Episode Transcript
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(00:05):
Tonight. What is the deal?Is the stock market going to go boom
or bust this summer. There's alot of predictions out there. We're going
to sort through them. You're listeningto Simply Money, presented by all Worth
Financial Imami Wagner along with Steve Ruby. Just a few short weeks ago,
all of the headlines and the financialwebsite said sell and may and go away.
Right, there was all of theseanalysis of historically summer months being very
(00:31):
sort of low months, boring monthsin the stock market. And then it's
so funny because then it's yesterday.It's like a summer rally. Summer rally,
right. It's funny how just thependulum swings back and forth depending on
what's happening that day. And Iwant to dig into this because my concern
is always the same that investors aregoing to see these headlines and feel like
(00:51):
they need to do something in responseto them. Either put more money in
the market because someone's saying there's goingto be a summer rally, or take
it out because someone said sell andmay and go away. Yeah, you
can always find something that supports whatyou believe is going to happen, and
echo chamber. Yes, this isprecisely an example of that, because market
Watch just put out this article yesterdayabout a summertime rally feeling inevitable, and
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you're right acting on these articles thatare the noisiest. If it bleeds,
it reads, and if you makeemotional decisions based on these predict these so
called predictions, you could be ina world to hurt. Yeah. I
mean so this article on market Watchright talking about the fact that we're likely
heading for a rally in stocks thissummer and giving reasons behind that the same
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site, and to be honest,it's the first sight, it's one of
the first sights I check every day. In the same site a few weeks
ago had headlines saying sell and maygo away in all kinds of data that
backed up someone's opinion on that.And it can be incredibly frustrating for people
like us, but incredibly confusing forthose who aren't paying close attention, don't
(02:00):
have the historical background, don't knowbetter. This data that you're talking about
is actually based on a book thatwas published back in nineteen sixty seven written
by Yale Hirsch, saying that thebest it's a concept that looks at the
best best six months of every year, suggesting that historically the time from November
to April sees a stronger average returnthan the rest of the year, which
(02:23):
is where that term sell in mayand go away comes from. Obviously I
don't buy it. No, timingthe market based on somebody's book that they
wrote in nineteen sixty seven is notwhat a fiduciary financial planner would recommend for
the folks that they work with,especially when the same news organization puts out
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an article a few weeks later thatwe're going to rally all summer long,
going back to sell and may andgo away. The concept of this goes
back to I don't know, probablythe nineteen sixties nineteen seventies, when these
very well paid brokers on Wall Streetwould be there right burning the candle at
both ends all winter long. Butthen when the stifling summer months in New
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York City would come around, theywould leave for the Hamptons and spend the
entire summer in Hampton's in trading activitywould all but halt, So of course
the stock market's going to be slower. No one's trading, no one's even
there to place the trades. Thismight have very well been the scenario in
nineteen sixty seven. Today it isnot. If people go to the Hamptons.
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There are still computers that can betrading right. Things have changed.
But when this article came out afew weeks ago, there were also some
numbers behind it. And it's interestingbecause you can really make numbers do whatever
you want to do based on howyou slice and dice them. And it
was really sort of making the pointthat historically that the months in the summer
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are slower months for stocks. Iteven kind of made this suggestion you might
want to either sell or go allto bonds for the summer months and then
come back into the market get aroundHalloween. And at the time we were
like, this is insane, andI hope then that you can understand why
a few weeks later, the samenews source is saying, oh, maybe
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you should go all in on themarket. The craziness of someone making decisions
based on these headlines it terrifies me. I mean I've talked about it before.
When I joined this industry, Iwas in a four to one K
customer service role where people would callin and they would ask to either shut
contributions off or sell everything to cash, and before you're a licensed individual,
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you can't ask why or is that? Are you sure you're making the best
decision based on that information? Itwould just be Hey, it reached the
right place. I'm really happy tohelp you with that today. Yeah.
Yeah, And you know it's oneof the reasons why I do what I
do here with the Simple Money radioshows, so that you, as a
listener, can hear this and say, maybe maybe I don't need to react
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to what I'm hearing from the mediaor what I saw on Facebook or you
know, saw on the news,because this example here Mark MarketWatch is credible
enough resource and they're sharing two veryconflicting viewpoints close together. I'm talking just
weeks ago was selling May and goaway, and now it's the summer rally
and they're not even referring back tohey, a few weeks ago. No,
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they're not. You may have readthis year, here's here's why things
have changed. Nope, they justput them out there as they should equally
hold water, and I think itcan be insanely confusing for investors. You're
listening to Simply Money presented by allWorth Financial, Imami Wagner, almost Steve
ruby as we do. One ofour favorite things to do, rip into
the headlines to give you the perspectivethat you need in order to make smart
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decisions. There is another prediction,kind of the mac daddy of them all,
that we've been talking about for severalmonths. It came toward the end
of last year. There was aUS economists that predicted that we are we
waiting for the biggest stock market crashof them all, and that it's going
to come at some point in twentytwenty four. Yeah, Harry Dent is
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a guy's name, and he saidthe twenty twenty four bring the biggest crash
of our lifetime. Nikes, that'sscary. It's scary if you believe it.
It's insane for those of us whoare like, are you serious,
come on, dude. Yeah.He also says that he's praying for a
crash while everybody else doesn't want tohappen, because it's going to bring things
back to normal. Now, Idon't disagree with the fact that processions normalize
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prices of investments a little bit.That's fine. That's a natural part of
the business side, healthy, thehealthy part of the cycle. But when
you're saying things like biggest crash ofour lifetime. You're full of it.
Yeah, and he's saying it's goingto happen in this year. A little
perspective on Mondays. We have ourchief investment officer every week, Andy Stop.
This guy is incredibly bright, andhe is taking in literally like reams
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of information like a computer that iswhat Andy is processing. Has come up
with the recession index and it lookssad and number. I think there's ten
leading economic indicators, and this issaying, okay, looking out six months,
right, these would start to signalif the economy was going south,
if things were going to change drasticallylike this would start to make us think
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along those lines that recession scorecard,that that indicator had been a red for
a while over the past couple ofmonths, it backed off. Now it's
on yellow. So here you havesomeone saying expect to brace for the largest
crash of our lifetime. And thenwe look at this data and we say,
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we don't even see it here,right, But if you're reading these
headlines and you hear this, yousee this, I can understand why you're
thinking I need to run, pullout all my money, curl up in
a feto position around it and neverinvest it again. And that's my concern.
There is zero truth in any ofthat. And I would say zero
truth in the suadline. Yeah,I agree, and look at the flip
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side of it, because there's alwaystwo sides. And in this situation,
yet another market watch article. Thisis an individual from Yar Denny Research that
looked at predictions for forecasting the DOOand the SMP five hundred. It's funny
because the headline itself says that theseindexes are both there's a fifty percent rise
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on the horizon, the Dow hittingsixty thousand, the SMP hitting eight thousand,
is what he says, but itdoesn't talk about the actual timeframe until
you dive into the article and youread it. It actually is by twenty
thirty, which sounds like a tonof gains, but really an annualized growth
of seven about seven percent just whatthat reflects. Yes, normal, So
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this headline is noisy, but notnecessarily wrong. If the markets continue to
grow as they have historically, likewalking up the stairs playing with the yo
yo, they're going to go upover the long term, but you're going
to have some dips along the way. It's just funny the way that that
article is written, because it's noisyuntil you click on and you read and
you're like, okay, well thatmakes sense because it didn't share the timeframe
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in the headline. This headline isjust as frustrating to me as those that
are saying sele and mango way thatare predicting a huge crash. Because we
know that there are two main emotionsthat impact investors making bad decisions, fear
and greed. And I honestly thinkthere is someone on these websites saying,
okay, how can we write ahead. Then every day that pushes onto one
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of these emotions, and then thisone is leaning into greed. If you're
looking at this and you're saying,oh, okay, here are these people,
these smart people, these economists thatare writing articles on this website that
I trust, and they're making thisprediction market's up fifty percent. I should
go all in, not taking intoaccount. Okay, if I'm a smart
investor, I've figured out what myrisk tolerance is, I figured out how
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much in stocks and how much inbonds I should be. I've looked at
my time horizon and all of thosethings. I've considered in making this decision.
No, you're gonna look at thisheadline and say put me all in
one hundred percent stocks, right,even if that's not the right mix for
you. Yeah, And you couldsee fear coming from record highs as well,
because people think, you know,it can't go any higher than this,
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They can only go down at thispoint. But we just talked about
it the other day. It wassomething that Andy Stout did over the weekend.
