Let’s kick off the week with some fresh listener questions we have lined up for you! And don't just stand on the sidelines- if you have a question you’d like us to answer, toss your voice memo our way. It only takes about 90 seconds to record and you can find a step by step guide over at HowToMoney.com/ask . Regardless of how random or bizarre you might think it is, we want to hear it!
1 - Target date fund: is my brokerage double dipping expense ratios if my target date fund has other funds as well?
2 - High deductible healthcare plan: help me to determine whether or not my HDHP makes sense!
3 - Promissory note: did I make a massive mistake in selling my house with a promissory note?
4 - Pro bono: what certifications should I get if I’d like to help others with their finances for free?
5 - 50 year mortgage: “change my mind” that a 50 year mortgage isn’t a great option for folks to build wealth with homeownership!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to how to Money.
Speaker 2 (00:01):
I'm Joel and I am Matt.
Speaker 1 (00:03):
Today we're answering your listener questions.
Speaker 2 (00:23):
Hey man, we're talking about personal finances today, like we
do every how the money. That's our job. Hey, let's
switch it up. What did you go? Do you want
to do today? Pinky take over the world. Well, we'll
talk personal finance. I was gonna ask you, did you
have a run this morning?
Speaker 1 (00:36):
Every morning? Our most morning?
Speaker 2 (00:38):
How far? How far this morning? Yeah?
Speaker 1 (00:40):
A little over eight miles?
Speaker 2 (00:41):
Oh my gosh. Yeah, like the distances you threw out there. Now,
I'm like for me to scrape out a three or
four mile run, is is quite the accomplishment. Did you
read There's an article in The Times a couple of
weeks ago about cross country and like this race that
this guy runs up in outside of New York City
all the time. I'll send it to you. It just
they talk about like the grit and the foul weather
(01:01):
that you have to endure and how you just get
tough and it make it may made me want to
make sure that my kids are running as they are
getting older, just to push them into.
Speaker 1 (01:10):
Cross country specifically too.
Speaker 2 (01:12):
Right, Like there's there's it's not flashy, it's not very sexy,
but there's just a whole lot of grit that goes
into running cross country. I ran cross country in high school,
so I think it resonated with me.
Speaker 1 (01:21):
Well, it's an interesting distance because it requires a lot
of you requires both aerobic and anaerobic, because it's like
that sweet spot distance where you really need the best
of both worlds both. But I was telling Emily on
the way out the door, I was like, I just
really don't want to go today, really, just because it's
so cold, and like it's I just you have to
bundle up and it's not fun ideal running temps like
fifty degrees. It's colder than that right now. Yeah, And
(01:42):
so uh yeah, but like once you get out there,
it's the best thing in the world. And I'm just
like so happy I didn't not go, Yeah, but I
went that you did.
Speaker 2 (01:51):
Actually go double Okay. But we do have personal finance
listener money questions to get to, like paying fees in
your target date. We'll get to that. Another listeners wanting
to make sure he picks the right healthcare plan. We're
gonna talk about fifty your mortgages, all that and more
during our episode today. Really quickly, though, I did want
to share a little PSA for everyone out there, which
(02:12):
is to consider decluttering before the holidays roll around, men
before Christmas shows or you reclutter before yes, I mean
quite literally, to make sure you have room for all
those crap that we end up buying and or receiving
around the holidays. And the reason I bring this up
is because I recently sold an old laptop on Facebook Marketplace.
And this was a laptop, dude that I thought, nobody
(02:34):
is going to want this. It's it's over a decade
old twenty thirteen MacBook Pro, and I was able to
list that thing get it sold. Somebody is now the
happy owner of.
Speaker 1 (02:45):
This old laptop. What'd you get for it?
Speaker 2 (02:47):
One hundred bucks, which well impressive considering you can get
a computer it's way better than that now for not
too much, like seven hundred dollars something like that. So yeah,
well I think that's the thing, like, in my mind,
is not worth it. But I also thought, well, somebody
else is gonna want this thing, and if the fact
is like that's what prices are right, like, that communicates
to me that this is worth it to somebody and
(03:08):
I even think I may have underpriced it because that
twenty twenty five people reached out about this thing, so
I'm thinking it's vintage. I guess, so I don't know
what it was, but I could have priced this a
bit more optimally. And but then again then you deal
with having to keep it listed for longer. And I
was just it was priced to move. Let's just sometimes
that's the best way to do it. If you want
to get rid of a bunch of stuff in short order,
(03:30):
you just want to get get it out the door.
Speaker 1 (03:31):
Don't overprice it, and then be able to hang away.
Speaker 2 (03:33):
They get accessible for somebody, they've got something affordable, you've
got a little bit of extra cash in your wallet.
And then obviously it's not sitting there on the shelf
or in the closet gathering dust at a point like
and eventually it's not going to be worth anything at
all and you just have to end up taking it
in and recycling.
Speaker 1 (03:52):
Yeah, exactly, But I think it's a good that's a
good tip, and it's one it'll help you raise a
few dollars or your Christmas spending this year, and then too, Yeah,
create that space, like you're saying so yeah, a little decluttering.
Maybe list a few things. Maybe maybe make make the
goal to find twenty things and list two a day
(04:12):
for the next ten days, something like that.
Speaker 2 (04:14):
I think fun.
Speaker 1 (04:15):
I don't know however you want to do it, but
just I like that idea.
Speaker 2 (04:17):
You remember when we did the one of the how
the Money Money challenges, Oh yeah, and the selling your stuff.
We'll throw back to that that old worksheet if you
were looking for a little bit of motivation to track
the items that you're spelling, you know. I was just
thinking thought about that we should resurrect those and put
them in the newsletter for people them. Yeah. Okay, so
or at least that one we got to find them.
Speaker 1 (04:36):
Yeah, but maybe we'll put those in an upcoming had
the Money newsletter. That's right, all right, Well let's mention
the beer we're having. This one's called Contrast. It's an
American style wheat ale and it's a collaboration between Burial
and Alligash too.
Speaker 2 (04:51):
Oh I didn't realize this was Burial because it didn't.
It kind of has the burial look, but not surprisingly
has more of an alleg ash.
Speaker 1 (04:59):
Yeah, to of the great American periks. We'll give our
thoughts on this one. Thank yeah later on and if
you have a money question, please send it our way.
We'd love to hear it. Go to Honamoney dot com
slash ask for specifics, but really just recording the voice
memo the app at your phone and emailing it over
to us. Matt, let's get to question numero uno. This
(05:19):
is a question about how much target date funds are
actually extracting from you.
Speaker 3 (05:23):
Hi, Matt and Joel, this is Steve and Nova just
south of DC. Thanks for doing your podcast. I've been
listening for about three or four years now, and I
really appreciate the approach that you guys have. I've been
growing my four to one K for a number of
years and periodically all change or tweak things here and there.
But one piece of advice that I really took from
you guys is sticking with simplicity and low cost. I
(05:46):
currently have an SMP five hundred fund, two target date funds,
and a bond fund, all of our vanguard, all of
our low expenses. But that brings me to my question.
My target date funds have an expense ratio of zero
point zero eight percent. Fine, but they're both basically funds.
Of funds, So is that expense ratio actually true? I
(06:10):
mean inside each one is maybe five other Vanguard funds.
Two of them are the same as the SNPN bond
fund that I have. So what about the expense ratios
for those funds that are inside the target date fund? Basically?
Are my expenses actually higher than the point eight percent
and they're just being hidden inside there by the other funds?
(06:32):
Or am I really just being too anal about this?
Thanks in advance, best friends out.
Speaker 2 (06:38):
Joel Steve wants to know if Vanguard is double dipping.
That's what he's trying to figure out here.
Speaker 1 (06:44):
It's a good question. I should should have asked their
chief global economics, and we had them on that too
long ago. Feet to the fire.
Speaker 2 (06:49):
Well we can answer that question, we don't have to.
How do you feel about double dipping though? From a
you're at a party, you know, holidays are maybe you're
attending a party here and there. How do you feel
about the actually double dipping?
Speaker 4 (07:03):
Oh?
Speaker 1 (07:04):
Man, I think it's probably uncouth like yours. At your
own home, you can double tip as long as like
you're not offending the people in your immediate family. But
at a at a party.
Speaker 2 (07:14):
No man, that's how you get sick, or that's how
you get.
Speaker 1 (07:17):
Everybody else sick.
Speaker 2 (07:18):
Yeah, we don't even certain things at home like Greek
yogurt and stuff. We're super anal about uh not touching
the spoon to your plate or like your bowl of yogurt,
as to not get other items from your bowl back
into the container, because that's like when it when you
introduce other bacteria back into the the host container like that. Yeah,
(07:38):
that's when it ends up going bad.
Speaker 5 (07:39):
Man.
Speaker 2 (07:40):
You know, I don't like wasting food. So yeah, we're
we're all about that.
Speaker 1 (07:43):
One of the things I caught in Steve's question, by
the way, he said he had two target date funds.
I thought that was really fascinating.
Speaker 2 (07:49):
Because maybe for him and his wife, oh maybe or
maybe yeah, that's good, but he didn't say he's got
a wife. But but if he has two for himself,
that is a really interesting choice because I'm totally fine
with people having a tart date fund and then having
exposure to another fund or two as well, because really,
really what you can do is say, hey, target date
funds aren't aren't quite they're too risk averse for me,
(08:10):
and I want more risk in my life and so
the Paul Merriman approach.
Speaker 1 (08:12):
Yeah, so the target date fund along with an S
ANDPI funder, total stock market or a small cap value
fund something like that, like, go for it. But two
target date funds is an interesting choice because typically you
choose the one based on when you're most likely to retire.
So I just would tell two target date funds might
be redundant. Yeah, I mean, especially if they're five years apart.
They're pretty dang similar, and so I want the perfect blend, right.
(08:36):
I don't understand why you do that, so I just
want to like maybe point that out on the front end.
We'll get to the heart of your question. But two
target date funds might be overkilled. Yeah, So I will say, Steve,
if I totally get why you might think that you
are paying an additional expense for target date funds, But
the truth is you're not. The stated expense ratio on
Vanguard or even Fidelity site is exactly what you are paying.
Speaker 2 (08:58):
So let's say a target date funds expense ratio is
point zero eight percent, like you mentioned there, Steve, Well,
that already reflects the fact that it owns the underlying
funds that may each have their own costs, So in
this case you are not double dipping, so no need
to worry about paying that, you know, plus the expense
of let's say the total stock market fund or a
(09:19):
bond fund that your target date fund is holding. So
you're essentially paying the total blended expense ratio. Like it's
the sticker price. Whatever it says right there on the
on the prospectus or on the page when you go
and check it out, that is what you're paying. It
may be a helpful way to think about. It makes
me think about like paying alack carte, Like if you
go to a restaurant or like a cafeteria, like you
(09:39):
can either pay alack cart or you're paying like the
buffet price. Target date funds is akin to buffet pricing.
You're a buffet guy, Matt. Yeah, you pay one price
and whatever you want on there, that's what you get.
Speaker 1 (09:51):
Or you the one who got into the fight at
that Golden Corral, that's all the headlines. Apell.
Speaker 2 (09:54):
I'm trying to think of the last time I've been
to a Golden Coral or no Orion's because they've got
the the yeast ye rolls. Oh my gosh, are they
still around. Ryan's yeah, I don't know.
Speaker 1 (10:04):
Okay, well it makes me think of a blender, right,
so you said blend it, and I think it like
when you toss like three or four different things into
a blender, like you mix them up, like you're still
you have something kind of a new product. But really
it's the element of all those underlying products.
Speaker 2 (10:18):
Okay, So the electricity that goes to power that it
doesn't matter how many things you stick in the blender,
you still are using the same amount of power to
get the initial blend.
Speaker 1 (10:27):
Yeah.
Speaker 2 (10:28):
Maybe maybe.
Speaker 1 (10:29):
So I don't know if that's a great analogy, Steve,
But Matt's right, Like the listed expensory show is the
actual that's the expenses that you're paying to own that fund.
