereall kinds of supply chain issues, it
would be like four cars for saleon a lot and twenty people trying to

(35:37):
make offers on them. At thesame time, it was really creepy.
It was bizarre. We're coming outof that time and getting to a more
normal place again where there's actually inventoryon lots, thank goodness. So now
new and used car prices are kindof starting to come back down, and
now we're getting to a place whereyou might actually have some leverage and negotiating

(35:58):
at least on maybe some of thesecars. On some of them, it
depends really based on how long thatcar has been sitting on the lot.
That's the bottom line. When adealership first gets a car, there's no
reason at all for them to lowerprices if customers are immediately interested. But
the longer that car has been sittingthere, and that's a luxury that some
people are seeing. Now. It'snot like COVID anymore, when supply chains

(36:20):
are completely disrupted. There are vehicleson lots for longer periods of time,
and when those have been sitting therefor a while, that gives you a
little bit more negotiating power to tryto get a better price on that vehicle.
Some of the research shows, especiallyif that vehicle has been there for
at least a couple of months,right, sixty days or more, then
all of a sudden that they're lookingat that Gosh, this car has been

(36:42):
sitting here for a while, Like, are we going to be able to
move it? Yeah? How doyou know? Right? How do you
know that that car has been sittingthere? So one of the things that
we've all sort of been conditioned todo is look at that carfax report.
Right, that's incredibly important. Oneof the things listed on that carfax report
should be the date that that vehiclewas listed for sale. Look at that
car fax. If it has beenmore than sixty days, voila, you

(37:07):
likely have some leverage. They wantto get that car off the lot.
It's been sitting there for a while. You can likely make a lower offer
on that car. Yeah, youcan. Also, you have the ability
to look at some of the inventorydetails directly at a dealership. If the
vehicle's listed on the dealer's Auto Traderinventory for more than a month or two,
then it's likely that it's slowly goingto be dropping in price, and

(37:29):
at that point also giving you anopportunity to have some negotiating power. What
I don't know, I think aboutlike the real estate industry and not right
now because there's not a lot ofinventory out there. But in historically,
you know, if a house hasbeen on the market for ninety days,
one hundred and twenty days, they'llpull it off the market and relist it
a week later, and it's likethat clock resets. Yeah, because I

(37:50):
think oftentimes if you're looking at ahome, you're like, something must be
wrong with that home. It's beenon the house, you know, it's
been the market for several several months. I don't know if there's a way
that car dealers can do this withit inventory listed on their website, which
is why I'm saying check that forsure for starters, but also go to
that Carfax report because it should beon there as well. Yeah. I
mean, there's actually a term forthis within the industry. It's called aged

(38:13):
inventory, and that's what you're lookingfor, whether it's Carfax or directly,
you know, looking at some ofthe paperwork at the dealership, when when
was that list, When was avehicle listed for sale? Things like that.
If you can identify the aged inventory, then that's going to give you
the opportunity to negotiate that. Ilove negotiating for cars. I think I
do too. Oh, it's oneof my favorite things and really out of

(38:36):
the gate in college. I absolutelyloved it. Here's another tactic for you.
Thanks for listening tonight. You've beenlistening to Simply Money, presented by
all Worth Financial here on fifty fiveKRC, the talk station