He put together a spreadsheet and lookedat how many record highs we've had
since nineteen fifty. It's twelve hundred. Yeah, twelve hundred record highs.
And if you use that information tomake a decision to say, well,
maybe I should pull back, andthe markets at a high, it's not
going to go anywhere from here exactly. So it's important to look at at
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these headlines and realize that if itbleeds, it reads, if it's noisy,
maybe ask why what is it tryingto make you do? If you're
working with a fiduciary financial plan orpart of their job is to protect you
from making mistakes yourself and reacting tothings emotionally, whether it's fear agreed,
because when you have a financial planop that's going to write the prescription for
your money. It's going to helpyou understand the risk you need to take
(11:03):
to meet your goals and how muchrisk you can afford to take based in
your financial situation. Getting to knowsomebody that we're working with or that an
advisor is working with and doing questionnairescan shine light on risk tolerance. But
finding that sweet spot for the longterm is what you need to do,
not try to time the markets basedon noisy headlines. A headline that says
buy and hold and stay diversified isn'tgoing to get a ton of clicks.
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It's not very boring. Only thepeople who listen to the show might be
like, oh, this is goodinformation. I know this, I'm going
to click on it. Everyone elseis going to go right on buy.
And that's why you're rarely going tosee the good, solid advice and the
headlines. It might be buried atthe bottom of an article somewhere, but
it's tough to get to on alot of these sites. Here's the all
Worth Advice legendary investor Charlie Munger right. He said this, the big money
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is not in the buying or selling, but in the waiting. Such fantastic
advice for investors. Coming up next, a unique way to look at budgeting
that might be really in line withyour values. We'll explain what we're talking
about. You're listening to Simply Money, presented by all Worth Financial. Here
in fifty five KRC the talk station. You're listening to Simply Money presented by
(12:15):
all Worth Financial. I Memi Wagneralong with Steve Ruby. If you can't
listen to our show every night,you do not have to miss a thing.
We've got a daily podcast for you. Just search Simply Money. It's
right there on the iHeart app orwherever you get your podcast. Coming up
at six forty three, A popquiz, how would you do? How
much do you know about retirement?Long term investing? Saving? We'll get
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into all of that all right.One of the staples of Wall Street,
and I think when many people thinkof actual Wall Street, you think of
the closing bell, the opening bell. There's just a lot of pomp and
circumstance around that. Well, nowthere's some talk of eliminating that opening bell
altogether. Yeah, you're a fanof tradition. How does this make you
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feel? I hate it? Ihate it. I understand that over the
years, the way that we trade, the way that this works has changed.
We were just talking about that afew minutes ago, right, the
fact that stock marked stock market traderswho used to live in New York would
go away for the summer. Thingshave changed so much, And so I
understand that people are investing and theyare making trades around the clock in markets
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around the globe, and so kindof the opening bell at nine thirty and
the closing ball at four Eastern time, that can feel dated, right,
not necessary anymore. Yeah, there'sexchanges tradition, there's exchanges around the world,
Tokyo, London, big stocks tradepretty much all times throughout the day
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because seven three sixty five. Yeah, but it's but it's still I mean,
yeah, I get it. I'ma little bummed about it too,
didn't didn't Ed and Nathan ring thebell think and Nathan be at one point,
Yeah, how do we do that? I don't know if it's going
away. I think we need tomake that happen. Yeah, doing some
research on that. We need toget there and do that. But yeah,
I mean, is this going todo anything that's going to make a
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difference to investors. Absolutely not,but I do. I am a huge
fan of traditions. I think thatunite us. I think there's something that
we can all sort of rally around, and it would make me sad if
they didn't do this anymore. Onething, one thing that came from this
is potential for extending traditional trading hoursin the US anyways from eight am to
two pm and a little break rightthere from two to two thirty and then
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reopen from two thirty to eight pmEastern Standard time. That would certainly be
interesting for a lot of firms acrossthe country. Well, and you were
making an excellent point earlier about ifyou're on the West coast, right,
market's open in six thirty out there, and then they are closed by one.
You know, so you work theseEast coast hours on the West coast,
which you know can be a littlebit crazy. So that could change.
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Will it affect your four oh oneK? Will it affect how or
when you invest? Absolutely not.It won't have zero impact on your daily
life. One of the things thatI think many of us would like to
avoid. But honestly, if you'regoing to be someone who is financially free
at some point in your life someonewho is very financially responsible, who has
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the control over your money. You'regoing to have to have a budget,
and I like that we're talking aboutit from this angle today of aligning your
budget with your values, because Ithink for many people who hate the B
word, this can make a lotof sense. Yeah. So this is
the idea of how not just whatyou need to spend your money on,
but how you want to spend yourmoney and making sure that you have things
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earmarked towards those particular goals tied toyour values. How do you want to
spend your time? Is it goingon vacation, is having experiences with friends?
What does that look like for you? Okay, I'm going to confess
something right now. The first timeI ever did a budget where I realized
maybe this does not line up withwhat I wanted to be doing was my
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senior year of college. I decidedto try to figure out how much spending
on alcohol and I started to trackit and then I was like, this
is not good, this is terrible. This is not how I want to
feel. But it was eye openingto me. I was like, I
don't make a lot of money rightnow, you know, going to a
happy hour and getting drinks with friendsis great, but I can't be spending
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this much money. And so Ithink one of the things that this can
do, and hopefully that's not whereyour budget shows you, but it can
illuminate, Hey, we're spending alot of money on eating out and then
we don't have a lot of moneyleft over for vacation, and vacation and
these shared experiences for our family isreally important us. So maybe we cut
back on how much we spend oneating out. Right. So, once
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you start to get this information,knowledge is power. It can then empower
you to make some smart decisions wherethe things that are really important to you
are things that are going to naturallybe built into your budget and things that
don't mean as much that maybe you'respending a lot of money on you may
not even realize it. Absolutely that'swhere you can trim the fat. As
far as back in college goes,I worked at the only liquor store in
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town. You are the most popularguy in all of that. That was
an easy way to save money onbooze because we did wholesale for all of
the bars and towns. You didn'tpay for your drinks. It was quite
the experience and a nice money savertoo, because I didn't have to worry
about that. There you go.But you know, if you're struggling with
building a budget, it's terribly boring, but it is important. Not everybody
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needs to, but most people needto. When I say not everybody,
it's if you have a ton ofmoney to spend willy nilly. Most of
us aren't in that boat. Ifyou're finding that you're overspending in certain areas,
then yes, finding things that alignwith your values can be a motivating
factor to actually sitting down and crunchingthe numbers now to get started. I
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know my bank, for example,will do a nice little breakdown based on
categories of what I spend via mycredit card, because I put everything I
can in my credit card and Ipay it off each month for points or
advocates of credit cards, if you'reusing them right, like to practice what
I preach. So your bank isa good starting point. And then there's
there's apps out there. There's freeones that are okay. The ones,
unfortunately that are the best, topof the line are the ones you got
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to pay for. You know.Steve Spovac made this point before he retired,
and I always have appreciated how transparenthe has been. On the show,
he talked about the fact that,you know, just raising kids was
incredibly expensive, and you know,he and his wife could hardly afford the
first house that they bought, youknow, and so it wasn't until his
kids got out of college that theyreally got serious about saving and investing and
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planning for retirement. As a resultof that, once a month he would
sit down with a yellow legal padand pencil in track everything and they would
figure out, Okay, this iswhere we need to cut a little bit.
This is we can put a littlemore into this account to save,
to put it into catchup contributions.If you're someone and I think there's many
of you out there, because that'swhat the research shows that is concerned about
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being behind for retirement, the budgetis a necessity. I don't think you
have to live and die by itevery day of the week and have an
Excel spreadsheet. But I think oncea year, taking a deep dive into
where you're spending your money, makingsure that you're automatically auto putting money into
these accounts to save and invest inyour four one K, then you have
enough leftover to pay the bills andthen if you can have fun, eat
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out, travel great. But Ithink getting those priorities stacked up is incredibly
important. You don't need to waituntil you're retiring to meet with a fiduciary
financial planner, because if you sitdown and build a financial plan ten years
out from retirement, it could beilluminating on shortfalls. And when you have
that time on your side to makeup the difference, yeah, it can
be easier to close gaps. Sojust get a much shorter runway when you
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get closer to retirement to make changes. That can be a motivating factor for
the dreaded B word, which is, you know, building that budget.
Here's the all Worth advice. Abudget is more than just dollars and cents.
