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1 - As newlyweds, how do we decide how much money we each get to spend as fun money?
2 - Should I further invest with my employer provided retirement accounts or should I open my own?
3 - What assets are vulnerable to the high costs of a long term care facility?
4 - Does it make sense to commingle my emergency fund with money I use to fund my hobby?
5 - Why is there a difference between different brokerage funds that all track that same index?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Out of Money. I'm Joel, I'm Matt. Today
we're answering your listener questions. That's right, buddy. Happy Monday
(00:26):
to everybody, Happy spring break to those who might be celebrating.
If you participate, if you celebrate the spring break, sure,
but we are people don't celebrate. So the people who don't,
they're irreligious. Heye, of course, to the vacations. A listener
is asking how much fun money should they be setting aside.
They're trying to determine, like how much seems fair between
(00:47):
him and his new wife, his new bride. Another listener
is asking about the cost of long term care and
specifically what assets might be vulnerable to that unexpectedly high
cost that folks would be realizing. And then another listener
is asking whether she should double down on her employer
provided retirement account or if she should just kind of
go out on her own, do her own thing the
(01:09):
individual retirement account. Jul, we'll get to that plus more.
You know, I said fun money too. Actually we got
another question that's fun money related. We'll get to all
that here during our episode. But first by day were
kind of money, by the way, it's the fun one. Hey,
I've got a frugler cheap for you, because I noticed
the other day I was driving along and only half
of the road was lit up. One of our headlights
(01:30):
had gone out, and you know they say typically once
one head leg is go ahead and replace both of them. Yeah,
first of all, do you do that? Do you do
you pull the one that's perfectly functional, that's working, because
you know it's going to go out very soon. I
typically do only because if I'm going to get a
nicer bowl, But I just wanted to be the same
color and shining the same distance. Like can you keep
(01:51):
up with a package or that's true, not the packaging,
but if you write it down somewhere look at your
Amazon orders, that's not my question. My question was that.
So I looked up the specific type of that I wanted,
and I saw that I could order it online. Actually
kind of splurged a little bit. Wanted to get the
nicer bowl, you know, like that kind of it's even crisper,
even brighter, it's farther exactly see further down the road,
(02:14):
extra vision. Plus Well you see what it looks like
on the packaging, and you're like, I'm sold, Well, of
course I want it to look like that. Yeah, so
I could order it online. The downside was that it
was going to take like seven or eight days. I
was really surprised to see how long it was going
to take for that thing to show up, reading it
from like Timu or or something. No, I don't know
who the provider was, but it was just going to
take a while. But then I looked up and saw
that locally, I could just hop over to the store
(02:36):
and get it at the local auto parts store, and
it was going to be like ten twenty dollars more expensive.
But I had the added benefit though, of not driving
around with one head light out. And I got to thinking,
wait a minute, am I being cheap by waiting by
in order to get the deal by driving around for
close to a week, all the while running the risk
(02:58):
of potentially getting it to it because depending depending on
what state you live in a deer you never know, yeah, yeah,
if your visibility is cut down low or somebody else
even seeing you. But I decided that it wasn't worth it,
and so I said, you know what, Normally, normally I
think I would kind of take the quote unquote cheap
route get the deal, But instead I need that with you.
I drove over to the local store, picked up the
(03:19):
headlights in person, installed them. I was good to go.
What would you have done though? In that situation, I
would either have ordered it where it was going to
come in in a day or two. But eight days
is too long, I think. Yeah, I I was completely shocked,
especially I'm so used to receiving something the next day.
There's also not a part store on every corner basically,
so it's not it's not like you have to drive
(03:41):
twenty five. Yeah, there's not some specialtything. There's like eight
within walking distance. It feels like, yeah, I mean that's
an exaggeration, but it feels like that's kind of true.
What it was that and then also thinking through if
I did the off chance get a ticket, and that
just the kind of excuse that an auto insure is
looking for to jack up your rates. Because then I
started thinking, well, even aside from the like maybe hitting
(04:03):
a deer or something like that, perpetually higher premiums down
the road, Like all these things were going through my
mind and I was It took me like ten seconds
to convince myself just to hop over to the local store.
Well a ticket, make it happen, it's gonna cost a
lot of money. But then if that ticket leads to
higher insurance costs, you're talking about like a double way
for like just one small little mistake right that you
you should have remedied earlier. So not the kind of
(04:24):
situation I wanted to divine myself in. Yeah, I'm with
you from a safety and a financial impact sort of standpoint.
And did you say we are in agreement? Did you
replace both? I did? Okay, Yeah. I mean again, like
if you're going from something that's if I was putting
in a matching bulb, then I would be okay holding off.
But if you're upgrading, you just want those things to
look the same. And typically those neural I feel like
they're they're kind of a bluer light because they're more led,
(04:46):
a little more crisp. Yeah, yeah, it's kind of I
hate it when I like, in the bathroom, if I
put in two different light bulbs and they're slightly oh
my gosh, Yeah, it's the worst. Okay, do you know
what temperature your family is? So with the bulbs off
on my head, it's either twenty seven hundred or it's
three thousand or even higher. But twenty seven is typically
the warmest. That's like the soft light traditional bowl, like
(05:07):
it's typical sixty. What are you that you're used to
different rooms? Right? You could if you want to, or
you'd go with the rock the same color throughout the
whole house in the same like light fixture. I want
all those to be consistent. But sometimes, like in my bathroom,
I'm okay with like a slightly different light than I
am going for, like a little bit crisper in the bathroom. Yeah,
just so you can see everything on your face right
(05:28):
while you're shaving. I mean, it's hideous, but it lights
it up well, so don't make it look any better. Sorry.
All right, let's mention the beer we're having today's episode.
This one's called Bossy Blonde. It's by contrast brewing or
contrast artists and nails. Excuse me, here you go. They
are Rachel Local Brewery. Ride around the corner and we'll
give our thoughts on this beer at the end of
the episode. If you have a money question, we'd love
(05:49):
to hear from you. Just got to have the money
dot com slash ask We need Matt some great listener questions.
Do so, if you have a money question. You're like, Eh,
he's kind of in the back of my head. Love
to know what Matt Joel think. Please do submit it.
Go to how to money dot com, slash ask, or
just literally record your question on the Voicemami app of
your phone, state your name at the top, and then
email it over to us howdomoneypot at gmail dot com.
(06:10):
We will of course take your question soon. Matt, let's
take a question about newlyweds and we want to learn
how to money together.
Speaker 2 (06:19):
Hey, Matt and Joel, this is Shyanne from Memphis, Tennessee.
Me and my wife got married last August and we've
done the fun task of combining finances. We're currently doing
the approach of having all money going too joint accounts
and then having a small amount that's deposited end our
individual accounts each month. I can't say for sure, but
I believe you both have been an advocate of this
(06:39):
approach in the past. The issue we're having is identifying
which type of expenses would fall into the individual spending
versus the joint spending account. How do you guys determine
this yourselves? Additionally, how do you determine how much to
put into the individual accounts. Do you do a fixed
them ount, do you do a percentage based on the
prior month savings them ount? Or is it something else?
(07:01):
Thank for the help.
Speaker 1 (07:02):
Memphis, Joel, you spent some time there? I have is that?
Did you actually get married in Memphis? We did get
married in Memphis, Yes, okay, I remember their wife is
from there or Tennessee and got married at the MEMPHISOO.
I'm sorry when I said Tennessee, I meant to say Chattanooga.
You also spend time there. We spent China Chattanooga, but
Memphis is also Tennessee. They're both, yeah, exactly, just in
like literally the opposite ends of Tennessee. But no, the
(07:23):
MEMPHISOO is plice, legit, lovely, just a wonderful place, and
I fond memories for sure. Best wedding ever. I didn't
go to yours. Well, we didn't know each other. Yeah,
I'm assuming mine was better. Well years was that you
were older in life like Kate and I got married
pretty young, And I feel like the older you get,
the more personality and the more your own you can
(07:46):
make it. I do. I don't know who you are
when you're like you were, like sixteen when you got married,
not quite that young. I mean yeah, like there's a
degree of like learning who you are, figuring yourself out,
figuring out the things that you value, and it's hard
to know all those things. I'm ever evolving, dynamic person
jol even now. I mean, yeah, you made sure your weddings.
Speaker 3 (08:06):
Well.
Speaker 1 (08:06):
I liked craft beer back then, but I also liked
dive bar beer, so like PBR, and I distinctly remember
wanting my groom's cake to be a PBR can and
I remember Emily's dad being like, no, man, come on,
that's not coolest lame. So instead I went with a
Norwegian flag because that's my heritage. And I'm actually that's fun.
I'm glad that I did that. So words of wisdom,
(08:29):
that's right, the future fell right, Yeah, if you willing
to listen to your elders. People. Speaking of elders, I'm
sure we're older than Cheyenne. Here, let's let's answer his question.
First off, congrats on getting married, and it sounds like
you guys have taken a really smart approach to combining
your finances. I mean, I prefer either everything being combined
or having one combined account and two separate accounts. But ideally,
(08:51):
I think the way you guys have have it set
up is great. Right, you get the benefits of combining everything,
and Matt, I think those benefits are many, Right. You
get the shared goals, you get the easy tracking, you
get the kind of transparency which builds trust in that relationship.
It's like, hey, I can look in and see what's
going on with the account. You can look in. We
both have essentially just as much control over this thing
as the other one. And then you also get at
(09:12):
least some autonomy because yeah, you're merging lives, you're too
becoming one flesh or whatever it is we say. But
it also doesn't mean that you aren't an individual with
your own hopes and goals and dreams too that you
share with your partner. Right, but at the very least
your own spending. Yeah, exactly, at the very least you
get to spend a little money without like kind of
no questions asked. I. Yeah, I get that. I've found
(09:35):
that for us, having a singular account that all of
the money is in that that is incredibly helpful. At least.
I think early on, when you first get married, it
seems like it's something you both want to keep up with.
But I would not be surprised, Hyenne, if it becomes
pretty quickly apparent that one of you enjoys doing this
more than the other person. And what you don't need
to do is to then be responsible for multiple logins,
(09:58):
like reconciling multiple accounts it all, and you know, just
kind of spread out all over the place, basically overcomplicating. Yeah,
it's just so much simpler to have a singular account.
And when it comes to so he's talking about having
separate accounts for their spending, I think a way around
that is just to simply have like a separate credit card.
And that's something that Kate actually actually does that she
has this separate card that I don't have, where she
(10:19):
completely manages expenses on that because if she knows she
goes out and buy something and she's thinking, there's a
good chance I'm going to return this. She doesn't want
me entering these transactions in where it's just like, oh, oh,
that sixty seven dollars hit or record it, and then
a couple weeks later she returns it and then I'm like, okay,
minus sixty seven. Now I got to go in and
do all this, she is able to mentally account for that,
and it also allows her like birthday presents, Christmas presents.
(10:44):
That's one of the reasons people talk about having their
own account as well as to well, I don't want
you to be able to see what I'm getting for
you or even where I'm getting it from when I
get you a gift, but the ability for her at
the end of the month to say, okay, and she
sends me a simple breakdown of like this number of
dollars from our giving account, this number of dollars goes
towards groceries, this amount comes out of the kids account.
(11:06):
That kind of thing. Yeah, there's a way to keep
things separate, whilst in my opinion, not necessarily having a
bunch of multiple accounts. That's a good point, I think
overdoing it with the accounts. I get why you might
want to do that, but I also just don't think
it's terribly helpful. And we've talked about this beforemat but
maybe we should highlight the reasons that combining things is good.
And especially you talked about getting married later on, and
(11:28):
I think the further along you are in your life,
let's say you get married in your forties. Right, then
you're like, I've already kind of built this financial life
on my own. I don't necessarily know that I want
to combine all the way, Like, let's put the rings
on the fingers, let's move in together. But that rental
property that I bought five years ago, that's mine, right,
And I guess I can understand the reasoning behind that.
(11:51):
But the benefits of combining accounts have been studied, and
they are significant because, according to statistics, you're going to
be happier if you do, You're going to experience greater
relationship satisfaction. Right, There's this added level of accountability that
helps to instill trust in the relationship. And then both partners,
as it turns out, are unlikely to spend in riskier ways.