And we should note that the cost of a target
date fund is higher than buying those funds individually, right,
But the slightly higher cost is likely worth it if
you determine that a target date fund is right for you,
(10:50):
and that that's because the fund is going to change
its exposure of the underlying funds over time as you
get closer to retirement age. That is, like the selling
point of target date funds is set it and forget
it allow someone else to do the hard work the
rebalancing for you. You're diversified without really having to think
(11:11):
about it. And so instead of rebalancing on your own,
the target date fund with a slightly higher expense ratio,
it's got to set glide path. It reduces stock exposure
over time, it increases bond exposures. You get closer to
needing to tap those funds. And you know, target date
fund expense ratios are pretty darn competitive that our favorite
low cost broke just so we say they're higher, and
(11:31):
yes they are, but really, when it comes down to it,
they're I think a bargain for a lot of mom
and pop investors who really want to put a blindfold on.
They want to invest pretty wisely, but they just don't
want to think about it.
Speaker 2 (11:45):
Yeah, they are more expensive, though, Like that's for me, honestly,
that is my biggest hang up and one of the
reasons I have a difficult time, Like if somebody came
to me and they're talking about what they're looking for
with their investments, to say, hey, even like the most
affordable target ate funds out at point zer eight percent,
you're looking at something that's two hundred and fifty percent
more expensive than Voo than an S and P five hundred, true,
(12:06):
or something that costs nothing at Fidelity if you are
going with a total stock market fund. So I still
have a really difficult time with the principle of paying
much more if you can handle the risk, right, if
you can handle the ups and downs. But oftentimes that
risk pays literal dividends because that is how you're going
to see your wealth grow the most. And that's one
of the biggest criticisms with target date funds is the
(12:28):
fact that they are so bond heavy. Even for like
a target day fund that's set for like twenty sixty five,
there are still more bonds bond exposure there then I
am personally looking to expose my portfolio to. So if
you are a bit more of a conservative investor, I
think a target date fund can make a bit more sense.
(12:48):
But even a more moderate investor I think would be
well served with either a total stock market fund. Or
if you see yourself as like no, no, no, I'm in
this for the long haul, twenty plus years, looking to
build well, looking to maybe retire, really something Okay, the
S and P five hundred, Yeah, get after it.
Speaker 1 (13:04):
I think there's a difference too, between taking a simple approach,
which is something we advocate, and taking the absolute simplest approach.
And I think the Target Date Fund the reason they
exist is because for the average person who doesn't care
about personal finance, they like do have at least a
thought in their brain about investing for their future, and
they've heard it from somewhere that they probably need to
(13:26):
be doing something, and so inside of the FOURM and
KO work, they're like, Yeah, I'm gonna put some money
in there, which fund should I pick? And it feels
to I think the average person who has very little
knowledge like an insurmountable task to pick the right fund
for their future, and the Target Date Fund is kind
of the solution to that problem for average people. But
how to money listeners, Matt, they're not average people, they
(13:48):
are they can opt for something slightly more complex. I
think most of the time the topic is just a
bit more aggressive, Yeah like them aggressive, or they can
at least think about yeah, maybe maybe having like we
talked about the very beginning, two different funds of Target
date Fund and another fund that at least ramps up
the risk appetite for the average person because that is,
(14:10):
like we said, the biggest criticism of target date funds,
they're just not risky enough for the average investor. We also,
by the way, learned last year after a Vanguard kerfuffle
that triggered a taxable event for some of its customers.
That's right that you should hold a target date fund
inside of your retirement account, never inside of your brokerage account.
So that I think should be stressed. I think there
(14:32):
was a lawsuit. I think Vanguard ended up was there
settling and maybe making it right for a lot of investors.
I need to go back and look at the details
on it.
Speaker 2 (14:39):
I mean that was more of a one time event,
like they're doing some restructuring recategorizing of what was considered
like is a business account like I forget the specifics,
but regardless that the same practice of what's going on
when they did that sort of one time newsworthy event
that is still happening periodically and regularly within target date
funds as they are rebalancing, and if.
Speaker 1 (15:02):
You don't in the scenes, you're not really aware of it.
Speaker 2 (15:04):
That's happening. Yeah, yeah, you haven't sold anything, but the
fund has, and you are required to take those as
capital gains and so if you are taxed on that,
that's why it's much more efficient to have that sitting
inside a tax exempts account like a roth IRA or tax.
Speaker 1 (15:21):
Deferred Yeah, four one K. And if you're gonna go
with a target date fund, Vanguard is one of the
best places to go because of those low expense ratios.
You said, yeah, I'm Matt. They're higher than VU, but
they're like the cheapest in the industry. And so the
actual differences in expense ratio between a Vanguard target date
fund and let's say a random one from another brokerage,
a brokerage or from let's say a bank or an
(15:42):
insurance company, it could be insane the difference in expense ratio.
And so I would just encourage anybody who's like, okay,
target date funds so one stop shop it is the
easy thing. I should jump jump on that bandwagon. Well,
getting your target date fund through Vanguard, if that's where're
on case, provided it is one thing. Getting it from
somewhere else, it could be an even more dramatically worse
(16:06):
decision because the expenses could be ten x or more
the Vanguard expensory show. And that's when you want to
tread lightly. There are some really good target date funds
and then there are some really truly awful ones that
are not good for people.
Speaker 2 (16:18):
That's right, man. We've got more to get to though.
We're going to cover the topic of promisory notes. That's
not something we've ever discussed here. We'll get to like
something madam monopoly and never was a huge monopoly fan myself,
so I can't completely verify that, but we'll get to
that question and more right after this.
Speaker 1 (16:41):
We're back. We've got a question to get to on
fifty or mortgages and just a bit. But let's get
to a question now about picking the right healthcare plan
during open enrollment.
Speaker 5 (16:50):
Hey guys, this is Greg and Tampa with a question
on your favorite topic, the HSA and high deductible plans. So,
my employer offers three deductible levels thirty five hund in
two thousand dollars each is eligible for the HSA. Basically,
each one costs different amounts per pay period, the most
expensive being the two thousand dollars plan. It's about sixty
(17:12):
dollars per pay period. Then you drop to about thirty
some dollars for the thirty five hundred and then the
six thousand dollars one is only about twenty bucks a
pay period. I have been playing around with these plans
the last several years, just like you've suggested paying out
of pocket saving my HSA. So what I'm kind of
(17:32):
thinking here is I have enough money in my HSA
to pay that six thousand dollars deductible for several years.
Once I hit that six thousand dollars deductible, I have
zero responsibility for anything else after that. The other plans,
I still would have twenty percent responsibility for any medical bill,
(17:53):
So I can pay the six thousand dollars for several
years and then own nothing. It seems like, now that
I have enough money in my NSA to cover that
for several years, it's the plan I should go with.
Just as an example, a couple of years ago, I
had a torn ligament from a run. One of my
feet doctors visits MRI. All of that I was on
(18:16):
the two thousand dollars plan, and I still didn't hit
my deductible because I went online and found the cheapest
options for everything, including the MRI. So it just seems
like the six thousand dollars one is the way to go,
especially since I have the HSA money, just pay the
lowest premium possible and be covered and kind of used
(18:37):
the health insurance for really emergencies only. Anyway, let me
know what you think. Am I being frugal? Am I
being cheap? What do you think?
Speaker 2 (18:46):
Man? Greg said he didn't even hit his two thousand
dollars deductible with an MRI on the books, plus doctors
visits Greg's in Florida. Maybe there's some really affordable healthcare
please call it back, Alley MRI and here they're really
get It always makes me think of that scene in
Minority Report where he gets his eyes swapped out there
in the bathtub and like to hill up. So gross,
(19:08):
the most disgusting quasi medical scene I think I've ever
seen in a past of sci fi.
Speaker 1 (19:13):
Yeah, movie, but that's a weird one. And that, by
the way, like this question Greg said was about HSA's
We do love hsas, but it actually sounds like what
Greg is asking about is less really HSA related, because
he said that every plan that he's being offered to
him comes with HSA access, so it's not a choice
between choosing the plan with or without an HSA eligibility
(19:35):
and also HSA adjacent. Yeah, Greg knows what he's doing
on the HSA front, so it doesn't sound like we
have a lot that we need to discuss on that front.
I think what he's really asking is whether it makes
sense to go with the healthcare plan that costs less
but has a higher deductible, which is one of the
most important questions during open enrollment. I think it's one
that people rack their brains over, largely because can't predict
(19:57):
the future perfectly and there's big money at stake.
Speaker 2 (19:59):
That's right, Yeah, So I'm going to cut to the chase, Greg,
based on what you said, I think the slam dunk
answer here is yes to go with the higher deductible plan.
It sounds like, generally speaking, you are mostly healthy and
even when something does pop up, which it sounds like
for you is rare, you don't even meet your deductible.
So since you are going to be saving money every
single paycheck on your premiums, I would go ahead and
(20:21):
take those savings to the bank. So I even did
the math here based on the numbers that you gave
as far as how much is coming out of your paycheck,
and this is assuming you get paid every other week.
Your premiums are going to be five hundred and twenty
dollars for the six thousand dollars deductible plan as opposed
to one five hundred and sixty dollars for the two
(20:42):
thousand dollars plan, which means that you're going to be
shilling out more than one thousand dollars more for the
guarantee of that lower deductible, which I don't think is
worth it given you your situation here, given your circumstances.
Speaker 1 (20:55):
Yeah, when you look at the premium discrepancy between the
cheapest and the middle plan, it's less so I guess
you could opt to spend a couple hundred more dollars
over the course of a year for a reduced deductible.
That might be the goldilocks option. But the six thousand
dollars deductible option doesn't have the twenty percent co insurance
cost to you after meeting your deductible. Yea, so it's
(21:17):
less attractive to me. Is like a sweet perk to
not have to worry about it at all. Yeah, to
know that that's literally the cap of what you would
be paying out of pocket in a given year. Also,
Greg like you're well prepared, like you've saved, You've invested
money for future health care expenses, so you can afford
to take a higher level of deductible risk. It sounds
like you're also more than willing to shop around if
you need a procedure, right, like using Healthcare blue Book
(21:40):
and sites like that. It's easier said than done, but
if you're willing to do it and go through the work,
then I think that will also help you reduce healthcare costs,
meaning the higher deductible plan makes even more sense for you.
That sort of scrappiness just makes us think the high
deductible plan is like an awesome choice.
Speaker 2 (21:59):
Yeah, and you can there's no guarantee that this is
absolutely going to be the right trunes right, Like you
can't look into the future. You don't know what your
health events are going to be in the future, but
you are making an informed decision based on your likely
healthcare needs plus the money that you have on hand.
It makes me think about like if you makes me
think about your house, like where you had the tree
branch come through your roof and I had the most
(22:22):
or I had like a one percent deductible which basically
was a lot of money.
Speaker 1 (22:26):
Meant, when the tree fell through, I was on the
hook for a large chunk of the repairs.
Speaker 2 (22:31):
Lots and lots of money. But you don't regret it
did right, Like at the time you said, I do
not regret that. I don't regret it, and you did
not change your It was still the right financial move
and it will pay off. Let's say, if I don't
have a homeowner's claim for the next eight to ten
years and just got unlucky, it'll easily it'll easily pay
having that higher deductible and lower premiums.
Speaker 1 (22:49):
But it doesn't doesn't mean it works out all the
time every year exactly.
Speaker 2 (22:53):
Yeah. It's similarly like you could drop a collision coverage
on your vehicle and then like the very next day
you could get in a wreck. And I think that
sort of the what ifs and the fear, like that's
what insurance companies they kind of pray on that. They
pray on those emotions and get you to give them
all your money, right as opposed to doing a degree
of self ensuring. And we are all for that. So,
(23:17):
like we talked about it from a financial standpoint, but
like from a principal standpoint, we advocate for personal responsibility,
right like taking your personal responsibility for your own actions.
That is personal finance. And so whether we're talking about
earning or saving, or spending or investing or in the
case of riskier behaviors that you could partake in that
(23:38):
could lead to higher expenses not only for you but
for everybody, right Like, that's the point of insurance is
is for those costs to be diffused among the public.
But it's more efficient if you, as an individual who
is the one making those decisions, if you bear the
brunt of those expenses. Right Like, you want to smoke,
go for it, but your health insurance is going to
(23:59):
be and rightly so should be a lot more expensive.