Try and make yours a reflection ofyour values and tweak it when it
doesn't align with them. Coming upnext, would you be willing to take
on debt to go on that incrediblevacation to get those Bengals season tickets?
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We're going to delve into that majorconundrum. Next. You're listening to Simply
Money and Amy all Worth Financial hereon fifty five KRC. The talk station
you're listening to Simply Money, presentedby all Worth Financial Amimi Wagner along with
Steve Ruby. How responsible are youwith your credit cards? We talk a
lot on the show about they're atool. You can control them or they
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can control you. We've got newnumbers in tonight that are enlightening about how
Americans are dealing with and handling theircredit cards. And joining us to explain
what those numbers look like and whatwe need to know about them is our
credit expert read Scarce Fritz. Thesenumbers are not good ones. No.
(20:40):
Credit card debt is up thirty twopercent according to this latest survey by the
FED. And you know, wehave people carrying more and more credit card
debt for longer. A lot offun stats that we can get into here.
I'm not sure I would call thatfun. See seeing this report and
realizing that that there are so manypeople carrying credit card balances of some don't
(21:07):
know or don't recall something, someeven for more than five years. Seventeen
percent of respondents to the survey saidthat they carried credit card that for more
than five years. That's right,And you know, and what ends up
happening and what people don't realize isthat you know these you know, the
Fed's been raising interest rates over thepast several years. So every time the
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FED raises the Fed funds rate,it you know it eventually it kind of
filters through to the prime rate,which is what these credit cards are based
on. So the average credit cardinterest rate is just under twenty one percent,
and a lot of these folks,if they're making minimum payments, it's
going to take you know, Idon't know, maybe eighteen years to pay
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it off and you'll pay back likeover ninety five hundred dollars an interest.
People don't realize that's a real uh, you know, that's a lot of
money to have to you know,to be paid back that you could be
putting in an emergency fund or puttingtoward retirement savings. Well, and I
think people don't run the numbers right, They don't think it through. Maybe
they don't even want to know whatthe numbers are ultimately, like what's the
(22:11):
absolute cost of this thing that youbought four years ago that you probably don't
even have any more, that you'restill paying for. When I look at
the numbers though, from this bankrate Research brit they go from my take
on them is for money management allthe way down to just plane stupid.
I mean, in some of thisis just a stupid way of thinking about
your credit cards. And I'm goingto throw out two of these stats and
(22:33):
I want to get your take onthem. One of them is almost forty
percent of Americans say I would gointo debt to buy discretionary purchases, so
not things that I need, vacationfun stuff. Forty percent right, willing
to go into debt for that.Almost seventy percent of people who have credit
card debt are still trying to maximizetheir credit card rewards. This makes me
want to pull my hair out.Britt, what's your response to it?
(22:59):
The same response. Yeah, you'reif you're carrying balances you know to get
and you're worried about you know,mileage points or you know, little cash
back things. You have no businessworrying about the cash back card while you
have you know, you know,large amounts of month to month. You
know you're carrying balances, revolving balanceson credit cards. You need to be
(23:19):
focused on a game plan to getout of that credit card debt. And
you know that's unfortunately a lot offolks are just they don't they think,
hey, as long as I'm makingmy payments, I'm okay. That they
don't realize how much it's actually costing, if it's a huge drain on their
future, you know, ability tobuild wealth. Well, we're fans of
(23:42):
using credit cards the right way.What I mean is by paying it off
every month, especially if you're focusingon the different credit card rewards, because
there are plenty of them out therethat are good deals as long as you're
an individual that's not carrying a balance. It's the ones that are carrying balances
that are actually paying for the benefitsthat you receive from your credit card.
If indeed you are paying them off, that's right. And those are really
(24:06):
only things you need to be,you know, dabbling with if you have
your finances under control, if you'renot revolving balances. Otherwise, do not
go and use a credit card andunder the and kind of talk yourself into,
you know, getting into debt becauseoh, I get airline miles.
Well, you're more than paying forthose airline tickets. If you get you're
(24:30):
more than paying whatever little bit ofcash back they give you. You're paying
way more than that. At almosttwenty one percent. Speaking of which,
the same report shows that a recordhigh percentage of Americans they have more credit
card debt than savings. But we'reup to thirty six percent at this point.
I'm curious to hear your perspective onthis. For those that have more
(24:52):
debt than savings, what would yourecommend attacking the debt or building the emergency
fund or a combination of both.Well, I'm a big fan of first
building an emergency fund with at leastabout twenty five hundred dollars for the average
person that would handle most emergencies,and then from there developing a game plan
(25:14):
to eliminate the credit card debt.You know, so you're going to pay
your minimum payments on the on thebigger balances and start to really aggressively add
additional to your smaller balances. AndI know a lot of people say,
well, you should pay the higherinterest rates off first, which is called
the avalanche method. But the snowball, the debt snowball, is really something
(25:36):
I'm more of a fan of becausewe do need mental wins. You know,
if you can pay off four orfive or six small accounts and then
use those minimum payments to add toyour next smallest account. That really does
work well for people. Gret.When we were in the pandemic and people
couldn't spend money, we saw personalsaving rates store to record levels. People
(25:59):
were saving up to thirty percent oftheir take home PAIG because they just couldn't
spend it anywhere. And on topof that, you had stimulus money coming
in, so people had more moneythan ever before. We called it then
right, We said, Okay,this is not going to last. As
soon as the economy opens back up, people are going to start spending credit
card debt. People were paying offcredit card debt at record levels. We've
kind of got this swing back,and part of me is saying, okay,
(26:22):
well, I want to try tounderstand why many people are making these
decisions. We've got inflation, thingscost more. But when I look at
these numbers and I see that it'snot even necessarily needs that people are putting
on credit cards, it's that they'rewilling to say, well, I want
to go on vacation and I'll paythat off in five years. What's your
message to consumers who have that sortof line of thinking. Yeah, there
(26:47):
was a lot of pent up demandfor travel people were just so cooped up
and they were like, I'm goingto go on these trips no matter what.
And you know, I think alot of folks think that it's you
know, making minimum pays is goingto pay your cards off a lot faster
than what the reality is. AsI said before, you know, it's
going to take you almost, youknow, eighteen years to pay off some
(27:08):
of this stuff if you if youpaid the minimum payments on these and you
know, I understand that a lotof people just felt like, oh my
gosh, I've been you know,I don't know if they call this,
uh revenge travel or whatever. Yeah, well for a couple of years there.
But you know, it's it's it'sfine to have experiences, but you
(27:32):
still need to be realistic. Youdon't want to jeopardize your future, you
know, just to have a goodtime, you know. And you know,
I've seen people, you know,they go out to eat all the
time, and they put thousands ofdollars a month on their credit card just
from going out and entertainment. Andyou know, you know, understand that
you could be paying on that fornine or ten years if you're not paying
that often fool every month and that'scosting you a lot of money. Well,
(27:56):
once I call it what you want, revenge spending, revenge travel.
It's irresponsible. I mean, itis what it is. It's irresponsible.
You can you can blame it onwhatever you want, but if you're carrying
a balance on that credit card withinterest rates as high as they are now,
it just makes zero sense. Yeah. I've had people say, well,
I've worked hard and I deserve it. Well, you justification for making
(28:23):
you deserve not to be in financialruin. Yeah, and have some financial
you know, peace and and youknow, live living within your means is
one of those things that we getto do as you know, as responsible
adults and managing our finances and uh, you know, unfortunately, I know
a lot of times we want toyou know, make our families happy.
(28:44):
We want to we want to dofun things. And I know younger generations
especially really put a lot of valueon on on experiences and travel and that
sort of And the key for todo that responsibly and not rack up credit
cards at in order to get agreat advice and insights is always on credit
card debt from our credit expert BirdsScarce you're listening to simply Money presented by
(29:04):
all Worth Financial. Here on fiftyfive KRC, the talk station you're listening
to simply Money presented by all WorthFinancial. I mean you Wagner along with
Steve Ruby. If you've got afinancial question can't figure out on your own,
we can help you. There's ared button you can click on while
you're listening to the show. It'sright there on the iHeart app. Record
(29:26):
your question, give us some detailsand it'll come straight to us. We'll
help you figure it out straight ahead. How to take advantage of finally,
some auto incentives coming back to lotsof us across the country. What you
need to know. Okay, wekind of make this a game show,
but really it's a very serious segmentbecause I'm amazed time and time again how
(29:49):
many untruths are out there about retirement, about smart investing, about saving,
and so this segment we do prettyoften because we want to just shine light
on what is fact and what isfiction. So retirement factor fiction. Here
we go. First, one factorfiction. Mister Ruby, A target date
fund. Date fund makes sense formost people, but not everyone. Uh
(30:11):
fiction, it doesn't make sense formost people. I mean target date fund
is Steve Sprovac used to call ita good enough fund. It is a
form of active investment management. ButI would equate it to riding a bus
to retirement because everybody in the busgets the same treatment based on the destination.