And that's partly because what they buy is aside from
(12:15):
the credit card that you're talking about, the kit has
access to Matt, although she gives you at least generalities
what she's spending with that, the partner is going to
see what you're buying if you're spending directly from the
joint account. And so if you opt for those separate
accounts for fun money, yeah, you're opting for a little
more privacy, but that's not necessarily for the best for
(12:36):
your relationship, and each couple is going to have a
different stance on whether that's something they feel they need
or not. But I think the general statistics reveal an
underlying truth that the combination of finances as a couple
is going to make you stronger. Totally. Yeah, But then
how do you decide how much each of you gets
to spend? This is going to be highly dependent on
your relationship as well, and just the dynamics. And like
(12:58):
some folks out there think that the person who makes
more money or like they should be able to spend more.
Like you make more, you spend more others. I think
it's a percentage. It's like, hey, I bring home twice sixty,
then I'm gonna have ten percent more. You're gonna have
to do less. So I get the thirty two ounce beer,
you get a sixteen outpeer And maybe I don't know.
Do you ever take body weight into into account, Joe
(13:19):
when you're splitting a beer with your wife? Yeah? Oh yeah,
I actually do, yeah, because I'm like, if I give you,
I get sixty forty. That's also just because she doesn't
drink it. All the way I do. So Kate, it's
like a tiny person, So not like a literal tiny person,
but like she's just significantly smaller than I am. And
I'm like, and I think, oh, if I actually pour
you the same amount, this is gonna impact you differently,
it's gonna impact me. That being said, some folks think
(13:41):
that it should be split evenly each and every month,
but then others think that they should be able just
to spend hour they choose unless the cost of an
item is going to exceed let's say a particular threshold,
like one hundred bucks, that kind of thing. And so
these are all personal decisions. And I mean, in my opinion,
I think this is something you need to talk about
because I think every couple out there is going to
(14:02):
arrive at a different dollar amount. In our case, this
is something that we've talked about. And Kate always gets
more money than I do every single month, and that's
because of what we've included in her personal category as well,
which includes hair, like she doesn't get goes I would
get for a haircut, or it gets her hair color,
that kind of thing, make up products, things like that
you cut yours in your son's hair but not hers.
(14:22):
Huh not, I have to. We've talked about I've even
tried coloring. I've even tried the bolliage at home before
and it saved us some money, but it took a
lot of time. I don't think we're gonna do that again.
It didn't quite turn out I think as as excellently
as maybe she was hoping for as well. Or it's
good for you, you'd be on the hook for doing
it for the rest of your life. Yeah, But I mean,
(14:43):
what I'm highlighting here, though, is that I think each
couple is gonna arrive at a different point and it
doesn't necessarily have to be the same amount. It doesn't
even have to correspond with who is earning more money,
because that would be me. But in this, in our case,
in our relationship, she actually gets more to spend every
single month than I do. So yeah, I mean, I
think the recurring amount is a good way to think
about it. And let's say one of you is a
bigger spender than the other. Uh, then I think you
(15:06):
should make concessions for that, and and and sometimes kind
of like what you're alluding to, it's not even about
being a bigger spender. But it's like the things that
women need and I'm just generalizing here, they can be
more expensive than what men need. Like I just spend
less in general then my wife because I don't go
get my heirded right, like I there's some dudes out
there who do there are? And if that's like so
that's totally yes, they could be, but I think it's
(15:27):
worth me. But on the other side, I think about,
let's say the grocery budget, Matt, And there were times
where I could buy my craft beer at the grocery
store and my wife's like, I'm not drinking that stuff,
like or I don't care about the twenty two dollars
four pack or something like that. But but but but
I like it, right, and if I buy four of those,
that's significally adding to the grocery budget. So we have
to have that discussion, like, Okay, is that included in
(15:49):
groceries or is that something that I have to fork
over myself. And we typically kind of came down on
the line of, well, if I'm going to go over
a certain amount of craft beer spending, that's when it
falls on me. You give for like a little token sip.
That way you can justify it being a grocery right.
If I'm sharing, it goes back into the grocery find Okay.
But on the flip side, like we make room for
other recurring purchases in our budget, like it doesn't get
(16:10):
taken from our individual monthly allocated amount. Like let's say
one of us is going to see a therapist and
the other one isn't. Well, that doesn't necessarily come out
of my wife's money, Matt. That's just something that we
budget for as a family, you know, And one of
us might spend more than the other, and one of
us typically does, but the money still jointly comes out
(16:30):
of our account. And I guess one thing I want
to make sure that Shyanne knows. And this is really
important in marriage in general. But like, things don't always
have to be perfectly fair, and sometimes you just have
to you have to give up on that desire to
make things perfectly equal because that's just not going to
be the best thing for your budget or for your marriage.
Let's talk about big expenses as well, because I'm thinking
(16:51):
about let's say Shia wants to go on a big
trip with a friend or a family member, and his
wife wants to stay at home. If that's the case,
I think it might feel a bit unfair to her
to hang out at home and while he's using that
joint money to pay for it. If that's the case,
I think a conversation is again certainly needed, and like
(17:12):
you could ask and this is something you could talk about,
but is this going to delay some other goals that
we might be trying to achieve. If so, I think
that's going to be tough to stomach, and you're going
to have to come up with a way to reconcile that.
And so for you, like, maybe what that means in
this specific example is just finding some money you know
that pays for that trip in the joint account, but
(17:32):
then maybe more of it comes out of your individual
account or like your fun or your blow money. And
then the you know, in your case, since you're the
one taking this trip, maybe you find a way to
make some additional money on the side. Maybe you're working
some overtime, maybe you're kind of getting after selling clearing
out the garage. Actually, we've combined not only our lives
but our stuff, and it turns out we've got a
lot of redundancies here. Maybe I can unload some items
(17:54):
on Facebook, and then you can sort of channel some
of that money into this trip as well. But I
think looking for just different creative ways to fund something
like this that might go above and beyond the typical
monthly expenses. It could be wise and some other creative
ways too, right, getting a credit card, getting the travel
sign up, yeah, points, and then saying, great, this is
gonna fund at least the flight that I'm taking, as
(18:16):
that reduces the cost to the outlay that we're going
that we're gonna have. But yeah, those are discussions I
think're right now. You can find the money for multiple
places in your budget. You just have to kind of
come to an agreement and have an open, honest conversation
about it. There's just no perfect or even right or
wrong way to do this, but subtle the things, you
guys will settle into something that works for both of
you over time, and sometimes you kind of stumble upon
(18:36):
it through trial and error too, especially in those early years.
Ultimately start out with kind of the best agreed upon
things and then iterate from there. It's gonna take, you know,
kind of communication, work discussions to continue to hone in
on what the best path for managing your money together
is totally Yeah, eighteen years in, it's like second nature.
These are like conversations we easily have eighteen months in. Yeah,
(18:59):
it's some thing you're still waiting through. It's like, totally
get it. Shall you learn how to drive a car
or something like that? Yeah, yeah, you don't even think
about it now, like you just get any you go.
Whereas like if you're eighteen years old, all those accidents
happen those first few years of driving. It's either so
expensive to ensure. But Joel, we got more to get to.
We're gonna hear from a listener who is considering long
term care insurance whether or not it's a necessity. We'll
get to that more right after this. All right, Matt,
(19:28):
we're back. Let's get to you a question about investing
and whether or not the employer account is superior to
doing your own thing.
Speaker 4 (19:36):
Hi, Matt and Joel Miranda to hear from Louis Utah.
I've got a question about retirement accounts. I recently got
a new job that automatically contributes a fourteen point two
percent match of my salary to a four oh one
a plan. They're also set up to do an automatic
three percent from my pay to a pre tax four
oh three B. I also have the option for further
WROTH four oh three B or four fifty seven B
(19:58):
WROTH or pre tax contry fusions. At my previous job,
I contributed six percent to a ROTH for oh one
K to get the company match of four point five percent.
Since I'm already used to contributing the six percent, I
would like to keep at least that much contributing to
another retirement account. My question is what account is the
best option one offered through my new employer, or should
(20:18):
I look at an IRA that I could potentially roll
my previous four oh one k into as well some
other notes, I'm almost thirty in anticipate staying in this
job for several years. I also have the option of
having these accounts with either TIAA or Fidelity. Any advice there,
thanks so much?
Speaker 1 (20:34):
All right, Miranda's got all the different accounts available to her.
Joel listeners. Alphabet suit hit back thirty a couple times.
If you wanted to listen to all the options that
are that have been laid up here before us in
her question, And Miranda, I'm going to say that you
are in a pretty fantastic matching situation here. Just I
mean the fact that you get a match that's that
(20:54):
generous here with your new job. She said fourteen point two.
I think, So where did the point two come from?
I don't know, but like I love it. The fact
that she's got that much coming out of her paycheck now,
like that amount of her paycheck that her employer is
choosing to stick in is what she's got going on.
That feels so good, right yeah. I mean it's like, hey,
by the way, this is your salary, but you also
got a fourteen point two percent raise, just like right
(21:17):
out of the gate. When do you think about what
the average American savings rate is. It's far below that.
So to feel like you're hitting that is just amazing
because of the generosity of your employer from the get go.
Is that's off the truck. It's no wonder that she's
planning on staying put. Like, who wants to give up
that kind of a benefit. It's amazing. I'm also pumped
that she's planning on keeping her contribution amount to where
it was before. I think it's a pretty phenomenal idea
(21:39):
to keep an investing floor essentially right, Like, she's like,
you know what, six percent, that's what I was doing before.
I'm going to keep it going. I'm not going to
go below that, even if the match grows, even if
the total dollar amount that she is socking away for
her future is going up significantly. By doing that, she's
gonna hit that financial independence stage of life before she
knows it. Man, But Miranda, should you be going deep
(22:00):
into the four or three B four P fifty seven
B direction or should you be going into your own IRA?
I mean, I think you've got so much money going
into the employer plan, which is again awesome, but there's
a benefit in diversifying which accounts that you contribute to.
So having an IRA in addition to those two workplace
accounts offers you some additional flexibility, and we prefer for
(22:22):
you to opt for a WROTH IRA over a traditional
So I think that's where I come down, Matt, And
that's that's often where we come down. Once you get
the match, it's like, Hey, going to the roth IRA
and then maybe coming back to the employer plan after
you've maxed out the WROTH is typically not always, but
that's typically the best way to go, and it sounds
like your workplace plans are really fantastic, right, And if
(22:43):
you had even more match dollars available, we'd want you
to snag those additional dollars soak them up. Yeah, but
them out there though, No, No, so that that's not
the case. So having your own roth IRA and building
that up over time with those excess personal contributions above
and beyond, I think that would be the superior choice
for your investing dollars right now. Sure, So I'm going
to be a little two faced here because I was
(23:04):
just talking about how great it is that I think
she's not going below her threshold or going below and
investing floor. Essentially, it's admirable, right, But I'm going to
introduce the nuanced conversation of like intermediate, medium to short
term goals because it is so easy for us to
beat the drama of Miranda. You need to be investing more.
You need to be if it's the more the better,
(23:25):
the sooner the better. And that's because the vast majority
of folks who are out there are not setting aside
enough for their retirements. Given the fact that this is
a new job for her, given the fact that the
percentage that she's got going set aside towards retirement has
also increased. That's I'm thinking about it. That's a significant
amount of money, and I don't I would hate to
see her in a position to where she's a little
(23:47):
cash strapped because she isn't necessarily thinking about some of
these more medium term intermediate goals like I want to
buy a house, specific car, those two things specifically, Yeah,
I mean because those yeah, that takes a lot of
money to save up, but downpay And so she didn't
say anything about her housing situation that I heard her,
So no, okay, but house in a car, I mean,
ideally you're paying cash for your car, but that takes
(24:09):
up I mean, that takes a lot of money to
set aside that much money. Same thing with the down
payment for a house. I don't want you to forsake
some of these. I don't even want to call them
lifestyle goals, but just I mean they are, I guess right,
but in everything lifestyle eventually, like you call it retirement,
but at some point we're talking about your lifestyle within retirement.