Same thing with like people who bungee jump or skydive,
like these are risk or like rock climbing or something like,
these are riskier endeavors. And there's a reason why different
types of insurance ask the kind of activities that you
participate in that you partake in. Yeah, and when we're
talking about self insuring, like there's a whole bunch of
different kinds of insurance you can avoid or that you
(24:22):
can pay less for the more money you have stacked
up in your bank account.
Speaker 5 (24:25):
There.
Speaker 1 (24:26):
It doesn't mean you like eradicate insurance from your life
like you still want probably a term life policy unless
you're completely financially independent, right, there are certain kinds of
insurance you're always going to want to have because the
risk is so high and the cost is so seemingly low,
even though it's like your homeowners insurance might it might
cost thousands of dollars a year, but the cost of
(24:47):
replacing your home if it order to burn down in
a fire could be hundreds and hundreds and hundreds of
thousands of dollars a year. And even if you would ruin,
you quote unquote have that, like yeah, you'd you'd be
going going back to square one. It makes me think
that people use. People who do not have a level
of self insurance a level of savings, they I think
are more induced to buy products, insurance products out of fear,
(25:09):
like extended warranties. This is one of those things where
you're buying an electronics item and you're asked whether or
not or by even like an airline ticket or a
concert ticket, Like there's insurance for everything now, and I
think the more tenuous your financial position the more likely
you are to be like, yeah, I guess I should
get that insurance product just in case, And then you're
(25:31):
spending more money on insurance because you didn't have the
discipline to create the savings to self insurre, especially for
some of those smaller things in life. But Greg, he
doesn't have to worry about that. He's well insured and
he cannot perform the higher deductible plan save himself some
money in the process.
Speaker 2 (25:47):
That's right, man.
Speaker 5 (25:48):
All right.
Speaker 2 (25:48):
Let's hear from another listener who has found herself in
a sticky situation. She sold her house and at the
center of this interaction is a promissory note. Let's hear
what she has for us.
Speaker 4 (26:00):
Hey, guys, it's Cheryl from Nebraska. About a year ago,
I sold the house in rural Nebraska and had one
bed on the house, and she couldn't come up with
the extra ten thousand dollars needed for the purchase of
the house. So I let her sign a promisory note
through an attorney, and she promised to.
Speaker 6 (26:24):
Pay me this year. And now she is not paying me.
I hired an attorney and they can't even seem to
get the money. They've taken her court. I do have
a leen on the house that she currently lives in.
I didn't know if there's any other thing I could
do legally. Thanks guys, man, I.
Speaker 2 (26:46):
Think, Joel, this is gonna be a fun question. You know,
why why because we know nothing about because we're not attorneys.
Speaker 1 (26:53):
That's true, and we have to say that at the beginning.
I think, especially with a question like this, Yeah, that's
probably true. I like, did sleep at a holiday and
last night, so I'm pretty sure I'm well equipped answer
this question. No, but I think you know, even though
we're not lawyers, wanted to take Cheryl's question because we
thought we could offer some helpful advice. And I just
want to start off from the outset. You might not
even want to go to the legal route. Like if
(27:16):
you met this woman at the closing table, you had
a solid interaction, I would consider sending a kind note
reminding her of her obligation to you. You might find
that using a human touch instead of sending lawyers after
her gets her engaging with you. It'll cost you a
whole lot less money too, Like Matt, as anybody knows,
like lawyers, fees can add up a lot. Makes me
think of one time I had a tenant who you know,
(27:39):
was not paying me the balance that was owed after
he moved out. He lived in the neighborhood, and so
I just like kindly went to him in person, like.
Speaker 2 (27:49):
At a public place, and did you arrive with your biggest,
most buffist friend.
Speaker 1 (27:54):
No, me solo, totally not buff totally not threatening. Not true,
It's not threatening at all. Now that I have the mustache,
maybe a little more. But and like it was, it
was a chance for me not to even shame him
or get mad or angry, but just to just to
be human, person to person, be human and say, hey, man,
like you still owe me money, how do we remedy this?
(28:16):
And he paid me. But that was one of those
things where I could have gone the legal route and
it would have cost me more than it was worth
in terms of money and in terms of hassle.
Speaker 2 (28:25):
That's true. Yeah, in Cheryl's case, it does sound like
and we're going to cover a bunch of this, I think,
because it'll be helpful for other listeners who may not
be as familiar with the situation and the steps that
you can take. But it does sound like Cheryl has
run through some of these a lot of these steps already,
but we will also get to the heart of Cheryl's
(28:46):
question later. But Jolie specifically, you mentioned fees and just
being able to avoid those, not only attorney's fees, court fees,
filing fees, all that kind of stuff adds up pretty
dang quickly. And if this individual chooses not to pay, like,
not only are you out the ten thousand dollars, but
you're also out these additional legal fees as well, assuming
that you don't win a judgment and she's not required
(29:08):
to pay them. And I just wouldn't want to see
you toss good money after bad it. Like, obviously it
sucks to be taken advantage of, but I think in
your frustration, like, I still want you to make as
wise of a decision as possible, not necessarily making one
on principle, because it doesn't necessarily matter if you are
moving forward on principle if there's no actual money to
(29:29):
be to be gained to be paid to you. But
I would just be reluctant to spend thousands of dollars
to go after this woman who may not even have
the money to be able to recoup or to fulfill
the promise that she made with that promisory note.
Speaker 1 (29:44):
That's right. Yeah, I think the next step after kindly
reaching out would likely to be sent a formal demand letter.
I'm sure you've already done that, but you send it
certified mail, return receipt requested. You know, state in that
letter that failure to pay could result in legal action.
But you're basically like ramping up those tactics slowly, like
gentle reminder, gradually tightening the screws right exactly, then sending
(30:06):
something more formal. You can write this yourself. You can
hire an attorney, which costs money, but it could also
be more likely to get her attention. But that might
be the inexpensive use of an attorney. I've you been
used in the past, Matt attorney friends who I'm like, hey,
it says lawyer after your name, right, Like will you
write this letter for me? Or can I write it?
Speaker 2 (30:24):
And can you put it on your are now my lawyer? Right?
Speaker 1 (30:27):
Yeah, something like that. I mean, I don't know how
kosher that is, but how good do.
Speaker 2 (30:31):
They feel about vu? That's a good question. But well,
so after that though, Ryl and I think we're kind
of catching up to where you are now suing her
right suing her in small claims court taking it up
another notch, and you can do that without hiring a
lawyer as well, depending on how into the weeds that
you've gotten. But with that promisory note in hand, you
should be able to argue your point well without legal
(30:55):
representation because it's all spelled out as to what it
is that she was supposed to do and the fact
that she hasn't. Just to note though, that you might
win the case and still have trouble collecting.
Speaker 1 (31:06):
So that's the hard.
Speaker 2 (31:07):
Part, is actually collecting, collecting the money after the judgment.
So like, so she's already got a lien on the house, right,
and so again this is sort of the crux of
Cheryl's question, and she's asking what else can she do?
Even a lien on the house, there are so many
hurdles before you can get money from the sale of
(31:28):
that house. And so you're thinking, well, you wouldn't get paid,
first of all, unless she refinanced or if the house sold.
But you might be saying, well, no, you can't you
force the sale of our property, like you know, we're
talking about an auction here, and yes that's true, but
also in the state of Nebraska, there is one hundred
and twenty thousand dollars of equity that's protected from payments
(31:51):
like this. Wow. In addition to that, though she's last
on the list as far as people who are getting paid,
were they to force the sale of that home, meaning.
Speaker 1 (32:00):
Even after the current homeowner's own equity like takes a
primary seat in order.
Speaker 2 (32:05):
Yeah, and then and then you've got to pay the
first leanholder, which is the mortgage company. So there's just
a whole lot of hurdles before even having being able
to do something with that lean where that will get
you paid. In addition to that, though you've got there's
like evidently two and this is the fun part. Well,
this is why I think this is fun because it
gets to do some research and learn things that we've
(32:26):
not learned that we've not interacted with before, which is
garnishing wages. But that's really hard to do a because
you need to know the exact employer that she has
their address for them to be able to be served
to where they're siphoning off a portion of her paycheck.
But even then it takes a long time because only
twenty five percent of her paycheck can go towards this
payment of what she owes you, So it can take
(32:47):
a really long time. And that's assuming she's gainfully employed.
If she's self employed, guess what, that's not a wage
you can garnish. Yeah, And then the other option, the
third option is a bank levy, but similar you have
to know the exact bank that she's with, and I
think it really helps to know the like the exact
bank account. And even once you have that information, if
(33:08):
there's no money in the account, well there's nothing. You
can't take any funds out, like you can't squeeze make
a what's the term, You can't squeez blood out out
of a stone, out of a rock or whatever. And
so at the end of the day, like, that's where
that promisory note it does. I don't know if it's
going to come to bear much fruit, because yes, you
can say that this person owes you, but if they
literally don't have any money, there's not Unfortunately, there's not
(33:30):
a whole lot of additional options.
Speaker 1 (33:32):
Sounds promising up front with the offer. It's like, hey,
we're gonna make minus ten k. It literally sounds promising, right,
and then ultimately when it comes down to it, holding
the promissory note can feel like holding a pile of ashes,
Like it's just there's not much to it, especially if
the person is keen on avoiding pain. And so I
hate that for you, Cheryl, so so sorry. Like sucks,
(33:54):
it really sucks. Terrible position to be in. And this
is I think this should be a warning to other
people out there right that the the buyer might even
have the best of intentions when signing the promisory note,
but has either been unable or unwilling to pay. And yeah,
you have a little bit of recourse here, but there's
still a chance you don't fully collect her that it
takes a lot of time and patience to get that money. Yeah,
and that's where I think the like kind of what
(34:15):
I was talking about at the beginning, that sort of
human approach, the kind human approach, is potentially the best
way to collect your money. Gosh, it's so frustrating to
be in the right and then also to not be
able to get paid what's you're owed. I realized that
that's a really tough position to be in. But to
(34:37):
be honest, you all have to be pragmatic here, and
we just don't want you to spend lots of money
on legal fees where you're like, yeah, they're gonna be
out not only the ten grand, but more money on
top of it.
Speaker 2 (34:45):
Yeah, because if they don't have this person, if she
doesn't have the money to be able to pay you
the ten thousand dollars that she owes you, she definitely
doesn't have the money to be able to cover attorney's fees.
It honestly puts promisory notes in a new light for me,
Like they are kind of sketchy, like they kind of everything,
but there's no power that they actually have and you
being able to get your money or they're just so impotent,
(35:07):
right that, Yeah, they're kind of worthless. Yeah, Like it
kind of outlines everything. But like that's okay, great, now
we know what the problem is. But you know, it's
sort of like getting a diagnosis. But then you're kind
of like, well, I don't have the money to fix
my car. It's great to know that whatever, I don't know,
timing bell's not timing like it used to. That's what
a timing bell does, right, something like that. I guess
(35:28):
that's the first step, But it doesn't mean that you
automatically get your funds.
Speaker 1 (35:32):
Yeah, wish you the best of luck, though, Cheryl Matt,
We've got more to get to, including a listener who
wants to help other people out with their money questions.
We'll get to that and more right after this. Right body,
we are back from the break.
Speaker 2 (35:52):
It's now time for the Facebook question of the week.
You mentioned the personal finance good Samaritan, and that's this
listener right here, Victoria. She wrote, I'm interested in getting
training to be able to offer people one on one,
pro bono financial help, budget planning, saving money, debt relief,
et cetera, not investing advice. Becoming a CFP seems daunting
(36:14):
and expensive. Are there any other trainings or certifications that
can make me qualified to do this kind of volunteer work.
Speaker 1 (36:22):
I think it's so cool that Victoria wants to help
people with your money and that she just wants to
do it at no cost, Like that She's just like, Hey,
I feel like I've learned a lot and I see
that there's a need out there. How can I be
a part of helping other people succeed with their finances?
That rocks And I'm also I agree with her that
she doesn't need to become a CFP to do this,
(36:42):
I think I would be like bringing a bazooka to
a knife fight. Like, you just be overkill, especially since
you're planning on focusing on like the building blocks of
personal finance and you're not offering complex or specific investing advice.