Gives you a level of risk that'sthat's higher the younger you are and
(30:33):
gets more conservative the older that youare. If you hold one, it
should be the only investment you holdbecause it doesn't take any consideration anything else
about your other investments, your yourfinancial situation, your risk tolerance. It's
just built on time horizon, lumpingyou in with a lot of other individuals.
Now, I will say for thesum that it could work for,
(30:53):
maybe you're just getting started in yourfirst four to oh one K, and
it's it's the default option. That'swhere it's good enough because it is again
a form of management. And whenyou're so far from retirement, it's going
to be mostly stock anyways. Yeah, and when you have all the time
in the world. Right, butat some point you're going to look at
that flour one K balance and that'sgoing to be real money to you.
You're going to look at that andsay that takes me X number of months
(31:15):
or X number of years right tosave this kind of money. And at
that point you probably don't want totake a one size fits all approach to
those investments anymore. So agree withyou. Target dat fund can make sense
if you're just starting out, butyou need to make a change with it
at some point. Fact or fictionYou'll put you'll pay less in taxes once
you retire. Fiction, I mean, it really depends on your individual situation.
(31:38):
Now we talk about tax preparation versustax planning. Tax preparation that's what
you do for April fifteenth every year. Tax planning, though, is happening
year round, and I think itcomes it should be, and I think
it becomes especially critical when you getclose to and into retirement because now you've
got money, and I would hopethat you've got money in different buckets with
(32:00):
different kinds of tax treatments. Andthis is where that tax planning can really
come into a fact that can reallyhelp you. When you get into your
seventies and you start taking required minimumdistributions, Uncle Sam is making you take
that tax deferred money out that couldbump you into a higher tax bracket if
you aren't smart. And that's whereI'm saying tax planning comes in so you
(32:23):
can find a way to control thosetaxes, but it's going to require year
round planning and also a good teamaround you that can help you make those
really smart decision. It's also amyth that you're going to spend less money
when you enter in retirement, becausethere's data out there that says you're going
to spend eighty percent of what youspend pre retirement. But oftentimes folks will
enter retirement they want to get outthere and do things and see the world
(32:45):
and you know, check items offtheir bucket list, and that can be
more expensive, higher expenses depending onthe tax depending on the buckets you have
to pull from, and the taxtreatment of those buckets could kick you into
a higher tax bracket. Here's thenext one, fact or fiction. A
will and a trust same thing,same thing, definitely fiction. They are
entirely different documents. A will doesn'teven necessarily avoid probate. It helps you
(33:09):
understand. It's just a legal documentthat with instructions on how to distribute different
property. Whereas a trust is itgives you more control. It's a complex
legal contract essentially that allows you totransfer property or an account managed by another
person. So you can have atrust as a beneficiary, for example,
on accounts that you hold for more, say, and how those dollars are
(33:32):
dispersed when something happens to you.I was at the PGA Championship in Valhalla
last week, and it's so funny. A few people who listened to the
show came up to me and sowe were just talking about money on the
way down. Here do we needa will or a trust? And so
here I am at the golf course. My husband's like, here, she
goes, I'm gonna lose her fora half hour. But it's important to
understand the difference is here. Ifyou have one four oh one K and
(33:54):
you're leaving all of that money toSteve Ruby, maybe a will can make
sense. Yeah, a more complicatedsituation. In these guys at the golf
course, we're saying, okay,what's more complicated? I said, okay,
well, blended family. We havefour children. One of them's a
lot younger than the others. Wewant to make sure that there's money left
to help him get through college.So if something were to happen to both
of us, the money goes intoa trust. Everyone gets through college,
(34:16):
and then it's not given out tothe four children until after college, so
that we know that he's had thesame opportunity to go to college as everyone
else. Right, that's an exampleof when a trust can really make sense.
It's a little more complicated of asituation exactly factor fiction. There's a
difference between loneliness and solitude. Thisis an absolute fact. And why are
(34:37):
we talking about this on a moneyshow. There's all kinds of research out
there that shows that if you arelonely, it can have as much of
an impact on your health as smokinga pack of cigarettes a day, and
there is a huge financial impact tothat. So solitude you can choose,
right, you can choose, andsome people need time alone. I love
alone time. I like to beable to schedule it, but then they
(34:59):
also like to be around people,So having control over that. If you
are feeling lonely in retirement, Iwould say you have to push yourself to
take steps to get out of thatsituation. Solitude is a choice and can
be healthy. Loneliness is something youdon't want to be experiencing in retirement.
Coming up next, the return ofauto incentives. How you can take advantage
(35:21):
of them. You're listening to SimplyMoney presented by all Worth Financial here in
fifty five KRC the talk station.You're listening to Simply Money presented by all
Worth Financial. I mean Wagner alongwith Steve Ruby. I think we can
safely say maybe we've turned a cornerwhen it comes to the cost to the
price of cars. Right coming outof the pandemic, it was terrible.
(35:43):
You couldn't find a new car orused car. There was a whole chip
shortage. And now we've got thingsslowing down in the car market, and
so now you've got automakers, autodealers, you've got car dealerships incentivizing you
to try to get you back inthe door and buy cars. And I
think there's some deals out there thatcan be had. Yeah, but unfortunately
(36:04):
there's a bit of a catch,and that has to do with the interest
rates. Yeah, seven point onepercent for a car loan in the first
quarter of twenty twenty four. That'sa fifth month in a row that rates
rows to up to more than sevenpercent. And that's according to Edmunds.
The APR for used car loans elevenpoint seven percent in that same period.
(36:24):
So of course they're offering incentives toget you in the door. But this
is where you have to go inwith eyes wide open, right, do
not see what you know? Youget an email from the car dealership and
you're like, oh, this isa great deal. I'm going in.
I'm buying this car. Before yougo in, I would say, and
I'm grateful that things have changed whenit comes to buying cars. Right.
(36:45):
It used to be you didn't haveany information until you walked into the car
ownership. Now you can do allkinds of research online. But second of
all, I would say, withinterest rates as high as they are right
now, you have to do themath and figure out what is the most
that I can exct I can affordon a monthly payment, but also what's
the total out the door cost.If I'm financing this. This is going
(37:06):
to be over the court because thesedealers want to say, oh, you
want this car with all the bellsand whistles, we can get it down
to X hundred dollars a month.You can afford that. Right What you're
not figuring out is you're paying somuch and by the way, you're still
paying off that car ten years laterwhen you can hardly drive it out of
your driveway. Getting the payment aslow as possible is done by extending the
(37:28):
time frame of the loan, andthat's a huge problem. That is a
massive issue that you do not wantto fall into the ideal time frame for
a loan if you need to takeone out four years. Yeah, auto
dealers they're putting them out there bydefault at five, six years, sometimes
even seven. Right now, thatis not a good deal. The deal
(37:49):
that you want to shop for isthe price that is actually lower the actual
payment, not the payment, butthe value of the car. That's the
number that you want to get lower, and not the payment because they can
play tips, little tricks to bringthe payment down just by extending the life
of the world. Yeah, youmentioned four years. We have kind of
a simply money rule to live bywhen it comes to buying your car.
And it's funny because I think,is well, so much has changed through
(38:09):
the years, this has not.It's the twenty ten to four You got
to have twenty percent to put down. If you don't you can't afford that
car, and then ten percent ofthe total cost of owning that car,
your monthly payment, your insurance upkeep, all of that shouldn't make up more
than ten percent of your take homepay, and then you pay it off
in four years. I honestly wonderif you were sitting down across from someone
(38:31):
in a car dealership, and Ihave within the past couple of years,
they started it with what the monthlycost would be over seven years, right,
keep it to four, yes,and understand what the outdoor cost of
everything is going to be before yousign that line. Thanks for listening tonight.
Tune in tomorrow. We're talking aboutthe worst investments of all time.
(38:52):
You've been listening to Simply Money,presented by all Worth Financial here in fifty
five KRC, the talk station
Tonight. What is the deal?Is the stock market going to go boom
or bust this summer. There's alot of predictions out there. We're going
to sort through them. You're listeningto Simply Money, presented by all Worth
Financial Imami Wagner along with Steve Ruby. Just a few short weeks ago,
all of the headlines and the financialwebsite said sell and may and go away.