And so I don't want you to forsake these short
term goals. With those two things in particular, you're you're
either talking about getting better financial terms, right or whereas
(24:32):
like say, saving twenty percent to put down instead of
having five percent to put down, you're gonna save a
bunch of money in that way. Or if you're paying
cash for the car instead of financing it, you're talking
about not having to take out a six or seven
percent loan these days. And that's if you've got that's
if you've got good credit. So I think what you're
getting at is if you over index towards retirement and
you're not also saving for goals and things that you
(24:54):
want to purchase in the coming years, then you're being
too myopic, right, You're being two laser fox focus retirement, retirement, retirement,
And I think that's obviously a really important consideration, but
you don't want to do it to the neglect of
other upcoming outlays that you're gonna have to make. I
think most listeners, yeah, keep saving, keep investing. But for
(25:14):
her specifically because she listens to the show, and because
she is the type of person to send us the
voice memo that tells me she's probably a little bit
more buttoned up than she's got a decent nest to
exent aside. So she asked too about like where maybe
she should open up the account, and I think we
should specific companies. Let's talk about that, and we typically
highlight a few, right, and we point to low cost
(25:35):
brokerages basically every time we talk about this. Matt Schwab, Fidelity, Vanguard,
those are the top three. They're not only like gargantuan behemoths,
but they also have just incredibly low costs index funds
that people can invest in. You could even opt for
robin Hood, which you love, Matt, because of their match. Yeah,
I know Betterment has been doing something similar because yeah,
(25:56):
Robinhood kicked it off. And now some of these other
online brokers are saying, wait a second, are we going
to offer matches to our customers too? And they're like,
I guess we have to since Robina did it. The
cat's out of the bag. So yeah, it's amazing. How
that's just a brand new thing that never existed before.
A match that you get from your brokerage and not
from your employer. Super super cool. Just prioritize, of course,
(26:18):
low cost, well diversified funds, no matter which one of
those firms you go with. And you mentioned too, the
ability to choose which company you go with from your employer,
Fidelity versus TIAA, and Fidelity is the choice there. And
it's not because tia is like a bad company or
anything like that, Like far from it. They are the
go to for a whole lot of nonprofits when it
(26:39):
comes to the investment brokerage house they choose, but if
you have the option of Fidelity, it's a superior choice
basically all the time. From a feet perspective, I think
of them, Matt and you can I think appreciate this.
They're kind of like the Aldi of investment houses. Yeah,
not the Costco, No, I think they're all the who
would be the Costco? Is Costco? Like Charles, Maybe seems
(27:01):
like they've got a little bit more going on in
the customer service, maybe some fancier options for you, but
they're not quite as discount. That's yeah. That might Bear,
might even be Aldie, I'm not sure, but that's true.
They're all great choices. I mean, at the end of
the day, Team Randa, she's not even thirty and it
sounds like she's investing close to a quarter of her income.
So just mad props to you. Keep it up. You're
(27:22):
gonna find yourself within that FI territory well before most folks,
and even before that, I think you are going to
be able to open up a lot of different options,
give yourself a ton more flexibility in the not so
distant future. Let's hear from a listener who is looking
ahead to the financial situation of his parents. He wants
to make sure they're a strong position there in their
later years.
Speaker 3 (27:43):
Hey, Joel and Matt, it's Nate from Oklahoma City ferst Off.
Love you guys and listen to you guys for I
think five years now. You guys help me settle on
the path to simplify my finance. And thank you so
much for that kind of question about long term care.
I was curious my parents have to be this question,
(28:06):
and I didn't know it for long term care when
someone's in a nursing home. We were wondering what assets
were protected from nursing homes to access, like retirement accounts or.
Speaker 2 (28:18):
Homes or anything like that.
Speaker 4 (28:20):
That's just my question.
Speaker 2 (28:21):
Thank mad.
Speaker 1 (28:22):
I wish we had like a medal or something like
that we could send to people who've been listening as
long as Nate has. They deserve it, like a challenge
coin from the Stoics. What's his name, Yeah, Ryan Holliday. Yeah,
he's got like all the coins and stuff in it
on you. He drops them and they hit the table
and you can hear them, like we've got beer caps.
That's right, we can send those out. Can you hear that? Well,
then Naked keep it in his pocket every time he
(28:43):
touches his pocket. He'd be like, oh, yeah, I love
that show. Someday I'm gonna die. It's like the what's
the Stoics? But they're momentum. Sometime I'm gonna die. But
for now, I'll listen to how to make it. You
should think about it. Glad the show's been helpful, Nate,
thank you for listening. Let's talk about long term care
andurance and just kind of thinking about planning for the
(29:03):
extreme future and for your parents. Less about extreme future,
more about near term stuff. These are questions Matt, I'm
sure you're having with your parents. I'm having with my
parents to a certain extent as well. A lot of
folks buy long term care insurance specifically because they're told to,
and in some cases it does make sense. But long
term care insurance can be so stinking expensive. It's not
(29:25):
even funny, and it's a far cry from what it
was like fifteen years ago. Premiums have skyrocketed, summerre up
something like five hundred percent over the last ten to
fifteen years. So talk about inflation, Matt, long term care
insurance premium inflation has been worse than eggs. And so,
you know, while long term care insurance can provide an
incredible benefit for a really expensive need, that's the thing.
(29:47):
It's like, you kind of want to ensure against something
like this because of how prohibitively expensive it can be.
Most Americans will need a few years of nursing home
care on average, right, And many who opt to take
out long term care insurance, well, they actually end up
dropping it before they're able to use the benefits because
of how expensive the premiums get. And yeah, it just
(30:08):
tends to become more than they barkin for. So, you know,
while avoiding long long term care insurance, it sounds like
a risky move, like, hey, if I don't get that stuff,
even though it's like ridiculously expensive, it feels like highway robbery,
then like I'm not going to be taken care of. Well,
dropping it before you use it is like the worst
thing in the world. It's like going to college for
three years, racking up a ton of debt, and then
dropping out before you get the degree, which is maybe
(30:30):
an okay situation to find yourself in if you say,
go to the local community college. But we're talking about
like Ivy League prices here when it comes to what
this long term care is going to cost. And then
with folks living longer, with the supply of the demand
and balance as well of the providers who are offering
this care to the elderly, I think this issue it
could actually get worse in the coming years. So let's
(30:51):
talk about funding long term care specifically. If you don't
have long term care insurance, well, you've got to spend
your own money, specifically until you reach the point where
Medicaid kicks in. But even then, Medicaid coverage it's only
gonna help in certain situations. It's not going to help
most middle class folks out there, and oftentimes what that
means is you're kind of out there on your own.
(31:11):
It's basically for people who are impoverish, who are destitute medicaids. Yeah, exactly,
if you built up a you know, not a ridiculous
elon must networth. But just like even just a nice
little tidy sum, sorry, Medicaid isn't going to kick in
to help you with long term care stuff. Yeah, and
so for Nay, I would hopefully your parents they've been
diligent savers. It's just important to factor this in, right, Like,
(31:34):
don't just project twenty five times your expenses and call
it a day, but also consider these future potential costs
and how you know they're going to add up over time.
This is one of those massive considerations that too many
folks aren't paying enough attention to. And you know, there
are other potential financial products and vehicles that can help
if you end up in a financial pinch. I'm specifically
(31:55):
thinking of a reverse mortgage. I think that's something that
folks are like, oh, yeah, we've always got that got
the house, But that's not ideal either. They can be
really expensive. The fees that are associated with those sky high,
and they can also prevent you from leaving your home
to your airs if you intend to. And like the
home specifically is just kind of like one of those
emotional things where I guess it depends on where you live.
(32:15):
You know, if you are living in a city and
it's much more trainsy, and your family isn't local, Well
maybe you don't care so much, but if you are
somewhere I don't know, was he in Oklahoma, But I
don't know. I picture like out in the more rural
setting and there's a family farm there spending a family
for generation, or like a home that I don't know,
a family member built and it's kind of been passed
down through the generations. That kind of thing. It's not
the kind of thing that you want to tap in
(32:37):
order to fund some of those later years, right, you
know what I'm saying. Okay, So Nate specifically asked about
nursing homes training assets, like is that a possibility? Well,
in some ways yes, but in other ways no, I
don't think not in the way that Nate intended it.
They can be really expensive with the way in which
I'm saying they can be asset trainers, because some predictions
are saying that in like twenty years, we'll be talking
(32:58):
about on average spending two one hundred thousand dollars a
year for the average nursing home facility. So to stay
in one for a year with a private room two
hundred grand. Does that include food, it's like an unlimited
buffet or like I think, well, yeah, of course INCLU food.
But like I'm sure we're gonna have more like robots
and stuff imported from Japan because think about that, they're
kind of going through that ahead of us. Hopefully we'll
(33:20):
learn a lot from that's actually a thing is yeah,
oh yeah, that's crazy. Yeah, robot's taking care of you.
I think we'll see more of that in the future too.
But the nursing home can't. And I think this is
what Nate was getting at. They can't drain your assets
without your permission, right. They can't like garnish your stock
portfolio or it starts selling stocks off, start selling positions
to pay for your care. But you know, if you've
(33:40):
been a good savor and investor, you're going to exceed,
kind of like you're talking about here, Matt. Eligibility requirements
for Medicaid. Every state, though, has different requirements, so familiarize
yourself with them. But if you're looking to if your
parents are thinking, well, Mendica, I've got Medicaid, I don't
need long term care insurance or I don't need to
pay attention to not spending down my retirement assets all
the way because Medicaid is going to care, it's going
(34:00):
to cover those costs. Was just not that simple or
easy most way too many people. Mat I looked up
at statistics something like forty six percent of people assume
that medicaid covers long term care for them. And again
for middle class folks, that's not the case. You're gonna
have to spend down your assets to make that happen.
You're gonna have to meet their resource limitation test. And
(34:21):
there are all sorts of like different nuanced ways to do.
It's really complex tackle that. It's very complex. Yeah, but
there's it's not like a fun process, no. Yeah. And
like you mentioned, spending down assets like your primary home,
it doesn't count as an asset under medicaid rules. And
so if you spent you know, two hundred thousand dollars
renovating that home in an attempt to spend that money down,
that's actually a strategy that some folks use. And then
(34:44):
like there's also these Medicaid complaint annuities that all that
being said, though, consider talking to an elder law attorney
in your state who specializes and medicaids strategy. This is
like a specific niche. It's a specific sort of branch
of law that I wasn't aware of up until recently.
It's like my cousin's a hand surgeon. Like there's all
(35:04):
sorts of surgeons, but she specializes in hands. And this
is like the same thing for attorneys, Like it's like
no elder law, but a medicaid specialist. Totally. Yeah. So
for you, Nate's you know, I hope this doesn't freak
you out, but it is another reason to be saving
and investing for your future. But what he's really asking
is what you already addressed, Joel. Like, it's not like
you owe money to a debtor and they've won a
(35:26):
judgment in a court of law and now they're gonna,
you know, garnish your paycheck. It's not like the federal
government coming after your four to one k because you
owe money to the irs. That kind of thing. Like,
none of this is actually going to happen, and I
think it's worth also having. I mean, hopefully this is
a conversation that you've already started, Nate, with your folks.
It is a conversation because it sounds like that they
asked you this but for everyone else out there, I
(35:47):
think it's worth having the conversation of what does it
look like for us to be a multi generational household.
I think it's highly underrated. And when we're talking about
the high costs associated with long term care, you kind
of alluded set at the beginning. I bet this is
a conversation you and cater having. We totally are. It
was a big reason why we were very comfortable with
putting a bedroom on the main level of our house
(36:07):
master around Maine. Dude, not because we're gonna need it
in the not too distant future, but maybe one of
our parents might be living with us at some point.
These are conversations like that we're literally in the middle of,
and once we get to a point to where where
we feel comfortable with the decision, I guess that we've made.
And maybe I'm saying this out loud as like accountability
to a certain extent, But I think it's important to
(36:27):
have these conversations with your parents because I think that
can alleviate some stress that they might be feeling as
they're looking ahead and thinking, well, how what if one
of us ends up in you know, and end up
in an assisted living home that kind of situation as
opposed to being like, hey, we got you, like we're
gonna take care of you. As a conversation I have
with your siblings too, if you have them, Yes, exactly, Yeah,
just to like divide and conquer a little bit, like, Okay,
(36:49):
what kind of situation are y'all in, Like, do y'all
have the ability to take this on? What do you
think five ten years from now? And obviously it's fluids,
it's dynamic, But I just like the idea of taking
some of that stress of them so that they can
focus on quality of life in the here and now,
as opposed to being like, well, we have to sock
this away for some unknown future that might you know,
that may or may not be something that we experience.