Avoiding the long and arduous and costly CFP route makes
the most sense, and honestly so you might not need
any education. There are just a lot of great money
(37:03):
coaches out there, yeah, who are offering advice basically based
on their hard earned wisdom and the DIY knowledge they
have gained over the.
Speaker 2 (37:11):
Years, the school of hard knocks.
Speaker 1 (37:13):
Yeah, and like we've even had some of those people
on the show in the past. Like they have a
lot of wisdom to offer, and they don't have a
bunch of fancy letters after their name or even a
bunch of years in a school and a degree hanging
on the wall. It's just, Hey, I've been through the ringer,
look at my story. Here's what I've done. I want
(37:33):
to help you do the same.
Speaker 2 (37:34):
Totally, And if so, I would totally be willing to
consider Victoria coming on the show to talk about her
heart and why she wants to do this, But she's
wanting specifics here, let's talk about some of these different certifications.
The APFC is the Accredited Personal Finance Coach designation. It's
totally legit costs around fifteen hundred bucks, which is worth
(37:56):
looking into. There's another one as well, that's called the AFC,
and so that's the Accredited Financial Counselor designation. That's another
one that's worth considering. It's also at a similar price point,
not too expensive. And I think for both of those
and just other certifications as well, I would check in
and see if they require annual renewals and what those
(38:19):
costs as well. And while we're talking about costs and fees,
you know, I really would consider charging your clients like
something truly, even if it's like a massively discounted rate
in like maybe you're only charging like twenty bucks an
hour or something like that. I think this could lead
to better results because when your clients, when they've got
some skin in the game, I think it tends to
(38:39):
lead to people taking things a bit more seriously. And
then all of a sudden, you're meeting with folks who
are truly motivated to change their habits, and they're listening
to what you're saying, they're showing up for the meetings
as opposed to you sitting there on zoom waiting for
them to show up, or at the coffee shop. Maybe
you're doing it in person. So this is not just
a way to I don't know, have enough money to
be able to cover the cost of coffee while you
(39:02):
are out. But also this truly could lead to better
results down the road for the folks that you aren't
actually trying to help. That's right.
Speaker 1 (39:07):
Yeah, My wife is a therapist at a nonprofit organization
and the people it's free, no, but it's able to
be significantly discounted. Here you go, so she can see
people who can pay as little as twenty five dollars
per visit. And I think it makes sense that it's
not just like free therapy for everyone, and it's highly targeted.
(39:28):
But also the expectation is that you pay a little
something and if you miss your appointment, you are charged
the fee. And it does keep people accountable to saying like,
if you're going to do this, let's do it, like
we'll give you a steep discount. Because therapy is expensive.
We know that, but it's not totally free. And there
is something I think good about that model, So I
(39:50):
think that's I think it's a good point, Matt. And again,
you might not even need to have certification if you
want to avoid that cost and you feel like you
have enough knowledge. I would share the highlights of your
story actively if you can get that across. Maybe get
some reviews from people who have used your services, like
you can have friends and family that you offer you
a session two for free. As you're kind of building
(40:12):
a portfolio of people who have used you for financial advice,
put those front and center on a website, right, and
then that effective marketing and doing great work is going
to ensure that you're able to reach the audience you want.
And please do, please do let us know when your
business is live so we can let how to money
listeners know about this resource of coure.
Speaker 2 (40:32):
Yeah, we got to tell you and do another one.
We're here real quick. Let's do it all right. This
is from Ellen. This is actually not a question, that's
a comment, and she wrote, you are way off on
the fifty year mortgage. This would allow people who cannot
afford higher payments to qualify and to otherwise have the
benefits of home ownership. Also, they would otherwise be paying
rent a useless thing, not building towards anything, rather than
(40:54):
building towards something and again having their first step into
home ownership. As I note with you, you seem to
tweak your comments to try and keep people out of
the benefits of owning real estate. Joel, why do you
hate renters? Why do you want people to just to
stay locked up in their shabby apartments when they could
be owning a home. This feels like this is targeted
towards you.
Speaker 1 (41:14):
Maybe it is.
Speaker 2 (41:15):
And she wrote, with this type of mortgage, people would
be able to afford their homes, So she's speaking to
home affordability. Yeah, well, which I can I understand.
Speaker 1 (41:25):
Which can all admit that homes are far less affordable
than they have been in recent years, especially like look
at what's happened over the past fifteen years, homes will
become far less affordable. So the frustration that people feel
towards the housing market and towards feeling like they are,
at least for the time being left out of that
part of the American dream, I get it, And so
(41:45):
I think maybe this comment comes from some of that
frustration point. So I just want to say I hear
you make sense to me, like it's not falling on
deaf ears. And we also we always appreciate feedback. Matt,
you're wrong so much of the time, me less so,
but like you know, occasionally we're wrong, and so it's
more than occasionally. We're always willing to have our minds
changed and to be open minded about like, well did
(42:07):
we miss that or is there something about this fifty
year mortgage that actually is better than we thought it
was going to be. And I think our minds have
changed about multiple things during the course of this podcast
over the years. I'm thinking about like pre nups. I've
come around on prenups.
Speaker 5 (42:21):
Matt.
Speaker 1 (42:21):
I don't know if you have, but like that conversation
changed me.
Speaker 2 (42:24):
It feels a bit more nuanced. Yeah, but like, and
I think Ellen does make a reasonable point here too,
that this would make buying a home more affordable than
from a monthly payment perspective. That is true having a
fifty year mortgage or sus a thirty year mortgage, but
extending the timeline of your debt will always do that, right.
That's that's also what tends to people to get people
in trouble, and that's why we are against seven year
(42:45):
car loans, buy now, pay later, and fifty year mortgages,
Like I put all three of those kind of in
the same category. Yes, a fifty year mortgage would.
Speaker 1 (42:53):
Allow you to buy a home, but it would also
make it highly unlikely that you'd ever own it. It
isn't that the okay?
Speaker 2 (43:00):
So I maybe I'm changing my mind during this particular episode.
Bring it well, So you're saying, like you're putting by
not pay later, what seven year car loans fifty year mortgages.
There is a difference. I will admit that there is
a difference between by not pay later, which is typically
for consumer products, even a car loan, which is yes,
it's for an asset, but it's for a depreciating asset,
(43:21):
And there is a difference between those and your home,
which is traditionally an appreciating asset. And so I guess
I'm willing to concede slightly that a fifty year mortgage
could be something that I would be okay with seeing
someone getting into I think specifically if they are also
I guess more interested in refinancing like later down the road,
(43:44):
and potentially more aggressively paying it down right like let's say,
like if that is how you get your foot in
the door for home ownership. And that's kind of what
I'm picking up here with what she's saying that, like
they're not even able to consider getting a home, but
if the fifty year mortgage allows them to consider that,
then why not? Why is that not an option on
the table? And so much of it though. I like
what you said though, because you said that, like the
(44:06):
fifty year mortgage, like them not actually being able to
own their home, Like, like, yes, it's their host.
Speaker 1 (44:13):
You do refinance at some point, but as.
Speaker 2 (44:14):
Far as from like, what you're talking about is from
an equity standpoint, right, Let's say if you need or
let's say you want to sell your home after ten years,
what you're speaking to is the fact that you own
so little of it were you to go with this.
And this is purely fictional, the fifty year mortgage. Still
it's being floated, it's being talked about, but it's not
an actual thing yet. But let's say you were looking
(44:36):
to sell your home after ten years, well, you would
have eradicated sixteen percent of the principle on a thirty
year mortgage. On a fifty year mortgage, you would have
only eaten into four percent of the equity of that home.
So we're talking after a decade. So if we're talking
about a difference a four x when it comes to
home equity, that I also feel you you know, you
(44:56):
know when you mentioned that, the fact that oh, yeah, yeah,
you own this home, but you actually don't own much
of it because you still owe so much money on
this loan, because it's amateurized and spread out over such
a long period of time. Yeah, and even just from
a financial perspective, like depending on maintenance costs and the
rate of appreciation, transaction costs, renting could easily be a
(45:17):
better financial outcome for a whole lot of people than
quote unquote buying and getting a fifty year mortgage. It's
not that we are against home ownership, is that we're
for it, and a fifty year mortgage won't boost people's
ability really to achieve that goal. Maybe it'll get your
foot in the door, but ultimately the fifty year mortgage
is not helping people own their homes. Yes, maybe it's
helping you buy, it's just not helping you own. Yeah,
(45:39):
I think that's maybe the heart of my problem with it. Yeah,
I'm with you there, And even to my generous argument
of like the fifty year mortgage allowing you to get
your foot in the door, when you break down the
actual payments, the monthly payments aren't that much more affordable
or not than a thirty year and so that's the
strike against it being a quote unquote affordability tool for
faces who are trying to get their first time If
(46:00):
it was a three thousand dollars a month mortgage on
a thirty year, I want to say, on a fifty year,
it'd be like twenty seven to fifty or.
Speaker 1 (46:06):
Something like that. So it's like, yeah, it's saving two
hundred and fifty bucks a month, but at what cost? And
it's a significant one. And home ownership is awesome, Like
Matt and I own our own homes. We're not against it,
We're for it. Yeah, real estate has been great for
us personally, and we hope it has been for a
lot of how to money listeners, and we want more
how to money listeners, especially younger ones, to get in
on home ownership if they are so inclined, but only
(46:28):
if they want to, because yeah, it can allow you
to put down roots and it's a goal worth saving
for it if that's what you want. But a lot
of listeners also.
Speaker 2 (46:35):
Fine, Matt.
Speaker 1 (46:36):
We hear this from a a lot of how to
money listeners that renting, especially in the current environment, it
doesn't feel like throwing money away. It actually allows them
to have a much higher savings rate to reach other
financial goals they have. We've even had listeners to reach
out and be like, I sold my home because it
wasn't for me, and I'm saving so much money.
Speaker 2 (46:52):
Money year number seven. Yeah, I'm doing everything that I
want to do in life.
Speaker 1 (46:55):
Renting is not throwing away money. I will preset till
I die because guess what, you get a roof over
your head and you don't have to pay for the
meat andance. You get additional flexibility as a renter. Like
it's different structure of different folks here. One is not
right and wrong. I think they are just different methods
of achieving like secure housing in your life, and pick
which one makes the most sense for you.
Speaker 2 (47:15):
That's right, Joel, Did you swim upstream with contrast the
American style wheat beer that was a collaboration between Burial
and Aligash. During this past forty five minutes, I have
been doing that at fifty minutes I think. Okay, to
be exact here, Yeah, would you think.
Speaker 1 (47:30):
You loved it?
Speaker 2 (47:31):
Did you? Yeah?
Speaker 1 (47:32):
I was surprised at how much I like this because
me too. It was like Golden was super citrusy, very
like like orange heavy vibes.
Speaker 2 (47:40):
Much better descriptive than Golden. I was about to ask you,
what does Golden taste like? No, it's a citrusy look. Yeah, yeah, citrusy.
Oh my gosh, yeah, like almost as like a cutie
right on the edge of your tongue. It had like
I thought, like a very lemony kind of citrus is
really bright on the front end for sure. Yeah.
Speaker 1 (47:55):
I And this was this is like literally two of
the craft beer heavyweights going going together to create something
really tasty, and usually wheat beers. I'm like, yeah, I
can take it or leave it. This one I will
take though.
Speaker 2 (48:08):
Yeah. Yeah, it gave way so like I thought that
after that limity, you kind of moved into that like
that weedy backbone, and then it it finished off like
down in the basement with like this kind of a
funky dankness that I'm assuming Burial brought to the party.
It's not normally something that Aligash does.
Speaker 1 (48:25):
They just like come up with a box of dank here.
Speaker 2 (48:27):
They're just like, oh, we just need two more touches
of dank please, thank you sir, May I have another?
But yeah, I thought I was really good, really enjoyed it.
I would love to see more collabs with Aligash specifically.
I feel like they are one of those old not
old timey breweries, but one of the original great breweries
who were doing very creative and amazing things that have
(48:47):
kind of fallen off my radar.
Speaker 1 (48:48):
Some of their like oak age sours are incredible, like
Alli Gash, I just don't get them often enough.
Speaker 2 (48:54):
But I'm thinking of curios that's one of them. That's
from from for Forever Again.
Speaker 1 (49:00):
There's like a peach one that they've made in the past.