Right, there was all of theseanalysis of historically summer months being very
(00:31):
sort of low months, boring monthsin the stock market. And then it's
so funny because then it's yesterday.It's like a summer rally. Summer rally,
right. It's funny how just thependulum swings back and forth depending on
what's happening that day. And Iwant to dig into this because my concern
is always the same that investors aregoing to see these headlines and feel like
(00:51):
they need to do something in responseto them. Either put more money in
the market because someone's saying there's goingto be a summer rally, or take
it out because someone said sell andmay and go away. Yeah, you
can always find something that supports whatyou believe is going to happen, and
echo chamber. Yes, this isprecisely an example of that, because market
Watch just put out this article yesterdayabout a summertime rally feeling inevitable, and
(01:15):
you're right acting on these articles thatare the noisiest. If it bleeds,
it reads, and if you makeemotional decisions based on these predict these so
called predictions, you could be ina world to hurt. Yeah. I
mean so this article on market Watchright talking about the fact that we're likely
heading for a rally in stocks thissummer and giving reasons behind that the same
(01:37):
site, and to be honest,it's the first sight, it's one of
the first sights I check every day. In the same site a few weeks
ago had headlines saying sell and maygo away in all kinds of data that
backed up someone's opinion on that.And it can be incredibly frustrating for people
like us, but incredibly confusing forthose who aren't paying close attention, don't
(02:00):
have the historical background, don't knowbetter. This data that you're talking about
is actually based on a book thatwas published back in nineteen sixty seven written
by Yale Hirsch, saying that thebest it's a concept that looks at the
best best six months of every year, suggesting that historically the time from November
to April sees a stronger average returnthan the rest of the year, which
(02:23):
is where that term sell in mayand go away comes from. Obviously I
don't buy it. No, timingthe market based on somebody's book that they
wrote in nineteen sixty seven is notwhat a fiduciary financial planner would recommend for
the folks that they work with,especially when the same news organization puts out
(02:45):
an article a few weeks later thatwe're going to rally all summer long,
going back to sell and may andgo away. The concept of this goes
back to I don't know, probablythe nineteen sixties nineteen seventies, when these
very well paid brokers on Wall Streetwould be there right burning the candle at
both ends all winter long. Butthen when the stifling summer months in New
(03:07):
York City would come around, theywould leave for the Hamptons and spend the
entire summer in Hampton's in trading activitywould all but halt, So of course
the stock market's going to be slower. No one's trading, no one's even
there to place the trades. Thismight have very well been the scenario in
nineteen sixty seven. Today it isnot. If people go to the Hamptons.
(03:30):
There are still computers that can betrading right. Things have changed.
But when this article came out afew weeks ago, there were also some
numbers behind it. And it's interestingbecause you can really make numbers do whatever
you want to do based on howyou slice and dice them. And it
was really sort of making the pointthat historically that the months in the summer
(03:50):
are slower months for stocks. Iteven kind of made this suggestion you might
want to either sell or go allto bonds for the summer months and then
come back into the market get aroundHalloween. And at the time we were
like, this is insane, andI hope then that you can understand why
a few weeks later, the samenews source is saying, oh, maybe
(04:11):
you should go all in on themarket. The craziness of someone making decisions
based on these headlines it terrifies me. I mean I've talked about it before.
When I joined this industry, Iwas in a four to one K
customer service role where people would callin and they would ask to either shut
contributions off or sell everything to cash, and before you're a licensed individual,
(04:36):
you can't ask why or is that? Are you sure you're making the best
decision based on that information? Itwould just be Hey, it reached the
right place. I'm really happy tohelp you with that today. Yeah.
Yeah, And you know it's oneof the reasons why I do what I
do here with the Simple Money radioshows, so that you, as a
listener, can hear this and say, maybe maybe I don't need to react
(05:00):
to what I'm hearing from the mediaor what I saw on Facebook or you
know, saw on the news,because this example here Mark MarketWatch is credible
enough resource and they're sharing two veryconflicting viewpoints close together. I'm talking just
weeks ago was selling May and goaway, and now it's the summer rally
and they're not even referring back tohey, a few weeks ago. No,
(05:24):
they're not. You may have readthis year, here's here's why things
have changed. Nope, they justput them out there as they should equally
hold water, and I think itcan be insanely confusing for investors. You're
listening to Simply Money presented by allWorth Financial, Imami Wagner, almost Steve
ruby as we do. One ofour favorite things to do, rip into
the headlines to give you the perspectivethat you need in order to make smart
(05:46):
decisions. There is another prediction,kind of the mac daddy of them all,
that we've been talking about for severalmonths. It came toward the end
of last year. There was aUS economists that predicted that we are we
waiting for the biggest stock market crashof them all, and that it's going
to come at some point in twentytwenty four. Yeah, Harry Dent is
(06:08):
a guy's name, and he saidthe twenty twenty four bring the biggest crash
of our lifetime. Nikes, that'sscary. It's scary if you believe it.
It's insane for those of us whoare like, are you serious,
come on, dude. Yeah.He also says that he's praying for a
crash while everybody else doesn't want tohappen, because it's going to bring things
back to normal. Now, Idon't disagree with the fact that processions normalize
(06:31):
prices of investments a little bit.That's fine. That's a natural part of
the business side, healthy, thehealthy part of the cycle. But when
you're saying things like biggest crash ofour lifetime. You're full of it.
Yeah, and he's saying it's goingto happen in this year. A little
perspective on Mondays. We have ourchief investment officer every week, Andy Stop.
This guy is incredibly bright, andhe is taking in literally like reams
(06:55):
of information like a computer that iswhat Andy is processing. Has come up
with the recession index and it lookssad and number. I think there's ten
leading economic indicators, and this issaying, okay, looking out six months,
right, these would start to signalif the economy was going south,
if things were going to change drasticallylike this would start to make us think
(07:17):
along those lines that recession scorecard,that that indicator had been a red for
a while over the past couple ofmonths, it backed off. Now it's
on yellow. So here you havesomeone saying expect to brace for the largest
crash of our lifetime. And thenwe look at this data and we say,
(07:38):
we don't even see it here,right, But if you're reading these
headlines and you hear this, yousee this, I can understand why you're
thinking I need to run, pullout all my money, curl up in
a feto position around it and neverinvest it again. And that's my concern.
There is zero truth in any ofthat. And I would say zero
truth in the suadline. Yeah,I agree, and look at the flip
(08:00):
side of it, because there's alwaystwo sides. And in this situation,
yet another market watch article. Thisis an individual from Yar Denny Research that
looked at predictions for forecasting the DOOand the SMP five hundred. It's funny
because the headline itself says that theseindexes are both there's a fifty percent rise
(08:24):
on the horizon, the Dow hittingsixty thousand, the SMP hitting eight thousand,
is what he says, but itdoesn't talk about the actual timeframe until
you dive into the article and youread it. It actually is by twenty
thirty, which sounds like a tonof gains, but really an annualized growth
of seven about seven percent just whatthat reflects. Yes, normal, So
(08:46):
this headline is noisy, but notnecessarily wrong. If the markets continue to
grow as they have historically, likewalking up the stairs playing with the yo
yo, they're going to go upover the long term, but you're going
to have some dips along the way. It's just funny the way that that
article is written, because it's noisyuntil you click on and you read and
you're like, okay, well thatmakes sense because it didn't share the timeframe
(09:09):
in the headline. This headline isjust as frustrating to me as those that
are saying sele and mango way thatare predicting a huge crash. Because we
know that there are two main emotionsthat impact investors making bad decisions, fear
and greed. And I honestly thinkthere is someone on these websites saying,
okay, how can we write ahead. Then every day that pushes onto one
(09:33):
of these emotions, and then thisone is leaning into greed. If you're
looking at this and you're saying,oh, okay, here are these people,
these smart people, these economists thatare writing articles on this website that
I trust, and they're making thisprediction market's up fifty percent. I should
go all in, not taking intoaccount. Okay, if I'm a smart
investor, I've figured out what myrisk tolerance is, I figured out how
(09:56):
much in stocks and how much inbonds I should be. I've looked at
my time horizon and all of thosethings. I've considered in making this decision.
No, you're gonna look at thisheadline and say put me all in
one hundred percent stocks, right,even if that's not the right mix for
you. Yeah, And you couldsee fear coming from record highs as well,
because people think, you know,it can't go any higher than this,
(10:18):
They can only go down at thispoint. But we just talked about
it the other day. It wassomething that Andy Stout did over the weekend.