(37:12):
And there's also a fine balance between them, like I'm
not saying it for them to spend unwisely and foolishly, right,
because would it be nice for a parent to show
up with some assets to be able to like pitch
in towards household expenses. Sure of course, But I think
all of these situations are better had when there's an
open conversation that's taking place. Yeah, I mean, my grandma
is in her mid nineties. She's been living with my
(37:34):
parents first and then my uncle now recently for over
a decade. And then that's just involved a lot of
back and forth discussions between siblings, and I think conversations
that are probably hard but are probably so good. Yeah,
And so much comes down to like health, because even
in that if health took a term for the worst,
then things change, right or your flexibility to family values.
(37:56):
So just make sure that all those topics are on
the table you're discussing that so that you can and
eyes wide open, kind of march into the future as
your parents' age. But best of luck with that, Nate.
Matt We've got more to get to on this episode,
including index funds. Are they all created equal? Because it
sure seems like they might not be the same. One
listener's worried about the differences and performance between some of them.
(38:17):
We'll talk about that and more right after this.
Speaker 5 (38:27):
All right, buddy, we're back from the break, and of
course now it is time for the Facebook Question of
the Week, which is from Matthew and he wrote, do
y'all keep your hobby fund money separate from emergency fund?
Speaker 1 (38:40):
Basically, I buy and flip a ton of stuff to
fund my hobby. But it seems whenever I do this,
an unexpected bill comes up. I do have a nice
emergency fundhm. I like this question, you think, Jill. I
mean it sounds like Matthew is already doing the emergency
fund thing well, which is important, right. I like the
idea though, of kind of flipping stuff to fund a hobby,
a little side hustle. Actually it is keep it siloed. Yeah, yeah,
(39:01):
it's that mini side hustle to pay for things that
you might not otherwise have the funds for, right, Or
you'd have to cut back on other financial goal. So
let's say you're like, oh, no, I got to hit
that twenty percent savings rate, but I still want to
fund this hobby. I can't do both. Well, then you
got to find a way to make a little bit
of extra money. Or let's say you're prioritizing saving for
a down payment or maxing out your wrath Ira. You
don't have to cut back on those things because you're
(39:22):
finding another source to find the money so that you
can pay for that hobby. Whether it's like skiing, I
would say disc golf, but that's a really cheap one.
You don't really have to find much money to do
that one. But this is a great way, I think
to ensure that you're prioritizing something you care about without
sacrificing to wealth building necessities that we think people need
to be employing over the long haul. Totally. I think
(39:44):
a question I've got for Dan is like, what are
these what he calls unexpected bills that keep popping up?
Because if they're happening this frequently, like every time he
is looking to spend some money on his hobby, is
it possible to plan a little bit better for them,
or you know, like to put them into your regular budget.
Because there are true emergencies that come along, and that's
(40:04):
of course what your emergency fund is there for. But
we also find that some folks dip into the emergency
fund a bit too regularly because they haven't planned as
well as they could have for expenses that happen every
year or at the same time every month. Christmas that
comes around the same time every year. It's like not
a real emergency, but like they chalk it up to
an emergency because they didn't really have much foresight so
(40:24):
time about things coming up. Yeah, it just it takes foresight.
I like what you said there, and so as you're
looking at your budget just or maybe maybe maybe that's
the thing. Maybe he doesn't have a budget. But even
if you do have a budget, and let's say these
are expenses that haven't been accounted for, revise the dang thing,
because if some of those unexpected bills could be planned for,
then being able to rearrange like that is the solution here,
(40:45):
and it's going to help you to touch your emergency
fund a whole lot less as well to really for
it to be there for the true emergencies in your life. Right. Yes,
and you just mentioned tires briefly there. That's that's like
a great example of something that's coming down the road.
That's a good pun, right literally, go, they're balding as
we speak, right, and you need to be saving up
(41:07):
ahead for that expense and hopefully you can kind of
figure out, well, what's a usable life left, how much
is it going to cost me when I do replace
those things? And how much do I need to start
saving now to be prepared or it's the same thing
that happens every year around Christmas time. People are like,
oh crap, I think I'm gonna spend like nine hundred
dollars this December, and I didn't plan for that. It's
not an emergency, that's something that needs to be thought
(41:27):
of aut of time, and so should start that saving
in January? Right exactly? So should your hobby budget be
a line item in your budget? Well, it depends. I
think the reason to keep it separate would be to
incentivize you to keep making extra money to fund your hobby.
Speaker 5 (41:41):
Right.
Speaker 1 (41:41):
So, if you make less money in a given month,
you enjoy your hobby less. But if you make more,
you get to ramp it up and enjoy that hobby
even more, or at least bank more, so you can
keep it up longer. Right. So it makes me think
of a listener don't remember his name off the top
of my head. Matt was. I should know that, but
I don't remember. But he donates plasma to on vacation.
Ryan Kay Ryan Kay, okay, Ryan, You're the man. And
(42:04):
he still does this. Seems he's been doing this for many,
many years, and I think this is a great way.
It's similar to the way Matthew's thinking about it. It's
like I'm gonna go on a vacation up to the
level at which I bank money from donating that plasma, right,
And so the reason to include it in your budget
is to know that you'll get to enjoy it no
matter what, that the money's always going to be there
(42:25):
because you've set it aside. But the reason to not
do that is because I think it incentivizes you to
push the envelope on that side gig or on that
plasma donation side, hustle so that you so that you
actually have your INCENTIVI is to go make the money
to pay for the thing you want to do. Yeah, yeah,
I want to. I'll say a quick note. I know
not everybody out there is like super organized like some
(42:46):
folks love it. I myself, I just just yesterday spent
some time in Excel organizing some expenses, checking in on
the budget, seeing where things are landing this month. I
know for you that feels like one of those nice
heavy anxiety likes. Yes, I like, I like keeping tabs
on it. Man, not everybody. It's not their cup of tea,
you know, And that's totally fine, but you have to,
I guess account for that. And so while maybe for us,
(43:08):
because we've got all the different savings buckets set aside,
we've got three to six months worth of living expenses
in our emergency fund. If you have no buckets and
it's just this, I'm gonna call it the emergency slush fund.
How about that It's like this one big giant pile.
All the money just gets piled in there. I think
that's totally fine, But you just are gonna have to
have a little bit more. You're gonna have to have
more margin on hand to be able to account for
(43:30):
some of these things that otherwise you would have planned for,
but instead you're kind of drawing it from the emergency
slush fund, which I kind of like the more, I say,
But just get to another quick one. This is an
email from Dan and he wrote, if these funds, if
they're all tracking the S and P of five hundred,
which should be the same, how come there's a wide
difference between the performances. And he specifically he highlighted the
(43:51):
different returns between let's say, vou vanguards S and P
five hundred fund fx AIX, which is fidelities the actual
S and P. There's a lot of different funds out there,
But what do you have for Dan to chew on?
As he's considering these different options. Yeah, I mean this
is a good question, and I think if you do
look at the returns, you're going to see little idiosyncrasies
(44:12):
and you're gonna say, this is not the exact same thing.
What's happening there? And yeah, these funds are attempting to
mimic a specific index, but there are also just these
little idiosyncrasies that lead to slightly different results. The biggest
one is how much they cost to own, right, I'm
talking about the expense ratios at least in parts, but
also potential fees that some old school fund managers charge
(44:33):
to own those funds. And so, while costs have overwhelmingly
gone down for every day investor, specifically on index funds,
like Dan is highlighting, there are still some sperms using
the old playbook. They're feeding people to death. It's amazing
the price discrepancy between one S and P five hundred
fund the cheapest ones, and then another fund that mimics
(44:54):
the S and P. But it's within old school provider
who just charges norm and a leg still right, and
those costs eat into it could make one etf look
better than the other. The higher the fees, the greater
divergence from the index itself and then from other low
cost competitors. So that's at least that's at least one
reason that you might see more of a divergence there. Yeah. Yeah.
So for instance, let's take the case of VTI versus
(45:17):
f Z Rocks. So VTI is Vanguard's total stock market
ETF the other is offered by Fidelity. They're both attempting
to track the total stock market. VTI has a minimal
expense ratio, minimal cost. Fc Rocks well they charged nothing
but to pull that off. Fidelity they omitted some microcap
stocks from their fund in an effort to minimize costs
(45:40):
on their end. But still the performance of both is
quite similar. FC Rocks is up around ninety two percent
over the past five years, and VTI it's right up
there with it, but just a few percentage points below
eighty nine or ninety something like that. I mean, it's like, yes,
same ballpark is not too far off. They're probably both
in left field, close to the fence, right. But yeah,
And some of the reason too, why they at some
(46:00):
of these different companies is just the way that they're
structured as well ets are. They're just more tax efficient.
Specifically when you are owning. If you've got let's say,
an ETF versus a mutual fund within a brokerage account
that's taxable, well, there are fewer taxable events that take
place with an ETF, But if we're talking about in
a retirement account, there's not much difference there because you
(46:21):
don't actually realize those taxable events with it being tax deferred.
I think, and this is a good question, Matt, but
I think the ultimate reality for everyone out there listening
is just don't get bogged down in the minutia. I
think you could go in and you could research every
S and P five hundred fund and you can say
which one perform the best over the past five years,
and then you can make your decision based on that.
I think it's a bad idea. I think there's really
(46:42):
one thing worth looking at, which is how much the
funds costs to own, and whether they mimic closely enough.
And so as long as the fund itself offers enough
diversification to satisfy you don't worry about which S and
P five hundred fund or which total stock market fund
has done better. The performance over time really shouldn't very
significantly targeting funds I think are a different story because
(47:02):
the construction of those can vary pretty meaningfully from like
Vanguard to Fidelity to like everybody has their own kind
of proprietary formula. I think of like KFC that thirty
seven herbs and spices, Like you got to use some
different herbs and spices if you work at Church's Chicken
and so they probably don't even call it rbs and
spices because they don't want to compete with KFC on that.
But they're going to look a little more different, Like
(47:24):
the variation is going to be more significant, because the
percentages of different things are going to change more significantly.
But when it comes to I guess specific index trackers
like an SMP or a total stock market that I
would worry a whole lot less about those micro differences
in outcomes. That's right, All right, Let's get back to
the beer that you and I enjoyed, which was a
(47:45):
bossy blonde, an Imperial blondale by contrast artists and ales.
What did you think, buddy? So, in my mind, an
Imperial blond feels like a unicorn, Like how often do
you get your hands on kind of a specialty? Yeah,
because blonds are typically just these super laxa daisical, laid
back sort of beers that I think even non craft
(48:07):
beer people can appreciate. But a bossy blonde, it's like,
it's a serious blonde. Right, by the way, let's okay,
so the artwork, because we're all they don't hear or
they don't see what we're looking at. They just hear
saying bossy blonde. But they've got the manager from office
space standing there, you know, the Golden Retriever form. Yeah,
the guy that's like, yeah, I'm gonna need those deep
what the reports on my desk by this afternoon, and
(48:29):
it's a Golden Retriever. I'm gonna need you to come
in on Sundays. And he's said, yeah, I'm gonna need
those biscuits on my desk by tomorrow. So I just
don't want folks thinking that contrast is out there denigrating
the blonde. That's true. That's all just the golden Golden
Retrievers are in charge, right. I think blonds to me
can be kind of black, but this one had more oop.
(48:49):
So yeah, I really enjoyed it. Even though blonde is
not a style and normally go to I think an
Imperial Blonde might be one i'd be downe with. Yeah,
it didn't like it's got no roasty flavors, it's got
no dark, multi kind of flavors. It's got that loggery
kind of blonde like flavor profile, but just bigger. It's
just like a bigger, more serious version. It's chewy, it does,
(49:09):
it's funny, it says something. You know, they're talking about
dog biscuits, but it does almost have like a breakfast
biscuity kind of flavor profile going on, but just kind
of amplify it up in a serious way. That just
makes this a bigger, in my opinion, more enjoyable beer
for sure. I agreed yeah that you and I got
to enjoy it during our episode today, And you can
find our show notes up on the website at howtomoney
dot com. We'll make sure to link to any of
(49:31):
the resources we may have mentioned up there, for instance,
the elder law attorney, We'll link to a site where
you can find somebody locally who specializes in that. If
you find, for instance, your parents in a situation like
this where they're trying to find they're trying to be
a bit more strategic about how they how they might
qualify for something like Medicaid. Yeah but yeah again. You
(49:52):
can find that at how to money dot com and
so buddy, that's it. So until next time, Best friends out,
best friends out U
Welcome to Out of Money. I'm Joel, I'm Matt. Today
we're answering your listener questions. That's right, buddy. Happy Monday
(00:26):
to everybody, Happy spring break to those who might be celebrating.