I mean, they've just made some incredible like fruit it sours,
But yeah, it's been too long, so I'll have to
revisit one soon. The Belgian Sason's no doubt. All right, Maddie,
that's gonna be it for this episode. We will put
links to in the show notes to some of the
resources we mentioned today. You can that's how the money
dot Com if you're curious.
Speaker 2 (49:21):
That's right, So until next time, best friends out, best
friends out,
Welcome to how to Money.
Speaker 2 (00:01):
I'm Joel and I am Matt.
Speaker 1 (00:03):
Today we're answering your listener questions.
Speaker 2 (00:23):
Hey man, we're talking about personal finances today, like we
do every how the money. That's our job. Hey, let's
switch it up. What did you go? Do you want
to do today? Pinky take over the world. Well, we'll
talk personal finance. I was gonna ask you, did you
have a run this morning?
Speaker 1 (00:36):
Every morning? Our most morning?
Speaker 2 (00:38):
How far? How far this morning? Yeah?
Speaker 1 (00:40):
A little over eight miles?
Speaker 2 (00:41):
Oh my gosh. Yeah, like the distances you threw out there. Now,
I'm like for me to scrape out a three or
four mile run, is is quite the accomplishment. Did you
read There's an article in The Times a couple of
weeks ago about cross country and like this race that
this guy runs up in outside of New York City
all the time. I'll send it to you. It just
they talk about like the grit and the foul weather
(01:01):
that you have to endure and how you just get
tough and it make it may made me want to
make sure that my kids are running as they are
getting older, just to push them into.
Speaker 1 (01:10):
Cross country specifically too.
Speaker 2 (01:12):
Right, Like there's there's it's not flashy, it's not very sexy,
but there's just a whole lot of grit that goes
into running cross country. I ran cross country in high school,
so I think it resonated with me.
Speaker 1 (01:21):
Well, it's an interesting distance because it requires a lot
of you requires both aerobic and anaerobic, because it's like
that sweet spot distance where you really need the best
of both worlds both. But I was telling Emily on
the way out the door, I was like, I just
really don't want to go today, really, just because it's
so cold, and like it's I just you have to
bundle up and it's not fun ideal running temps like
fifty degrees. It's colder than that right now. Yeah, And
(01:42):
so uh yeah, but like once you get out there,
it's the best thing in the world. And I'm just
like so happy I didn't not go, Yeah, but I
went that you did.
Speaker 2 (01:51):
Actually go double Okay. But we do have personal finance
listener money questions to get to, like paying fees in
your target date. We'll get to that. Another listeners wanting
to make sure he picks the right healthcare plan. We're
gonna talk about fifty your mortgages, all that and more
during our episode today. Really quickly, though, I did want
to share a little PSA for everyone out there, which
(02:12):
is to consider decluttering before the holidays roll around, men
before Christmas shows or you reclutter before yes, I mean
quite literally, to make sure you have room for all
those crap that we end up buying and or receiving
around the holidays. And the reason I bring this up
is because I recently sold an old laptop on Facebook Marketplace.
And this was a laptop, dude that I thought, nobody
(02:34):
is going to want this. It's it's over a decade
old twenty thirteen MacBook Pro, and I was able to
list that thing get it sold. Somebody is now the
happy owner of.
Speaker 1 (02:45):
This old laptop. What'd you get for it?
Speaker 2 (02:47):
One hundred bucks, which well impressive considering you can get
a computer it's way better than that now for not
too much, like seven hundred dollars something like that. So yeah,
well I think that's the thing, like, in my mind,
is not worth it. But I also thought, well, somebody
else is gonna want this thing, and if the fact
is like that's what prices are right, like, that communicates
to me that this is worth it to somebody and
(03:08):
I even think I may have underpriced it because that
twenty twenty five people reached out about this thing, so
I'm thinking it's vintage. I guess, so I don't know
what it was, but I could have priced this a
bit more optimally. And but then again then you deal
with having to keep it listed for longer. And I
was just it was priced to move. Let's just sometimes
that's the best way to do it. If you want
to get rid of a bunch of stuff in short order,
(03:30):
you just want to get get it out the door.
Speaker 1 (03:31):
Don't overprice it, and then be able to hang away.
Speaker 2 (03:33):
They get accessible for somebody, they've got something affordable, you've
got a little bit of extra cash in your wallet.
And then obviously it's not sitting there on the shelf
or in the closet gathering dust at a point like
and eventually it's not going to be worth anything at
all and you just have to end up taking it
in and recycling.
Speaker 1 (03:52):
Yeah, exactly, But I think it's a good that's a
good tip, and it's one it'll help you raise a
few dollars or your Christmas spending this year, and then too, Yeah,
create that space, like you're saying so yeah, a little decluttering.
Maybe list a few things. Maybe maybe make make the
goal to find twenty things and list two a day
(04:12):
for the next ten days, something like that.
Speaker 2 (04:14):
I think fun.
Speaker 1 (04:15):
I don't know however you want to do it, but
just I like that idea.
Speaker 2 (04:17):
You remember when we did the one of the how
the Money Money challenges, Oh yeah, and the selling your stuff.
We'll throw back to that that old worksheet if you
were looking for a little bit of motivation to track
the items that you're spelling, you know. I was just
thinking thought about that we should resurrect those and put
them in the newsletter for people them. Yeah. Okay, so
or at least that one we got to find them.
Speaker 1 (04:36):
Yeah, but maybe we'll put those in an upcoming had
the Money newsletter. That's right, all right, Well let's mention
the beer we're having. This one's called Contrast. It's an
American style wheat ale and it's a collaboration between Burial
and Alligash too.
Speaker 2 (04:51):
Oh I didn't realize this was Burial because it didn't.
It kind of has the burial look, but not surprisingly
has more of an alleg ash.
Speaker 1 (04:59):
Yeah, to of the great American periks. We'll give our
thoughts on this one. Thank yeah later on and if
you have a money question, please send it our way.
We'd love to hear it. Go to Honamoney dot com
slash ask for specifics, but really just recording the voice
memo the app at your phone and emailing it over
to us. Matt, let's get to question numero uno. This
(05:19):
is a question about how much target date funds are
actually extracting from you.
Speaker 3 (05:23):
Hi, Matt and Joel, this is Steve and Nova just
south of DC. Thanks for doing your podcast. I've been
listening for about three or four years now, and I
really appreciate the approach that you guys have. I've been
growing my four to one K for a number of
years and periodically all change or tweak things here and there.
But one piece of advice that I really took from
you guys is sticking with simplicity and low cost. I
(05:46):
currently have an SMP five hundred fund, two target date funds,
and a bond fund, all of our vanguard, all of
our low expenses. But that brings me to my question.
My target date funds have an expense ratio of zero
point zero eight percent. Fine, but they're both basically funds.
Of funds, So is that expense ratio actually true? I
(06:10):
mean inside each one is maybe five other Vanguard funds.
Two of them are the same as the SNPN bond
fund that I have. So what about the expense ratios
for those funds that are inside the target date fund? Basically?
Are my expenses actually higher than the point eight percent
and they're just being hidden inside there by the other funds?
(06:32):
Or am I really just being too anal about this?
Thanks in advance, best friends out.
Speaker 2 (06:38):
Joel Steve wants to know if Vanguard is double dipping.
That's what he's trying to figure out here.
Speaker 1 (06:44):
It's a good question. I should should have asked their
chief global economics, and we had them on that too
long ago. Feet to the fire.
Speaker 2 (06:49):
Well we can answer that question, we don't have to.
How do you feel about double dipping though? From a
you're at a party, you know, holidays are maybe you're
attending a party here and there. How do you feel
about the actually double dipping?
Speaker 4 (07:03):
Oh?
Speaker 1 (07:04):
Man, I think it's probably uncouth like yours. At your
own home, you can double tip as long as like
you're not offending the people in your immediate family. But
at a at a party.
Speaker 2 (07:14):
No man, that's how you get sick, or that's how
you get.
Speaker 1 (07:17):
Everybody else sick.
Speaker 2 (07:18):
Yeah, we don't even certain things at home like Greek
yogurt and stuff. We're super anal about uh not touching
the spoon to your plate or like your bowl of yogurt,
as to not get other items from your bowl back
into the container, because that's like when it when you
introduce other bacteria back into the the host container like that. Yeah,
(07:38):
that's when it ends up going bad.
Speaker 5 (07:39):
Man.
Speaker 2 (07:40):
You know, I don't like wasting food. So yeah, we're
we're all about that.
Speaker 1 (07:43):
One of the things I caught in Steve's question, by
the way, he said he had two target date funds.
I thought that was really fascinating.
Speaker 2 (07:49):
Because maybe for him and his wife, oh maybe or
maybe yeah, that's good, but he didn't say he's got
a wife. But but if he has two for himself,
that is a really interesting choice because I'm totally fine
with people having a tart date fund and then having
exposure to another fund or two as well, because really,
really what you can do is say, hey, target date
funds aren't aren't quite they're too risk averse for me,
(08:10):
and I want more risk in my life and so
the Paul Merriman approach.
Speaker 1 (08:12):
Yeah, so the target date fund along with an S
ANDPI funder, total stock market or a small cap value
fund something like that, like, go for it. But two
target date funds is an interesting choice because typically you
choose the one based on when you're most likely to retire.
So I just would tell two target date funds might
be redundant. Yeah, I mean, especially if they're five years apart.
They're pretty dang similar, and so I want the perfect blend, right.
(08:36):
I don't understand why you do that, so I just
want to like maybe point that out on the front end.
We'll get to the heart of your question. But two
target date funds might be overkilled. Yeah, So I will say, Steve,
if I totally get why you might think that you
are paying an additional expense for target date funds, But
the truth is you're not. The stated expense ratio on
Vanguard or even Fidelity site is exactly what you are paying.
Speaker 2 (08:58):
So let's say a target date funds expense ratio is
point zero eight percent, like you mentioned there, Steve, Well,
that already reflects the fact that it owns the underlying
funds that may each have their own costs, So in
this case you are not double dipping, so no need
to worry about paying that, you know, plus the expense
of let's say the total stock market fund or a
(09:19):
bond fund that your target date fund is holding. So
you're essentially paying the total blended expense ratio. Like it's
the sticker price. Whatever it says right there on the
on the prospectus or on the page when you go
and check it out, that is what you're paying. It
may be a helpful way to think about. It makes
me think about like paying alack carte, Like if you
go to a restaurant or like a cafeteria, like you
(09:39):
can either pay alack cart or you're paying like the
buffet price. Target date funds is akin to buffet pricing.
You're a buffet guy, Matt. Yeah, you pay one price
and whatever you want on there, that's what you get.
Speaker 1 (09:51):
Or you the one who got into the fight at
that Golden Corral, that's all the headlines. Apell.
Speaker 2 (09:54):
I'm trying to think of the last time I've been
to a Golden Coral or no Orion's because they've got
the the yeast ye rolls. Oh my gosh, are they
still around. Ryan's yeah, I don't know.
Speaker 1 (10:04):
Okay, well it makes me think of a blender, right,
so you said blend it, and I think it like
when you toss like three or four different things into
a blender, like you mix them up, like you're still
you have something kind of a new product. But really
it's the element of all those underlying products.
Speaker 2 (10:18):
Okay, So the electricity that goes to power that it
doesn't matter how many things you stick in the blender,
you still are using the same amount of power to
get the initial blend.
Speaker 1 (10:27):
Yeah.
Speaker 2 (10:28):
Maybe maybe.
Speaker 1 (10:29):
So I don't know if that's a great analogy, Steve,
But Matt's right, Like the listed expensory show is the
actual that's the expenses that you're paying to own that fund.
And we should note that the cost of a target
date fund is higher than buying those funds individually, right,
But the slightly higher cost is likely worth it if
you determine that a target date fund is right for you,
(10:50):
and that that's because the fund is going to change
its exposure of the underlying funds over time as you
get closer to retirement age. That is, like the selling
point of target date funds is set it and forget
it allow someone else to do the hard work the
rebalancing for you. You're diversified without really having to think
(11:11):
about it. And so instead of rebalancing on your own,
the target date fund with a slightly higher expense ratio,
it's got to set glide path. It reduces stock exposure
over time, it increases bond exposures. You get closer to
needing to tap those funds. And you know, target date
fund expense ratios are pretty darn competitive that our favorite
low cost broke just so we say they're higher, and
(11:31):
yes they are, but really, when it comes down to it,
they're I think a bargain for a lot of mom
and pop investors who really want to put a blindfold on.