He put together a spreadsheet and lookedat how many record highs we've had
since nineteen fifty. It's twelve hundred. Yeah, twelve hundred record highs.
And if you use that information tomake a decision to say, well,
maybe I should pull back, andthe markets at a high, it's not
going to go anywhere from here exactly. So it's important to look at at
(10:41):
these headlines and realize that if itbleeds, it reads, if it's noisy,
maybe ask why what is it tryingto make you do? If you're
working with a fiduciary financial plan orpart of their job is to protect you
from making mistakes yourself and reacting tothings emotionally, whether it's fear agreed,
because when you have a financial planop that's going to write the prescription for
your money. It's going to helpyou understand the risk you need to take
(11:03):
to meet your goals and how muchrisk you can afford to take based in
your financial situation. Getting to knowsomebody that we're working with or that an
advisor is working with and doing questionnairescan shine light on risk tolerance. But
finding that sweet spot for the longterm is what you need to do,
not try to time the markets basedon noisy headlines. A headline that says
buy and hold and stay diversified isn'tgoing to get a ton of clicks.
(11:28):
It's not very boring. Only thepeople who listen to the show might be
like, oh, this is goodinformation. I know this, I'm going
to click on it. Everyone elseis going to go right on buy.
And that's why you're rarely going tosee the good, solid advice and the
headlines. It might be buried atthe bottom of an article somewhere, but
it's tough to get to on alot of these sites. Here's the all
Worth Advice legendary investor Charlie Munger right. He said this, the big money
(11:50):
is not in the buying or selling, but in the waiting. Such fantastic
advice for investors. Coming up next, a unique way to look at budgeting
that might be really in line withyour values. We'll explain what we're talking
about. You're listening to Simply Money, presented by all Worth Financial. Here
in fifty five KRC the talk station. You're listening to Simply Money presented by
(12:15):
all Worth Financial. I Memi Wagneralong with Steve Ruby. If you can't
listen to our show every night,you do not have to miss a thing.
We've got a daily podcast for you. Just search Simply Money. It's
right there on the iHeart app orwherever you get your podcast. Coming up
at six forty three, A popquiz, how would you do? How
much do you know about retirement?Long term investing? Saving? We'll get
(12:35):
into all of that all right.One of the staples of Wall Street,
and I think when many people thinkof actual Wall Street, you think of
the closing bell, the opening bell. There's just a lot of pomp and
circumstance around that. Well, nowthere's some talk of eliminating that opening bell
altogether. Yeah, you're a fanof tradition. How does this make you
(12:56):
feel? I hate it? Ihate it. I understand that over the
years, the way that we trade, the way that this works has changed.
We were just talking about that afew minutes ago, right, the
fact that stock marked stock market traderswho used to live in New York would
go away for the summer. Thingshave changed so much, And so I
understand that people are investing and theyare making trades around the clock in markets
(13:20):
around the globe, and so kindof the opening bell at nine thirty and
the closing ball at four Eastern time, that can feel dated, right,
not necessary anymore. Yeah, there'sexchanges tradition, there's exchanges around the world,
Tokyo, London, big stocks tradepretty much all times throughout the day
(13:41):
because seven three sixty five. Yeah, but it's but it's still I mean,
yeah, I get it. I'ma little bummed about it too,
didn't didn't Ed and Nathan ring thebell think and Nathan be at one point,
Yeah, how do we do that? I don't know if it's going
away. I think we need tomake that happen. Yeah, doing some
research on that. We need toget there and do that. But yeah,
I mean, is this going todo anything that's going to make a
(14:05):
difference to investors. Absolutely not,but I do. I am a huge
fan of traditions. I think thatunite us. I think there's something that
we can all sort of rally around, and it would make me sad if
they didn't do this anymore. Onething, one thing that came from this
is potential for extending traditional trading hoursin the US anyways from eight am to
two pm and a little break rightthere from two to two thirty and then
(14:26):
reopen from two thirty to eight pmEastern Standard time. That would certainly be
interesting for a lot of firms acrossthe country. Well, and you were
making an excellent point earlier about ifyou're on the West coast, right,
market's open in six thirty out there, and then they are closed by one.
You know, so you work theseEast coast hours on the West coast,
which you know can be a littlebit crazy. So that could change.
(14:48):
Will it affect your four oh oneK? Will it affect how or
when you invest? Absolutely not.It won't have zero impact on your daily
life. One of the things thatI think many of us would like to
avoid. But honestly, if you'regoing to be someone who is financially free
at some point in your life someonewho is very financially responsible, who has
(15:11):
the control over your money. You'regoing to have to have a budget,
and I like that we're talking aboutit from this angle today of aligning your
budget with your values, because Ithink for many people who hate the B
word, this can make a lotof sense. Yeah. So this is
the idea of how not just whatyou need to spend your money on,
but how you want to spend yourmoney and making sure that you have things
(15:35):
earmarked towards those particular goals tied toyour values. How do you want to
spend your time? Is it goingon vacation, is having experiences with friends?
What does that look like for you? Okay, I'm going to confess
something right now. The first timeI ever did a budget where I realized
maybe this does not line up withwhat I wanted to be doing was my
(15:56):
senior year of college. I decidedto try to figure out how much spending
on alcohol and I started to trackit and then I was like, this
is not good, this is terrible. This is not how I want to
feel. But it was eye openingto me. I was like, I
don't make a lot of money rightnow, you know, going to a
happy hour and getting drinks with friendsis great, but I can't be spending
(16:18):
this much money. And so Ithink one of the things that this can
do, and hopefully that's not whereyour budget shows you, but it can
illuminate, Hey, we're spending alot of money on eating out and then
we don't have a lot of moneyleft over for vacation, and vacation and
these shared experiences for our family isreally important us. So maybe we cut
back on how much we spend oneating out. Right. So, once
(16:41):
you start to get this information,knowledge is power. It can then empower
you to make some smart decisions wherethe things that are really important to you
are things that are going to naturallybe built into your budget and things that
don't mean as much that maybe you'respending a lot of money on you may
not even realize it. Absolutely that'swhere you can trim the fat. As
far as back in college goes,I worked at the only liquor store in
(17:03):
town. You are the most popularguy in all of that. That was
an easy way to save money onbooze because we did wholesale for all of
the bars and towns. You didn'tpay for your drinks. It was quite
the experience and a nice money savertoo, because I didn't have to worry
about that. There you go.But you know, if you're struggling with
building a budget, it's terribly boring, but it is important. Not everybody
(17:23):
needs to, but most people needto. When I say not everybody,
it's if you have a ton ofmoney to spend willy nilly. Most of
us aren't in that boat. Ifyou're finding that you're overspending in certain areas,
then yes, finding things that alignwith your values can be a motivating
factor to actually sitting down and crunchingthe numbers now to get started. I
(17:45):
know my bank, for example,will do a nice little breakdown based on
categories of what I spend via mycredit card, because I put everything I
can in my credit card and Ipay it off each month for points or
advocates of credit cards, if you'reusing them right, like to practice what
I preach. So your bank isa good starting point. And then there's
there's apps out there. There's freeones that are okay. The ones,
unfortunately that are the best, topof the line are the ones you got
(18:07):
to pay for. You know.Steve Spovac made this point before he retired,
and I always have appreciated how transparenthe has been. On the show,
he talked about the fact that,you know, just raising kids was
incredibly expensive, and you know,he and his wife could hardly afford the
first house that they bought, youknow, and so it wasn't until his
kids got out of college that theyreally got serious about saving and investing and
(18:27):
planning for retirement. As a resultof that, once a month he would
sit down with a yellow legal padand pencil in track everything and they would
figure out, Okay, this iswhere we need to cut a little bit.
This is we can put a littlemore into this account to save,
to put it into catchup contributions.If you're someone and I think there's many
of you out there, because that'swhat the research shows that is concerned about
(18:48):
being behind for retirement, the budgetis a necessity. I don't think you
have to live and die by itevery day of the week and have an
Excel spreadsheet. But I think oncea year, taking a deep dive into
where you're spending your money, makingsure that you're automatically auto putting money into
these accounts to save and invest inyour four one K, then you have
enough leftover to pay the bills andthen if you can have fun, eat
(19:11):
out, travel great. But Ithink getting those priorities stacked up is incredibly
important. You don't need to waituntil you're retiring to meet with a fiduciary
financial planner, because if you sitdown and build a financial plan ten years
out from retirement, it could beilluminating on shortfalls. And when you have
that time on your side to makeup the difference, yeah, it can
be easier to close gaps. Sojust get a much shorter runway when you
(19:33):
get closer to retirement to make changes. That can be a motivating factor for
the dreaded B word, which is, you know, building that budget.