If you participate, if you celebrate the spring break, sure,
but we are people don't celebrate. So the people who don't,
they're irreligious. Heye, of course, to the vacations. A listener
is asking how much fun money should they be setting aside.
They're trying to determine, like how much seems fair between
(00:47):
him and his new wife, his new bride. Another listener
is asking about the cost of long term care and
specifically what assets might be vulnerable to that unexpectedly high
cost that folks would be realizing. And then another listener
is asking whether she should double down on her employer
provided retirement account or if she should just kind of
go out on her own, do her own thing the
(01:09):
individual retirement account. Jul, we'll get to that plus more.
You know, I said fun money too. Actually we got
another question that's fun money related. We'll get to all
that here during our episode. But first by day were
kind of money, by the way, it's the fun one. Hey,
I've got a frugler cheap for you, because I noticed
the other day I was driving along and only half
of the road was lit up. One of our headlights
(01:30):
had gone out, and you know they say typically once
one head leg is go ahead and replace both of them. Yeah,
first of all, do you do that? Do you do
you pull the one that's perfectly functional, that's working, because
you know it's going to go out very soon. I
typically do only because if I'm going to get a
nicer bowl, But I just wanted to be the same
color and shining the same distance. Like can you keep
(01:51):
up with a package or that's true, not the packaging,
but if you write it down somewhere look at your
Amazon orders, that's not my question. My question was that.
So I looked up the specific type of that I wanted,
and I saw that I could order it online. Actually
kind of splurged a little bit. Wanted to get the
nicer bowl, you know, like that kind of it's even crisper,
even brighter, it's farther exactly see further down the road,
(02:14):
extra vision. Plus Well you see what it looks like
on the packaging, and you're like, I'm sold, Well, of
course I want it to look like that. Yeah, so
I could order it online. The downside was that it
was going to take like seven or eight days. I
was really surprised to see how long it was going
to take for that thing to show up, reading it
from like Timu or or something. No, I don't know
who the provider was, but it was just going to
take a while. But then I looked up and saw
that locally, I could just hop over to the store
(02:36):
and get it at the local auto parts store, and
it was going to be like ten twenty dollars more expensive.
But I had the added benefit though, of not driving
around with one head light out. And I got to thinking,
wait a minute, am I being cheap by waiting by
in order to get the deal by driving around for
close to a week, all the while running the risk
(02:58):
of potentially getting it to it because depending depending on
what state you live in a deer you never know, yeah, yeah,
if your visibility is cut down low or somebody else
even seeing you. But I decided that it wasn't worth it,
and so I said, you know what, Normally, normally I
think I would kind of take the quote unquote cheap
route get the deal, But instead I need that with you.
I drove over to the local store, picked up the
(03:19):
headlights in person, installed them. I was good to go.
What would you have done though? In that situation, I
would either have ordered it where it was going to
come in in a day or two. But eight days
is too long, I think. Yeah, I I was completely shocked,
especially I'm so used to receiving something the next day.
There's also not a part store on every corner basically,
so it's not it's not like you have to drive
(03:41):
twenty five. Yeah, there's not some specialtything. There's like eight
within walking distance. It feels like, yeah, I mean that's
an exaggeration, but it feels like that's kind of true.
What it was that and then also thinking through if
I did the off chance get a ticket, and that
just the kind of excuse that an auto insure is
looking for to jack up your rates. Because then I
started thinking, well, even aside from the like maybe hitting
(04:03):
a deer or something like that, perpetually higher premiums down
the road, Like all these things were going through my
mind and I was It took me like ten seconds
to convince myself just to hop over to the local store.
Well a ticket, make it happen, it's gonna cost a
lot of money. But then if that ticket leads to
higher insurance costs, you're talking about like a double way
for like just one small little mistake right that you
you should have remedied earlier. So not the kind of
(04:24):
situation I wanted to divine myself in. Yeah, I'm with
you from a safety and a financial impact sort of standpoint.
And did you say we are in agreement? Did you
replace both? I did? Okay, Yeah. I mean again, like
if you're going from something that's if I was putting
in a matching bulb, then I would be okay holding off.
But if you're upgrading, you just want those things to
look the same. And typically those neural I feel like
they're they're kind of a bluer light because they're more led,
(04:46):
a little more crisp. Yeah, yeah, it's kind of I
hate it when I like, in the bathroom, if I
put in two different light bulbs and they're slightly oh
my gosh, Yeah, it's the worst. Okay, do you know
what temperature your family is? So with the bulbs off
on my head, it's either twenty seven hundred or it's
three thousand or even higher. But twenty seven is typically
the warmest. That's like the soft light traditional bowl, like
(05:07):
it's typical sixty. What are you that you're used to
different rooms? Right? You could if you want to, or
you'd go with the rock the same color throughout the
whole house in the same like light fixture. I want
all those to be consistent. But sometimes, like in my bathroom,
I'm okay with like a slightly different light than I
am going for, like a little bit crisper in the bathroom. Yeah,
just so you can see everything on your face right
(05:28):
while you're shaving. I mean, it's hideous, but it lights
it up well, so don't make it look any better. Sorry.
All right, let's mention the beer we're having today's episode.
This one's called Bossy Blonde. It's by contrast brewing or
contrast artists and nails. Excuse me, here you go. They
are Rachel Local Brewery. Ride around the corner and we'll
give our thoughts on this beer at the end of
the episode. If you have a money question, we'd love
(05:49):
to hear from you. Just got to have the money
dot com slash ask We need Matt some great listener questions.
Do so, if you have a money question. You're like, Eh,
he's kind of in the back of my head. Love
to know what Matt Joel think. Please do submit it.
Go to how to money dot com, slash ask, or
just literally record your question on the Voicemami app of
your phone, state your name at the top, and then
email it over to us howdomoneypot at gmail dot com.
(06:10):
We will of course take your question soon. Matt, let's
take a question about newlyweds and we want to learn
how to money together.
Speaker 2 (06:19):
Hey, Matt and Joel, this is Shyanne from Memphis, Tennessee.
Me and my wife got married last August and we've
done the fun task of combining finances. We're currently doing
the approach of having all money going too joint accounts
and then having a small amount that's deposited end our
individual accounts each month. I can't say for sure, but
I believe you both have been an advocate of this
(06:39):
approach in the past. The issue we're having is identifying
which type of expenses would fall into the individual spending
versus the joint spending account. How do you guys determine
this yourselves? Additionally, how do you determine how much to
put into the individual accounts. Do you do a fixed
them ount, do you do a percentage based on the
prior month savings them ount? Or is it something else?
(07:01):
Thank for the help.
Speaker 1 (07:02):
Memphis, Joel, you spent some time there? I have is that?
Did you actually get married in Memphis? We did get
married in Memphis, Yes, okay, I remember their wife is
from there or Tennessee and got married at the MEMPHISOO.
I'm sorry when I said Tennessee, I meant to say Chattanooga.
You also spend time there. We spent China Chattanooga, but
Memphis is also Tennessee. They're both, yeah, exactly, just in
like literally the opposite ends of Tennessee. But no, the
(07:23):
MEMPHISOO is plice, legit, lovely, just a wonderful place, and
I fond memories for sure. Best wedding ever. I didn't
go to yours. Well, we didn't know each other. Yeah,
I'm assuming mine was better. Well years was that you
were older in life like Kate and I got married
pretty young, And I feel like the older you get,
the more personality and the more your own you can
(07:46):
make it. I do. I don't know who you are
when you're like you were, like sixteen when you got married,
not quite that young. I mean yeah, like there's a
degree of like learning who you are, figuring yourself out,
figuring out the things that you value, and it's hard
to know all those things. I'm ever evolving, dynamic person
jol even now. I mean, yeah, you made sure your weddings.
Speaker 3 (08:06):
Well.
Speaker 1 (08:06):
I liked craft beer back then, but I also liked
dive bar beer, so like PBR, and I distinctly remember
wanting my groom's cake to be a PBR can and
I remember Emily's dad being like, no, man, come on,
that's not coolest lame. So instead I went with a
Norwegian flag because that's my heritage. And I'm actually that's fun.
I'm glad that I did that. So words of wisdom,
(08:29):
that's right, the future fell right, Yeah, if you willing
to listen to your elders. People. Speaking of elders, I'm
sure we're older than Cheyenne. Here, let's let's answer his question.
First off, congrats on getting married, and it sounds like
you guys have taken a really smart approach to combining
your finances. I mean, I prefer either everything being combined
or having one combined account and two separate accounts. But ideally,
(08:51):
I think the way you guys have have it set
up is great. Right, you get the benefits of combining everything,
and Matt, I think those benefits are many, Right. You
get the shared goals, you get the easy tracking, you
get the kind of transparency which builds trust in that relationship.
It's like, hey, I can look in and see what's
going on with the account. You can look in. We
both have essentially just as much control over this thing
as the other one. And then you also get at
(09:12):
least some autonomy because yeah, you're merging lives, you're too
becoming one flesh or whatever it is we say. But
it also doesn't mean that you aren't an individual with
your own hopes and goals and dreams too that you
share with your partner. Right, but at the very least
your own spending. Yeah, exactly, at the very least you
get to spend a little money without like kind of
no questions asked. I. Yeah, I get that. I've found
(09:35):
that for us, having a singular account that all of
the money is in that that is incredibly helpful. At least.
I think early on, when you first get married, it
seems like it's something you both want to keep up with.
But I would not be surprised, Hyenne, if it becomes
pretty quickly apparent that one of you enjoys doing this
more than the other person. And what you don't need
to do is to then be responsible for multiple logins,
(09:58):
like reconciling multiple accounts it all, and you know, just
kind of spread out all over the place, basically overcomplicating. Yeah,
it's just so much simpler to have a singular account.
And when it comes to so he's talking about having
separate accounts for their spending, I think a way around
that is just to simply have like a separate credit card.
And that's something that Kate actually actually does that she
has this separate card that I don't have, where she
(10:19):
completely manages expenses on that because if she knows she
goes out and buy something and she's thinking, there's a
good chance I'm going to return this. She doesn't want
me entering these transactions in where it's just like, oh, oh,
that sixty seven dollars hit or record it, and then
a couple weeks later she returns it and then I'm like, okay,
minus sixty seven. Now I got to go in and
do all this, she is able to mentally account for that,
and it also allows her like birthday presents, Christmas presents.
(10:44):
That's one of the reasons people talk about having their
own account as well as to well, I don't want
you to be able to see what I'm getting for
you or even where I'm getting it from when I
get you a gift, but the ability for her at
the end of the month to say, okay, and she
sends me a simple breakdown of like this number of
dollars from our giving account, this number of dollars goes
towards groceries, this amount comes out of the kids account.
(11:06):
That kind of thing. Yeah, there's a way to keep
things separate, whilst in my opinion, not necessarily having a
bunch of multiple accounts. That's a good point, I think
overdoing it with the accounts. I get why you might
want to do that, but I also just don't think
it's terribly helpful. And we've talked about this beforemat but
maybe we should highlight the reasons that combining things is good.
And especially you talked about getting married later on, and
(11:28):
I think the further along you are in your life,
let's say you get married in your forties. Right, then
you're like, I've already kind of built this financial life
on my own. I don't necessarily know that I want
to combine all the way, Like, let's put the rings
on the fingers, let's move in together. But that rental
property that I bought five years ago, that's mine, right,
And I guess I can understand the reasoning behind that.
(11:51):
But the benefits of combining accounts have been studied, and
they are significant because, according to statistics, you're going to
be happier if you do, You're going to experience greater
relationship satisfaction. Right, There's this added level of accountability that
helps to instill trust in the relationship. And then both partners,
as it turns out, are unlikely to spend in riskier ways.