They want to invest pretty wisely, but they just don't
want to think about it.
Speaker 2 (11:45):
Yeah, they are more expensive, though, Like that's for me, honestly,
that is my biggest hang up and one of the
reasons I have a difficult time, Like if somebody came
to me and they're talking about what they're looking for
with their investments, to say, hey, even like the most
affordable target ate funds out at point zer eight percent,
you're looking at something that's two hundred and fifty percent
more expensive than Voo than an S and P five hundred, true,
(12:06):
or something that costs nothing at Fidelity if you are
going with a total stock market fund. So I still
have a really difficult time with the principle of paying
much more if you can handle the risk, right, if
you can handle the ups and downs. But oftentimes that
risk pays literal dividends because that is how you're going
to see your wealth grow the most. And that's one
of the biggest criticisms with target date funds is the
(12:28):
fact that they are so bond heavy. Even for like
a target day fund that's set for like twenty sixty five,
there are still more bonds bond exposure there then I
am personally looking to expose my portfolio to. So if
you are a bit more of a conservative investor, I
think a target date fund can make a bit more sense.
(12:48):
But even a more moderate investor I think would be
well served with either a total stock market fund. Or
if you see yourself as like no, no, no, I'm in
this for the long haul, twenty plus years, looking to
build well, looking to maybe retire, really something Okay, the
S and P five hundred, Yeah, get after it.
Speaker 1 (13:04):
I think there's a difference too, between taking a simple approach,
which is something we advocate, and taking the absolute simplest approach.
And I think the Target Date Fund the reason they
exist is because for the average person who doesn't care
about personal finance, they like do have at least a
thought in their brain about investing for their future, and
they've heard it from somewhere that they probably need to
(13:26):
be doing something, and so inside of the FOURM and
KO work, they're like, Yeah, I'm gonna put some money
in there, which fund should I pick? And it feels
to I think the average person who has very little
knowledge like an insurmountable task to pick the right fund
for their future, and the Target Date Fund is kind
of the solution to that problem for average people. But
how to money listeners, Matt, they're not average people, they
(13:48):
are they can opt for something slightly more complex. I
think most of the time the topic is just a
bit more aggressive, Yeah like them aggressive, or they can
at least think about yeah, maybe maybe having like we
talked about the very beginning, two different funds of Target
date Fund and another fund that at least ramps up
the risk appetite for the average person because that is,
(14:10):
like we said, the biggest criticism of target date funds,
they're just not risky enough for the average investor. We also,
by the way, learned last year after a Vanguard kerfuffle
that triggered a taxable event for some of its customers.
That's right that you should hold a target date fund
inside of your retirement account, never inside of your brokerage account.
So that I think should be stressed. I think there
(14:32):
was a lawsuit. I think Vanguard ended up was there
settling and maybe making it right for a lot of investors.
I need to go back and look at the details
on it.
Speaker 2 (14:39):
I mean that was more of a one time event,
like they're doing some restructuring recategorizing of what was considered
like is a business account like I forget the specifics,
but regardless that the same practice of what's going on
when they did that sort of one time newsworthy event
that is still happening periodically and regularly within target date
funds as they are rebalancing, and if.
Speaker 1 (15:02):
You don't in the scenes, you're not really aware of it.
Speaker 2 (15:04):
That's happening. Yeah, yeah, you haven't sold anything, but the
fund has, and you are required to take those as
capital gains and so if you are taxed on that,
that's why it's much more efficient to have that sitting
inside a tax exempts account like a roth IRA or tax.
Speaker 1 (15:21):
Deferred Yeah, four one K. And if you're gonna go
with a target date fund, Vanguard is one of the
best places to go because of those low expense ratios.
You said, yeah, I'm Matt. They're higher than VU, but
they're like the cheapest in the industry. And so the
actual differences in expense ratio between a Vanguard target date
fund and let's say a random one from another brokerage,
a brokerage or from let's say a bank or an
(15:42):
insurance company, it could be insane the difference in expense ratio.
And so I would just encourage anybody who's like, okay,
target date funds so one stop shop it is the
easy thing. I should jump jump on that bandwagon. Well,
getting your target date fund through Vanguard, if that's where're
on case, provided it is one thing. Getting it from
somewhere else, it could be an even more dramatically worse
(16:06):
decision because the expenses could be ten x or more
the Vanguard expensory show. And that's when you want to
tread lightly. There are some really good target date funds
and then there are some really truly awful ones that
are not good for people.
Speaker 2 (16:18):
That's right, man. We've got more to get to though.
We're going to cover the topic of promisory notes. That's
not something we've ever discussed here. We'll get to like
something madam monopoly and never was a huge monopoly fan myself,
so I can't completely verify that, but we'll get to
that question and more right after this.
Speaker 1 (16:41):
We're back. We've got a question to get to on
fifty or mortgages and just a bit. But let's get
to a question now about picking the right healthcare plan
during open enrollment.
Speaker 5 (16:50):
Hey guys, this is Greg and Tampa with a question
on your favorite topic, the HSA and high deductible plans. So,
my employer offers three deductible levels thirty five hund in
two thousand dollars each is eligible for the HSA. Basically,
each one costs different amounts per pay period, the most
expensive being the two thousand dollars plan. It's about sixty
(17:12):
dollars per pay period. Then you drop to about thirty
some dollars for the thirty five hundred and then the
six thousand dollars one is only about twenty bucks a
pay period. I have been playing around with these plans
the last several years, just like you've suggested paying out
of pocket saving my HSA. So what I'm kind of
(17:32):
thinking here is I have enough money in my HSA
to pay that six thousand dollars deductible for several years.
Once I hit that six thousand dollars deductible, I have
zero responsibility for anything else after that. The other plans,
I still would have twenty percent responsibility for any medical bill,
(17:53):
So I can pay the six thousand dollars for several
years and then own nothing. It seems like, now that
I have enough money in my NSA to cover that
for several years, it's the plan I should go with.
Just as an example, a couple of years ago, I
had a torn ligament from a run. One of my
feet doctors visits MRI. All of that I was on
(18:16):
the two thousand dollars plan, and I still didn't hit
my deductible because I went online and found the cheapest
options for everything, including the MRI. So it just seems
like the six thousand dollars one is the way to go,
especially since I have the HSA money, just pay the
lowest premium possible and be covered and kind of used
(18:37):
the health insurance for really emergencies only. Anyway, let me
know what you think. Am I being frugal? Am I
being cheap? What do you think?
Speaker 2 (18:46):
Man? Greg said he didn't even hit his two thousand
dollars deductible with an MRI on the books, plus doctors
visits Greg's in Florida. Maybe there's some really affordable healthcare
please call it back, Alley MRI and here they're really
get It always makes me think of that scene in
Minority Report where he gets his eyes swapped out there
in the bathtub and like to hill up. So gross,
(19:08):
the most disgusting quasi medical scene I think I've ever
seen in a past of sci fi.
Speaker 1 (19:13):
Yeah, movie, but that's a weird one. And that, by
the way, like this question Greg said was about HSA's
We do love hsas, but it actually sounds like what
Greg is asking about is less really HSA related, because
he said that every plan that he's being offered to
him comes with HSA access, so it's not a choice
between choosing the plan with or without an HSA eligibility
(19:35):
and also HSA adjacent. Yeah, Greg knows what he's doing
on the HSA front, so it doesn't sound like we
have a lot that we need to discuss on that front.
I think what he's really asking is whether it makes
sense to go with the healthcare plan that costs less
but has a higher deductible, which is one of the
most important questions during open enrollment. I think it's one
that people rack their brains over, largely because can't predict
(19:57):
the future perfectly and there's big money at stake.
Speaker 2 (19:59):
That's right, Yeah, So I'm going to cut to the chase, Greg,
based on what you said, I think the slam dunk
answer here is yes to go with the higher deductible plan.
It sounds like, generally speaking, you are mostly healthy and
even when something does pop up, which it sounds like
for you is rare, you don't even meet your deductible.
So since you are going to be saving money every
single paycheck on your premiums, I would go ahead and
(20:21):
take those savings to the bank. So I even did
the math here based on the numbers that you gave
as far as how much is coming out of your paycheck,
and this is assuming you get paid every other week.
Your premiums are going to be five hundred and twenty
dollars for the six thousand dollars deductible plan as opposed
to one five hundred and sixty dollars for the two
(20:42):
thousand dollars plan, which means that you're going to be
shilling out more than one thousand dollars more for the
guarantee of that lower deductible, which I don't think is
worth it given you your situation here, given your circumstances.
Speaker 1 (20:55):
Yeah, when you look at the premium discrepancy between the
cheapest and the middle plan, it's less so I guess
you could opt to spend a couple hundred more dollars
over the course of a year for a reduced deductible.
That might be the goldilocks option. But the six thousand
dollars deductible option doesn't have the twenty percent co insurance
cost to you after meeting your deductible. Yea, so it's
(21:17):
less attractive to me. Is like a sweet perk to
not have to worry about it at all. Yeah, to
know that that's literally the cap of what you would
be paying out of pocket in a given year. Also,
Greg like you're well prepared, like you've saved, You've invested
money for future health care expenses, so you can afford
to take a higher level of deductible risk. It sounds
like you're also more than willing to shop around if
you need a procedure, right, like using Healthcare blue Book
(21:40):
and sites like that. It's easier said than done, but
if you're willing to do it and go through the work,
then I think that will also help you reduce healthcare costs,
meaning the higher deductible plan makes even more sense for you.
That sort of scrappiness just makes us think the high
deductible plan is like an awesome choice.
Speaker 2 (21:59):
Yeah, and you can there's no guarantee that this is
absolutely going to be the right trunes right, Like you
can't look into the future. You don't know what your
health events are going to be in the future, but
you are making an informed decision based on your likely
healthcare needs plus the money that you have on hand.
It makes me think about like if you makes me
think about your house, like where you had the tree
branch come through your roof and I had the most
(22:22):
or I had like a one percent deductible which basically
was a lot of money.
Speaker 1 (22:26):
Meant, when the tree fell through, I was on the
hook for a large chunk of the repairs.
Speaker 2 (22:31):
Lots and lots of money. But you don't regret it
did right, Like at the time you said, I do
not regret that. I don't regret it, and you did
not change your It was still the right financial move
and it will pay off. Let's say, if I don't
have a homeowner's claim for the next eight to ten
years and just got unlucky, it'll easily it'll easily pay
having that higher deductible and lower premiums.
Speaker 1 (22:49):
But it doesn't doesn't mean it works out all the
time every year exactly.
Speaker 2 (22:53):
Yeah. It's similarly like you could drop a collision coverage
on your vehicle and then like the very next day
you could get in a wreck. And I think that
sort of the what ifs and the fear, like that's
what insurance companies they kind of pray on that. They
pray on those emotions and get you to give them
all your money, right as opposed to doing a degree
of self ensuring. And we are all for that. So,
(23:17):
like we talked about it from a financial standpoint, but
like from a principal standpoint, we advocate for personal responsibility,
right like taking your personal responsibility for your own actions.
That is personal finance. And so whether we're talking about
earning or saving, or spending or investing or in the
case of riskier behaviors that you could partake in that
(23:38):
could lead to higher expenses not only for you but
for everybody, right Like, that's the point of insurance is
is for those costs to be diffused among the public.
But it's more efficient if you, as an individual who
is the one making those decisions, if you bear the
brunt of those expenses. Right Like, you want to smoke,
go for it, but your health insurance is going to
(23:59):
be and rightly so should be a lot more expensive.
Same thing with like people who bungee jump or skydive,
like these are risk or like rock climbing or something like,
these are riskier endeavors. And there's a reason why different
types of insurance ask the kind of activities that you
participate in that you partake in. Yeah, and when we're
talking about self insuring, like there's a whole bunch of
different kinds of insurance you can avoid or that you
(24:22):
can pay less for the more money you have stacked
up in your bank account.
Speaker 5 (24:25):
There.