Here's the all Worth advice. Abudget is more than just dollars and cents.
Try and make yours a reflection ofyour values and tweak it when it
doesn't align with them. Coming upnext, would you be willing to take
on debt to go on that incrediblevacation to get those Bengals season tickets?
(19:55):
We're going to delve into that majorconundrum. Next. You're listening to Simply
Money and Amy all Worth Financial hereon fifty five KRC. The talk station
you're listening to Simply Money, presentedby all Worth Financial Amimi Wagner along with
Steve Ruby. How responsible are youwith your credit cards? We talk a
lot on the show about they're atool. You can control them or they
(20:18):
can control you. We've got newnumbers in tonight that are enlightening about how
Americans are dealing with and handling theircredit cards. And joining us to explain
what those numbers look like and whatwe need to know about them is our
credit expert read Scarce Fritz. Thesenumbers are not good ones. No.
(20:40):
Credit card debt is up thirty twopercent according to this latest survey by the
FED. And you know, wehave people carrying more and more credit card
debt for longer. A lot offun stats that we can get into here.
I'm not sure I would call thatfun. See seeing this report and
realizing that that there are so manypeople carrying credit card balances of some don't
(21:07):
know or don't recall something, someeven for more than five years. Seventeen
percent of respondents to the survey saidthat they carried credit card that for more
than five years. That's right,And you know, and what ends up
happening and what people don't realize isthat you know these you know, the
Fed's been raising interest rates over thepast several years. So every time the
(21:27):
FED raises the Fed funds rate,it you know it eventually it kind of
filters through to the prime rate,which is what these credit cards are based
on. So the average credit cardinterest rate is just under twenty one percent,
and a lot of these folks,if they're making minimum payments, it's
going to take you know, Idon't know, maybe eighteen years to pay
(21:48):
it off and you'll pay back likeover ninety five hundred dollars an interest.
People don't realize that's a real uh, you know, that's a lot of
money to have to you know,to be paid back that you could be
putting in an emergency fund or puttingtoward retirement savings. Well, and I
think people don't run the numbers right, They don't think it through. Maybe
they don't even want to know whatthe numbers are ultimately, like what's the
(22:11):
absolute cost of this thing that youbought four years ago that you probably don't
even have any more, that you'restill paying for. When I look at
the numbers though, from this bankrate Research brit they go from my take
on them is for money management allthe way down to just plane stupid.
I mean, in some of thisis just a stupid way of thinking about
your credit cards. And I'm goingto throw out two of these stats and
(22:33):
I want to get your take onthem. One of them is almost forty
percent of Americans say I would gointo debt to buy discretionary purchases, so
not things that I need, vacationfun stuff. Forty percent right, willing
to go into debt for that.Almost seventy percent of people who have credit
card debt are still trying to maximizetheir credit card rewards. This makes me
want to pull my hair out.Britt, what's your response to it?
(22:59):
The same response. Yeah, you'reif you're carrying balances you know to get
and you're worried about you know,mileage points or you know, little cash
back things. You have no businessworrying about the cash back card while you
have you know, you know,large amounts of month to month. You
know you're carrying balances, revolving balanceson credit cards. You need to be
(23:19):
focused on a game plan to getout of that credit card debt. And
you know that's unfortunately a lot offolks are just they don't they think,
hey, as long as I'm makingmy payments, I'm okay. That they
don't realize how much it's actually costing, if it's a huge drain on their
future, you know, ability tobuild wealth. Well, we're fans of
(23:42):
using credit cards the right way.What I mean is by paying it off
every month, especially if you're focusingon the different credit card rewards, because
there are plenty of them out therethat are good deals as long as you're
an individual that's not carrying a balance. It's the ones that are carrying balances
that are actually paying for the benefitsthat you receive from your credit card.
If indeed you are paying them off, that's right. And those are really
(24:06):
only things you need to be,you know, dabbling with if you have
your finances under control, if you'renot revolving balances. Otherwise, do not
go and use a credit card andunder the and kind of talk yourself into,
you know, getting into debt becauseoh, I get airline miles.
Well, you're more than paying forthose airline tickets. If you get you're
(24:30):
more than paying whatever little bit ofcash back they give you. You're paying
way more than that. At almosttwenty one percent. Speaking of which,
the same report shows that a recordhigh percentage of Americans they have more credit
card debt than savings. But we'reup to thirty six percent at this point.
I'm curious to hear your perspective onthis. For those that have more
(24:52):
debt than savings, what would yourecommend attacking the debt or building the emergency
fund or a combination of both.Well, I'm a big fan of first
building an emergency fund with at leastabout twenty five hundred dollars for the average
person that would handle most emergencies,and then from there developing a game plan
(25:14):
to eliminate the credit card debt.You know, so you're going to pay
your minimum payments on the on thebigger balances and start to really aggressively add
additional to your smaller balances. AndI know a lot of people say,
well, you should pay the higherinterest rates off first, which is called
the avalanche method. But the snowball, the debt snowball, is really something
(25:36):
I'm more of a fan of becausewe do need mental wins. You know,
if you can pay off four orfive or six small accounts and then
use those minimum payments to add toyour next smallest account. That really does
work well for people. Gret.When we were in the pandemic and people
couldn't spend money, we saw personalsaving rates store to record levels. People
(25:59):
were saving up to thirty percent oftheir take home PAIG because they just couldn't
spend it anywhere. And on topof that, you had stimulus money coming
in, so people had more moneythan ever before. We called it then
right, We said, Okay,this is not going to last. As
soon as the economy opens back up, people are going to start spending credit
card debt. People were paying offcredit card debt at record levels. We've
kind of got this swing back,and part of me is saying, okay,
(26:22):
well, I want to try tounderstand why many people are making these
decisions. We've got inflation, thingscost more. But when I look at
these numbers and I see that it'snot even necessarily needs that people are putting
on credit cards, it's that they'rewilling to say, well, I want
to go on vacation and I'll paythat off in five years. What's your
message to consumers who have that sortof line of thinking. Yeah, there
(26:47):
was a lot of pent up demandfor travel people were just so cooped up
and they were like, I'm goingto go on these trips no matter what.
And you know, I think alot of folks think that it's you
know, making minimum pays is goingto pay your cards off a lot faster
than what the reality is. AsI said before, you know, it's
going to take you almost, youknow, eighteen years to pay off some
(27:08):
of this stuff if you if youpaid the minimum payments on these and you
know, I understand that a lotof people just felt like, oh my
gosh, I've been you know,I don't know if they call this,
uh revenge travel or whatever. Yeah, well for a couple of years there.
But you know, it's it's it'sfine to have experiences, but you
(27:32):
still need to be realistic. Youdon't want to jeopardize your future, you
know, just to have a goodtime, you know. And you know,
I've seen people, you know,they go out to eat all the
time, and they put thousands ofdollars a month on their credit card just
from going out and entertainment. Andyou know, you know, understand that
you could be paying on that fornine or ten years if you're not paying
that often fool every month and that'scosting you a lot of money. Well,
(27:56):
once I call it what you want, revenge spending, revenge travel.
It's irresponsible. I mean, itis what it is. It's irresponsible.
You can you can blame it onwhatever you want, but if you're carrying
a balance on that credit card withinterest rates as high as they are now,
it just makes zero sense. Yeah. I've had people say, well,
I've worked hard and I deserve it. Well, you justification for making
(28:23):
you deserve not to be in financialruin. Yeah, and have some financial
you know, peace and and youknow, live living within your means is
one of those things that we getto do as you know, as responsible
adults and managing our finances and uh, you know, unfortunately, I know
a lot of times we want toyou know, make our families happy.
(28:44):
We want to we want to dofun things. And I know younger generations
especially really put a lot of valueon on on experiences and travel and that
sort of And the key for todo that responsibly and not rack up credit
cards at in order to get agreat advice and insights is always on credit
card debt from our credit expert BirdsScarce you're listening to simply Money presented by
(29:04):
all Worth Financial. Here on fiftyfive KRC, the talk station you're listening
to simply Money presented by all WorthFinancial. I mean you Wagner along with
Steve Ruby. If you've got afinancial question can't figure out on your own,
we can help you. There's ared button you can click on while
you're listening to the show. It'sright there on the iHeart app. Record
(29:26):
your question, give us some detailsand it'll come straight to us. We'll
help you figure it out straight ahead. How to take advantage of finally,
some auto incentives coming back to lotsof us across the country. What you
need to know. Okay, wekind of make this a game show,
but really it's a very serious segmentbecause I'm amazed time and time again how
(29:49):
many untruths are out there about retirement, about smart investing, about saving,
and so this segment we do prettyoften because we want to just shine light
on what is fact and what isfiction. So retirement factor fiction. Here
we go. First, one factorfiction. Mister Ruby, A target date
fund. Date fund makes sense formost people, but not everyone. Uh
(30:11):
fiction, it doesn't make sense formost people. I mean target date fund
is Steve Sprovac used to call ita good enough fund. It is a
form of active investment management. ButI would equate it to riding a bus
to retirement because everybody in the busgets the same treatment based on the destination.