And that's partly because what they buy is aside from
(12:15):
the credit card that you're talking about, the kit has
access to Matt, although she gives you at least generalities
what she's spending with that, the partner is going to
see what you're buying if you're spending directly from the
joint account. And so if you opt for those separate
accounts for fun money, yeah, you're opting for a little
more privacy, but that's not necessarily for the best for
(12:36):
your relationship, and each couple is going to have a
different stance on whether that's something they feel they need
or not. But I think the general statistics reveal an
underlying truth that the combination of finances as a couple
is going to make you stronger. Totally. Yeah, But then
how do you decide how much each of you gets
to spend? This is going to be highly dependent on
your relationship as well, and just the dynamics. And like
(12:58):
some folks out there think that the person who makes
more money or like they should be able to spend more.
Like you make more, you spend more others. I think
it's a percentage. It's like, hey, I bring home twice sixty,
then I'm gonna have ten percent more. You're gonna have
to do less. So I get the thirty two ounce beer,
you get a sixteen outpeer And maybe I don't know.
Do you ever take body weight into into account, Joe
(13:19):
when you're splitting a beer with your wife? Yeah? Oh yeah,
I actually do, yeah, because I'm like, if I give you,
I get sixty forty. That's also just because she doesn't
drink it. All the way I do. So Kate, it's
like a tiny person, So not like a literal tiny person,
but like she's just significantly smaller than I am. And
I'm like, and I think, oh, if I actually pour
you the same amount, this is gonna impact you differently,
it's gonna impact me. That being said, some folks think
(13:41):
that it should be split evenly each and every month,
but then others think that they should be able just
to spend hour they choose unless the cost of an
item is going to exceed let's say a particular threshold,
like one hundred bucks, that kind of thing. And so
these are all personal decisions. And I mean, in my opinion,
I think this is something you need to talk about
because I think every couple out there is going to
(14:02):
arrive at a different dollar amount. In our case, this
is something that we've talked about. And Kate always gets
more money than I do every single month, and that's
because of what we've included in her personal category as well,
which includes hair, like she doesn't get goes I would
get for a haircut, or it gets her hair color,
that kind of thing, make up products, things like that
you cut yours in your son's hair but not hers.
(14:22):
Huh not, I have to. We've talked about I've even
tried coloring. I've even tried the bolliage at home before
and it saved us some money, but it took a
lot of time. I don't think we're gonna do that again.
It didn't quite turn out I think as as excellently
as maybe she was hoping for as well. Or it's
good for you, you'd be on the hook for doing
it for the rest of your life. Yeah, But I mean,
(14:43):
what I'm highlighting here, though, is that I think each
couple is gonna arrive at a different point and it
doesn't necessarily have to be the same amount. It doesn't
even have to correspond with who is earning more money,
because that would be me. But in this, in our case,
in our relationship, she actually gets more to spend every
single month than I do. So yeah, I mean, I
think the recurring amount is a good way to think
about it. And let's say one of you is a
bigger spender than the other. Uh, then I think you
(15:06):
should make concessions for that, and and and sometimes kind
of like what you're alluding to, it's not even about
being a bigger spender. But it's like the things that
women need and I'm just generalizing here, they can be
more expensive than what men need. Like I just spend
less in general then my wife because I don't go
get my heirded right, like I there's some dudes out
there who do there are? And if that's like so
that's totally yes, they could be, but I think it's
(15:27):
worth me. But on the other side, I think about,
let's say the grocery budget, Matt, And there were times
where I could buy my craft beer at the grocery
store and my wife's like, I'm not drinking that stuff,
like or I don't care about the twenty two dollars
four pack or something like that. But but but but
I like it, right, and if I buy four of those,
that's significally adding to the grocery budget. So we have
to have that discussion, like, Okay, is that included in
(15:49):
groceries or is that something that I have to fork
over myself. And we typically kind of came down on
the line of, well, if I'm going to go over
a certain amount of craft beer spending, that's when it
falls on me. You give for like a little token sip.
That way you can justify it being a grocery right.
If I'm sharing, it goes back into the grocery find Okay.
But on the flip side, like we make room for
other recurring purchases in our budget, like it doesn't get
(16:10):
taken from our individual monthly allocated amount. Like let's say
one of us is going to see a therapist and
the other one isn't. Well, that doesn't necessarily come out
of my wife's money, Matt. That's just something that we
budget for as a family, you know, And one of
us might spend more than the other, and one of
us typically does, but the money still jointly comes out
(16:30):
of our account. And I guess one thing I want
to make sure that Shyanne knows. And this is really
important in marriage in general. But like, things don't always
have to be perfectly fair, and sometimes you just have
to you have to give up on that desire to
make things perfectly equal because that's just not going to
be the best thing for your budget or for your marriage.
Let's talk about big expenses as well, because I'm thinking
(16:51):
about let's say Shia wants to go on a big
trip with a friend or a family member, and his
wife wants to stay at home. If that's the case,
I think it might feel a bit unfair to her
to hang out at home and while he's using that
joint money to pay for it. If that's the case,
I think a conversation is again certainly needed, and like
(17:12):
you could ask and this is something you could talk about,
but is this going to delay some other goals that
we might be trying to achieve. If so, I think
that's going to be tough to stomach, and you're going
to have to come up with a way to reconcile that.
And so for you, like, maybe what that means in
this specific example is just finding some money you know
that pays for that trip in the joint account, but
(17:32):
then maybe more of it comes out of your individual
account or like your fun or your blow money. And
then the you know, in your case, since you're the
one taking this trip, maybe you find a way to
make some additional money on the side. Maybe you're working
some overtime, maybe you're kind of getting after selling clearing
out the garage. Actually, we've combined not only our lives
but our stuff, and it turns out we've got a
lot of redundancies here. Maybe I can unload some items
(17:54):
on Facebook, and then you can sort of channel some
of that money into this trip as well. But I
think looking for just different creative ways to fund something
like this that might go above and beyond the typical
monthly expenses. It could be wise and some other creative
ways too, right, getting a credit card, getting the travel
sign up, yeah, points, and then saying, great, this is
gonna fund at least the flight that I'm taking, as
(18:16):
that reduces the cost to the outlay that we're going
that we're gonna have. But yeah, those are discussions I
think're right now. You can find the money for multiple
places in your budget. You just have to kind of
come to an agreement and have an open, honest conversation
about it. There's just no perfect or even right or
wrong way to do this, but subtle the things, you
guys will settle into something that works for both of
you over time, and sometimes you kind of stumble upon
(18:36):
it through trial and error too, especially in those early years.
Ultimately start out with kind of the best agreed upon
things and then iterate from there. It's gonna take, you know,
kind of communication, work discussions to continue to hone in
on what the best path for managing your money together
is totally Yeah, eighteen years in, it's like second nature.
These are like conversations we easily have eighteen months in. Yeah,
(18:59):
it's some thing you're still waiting through. It's like, totally
get it. Shall you learn how to drive a car
or something like that? Yeah, yeah, you don't even think
about it now, like you just get any you go.
Whereas like if you're eighteen years old, all those accidents
happen those first few years of driving. It's either so
expensive to ensure. But Joel, we got more to get to.
We're gonna hear from a listener who is considering long
term care insurance whether or not it's a necessity. We'll
get to that more right after this. All right, Matt,
(19:28):
we're back. Let's get to you a question about investing
and whether or not the employer account is superior to
doing your own thing.
Speaker 4 (19:36):
Hi, Matt and Joel Miranda to hear from Louis Utah.
I've got a question about retirement accounts. I recently got
a new job that automatically contributes a fourteen point two
percent match of my salary to a four oh one
a plan. They're also set up to do an automatic
three percent from my pay to a pre tax four
oh three B. I also have the option for further
WROTH four oh three B or four fifty seven B
(19:58):
WROTH or pre tax contry fusions. At my previous job,
I contributed six percent to a ROTH for oh one
K to get the company match of four point five percent.
Since I'm already used to contributing the six percent, I
would like to keep at least that much contributing to
another retirement account. My question is what account is the
best option one offered through my new employer, or should
(20:18):
I look at an IRA that I could potentially roll
my previous four oh one k into as well some
other notes, I'm almost thirty in anticipate staying in this
job for several years. I also have the option of
having these accounts with either TIAA or Fidelity. Any advice there,
thanks so much?
Speaker 1 (20:34):
All right, Miranda's got all the different accounts available to her.
Joel listeners. Alphabet suit hit back thirty a couple times.
If you wanted to listen to all the options that
are that have been laid up here before us in
her question, And Miranda, I'm going to say that you
are in a pretty fantastic matching situation here. Just I
mean the fact that you get a match that's that
(20:54):
generous here with your new job. She said fourteen point two.
I think, So where did the point two come from?
I don't know, but like I love it. The fact
that she's got that much coming out of her paycheck now,
like that amount of her paycheck that her employer is
choosing to stick in is what she's got going on.
That feels so good, right yeah. I mean it's like, hey,
by the way, this is your salary, but you also
got a fourteen point two percent raise, just like right
(21:17):
out of the gate. When do you think about what
the average American savings rate is. It's far below that.
So to feel like you're hitting that is just amazing
because of the generosity of your employer from the get go.
Is that's off the truck. It's no wonder that she's
planning on staying put. Like, who wants to give up
that kind of a benefit. It's amazing. I'm also pumped
that she's planning on keeping her contribution amount to where
it was before. I think it's a pretty phenomenal idea
(21:39):
to keep an investing floor essentially right, Like, she's like,
you know what, six percent, that's what I was doing before.
I'm going to keep it going. I'm not going to
go below that, even if the match grows, even if
the total dollar amount that she is socking away for
her future is going up significantly. By doing that, she's
gonna hit that financial independence stage of life before she
knows it. Man, But Miranda, should you be going deep
(22:00):
into the four or three B four P fifty seven
B direction or should you be going into your own IRA?
I mean, I think you've got so much money going
into the employer plan, which is again awesome, but there's
a benefit in diversifying which accounts that you contribute to.
So having an IRA in addition to those two workplace
accounts offers you some additional flexibility, and we prefer for
(22:22):
you to opt for a WROTH IRA over a traditional
So I think that's where I come down, Matt, And
that's that's often where we come down. Once you get
the match, it's like, Hey, going to the roth IRA
and then maybe coming back to the employer plan after
you've maxed out the WROTH is typically not always, but
that's typically the best way to go, and it sounds
like your workplace plans are really fantastic, right, And if
(22:43):
you had even more match dollars available, we'd want you
to snag those additional dollars soak them up. Yeah, but
them out there though, No, No, so that that's not
the case. So having your own roth IRA and building
that up over time with those excess personal contributions above
and beyond, I think that would be the superior choice
for your investing dollars right now. Sure, So I'm going
to be a little two faced here because I was
(23:04):
just talking about how great it is that I think
she's not going below her threshold or going below and
investing floor. Essentially, it's admirable, right, But I'm going to
introduce the nuanced conversation of like intermediate, medium to short
term goals because it is so easy for us to
beat the drama of Miranda. You need to be investing more.
You need to be if it's the more the better,
(23:25):
the sooner the better. And that's because the vast majority
of folks who are out there are not setting aside
enough for their retirements. Given the fact that this is
a new job for her, given the fact that the
percentage that she's got going set aside towards retirement has
also increased. That's I'm thinking about it. That's a significant
amount of money, and I don't I would hate to
see her in a position to where she's a little
(23:47):
cash strapped because she isn't necessarily thinking about some of
these more medium term intermediate goals like I want to
buy a house, specific car, those two things specifically, Yeah,
I mean because those yeah, that takes a lot of
money to save up, but downpay And so she didn't
say anything about her housing situation that I heard her,
So no, okay, but house in a car, I mean,
ideally you're paying cash for your car, but that takes
(24:09):
up I mean, that takes a lot of money to
set aside that much money. Same thing with the down
payment for a house. I don't want you to forsake
some of these. I don't even want to call them
lifestyle goals, but just I mean they are, I guess right,
but in everything lifestyle eventually, like you call it retirement,
but at some point we're talking about your lifestyle within retirement.