Speaker 1 (24:26):
It doesn't mean you like eradicate insurance from your life
like you still want probably a term life policy unless
you're completely financially independent, right, there are certain kinds of
insurance you're always going to want to have because the
risk is so high and the cost is so seemingly low,
even though it's like your homeowners insurance might it might
cost thousands of dollars a year, but the cost of
(24:47):
replacing your home if it order to burn down in
a fire could be hundreds and hundreds and hundreds of
thousands of dollars a year. And even if you would ruin,
you quote unquote have that, like yeah, you'd you'd be
going going back to square one. It makes me think
that people use. People who do not have a level
of self insurance a level of savings, they I think
are more induced to buy products, insurance products out of fear,
(25:09):
like extended warranties. This is one of those things where
you're buying an electronics item and you're asked whether or
not or by even like an airline ticket or a
concert ticket, Like there's insurance for everything now, and I
think the more tenuous your financial position the more likely
you are to be like, yeah, I guess I should
get that insurance product just in case, And then you're
(25:31):
spending more money on insurance because you didn't have the
discipline to create the savings to self insurre, especially for
some of those smaller things in life. But Greg, he
doesn't have to worry about that. He's well insured and
he cannot perform the higher deductible plan save himself some
money in the process.
Speaker 2 (25:47):
That's right, man.
Speaker 5 (25:48):
All right.
Speaker 2 (25:48):
Let's hear from another listener who has found herself in
a sticky situation. She sold her house and at the
center of this interaction is a promissory note. Let's hear
what she has for us.
Speaker 4 (26:00):
Hey, guys, it's Cheryl from Nebraska. About a year ago,
I sold the house in rural Nebraska and had one
bed on the house, and she couldn't come up with
the extra ten thousand dollars needed for the purchase of
the house. So I let her sign a promisory note
through an attorney, and she promised to.
Speaker 6 (26:24):
Pay me this year. And now she is not paying me.
I hired an attorney and they can't even seem to
get the money. They've taken her court. I do have
a leen on the house that she currently lives in.
I didn't know if there's any other thing I could
do legally. Thanks guys, man, I.
Speaker 2 (26:46):
Think, Joel, this is gonna be a fun question. You know,
why why because we know nothing about because we're not attorneys.
Speaker 1 (26:53):
That's true, and we have to say that at the beginning.
I think, especially with a question like this, Yeah, that's
probably true. I like, did sleep at a holiday and
last night, so I'm pretty sure I'm well equipped answer
this question. No, but I think you know, even though
we're not lawyers, wanted to take Cheryl's question because we
thought we could offer some helpful advice. And I just
want to start off from the outset. You might not
even want to go to the legal route. Like if
(27:16):
you met this woman at the closing table, you had
a solid interaction, I would consider sending a kind note
reminding her of her obligation to you. You might find
that using a human touch instead of sending lawyers after
her gets her engaging with you. It'll cost you a
whole lot less money too, Like Matt, as anybody knows,
like lawyers, fees can add up a lot. Makes me
think of one time I had a tenant who you know,
(27:39):
was not paying me the balance that was owed after
he moved out. He lived in the neighborhood, and so
I just like kindly went to him in person, like.
Speaker 2 (27:49):
At a public place, and did you arrive with your biggest,
most buffist friend.
Speaker 1 (27:54):
No, me solo, totally not buff totally not threatening. Not true,
It's not threatening at all. Now that I have the mustache,
maybe a little more. But and like it was, it
was a chance for me not to even shame him
or get mad or angry, but just to just to
be human, person to person, be human and say, hey, man,
like you still owe me money, how do we remedy this?
(28:16):
And he paid me. But that was one of those
things where I could have gone the legal route and
it would have cost me more than it was worth
in terms of money and in terms of hassle.
Speaker 2 (28:25):
That's true. Yeah, in Cheryl's case, it does sound like
and we're going to cover a bunch of this, I think,
because it'll be helpful for other listeners who may not
be as familiar with the situation and the steps that
you can take. But it does sound like Cheryl has
run through some of these a lot of these steps already,
but we will also get to the heart of Cheryl's
(28:46):
question later. But Jolie specifically, you mentioned fees and just
being able to avoid those, not only attorney's fees, court fees,
filing fees, all that kind of stuff adds up pretty
dang quickly. And if this individual chooses not to pay, like,
not only are you out the ten thousand dollars, but
you're also out these additional legal fees as well, assuming
that you don't win a judgment and she's not required
(29:08):
to pay them. And I just wouldn't want to see
you toss good money after bad it. Like, obviously it
sucks to be taken advantage of, but I think in
your frustration, like, I still want you to make as
wise of a decision as possible, not necessarily making one
on principle, because it doesn't necessarily matter if you are
moving forward on principle if there's no actual money to
(29:29):
be to be gained to be paid to you. But
I would just be reluctant to spend thousands of dollars
to go after this woman who may not even have
the money to be able to recoup or to fulfill
the promise that she made with that promisory note.
Speaker 1 (29:44):
That's right. Yeah, I think the next step after kindly
reaching out would likely to be sent a formal demand letter.
I'm sure you've already done that, but you send it
certified mail, return receipt requested. You know, state in that
letter that failure to pay could result in legal action.
But you're basically like ramping up those tactics slowly, like
gentle reminder, gradually tightening the screws right exactly, then sending
(30:06):
something more formal. You can write this yourself. You can
hire an attorney, which costs money, but it could also
be more likely to get her attention. But that might
be the inexpensive use of an attorney. I've you been
used in the past, Matt attorney friends who I'm like, hey,
it says lawyer after your name, right, Like will you
write this letter for me? Or can I write it?
Speaker 2 (30:24):
And can you put it on your are now my lawyer? Right?
Speaker 1 (30:27):
Yeah, something like that. I mean, I don't know how
kosher that is, but how good do.
Speaker 2 (30:31):
They feel about vu? That's a good question. But well,
so after that though, Ryl and I think we're kind
of catching up to where you are now suing her
right suing her in small claims court taking it up
another notch, and you can do that without hiring a
lawyer as well, depending on how into the weeds that
you've gotten. But with that promisory note in hand, you
should be able to argue your point well without legal
(30:55):
representation because it's all spelled out as to what it
is that she was supposed to do and the fact
that she hasn't. Just to note though, that you might
win the case and still have trouble collecting.
Speaker 1 (31:06):
So that's the hard.
Speaker 2 (31:07):
Part, is actually collecting, collecting the money after the judgment.
So like, so she's already got a lien on the house, right,
and so again this is sort of the crux of
Cheryl's question, and she's asking what else can she do?
Even a lien on the house, there are so many
hurdles before you can get money from the sale of
(31:28):
that house. And so you're thinking, well, you wouldn't get paid,
first of all, unless she refinanced or if the house sold.
But you might be saying, well, no, you can't you
force the sale of our property, like you know, we're
talking about an auction here, and yes that's true, but
also in the state of Nebraska, there is one hundred
and twenty thousand dollars of equity that's protected from payments
(31:51):
like this. Wow. In addition to that, though she's last
on the list as far as people who are getting paid,
were they to force the sale of that home, meaning.
Speaker 1 (32:00):
Even after the current homeowner's own equity like takes a
primary seat in order.
Speaker 2 (32:05):
Yeah, and then and then you've got to pay the
first leanholder, which is the mortgage company. So there's just
a whole lot of hurdles before even having being able
to do something with that lean where that will get
you paid. In addition to that, though you've got there's
like evidently two and this is the fun part. Well,
this is why I think this is fun because it
gets to do some research and learn things that we've
(32:26):
not learned that we've not interacted with before, which is
garnishing wages. But that's really hard to do a because
you need to know the exact employer that she has
their address for them to be able to be served
to where they're siphoning off a portion of her paycheck.
But even then it takes a long time because only
twenty five percent of her paycheck can go towards this
payment of what she owes you, So it can take
(32:47):
a really long time. And that's assuming she's gainfully employed.
If she's self employed, guess what, that's not a wage
you can garnish. Yeah, And then the other option, the
third option is a bank levy, but similar you have
to know the exact bank that she's with, and I
think it really helps to know the like the exact
bank account. And even once you have that information, if
(33:08):
there's no money in the account, well there's nothing. You
can't take any funds out, like you can't squeeze make
a what's the term, You can't squeez blood out out
of a stone, out of a rock or whatever. And
so at the end of the day, like, that's where
that promisory note it does. I don't know if it's
going to come to bear much fruit, because yes, you
can say that this person owes you, but if they
literally don't have any money, there's not Unfortunately, there's not
(33:30):
a whole lot of additional options.
Speaker 1 (33:32):
Sounds promising up front with the offer. It's like, hey,
we're gonna make minus ten k. It literally sounds promising, right,
and then ultimately when it comes down to it, holding
the promissory note can feel like holding a pile of ashes,
Like it's just there's not much to it, especially if
the person is keen on avoiding pain. And so I
hate that for you, Cheryl, so so sorry. Like sucks,
(33:54):
it really sucks. Terrible position to be in. And this
is I think this should be a warning to other
people out there right that the the buyer might even
have the best of intentions when signing the promisory note,
but has either been unable or unwilling to pay. And yeah,
you have a little bit of recourse here, but there's
still a chance you don't fully collect her that it
takes a lot of time and patience to get that money. Yeah,
and that's where I think the like kind of what
(34:15):
I was talking about at the beginning, that sort of
human approach, the kind human approach, is potentially the best
way to collect your money. Gosh, it's so frustrating to
be in the right and then also to not be
able to get paid what's you're owed. I realized that
that's a really tough position to be in. But to
(34:37):
be honest, you all have to be pragmatic here, and
we just don't want you to spend lots of money
on legal fees where you're like, yeah, they're gonna be
out not only the ten grand, but more money on
top of it.
Speaker 2 (34:45):
Yeah, because if they don't have this person, if she
doesn't have the money to be able to pay you
the ten thousand dollars that she owes you, she definitely
doesn't have the money to be able to cover attorney's fees.
It honestly puts promisory notes in a new light for me,
Like they are kind of sketchy, like they kind of everything,
but there's no power that they actually have and you
being able to get your money or they're just so impotent,
(35:07):
right that, Yeah, they're kind of worthless. Yeah, Like it
kind of outlines everything. But like that's okay, great, now
we know what the problem is. But you know, it's
sort of like getting a diagnosis. But then you're kind
of like, well, I don't have the money to fix
my car. It's great to know that whatever, I don't know,
timing bell's not timing like it used to. That's what
a timing bell does, right, something like that. I guess
(35:28):
that's the first step, But it doesn't mean that you
automatically get your funds.
Speaker 1 (35:32):
Yeah, wish you the best of luck, though, Cheryl Matt,
We've got more to get to, including a listener who
wants to help other people out with their money questions.
We'll get to that and more right after this. Right body,
we are back from the break.
Speaker 2 (35:52):
It's now time for the Facebook question of the week.
You mentioned the personal finance good Samaritan, and that's this
listener right here, Victoria. She wrote, I'm interested in getting
training to be able to offer people one on one,
pro bono financial help, budget planning, saving money, debt relief,
et cetera, not investing advice. Becoming a CFP seems daunting
(36:14):
and expensive. Are there any other trainings or certifications that
can make me qualified to do this kind of volunteer work.
Speaker 1 (36:22):
I think it's so cool that Victoria wants to help
people with your money and that she just wants to
do it at no cost, Like that She's just like, Hey,
I feel like I've learned a lot and I see
that there's a need out there. How can I be
a part of helping other people succeed with their finances?
That rocks And I'm also I agree with her that
she doesn't need to become a CFP to do this,
(36:42):
I think I would be like bringing a bazooka to
a knife fight. Like, you just be overkill, especially since
you're planning on focusing on like the building blocks of
personal finance and you're not offering complex or specific investing advice.
Avoiding the long and arduous and costly CFP route makes
the most sense, and honestly so you might not need
any education. There are just a lot of great money
(37:03):
coaches out there, yeah, who are offering advice basically based
on their hard earned wisdom and the DIY knowledge they
have gained over the.
Speaker 2 (37:11):
Years, the school of hard knocks.