Gives you a level of risk that'sthat's higher the younger you are and
(30:33):
gets more conservative the older that youare. If you hold one, it
should be the only investment you holdbecause it doesn't take any consideration anything else
about your other investments, your yourfinancial situation, your risk tolerance. It's
just built on time horizon, lumpingyou in with a lot of other individuals.
Now, I will say for thesum that it could work for,
(30:53):
maybe you're just getting started in yourfirst four to oh one K, and
it's it's the default option. That'swhere it's good enough because it is again
a form of management. And whenyou're so far from retirement, it's going
to be mostly stock anyways. Yeah, and when you have all the time
in the world. Right, butat some point you're going to look at
that flour one K balance and that'sgoing to be real money to you.
You're going to look at that andsay that takes me X number of months
(31:15):
or X number of years right tosave this kind of money. And at
that point you probably don't want totake a one size fits all approach to
those investments anymore. So agree withyou. Target dat fund can make sense
if you're just starting out, butyou need to make a change with it
at some point. Fact or fictionYou'll put you'll pay less in taxes once
you retire. Fiction, I mean, it really depends on your individual situation.
(31:38):
Now we talk about tax preparation versustax planning. Tax preparation that's what
you do for April fifteenth every year. Tax planning, though, is happening
year round, and I think itcomes it should be, and I think
it becomes especially critical when you getclose to and into retirement because now you've
got money, and I would hopethat you've got money in different buckets with
(32:00):
different kinds of tax treatments. Andthis is where that tax planning can really
come into a fact that can reallyhelp you. When you get into your
seventies and you start taking required minimumdistributions, Uncle Sam is making you take
that tax deferred money out that couldbump you into a higher tax bracket if
you aren't smart. And that's whereI'm saying tax planning comes in so you
(32:23):
can find a way to control thosetaxes, but it's going to require year
round planning and also a good teamaround you that can help you make those
really smart decision. It's also amyth that you're going to spend less money
when you enter in retirement, becausethere's data out there that says you're going
to spend eighty percent of what youspend pre retirement. But oftentimes folks will
enter retirement they want to get outthere and do things and see the world
(32:45):
and you know, check items offtheir bucket list, and that can be
more expensive, higher expenses depending onthe tax depending on the buckets you have
to pull from, and the taxtreatment of those buckets could kick you into
a higher tax bracket. Here's thenext one, fact or fiction. A
will and a trust same thing,same thing, definitely fiction. They are
entirely different documents. A will doesn'teven necessarily avoid probate. It helps you
(33:09):
understand. It's just a legal documentthat with instructions on how to distribute different
property. Whereas a trust is itgives you more control. It's a complex
legal contract essentially that allows you totransfer property or an account managed by another
person. So you can have atrust as a beneficiary, for example,
on accounts that you hold for more, say, and how those dollars are
(33:32):
dispersed when something happens to you.I was at the PGA Championship in Valhalla
last week, and it's so funny. A few people who listened to the
show came up to me and sowe were just talking about money on the
way down. Here do we needa will or a trust? And so
here I am at the golf course. My husband's like, here, she
goes, I'm gonna lose her fora half hour. But it's important to
understand the difference is here. Ifyou have one four oh one K and
(33:54):
you're leaving all of that money toSteve Ruby, maybe a will can make
sense. Yeah, a more complicatedsituation. In these guys at the golf
course, we're saying, okay,what's more complicated? I said, okay,
well, blended family. We havefour children. One of them's a
lot younger than the others. Wewant to make sure that there's money left
to help him get through college.So if something were to happen to both
of us, the money goes intoa trust. Everyone gets through college,
(34:16):
and then it's not given out tothe four children until after college, so
that we know that he's had thesame opportunity to go to college as everyone
else. Right, that's an exampleof when a trust can really make sense.
It's a little more complicated of asituation exactly factor fiction. There's a
difference between loneliness and solitude. Thisis an absolute fact. And why are
(34:37):
we talking about this on a moneyshow. There's all kinds of research out
there that shows that if you arelonely, it can have as much of
an impact on your health as smokinga pack of cigarettes a day, and
there is a huge financial impact tothat. So solitude you can choose,
right, you can choose, andsome people need time alone. I love
alone time. I like to beable to schedule it, but then they
(34:59):
also like to be around people,So having control over that. If you
are feeling lonely in retirement, Iwould say you have to push yourself to
take steps to get out of thatsituation. Solitude is a choice and can
be healthy. Loneliness is something youdon't want to be experiencing in retirement.
Coming up next, the return ofauto incentives. How you can take advantage
(35:21):
of them. You're listening to SimplyMoney presented by all Worth Financial here in
fifty five KRC the talk station.You're listening to Simply Money presented by all
Worth Financial. I mean Wagner alongwith Steve Ruby. I think we can
safely say maybe we've turned a cornerwhen it comes to the cost to the
price of cars. Right coming outof the pandemic, it was terrible.
(35:43):
You couldn't find a new car orused car. There was a whole chip
shortage. And now we've got thingsslowing down in the car market, and
so now you've got automakers, autodealers, you've got car dealerships incentivizing you
to try to get you back inthe door and buy cars. And I
think there's some deals out there thatcan be had. Yeah, but unfortunately
(36:04):
there's a bit of a catch,and that has to do with the interest
rates. Yeah, seven point onepercent for a car loan in the first
quarter of twenty twenty four. That'sa fifth month in a row that rates
rows to up to more than sevenpercent. And that's according to Edmunds.
The APR for used car loans elevenpoint seven percent in that same period.
(36:24):
So of course they're offering incentives toget you in the door. But this
is where you have to go inwith eyes wide open, right, do
not see what you know? Youget an email from the car dealership and
you're like, oh, this isa great deal. I'm going in.
I'm buying this car. Before yougo in, I would say, and
I'm grateful that things have changed whenit comes to buying cars. Right.
(36:45):
It used to be you didn't haveany information until you walked into the car
ownership. Now you can do allkinds of research online. But second of
all, I would say, withinterest rates as high as they are right
now, you have to do themath and figure out what is the most
that I can exct I can affordon a monthly payment, but also what's
the total out the door cost.If I'm financing this. This is going
(37:06):
to be over the court because thesedealers want to say, oh, you
want this car with all the bellsand whistles, we can get it down
to X hundred dollars a month.You can afford that. Right What you're
not figuring out is you're paying somuch and by the way, you're still
paying off that car ten years laterwhen you can hardly drive it out of
your driveway. Getting the payment aslow as possible is done by extending the
(37:28):
time frame of the loan, andthat's a huge problem. That is a
massive issue that you do not wantto fall into the ideal time frame for
a loan if you need to takeone out four years. Yeah, auto
dealers they're putting them out there bydefault at five, six years, sometimes
even seven. Right now, thatis not a good deal. The deal
(37:49):
that you want to shop for isthe price that is actually lower the actual
payment, not the payment, butthe value of the car. That's the
number that you want to get lower, and not the payment because they can
play tips, little tricks to bringthe payment down just by extending the life
of the world. Yeah, youmentioned four years. We have kind of
a simply money rule to live bywhen it comes to buying your car.
And it's funny because I think,is well, so much has changed through
(38:09):
the years, this has not.It's the twenty ten to four You got
to have twenty percent to put down. If you don't you can't afford that
car, and then ten percent ofthe total cost of owning that car,
your monthly payment, your insurance upkeep, all of that shouldn't make up more
than ten percent of your take homepay, and then you pay it off
in four years. I honestly wonderif you were sitting down across from someone
(38:31):
in a car dealership, and Ihave within the past couple of years,
they started it with what the monthlycost would be over seven years, right,
keep it to four, yes,and understand what the outdoor cost of
everything is going to be before yousign that line. Thanks for listening tonight.
Tune in tomorrow. We're talking aboutthe worst investments of all time.
(38:52):
You've been listening to Simply Money,presented by all Worth Financial here in fifty
five KRC, the talk station
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