And so I don't want you to forsake these short
term goals. With those two things in particular, you're you're
either talking about getting better financial terms, right or whereas
(24:32):
like say, saving twenty percent to put down instead of
having five percent to put down, you're gonna save a
bunch of money in that way. Or if you're paying
cash for the car instead of financing it, you're talking
about not having to take out a six or seven
percent loan these days. And that's if you've got that's
if you've got good credit. So I think what you're
getting at is if you over index towards retirement and
you're not also saving for goals and things that you
(24:54):
want to purchase in the coming years, then you're being
too myopic, right, You're being two laser fox focus retirement, retirement, retirement,
And I think that's obviously a really important consideration, but
you don't want to do it to the neglect of
other upcoming outlays that you're gonna have to make. I
think most listeners, yeah, keep saving, keep investing. But for
(25:14):
her specifically because she listens to the show, and because
she is the type of person to send us the
voice memo that tells me she's probably a little bit
more buttoned up than she's got a decent nest to
exent aside. So she asked too about like where maybe
she should open up the account, and I think we
should specific companies. Let's talk about that, and we typically
highlight a few, right, and we point to low cost
(25:35):
brokerages basically every time we talk about this. Matt Schwab, Fidelity, Vanguard,
those are the top three. They're not only like gargantuan behemoths,
but they also have just incredibly low costs index funds
that people can invest in. You could even opt for
robin Hood, which you love, Matt, because of their match. Yeah,
I know Betterment has been doing something similar because yeah,
(25:56):
Robinhood kicked it off. And now some of these other
online brokers are saying, wait a second, are we going
to offer matches to our customers too? And they're like,
I guess we have to since Robina did it. The
cat's out of the bag. So yeah, it's amazing. How
that's just a brand new thing that never existed before.
A match that you get from your brokerage and not
from your employer. Super super cool. Just prioritize, of course,
(26:18):
low cost, well diversified funds, no matter which one of
those firms you go with. And you mentioned too, the
ability to choose which company you go with from your employer,
Fidelity versus TIAA, and Fidelity is the choice there. And
it's not because tia is like a bad company or
anything like that, Like far from it. They are the
go to for a whole lot of nonprofits when it
(26:39):
comes to the investment brokerage house they choose, but if
you have the option of Fidelity, it's a superior choice
basically all the time. From a feet perspective, I think
of them, Matt and you can I think appreciate this.
They're kind of like the Aldi of investment houses. Yeah,
not the Costco, No, I think they're all the who
would be the Costco? Is Costco? Like Charles, Maybe seems
(27:01):
like they've got a little bit more going on in
the customer service, maybe some fancier options for you, but
they're not quite as discount. That's yeah. That might Bear,
might even be Aldie, I'm not sure, but that's true.
They're all great choices. I mean, at the end of
the day, Team Randa, she's not even thirty and it
sounds like she's investing close to a quarter of her income.
So just mad props to you. Keep it up. You're
(27:22):
gonna find yourself within that FI territory well before most folks,
and even before that, I think you are going to
be able to open up a lot of different options,
give yourself a ton more flexibility in the not so
distant future. Let's hear from a listener who is looking
ahead to the financial situation of his parents. He wants
to make sure they're a strong position there in their
later years.
Speaker 3 (27:43):
Hey, Joel and Matt, it's Nate from Oklahoma City ferst Off.
Love you guys and listen to you guys for I
think five years now. You guys help me settle on
the path to simplify my finance. And thank you so
much for that kind of question about long term care.
I was curious my parents have to be this question,
(28:06):
and I didn't know it for long term care when
someone's in a nursing home. We were wondering what assets
were protected from nursing homes to access, like retirement accounts or.
Speaker 2 (28:18):
Homes or anything like that.
Speaker 4 (28:20):
That's just my question.
Speaker 2 (28:21):
Thank mad.
Speaker 1 (28:22):
I wish we had like a medal or something like
that we could send to people who've been listening as
long as Nate has. They deserve it, like a challenge
coin from the Stoics. What's his name, Yeah, Ryan Holliday. Yeah,
he's got like all the coins and stuff in it
on you. He drops them and they hit the table
and you can hear them, like we've got beer caps.
That's right, we can send those out. Can you hear that? Well,
then Naked keep it in his pocket every time he
(28:43):
touches his pocket. He'd be like, oh, yeah, I love
that show. Someday I'm gonna die. It's like the what's
the Stoics? But they're momentum. Sometime I'm gonna die. But
for now, I'll listen to how to make it. You
should think about it. Glad the show's been helpful, Nate,
thank you for listening. Let's talk about long term care
andurance and just kind of thinking about planning for the
(29:03):
extreme future and for your parents. Less about extreme future,
more about near term stuff. These are questions Matt, I'm
sure you're having with your parents. I'm having with my
parents to a certain extent as well. A lot of
folks buy long term care insurance specifically because they're told to,
and in some cases it does make sense. But long
term care insurance can be so stinking expensive. It's not
(29:25):
even funny, and it's a far cry from what it
was like fifteen years ago. Premiums have skyrocketed, summerre up
something like five hundred percent over the last ten to
fifteen years. So talk about inflation, Matt, long term care
insurance premium inflation has been worse than eggs. And so,
you know, while long term care insurance can provide an
incredible benefit for a really expensive need, that's the thing.
(29:47):
It's like, you kind of want to ensure against something
like this because of how prohibitively expensive it can be.
Most Americans will need a few years of nursing home
care on average, right, And many who opt to take
out long term care insurance, well, they actually end up
dropping it before they're able to use the benefits because
of how expensive the premiums get. And yeah, it just
(30:08):
tends to become more than they barkin for. So, you know,
while avoiding long long term care insurance, it sounds like
a risky move, like, hey, if I don't get that stuff,
even though it's like ridiculously expensive, it feels like highway robbery,
then like I'm not going to be taken care of. Well,
dropping it before you use it is like the worst
thing in the world. It's like going to college for
three years, racking up a ton of debt, and then
dropping out before you get the degree, which is maybe
(30:30):
an okay situation to find yourself in if you say,
go to the local community college. But we're talking about
like Ivy League prices here when it comes to what
this long term care is going to cost. And then
with folks living longer, with the supply of the demand
and balance as well of the providers who are offering
this care to the elderly, I think this issue it
could actually get worse in the coming years. So let's
(30:51):
talk about funding long term care specifically. If you don't
have long term care insurance, well, you've got to spend
your own money, specifically until you reach the point where
Medicaid kicks in. But even then, Medicaid coverage it's only
gonna help in certain situations. It's not going to help
most middle class folks out there, and oftentimes what that
means is you're kind of out there on your own.
(31:11):
It's basically for people who are impoverish, who are destitute medicaids. Yeah, exactly,
if you built up a you know, not a ridiculous
elon must networth. But just like even just a nice
little tidy sum, sorry, Medicaid isn't going to kick in
to help you with long term care stuff. Yeah, and
so for Nay, I would hopefully your parents they've been
diligent savers. It's just important to factor this in, right, Like,
(31:34):
don't just project twenty five times your expenses and call
it a day, but also consider these future potential costs
and how you know they're going to add up over time.
This is one of those massive considerations that too many
folks aren't paying enough attention to. And you know, there
are other potential financial products and vehicles that can help
if you end up in a financial pinch. I'm specifically
(31:55):
thinking of a reverse mortgage. I think that's something that
folks are like, oh, yeah, we've always got that got
the house, But that's not ideal either. They can be
really expensive. The fees that are associated with those sky high,
and they can also prevent you from leaving your home
to your airs if you intend to. And like the
home specifically is just kind of like one of those
emotional things where I guess it depends on where you live.
(32:15):
You know, if you are living in a city and
it's much more trainsy, and your family isn't local, Well
maybe you don't care so much, but if you are
somewhere I don't know, was he in Oklahoma, But I
don't know. I picture like out in the more rural
setting and there's a family farm there spending a family
for generation, or like a home that I don't know,
a family member built and it's kind of been passed
down through the generations. That kind of thing. It's not
the kind of thing that you want to tap in
(32:37):
order to fund some of those later years, right, you
know what I'm saying. Okay, So Nate specifically asked about
nursing homes training assets, like is that a possibility? Well,
in some ways yes, but in other ways no, I
don't think not in the way that Nate intended it.
They can be really expensive with the way in which
I'm saying they can be asset trainers, because some predictions
are saying that in like twenty years, we'll be talking
(32:58):
about on average spending two one hundred thousand dollars a
year for the average nursing home facility. So to stay
in one for a year with a private room two
hundred grand. Does that include food, it's like an unlimited
buffet or like I think, well, yeah, of course INCLU food.
But like I'm sure we're gonna have more like robots
and stuff imported from Japan because think about that, they're
kind of going through that ahead of us. Hopefully we'll
(33:20):
learn a lot from that's actually a thing is yeah,
oh yeah, that's crazy. Yeah, robot's taking care of you.
I think we'll see more of that in the future too.
But the nursing home can't. And I think this is
what Nate was getting at. They can't drain your assets
without your permission, right. They can't like garnish your stock
portfolio or it starts selling stocks off, start selling positions
to pay for your care. But you know, if you've
(33:40):
been a good savor and investor, you're going to exceed,
kind of like you're talking about here, Matt. Eligibility requirements
for Medicaid. Every state, though, has different requirements, so familiarize
yourself with them. But if you're looking to if your
parents are thinking, well, Mendica, I've got Medicaid, I don't
need long term care insurance or I don't need to
pay attention to not spending down my retirement assets all
the way because Medicaid is going to care, it's going
(34:00):
to cover those costs. Was just not that simple or
easy most way too many people. Mat I looked up
at statistics something like forty six percent of people assume
that medicaid covers long term care for them. And again
for middle class folks, that's not the case. You're gonna
have to spend down your assets to make that happen.
You're gonna have to meet their resource limitation test. And
(34:21):
there are all sorts of like different nuanced ways to do.
It's really complex tackle that. It's very complex. Yeah, but
there's it's not like a fun process, no. Yeah. And
like you mentioned, spending down assets like your primary home,
it doesn't count as an asset under medicaid rules. And
so if you spent you know, two hundred thousand dollars
renovating that home in an attempt to spend that money down,
that's actually a strategy that some folks use. And then
(34:44):
like there's also these Medicaid complaint annuities that all that
being said, though, consider talking to an elder law attorney
in your state who specializes and medicaids strategy. This is
like a specific niche. It's a specific sort of branch
of law that I wasn't aware of up until recently.
It's like my cousin's a hand surgeon. Like there's all
(35:04):
sorts of surgeons, but she specializes in hands. And this
is like the same thing for attorneys, Like it's like
no elder law, but a medicaid specialist. Totally. Yeah. So
for you, Nate's you know, I hope this doesn't freak
you out, but it is another reason to be saving
and investing for your future. But what he's really asking
is what you already addressed, Joel. Like, it's not like
you owe money to a debtor and they've won a
(35:26):
judgment in a court of law and now they're gonna,
you know, garnish your paycheck. It's not like the federal
government coming after your four to one k because you
owe money to the irs. That kind of thing. Like,
none of this is actually going to happen, and I
think it's worth also having. I mean, hopefully this is
a conversation that you've already started, Nate, with your folks.
It is a conversation because it sounds like that they
asked you this but for everyone else out there, I
(35:47):
think it's worth having the conversation of what does it
look like for us to be a multi generational household.
I think it's highly underrated. And when we're talking about
the high costs associated with long term care, you kind
of alluded set at the beginning. I bet this is
a conversation you and cater having. We totally are. It
was a big reason why we were very comfortable with
putting a bedroom on the main level of our house
(36:07):
master around Maine. Dude, not because we're gonna need it
in the not too distant future, but maybe one of
our parents might be living with us at some point.
These are conversations like that we're literally in the middle of,
and once we get to a point to where where
we feel comfortable with the decision, I guess that we've made.
And maybe I'm saying this out loud as like accountability
to a certain extent, But I think it's important to
(36:27):
have these conversations with your parents because I think that
can alleviate some stress that they might be feeling as
they're looking ahead and thinking, well, how what if one
of us ends up in you know, and end up
in an assisted living home that kind of situation as
opposed to being like, hey, we got you, like we're
gonna take care of you. As a conversation I have
with your siblings too, if you have them, Yes, exactly, Yeah,
just to like divide and conquer a little bit, like, Okay,
(36:49):
what kind of situation are y'all in, Like, do y'all
have the ability to take this on? What do you
think five ten years from now? And obviously it's fluids,
it's dynamic, But I just like the idea of taking
some of that stress of them so that they can
focus on quality of life in the here and now,
as opposed to being like, well, we have to sock
this away for some unknown future that might you know,
that may or may not be something that we experience.