Speaker 1 (37:13):
Yeah, and like we've even had some of those people
on the show in the past. Like they have a
lot of wisdom to offer, and they don't have a
bunch of fancy letters after their name or even a
bunch of years in a school and a degree hanging
on the wall. It's just, Hey, I've been through the ringer,
look at my story. Here's what I've done. I want
(37:33):
to help you do the same.
Speaker 2 (37:34):
Totally, And if so, I would totally be willing to
consider Victoria coming on the show to talk about her
heart and why she wants to do this, But she's
wanting specifics here, let's talk about some of these different certifications.
The APFC is the Accredited Personal Finance Coach designation. It's
totally legit costs around fifteen hundred bucks, which is worth
(37:56):
looking into. There's another one as well, that's called the AFC,
and so that's the Accredited Financial Counselor designation. That's another
one that's worth considering. It's also at a similar price point,
not too expensive. And I think for both of those
and just other certifications as well, I would check in
and see if they require annual renewals and what those
(38:19):
costs as well. And while we're talking about costs and fees,
you know, I really would consider charging your clients like
something truly, even if it's like a massively discounted rate
in like maybe you're only charging like twenty bucks an
hour or something like that. I think this could lead
to better results because when your clients, when they've got
some skin in the game, I think it tends to
(38:39):
lead to people taking things a bit more seriously. And
then all of a sudden, you're meeting with folks who
are truly motivated to change their habits, and they're listening
to what you're saying, they're showing up for the meetings
as opposed to you sitting there on zoom waiting for
them to show up, or at the coffee shop. Maybe
you're doing it in person. So this is not just
a way to I don't know, have enough money to
be able to cover the cost of coffee while you
(39:02):
are out. But also this truly could lead to better
results down the road for the folks that you aren't
actually trying to help. That's right.
Speaker 1 (39:07):
Yeah, My wife is a therapist at a nonprofit organization
and the people it's free, no, but it's able to
be significantly discounted. Here you go, so she can see
people who can pay as little as twenty five dollars
per visit. And I think it makes sense that it's
not just like free therapy for everyone, and it's highly targeted.
(39:28):
But also the expectation is that you pay a little
something and if you miss your appointment, you are charged
the fee. And it does keep people accountable to saying like,
if you're going to do this, let's do it, like
we'll give you a steep discount. Because therapy is expensive.
We know that, but it's not totally free. And there
is something I think good about that model, So I
(39:50):
think that's I think it's a good point, Matt. And again,
you might not even need to have certification if you
want to avoid that cost and you feel like you
have enough knowledge. I would share the highlights of your
story actively if you can get that across. Maybe get
some reviews from people who have used your services, like
you can have friends and family that you offer you
a session two for free. As you're kind of building
(40:12):
a portfolio of people who have used you for financial advice,
put those front and center on a website, right, and
then that effective marketing and doing great work is going
to ensure that you're able to reach the audience you want.
And please do, please do let us know when your
business is live so we can let how to money
listeners know about this resource of coure.
Speaker 2 (40:32):
Yeah, we got to tell you and do another one.
We're here real quick. Let's do it all right. This
is from Ellen. This is actually not a question, that's
a comment, and she wrote, you are way off on
the fifty year mortgage. This would allow people who cannot
afford higher payments to qualify and to otherwise have the
benefits of home ownership. Also, they would otherwise be paying
rent a useless thing, not building towards anything, rather than
(40:54):
building towards something and again having their first step into
home ownership. As I note with you, you seem to
tweak your comments to try and keep people out of
the benefits of owning real estate. Joel, why do you
hate renters? Why do you want people to just to
stay locked up in their shabby apartments when they could
be owning a home. This feels like this is targeted
towards you.
Speaker 1 (41:14):
Maybe it is.
Speaker 2 (41:15):
And she wrote, with this type of mortgage, people would
be able to afford their homes, So she's speaking to
home affordability. Yeah, well, which I can I understand.
Speaker 1 (41:25):
Which can all admit that homes are far less affordable
than they have been in recent years, especially like look
at what's happened over the past fifteen years, homes will
become far less affordable. So the frustration that people feel
towards the housing market and towards feeling like they are,
at least for the time being left out of that
part of the American dream, I get it, And so
(41:45):
I think maybe this comment comes from some of that
frustration point. So I just want to say I hear
you make sense to me, like it's not falling on
deaf ears. And we also we always appreciate feedback. Matt,
you're wrong so much of the time, me less so,
but like you know, occasionally we're wrong, and so it's
more than occasionally. We're always willing to have our minds
changed and to be open minded about like, well did
(42:07):
we miss that or is there something about this fifty
year mortgage that actually is better than we thought it
was going to be. And I think our minds have
changed about multiple things during the course of this podcast
over the years. I'm thinking about like pre nups. I've
come around on prenups.
Speaker 5 (42:21):
Matt.
Speaker 1 (42:21):
I don't know if you have, but like that conversation
changed me.
Speaker 2 (42:24):
It feels a bit more nuanced. Yeah, but like, and
I think Ellen does make a reasonable point here too,
that this would make buying a home more affordable than
from a monthly payment perspective. That is true having a
fifty year mortgage or sus a thirty year mortgage, but
extending the timeline of your debt will always do that, right.
That's that's also what tends to people to get people
in trouble, and that's why we are against seven year
(42:45):
car loans, buy now, pay later, and fifty year mortgages,
Like I put all three of those kind of in
the same category. Yes, a fifty year mortgage would.
Speaker 1 (42:53):
Allow you to buy a home, but it would also
make it highly unlikely that you'd ever own it. It
isn't that the okay?
Speaker 2 (43:00):
So I maybe I'm changing my mind during this particular episode.
Bring it well, So you're saying, like you're putting by
not pay later, what seven year car loans fifty year mortgages.
There is a difference. I will admit that there is
a difference between by not pay later, which is typically
for consumer products, even a car loan, which is yes,
it's for an asset, but it's for a depreciating asset,
(43:21):
And there is a difference between those and your home,
which is traditionally an appreciating asset. And so I guess
I'm willing to concede slightly that a fifty year mortgage
could be something that I would be okay with seeing
someone getting into I think specifically if they are also
I guess more interested in refinancing like later down the road,
(43:44):
and potentially more aggressively paying it down right like let's say,
like if that is how you get your foot in
the door for home ownership. And that's kind of what
I'm picking up here with what she's saying that, like
they're not even able to consider getting a home, but
if the fifty year mortgage allows them to consider that,
then why not? Why is that not an option on
the table? And so much of it though. I like
what you said though, because you said that, like the
(44:06):
fifty year mortgage, like them not actually being able to
own their home, Like, like, yes, it's their host.
Speaker 1 (44:13):
You do refinance at some point, but as.
Speaker 2 (44:14):
Far as from like, what you're talking about is from
an equity standpoint, right, Let's say if you need or
let's say you want to sell your home after ten years,
what you're speaking to is the fact that you own
so little of it were you to go with this.
And this is purely fictional, the fifty year mortgage. Still
it's being floated, it's being talked about, but it's not
an actual thing yet. But let's say you were looking
(44:36):
to sell your home after ten years, well, you would
have eradicated sixteen percent of the principle on a thirty
year mortgage. On a fifty year mortgage, you would have
only eaten into four percent of the equity of that home.
So we're talking after a decade. So if we're talking
about a difference a four x when it comes to
home equity, that I also feel you you know, you
(44:56):
know when you mentioned that, the fact that oh, yeah, yeah,
you own this home, but you actually don't own much
of it because you still owe so much money on
this loan, because it's amateurized and spread out over such
a long period of time. Yeah, and even just from
a financial perspective, like depending on maintenance costs and the
rate of appreciation, transaction costs, renting could easily be a
(45:17):
better financial outcome for a whole lot of people than
quote unquote buying and getting a fifty year mortgage. It's
not that we are against home ownership, is that we're
for it, and a fifty year mortgage won't boost people's
ability really to achieve that goal. Maybe it'll get your
foot in the door, but ultimately the fifty year mortgage
is not helping people own their homes. Yes, maybe it's
helping you buy, it's just not helping you own. Yeah,
(45:39):
I think that's maybe the heart of my problem with it. Yeah,
I'm with you there, And even to my generous argument
of like the fifty year mortgage allowing you to get
your foot in the door, when you break down the
actual payments, the monthly payments aren't that much more affordable
or not than a thirty year and so that's the
strike against it being a quote unquote affordability tool for
faces who are trying to get their first time If
(46:00):
it was a three thousand dollars a month mortgage on
a thirty year, I want to say, on a fifty year,
it'd be like twenty seven to fifty or.
Speaker 1 (46:06):
Something like that. So it's like, yeah, it's saving two
hundred and fifty bucks a month, but at what cost? And
it's a significant one. And home ownership is awesome, Like
Matt and I own our own homes. We're not against it,
We're for it. Yeah, real estate has been great for
us personally, and we hope it has been for a
lot of how to money listeners, and we want more
how to money listeners, especially younger ones, to get in
on home ownership if they are so inclined, but only
(46:28):
if they want to, because yeah, it can allow you
to put down roots and it's a goal worth saving
for it if that's what you want. But a lot
of listeners also.
Speaker 2 (46:35):
Fine, Matt.
Speaker 1 (46:36):
We hear this from a a lot of how to
money listeners that renting, especially in the current environment, it
doesn't feel like throwing money away. It actually allows them
to have a much higher savings rate to reach other
financial goals they have. We've even had listeners to reach
out and be like, I sold my home because it
wasn't for me, and I'm saving so much money.
Speaker 2 (46:52):
Money year number seven. Yeah, I'm doing everything that I
want to do in life.
Speaker 1 (46:55):
Renting is not throwing away money. I will preset till
I die because guess what, you get a roof over
your head and you don't have to pay for the
meat andance. You get additional flexibility as a renter. Like
it's different structure of different folks here. One is not
right and wrong. I think they are just different methods
of achieving like secure housing in your life, and pick
which one makes the most sense for you.
Speaker 2 (47:15):
That's right, Joel, Did you swim upstream with contrast the
American style wheat beer that was a collaboration between Burial
and Aligash. During this past forty five minutes, I have
been doing that at fifty minutes I think. Okay, to
be exact here, Yeah, would you think.
Speaker 1 (47:30):
You loved it?
Speaker 2 (47:31):
Did you? Yeah?
Speaker 1 (47:32):
I was surprised at how much I like this because
me too. It was like Golden was super citrusy, very
like like orange heavy vibes.
Speaker 2 (47:40):
Much better descriptive than Golden. I was about to ask you,
what does Golden taste like? No, it's a citrusy look. Yeah, yeah, citrusy.
Oh my gosh, yeah, like almost as like a cutie
right on the edge of your tongue. It had like
I thought, like a very lemony kind of citrus is
really bright on the front end for sure. Yeah.
Speaker 1 (47:55):
I And this was this is like literally two of
the craft beer heavyweights going going together to create something
really tasty, and usually wheat beers. I'm like, yeah, I
can take it or leave it. This one I will
take though.
Speaker 2 (48:08):
Yeah. Yeah, it gave way so like I thought that
after that limity, you kind of moved into that like
that weedy backbone, and then it it finished off like
down in the basement with like this kind of a
funky dankness that I'm assuming Burial brought to the party.
It's not normally something that Aligash does.
Speaker 1 (48:25):
They just like come up with a box of dank here.
Speaker 2 (48:27):
They're just like, oh, we just need two more touches
of dank please, thank you sir, May I have another?
But yeah, I thought I was really good, really enjoyed it.
I would love to see more collabs with Aligash specifically.
I feel like they are one of those old not
old timey breweries, but one of the original great breweries
who were doing very creative and amazing things that have
(48:47):
kind of fallen off my radar.
Speaker 1 (48:48):
Some of their like oak age sours are incredible, like
Alli Gash, I just don't get them often enough.
Speaker 2 (48:54):
But I'm thinking of curios that's one of them. That's
from from for Forever Again.
Speaker 1 (49:00):
There's like a peach one that they've made in the past.
I mean, they've just made some incredible like fruit it sours,
But yeah, it's been too long, so I'll have to
revisit one soon. The Belgian Sason's no doubt. All right, Maddie,
that's gonna be it for this episode. We will put
links to in the show notes to some of the
resources we mentioned today. You can that's how the money
dot Com if you're curious.
Speaker 2 (49:21):
That's right, So until next time, best friends out, best
friends out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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