(37:12):
And there's also a fine balance between them, like I'm
not saying it for them to spend unwisely and foolishly, right,
because would it be nice for a parent to show
up with some assets to be able to like pitch
in towards household expenses. Sure of course, But I think
all of these situations are better had when there's an
open conversation that's taking place. Yeah, I mean, my grandma
is in her mid nineties. She's been living with my
(37:34):
parents first and then my uncle now recently for over
a decade. And then that's just involved a lot of
back and forth discussions between siblings, and I think conversations
that are probably hard but are probably so good. Yeah,
And so much comes down to like health, because even
in that if health took a term for the worst,
then things change, right or your flexibility to family values.
(37:56):
So just make sure that all those topics are on
the table you're discussing that so that you can and
eyes wide open, kind of march into the future as
your parents' age. But best of luck with that, Nate.
Matt We've got more to get to on this episode,
including index funds. Are they all created equal? Because it
sure seems like they might not be the same. One
listener's worried about the differences and performance between some of them.
(38:17):
We'll talk about that and more right after this.
Speaker 5 (38:27):
All right, buddy, we're back from the break, and of
course now it is time for the Facebook Question of
the Week, which is from Matthew and he wrote, do
y'all keep your hobby fund money separate from emergency fund?
Speaker 1 (38:40):
Basically, I buy and flip a ton of stuff to
fund my hobby. But it seems whenever I do this,
an unexpected bill comes up. I do have a nice
emergency fundhm. I like this question, you think, Jill. I
mean it sounds like Matthew is already doing the emergency
fund thing well, which is important, right. I like the
idea though, of kind of flipping stuff to fund a hobby,
a little side hustle. Actually it is keep it siloed. Yeah, yeah,
(39:01):
it's that mini side hustle to pay for things that
you might not otherwise have the funds for, right, Or
you'd have to cut back on other financial goal. So
let's say you're like, oh, no, I got to hit
that twenty percent savings rate, but I still want to
fund this hobby. I can't do both. Well, then you
got to find a way to make a little bit
of extra money. Or let's say you're prioritizing saving for
a down payment or maxing out your wrath Ira. You
don't have to cut back on those things because you're
(39:22):
finding another source to find the money so that you
can pay for that hobby. Whether it's like skiing, I
would say disc golf, but that's a really cheap one.
You don't really have to find much money to do
that one. But this is a great way, I think
to ensure that you're prioritizing something you care about without
sacrificing to wealth building necessities that we think people need
to be employing over the long haul. Totally. I think
(39:44):
a question I've got for Dan is like, what are
these what he calls unexpected bills that keep popping up?
Because if they're happening this frequently, like every time he
is looking to spend some money on his hobby, is
it possible to plan a little bit better for them,
or you know, like to put them into your regular budget.
Because there are true emergencies that come along, and that's
(40:04):
of course what your emergency fund is there for. But
we also find that some folks dip into the emergency
fund a bit too regularly because they haven't planned as
well as they could have for expenses that happen every
year or at the same time every month. Christmas that
comes around the same time every year. It's like not
a real emergency, but like they chalk it up to
an emergency because they didn't really have much foresight so
(40:24):
time about things coming up. Yeah, it just it takes foresight.
I like what you said there, and so as you're
looking at your budget just or maybe maybe maybe that's
the thing. Maybe he doesn't have a budget. But even
if you do have a budget, and let's say these
are expenses that haven't been accounted for, revise the dang thing,
because if some of those unexpected bills could be planned for,
then being able to rearrange like that is the solution here,
(40:45):
and it's going to help you to touch your emergency
fund a whole lot less as well to really for
it to be there for the true emergencies in your life. Right. Yes,
and you just mentioned tires briefly there. That's that's like
a great example of something that's coming down the road.
That's a good pun, right literally, go, they're balding as
we speak, right, and you need to be saving up
(41:07):
ahead for that expense and hopefully you can kind of
figure out, well, what's a usable life left, how much
is it going to cost me when I do replace
those things? And how much do I need to start
saving now to be prepared or it's the same thing
that happens every year around Christmas time. People are like,
oh crap, I think I'm gonna spend like nine hundred
dollars this December, and I didn't plan for that. It's
not an emergency, that's something that needs to be thought
(41:27):
of aut of time, and so should start that saving
in January? Right exactly? So should your hobby budget be
a line item in your budget? Well, it depends. I
think the reason to keep it separate would be to
incentivize you to keep making extra money to fund your hobby.
Speaker 5 (41:41):
Right.
Speaker 1 (41:41):
So, if you make less money in a given month,
you enjoy your hobby less. But if you make more,
you get to ramp it up and enjoy that hobby
even more, or at least bank more, so you can
keep it up longer. Right. So it makes me think
of a listener don't remember his name off the top
of my head. Matt was. I should know that, but
I don't remember. But he donates plasma to on vacation.
Ryan Kay Ryan Kay, okay, Ryan, You're the man. And
(42:04):
he still does this. Seems he's been doing this for many,
many years, and I think this is a great way.
It's similar to the way Matthew's thinking about it. It's
like I'm gonna go on a vacation up to the
level at which I bank money from donating that plasma, right,
And so the reason to include it in your budget
is to know that you'll get to enjoy it no
matter what, that the money's always going to be there
(42:25):
because you've set it aside. But the reason to not
do that is because I think it incentivizes you to
push the envelope on that side gig or on that
plasma donation side, hustle so that you so that you
actually have your INCENTIVI is to go make the money
to pay for the thing you want to do. Yeah, yeah,
I want to. I'll say a quick note. I know
not everybody out there is like super organized like some
(42:46):
folks love it. I myself, I just just yesterday spent
some time in Excel organizing some expenses, checking in on
the budget, seeing where things are landing this month. I
know for you that feels like one of those nice
heavy anxiety likes. Yes, I like, I like keeping tabs
on it. Man, not everybody. It's not their cup of tea,
you know, And that's totally fine, but you have to,
I guess account for that. And so while maybe for us,
(43:08):
because we've got all the different savings buckets set aside,
we've got three to six months worth of living expenses
in our emergency fund. If you have no buckets and
it's just this, I'm gonna call it the emergency slush fund.
How about that It's like this one big giant pile.
All the money just gets piled in there. I think
that's totally fine, But you just are gonna have to
have a little bit more. You're gonna have to have
more margin on hand to be able to account for
(43:30):
some of these things that otherwise you would have planned for,
but instead you're kind of drawing it from the emergency
slush fund, which I kind of like the more, I say,
But just get to another quick one. This is an
email from Dan and he wrote, if these funds, if
they're all tracking the S and P of five hundred,
which should be the same, how come there's a wide
difference between the performances. And he specifically he highlighted the
(43:51):
different returns between let's say, vou vanguards S and P
five hundred fund fx AIX, which is fidelities the actual
S and P. There's a lot of different funds out there,
But what do you have for Dan to chew on?
As he's considering these different options. Yeah, I mean this
is a good question, and I think if you do
look at the returns, you're going to see little idiosyncrasies
(44:12):
and you're gonna say, this is not the exact same thing.
What's happening there? And yeah, these funds are attempting to
mimic a specific index, but there are also just these
little idiosyncrasies that lead to slightly different results. The biggest
one is how much they cost to own, right, I'm
talking about the expense ratios at least in parts, but
also potential fees that some old school fund managers charge
(44:33):
to own those funds. And so, while costs have overwhelmingly
gone down for every day investor, specifically on index funds,
like Dan is highlighting, there are still some sperms using
the old playbook. They're feeding people to death. It's amazing
the price discrepancy between one S and P five hundred
fund the cheapest ones, and then another fund that mimics
(44:54):
the S and P. But it's within old school provider
who just charges norm and a leg still right, and
those costs eat into it could make one etf look
better than the other. The higher the fees, the greater
divergence from the index itself and then from other low
cost competitors. So that's at least that's at least one
reason that you might see more of a divergence there. Yeah. Yeah.
So for instance, let's take the case of VTI versus
(45:17):
f Z Rocks. So VTI is Vanguard's total stock market
ETF the other is offered by Fidelity. They're both attempting
to track the total stock market. VTI has a minimal
expense ratio, minimal cost. Fc Rocks well they charged nothing
but to pull that off. Fidelity they omitted some microcap
stocks from their fund in an effort to minimize costs
(45:40):
on their end. But still the performance of both is
quite similar. FC Rocks is up around ninety two percent
over the past five years, and VTI it's right up
there with it, but just a few percentage points below
eighty nine or ninety something like that. I mean, it's like, yes,
same ballpark is not too far off. They're probably both
in left field, close to the fence, right. But yeah,
And some of the reason too, why they at some
(46:00):
of these different companies is just the way that they're
structured as well ets are. They're just more tax efficient.
Specifically when you are owning. If you've got let's say,
an ETF versus a mutual fund within a brokerage account
that's taxable, well, there are fewer taxable events that take
place with an ETF, But if we're talking about in
a retirement account, there's not much difference there because you
(46:21):
don't actually realize those taxable events with it being tax deferred.
I think, and this is a good question, Matt, but
I think the ultimate reality for everyone out there listening
is just don't get bogged down in the minutia. I
think you could go in and you could research every
S and P five hundred fund and you can say
which one perform the best over the past five years,
and then you can make your decision based on that.
I think it's a bad idea. I think there's really
(46:42):
one thing worth looking at, which is how much the
funds costs to own, and whether they mimic closely enough.
And so as long as the fund itself offers enough
diversification to satisfy you don't worry about which S and
P five hundred fund or which total stock market fund
has done better. The performance over time really shouldn't very
significantly targeting funds I think are a different story because
(47:02):
the construction of those can vary pretty meaningfully from like
Vanguard to Fidelity to like everybody has their own kind
of proprietary formula. I think of like KFC that thirty
seven herbs and spices, Like you got to use some
different herbs and spices if you work at Church's Chicken
and so they probably don't even call it rbs and
spices because they don't want to compete with KFC on that.
But they're going to look a little more different, Like
(47:24):
the variation is going to be more significant, because the
percentages of different things are going to change more significantly.
But when it comes to I guess specific index trackers
like an SMP or a total stock market that I
would worry a whole lot less about those micro differences
in outcomes. That's right, All right, Let's get back to
the beer that you and I enjoyed, which was a
(47:45):
bossy blonde, an Imperial blondale by contrast artists and ales.
What did you think, buddy? So, in my mind, an
Imperial blond feels like a unicorn, Like how often do
you get your hands on kind of a specialty? Yeah,
because blonds are typically just these super laxa daisical, laid
back sort of beers that I think even non craft
(48:07):
beer people can appreciate. But a bossy blonde, it's like,
it's a serious blonde. Right, by the way, let's okay,
so the artwork, because we're all they don't hear or
they don't see what we're looking at. They just hear
saying bossy blonde. But they've got the manager from office
space standing there, you know, the Golden Retriever form. Yeah,
the guy that's like, yeah, I'm gonna need those deep
what the reports on my desk by this afternoon, and
(48:29):
it's a Golden Retriever. I'm gonna need you to come
in on Sundays. And he's said, yeah, I'm gonna need
those biscuits on my desk by tomorrow. So I just
don't want folks thinking that contrast is out there denigrating
the blonde. That's true. That's all just the golden Golden
Retrievers are in charge, right. I think blonds to me
can be kind of black, but this one had more oop.
(48:49):
So yeah, I really enjoyed it. Even though blonde is
not a style and normally go to I think an
Imperial Blonde might be one i'd be downe with. Yeah,
it didn't like it's got no roasty flavors, it's got
no dark, multi kind of flavors. It's got that loggery
kind of blonde like flavor profile, but just bigger. It's
just like a bigger, more serious version. It's chewy, it does,
(49:09):
it's funny, it says something. You know, they're talking about
dog biscuits, but it does almost have like a breakfast
biscuity kind of flavor profile going on, but just kind
of amplify it up in a serious way. That just
makes this a bigger, in my opinion, more enjoyable beer
for sure. I agreed yeah that you and I got
to enjoy it during our episode today, And you can
find our show notes up on the website at howtomoney
dot com. We'll make sure to link to any of
(49:31):
the resources we may have mentioned up there, for instance,
the elder law attorney, We'll link to a site where
you can find somebody locally who specializes in that. If
you find, for instance, your parents in a situation like
this where they're trying to find they're trying to be
a bit more strategic about how they how they might
qualify for something like Medicaid. Yeah but yeah again. You
(49:52):
can find that at how to money dot com and
so buddy, that's it. So until next time, Best friends out,
best friends out U
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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