Let’s dive into the week with some fresh listener questions we have lined up for you! And don't just stand on the sidelines- if you have a question you’d like us to answer, toss your voice memo our way. It only takes about 90 seconds to record and you can find a step by step guide over at HowToMoney.com/ask . Regardless of how random or bizarre you might think it is, we want to hear it!
1 - What should I do after losing my job during the recent mass government layoffs?
2 - Money is tight, so should we sell our condo that we’ve been renting for the past two years?
3 - I’d like a secondary source of income that generates $60,000 annually- should I consider ETFs, REITs, or traditional real estate?
4 - Is the Costco Anywhere Visa worth signing up for?
5 - How do I analyze whether buying a home is worth it if we’re only going to be there for five years?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Had of Money. I'm Joel, I'm Matt, and
today we're gonna answer some of your listener questions.
Speaker 2 (00:24):
Yeah, some questions like what to do when someone is
without work. We've got a listener Joel, who is part
of the mass government layoff. Another listener is wondering if
it's worth continuing to rent the condo that they used
to live in. They're currently in a tight spot financially,
so they're trying to like weigh the pros and cons there.
And another listener she's got her eyes on some passive
income streams. She's specifically, she's trying to figure out, like
(00:47):
what is the best way to achieve this. She's got
a few options she's that she's considering. But uh, hey man,
you notice I got a nice clean shave over here.
Speaker 1 (00:56):
Oh yeah, I do see that. You want to do
you want to touch it? I'm good offer.
Speaker 2 (01:00):
Have you ever been invited by another friend to touch
their face? Not that I know, I feel normally it's
the opposite. You're the one normally reaching out to touch
touch other people's faces uninvited, which is like I'm a hugger,
borderline assault.
Speaker 1 (01:12):
I get in people zones sometimes I asked that because
I had uh for the longest time, I will touch
your face. Bring it over here, you can do it
all right. That's pretty soft, baby, pretty smooth.
Speaker 2 (01:22):
Luckily you touched where whiskers don't normally grow, which is
most of my face. Yeah, you don't ever have hair there,
but I do chin in the upper lip of course.
And for the longest time I had Harry's. You like
the orange handled Harry's razor. They're one of the first
direct to consumer models.
Speaker 1 (01:36):
Did we voice for them like years ago? I think
we did.
Speaker 2 (01:38):
Yeah, Okay, so literally I still have the same razor.
This is so embarrassing, but literally the same razor from them.
I've never embarrassing because it's been dull for a long
time and I continue to use the same I didn't
buy new heads. I still have the same It came
with two heads. Yeah, and that's what I've been using
for I don't know. I guess we can look it
up for years.
Speaker 1 (01:56):
I shaped so rarely, partly because I have a similar
uh thought little fussful challenges you it. I have to
buy new blades almost never. I also use like an
electric razer most of the time.
Speaker 2 (02:06):
Okay, Well, I do like a clean shape because when
need it grows out, it gets itchy. That's what I
don't like is laying down to bed having the whiskers
scratch against the pillowcase and it's just a little bit scratchy.
Speaker 1 (02:16):
So I haven't shaving more recently.
Speaker 2 (02:18):
But you want to know the best way to convince
yourself that the razors that they saw at Aldi are
the absolute best. I guess keep using your nice razor
for maybe a year past when you should then get
the four pack for three dollars. And oh my gosh,
I shaved this warning dude, and it's like I was
in heaven.
Speaker 1 (02:35):
Yeah, it felt glorious.
Speaker 2 (02:37):
But I was curious what your thoughts were on the
uber cheap disposable razors that you can get.
Speaker 1 (02:42):
I'm fine with it. I think big razor makes everything
cost too much. You remember when dollar shave Club first
came about. It was a it was a revelation only
it's like twenty dollars shave club. Yeah, I still remember
that ad that they that was like, I don't potentially
the best. It was so inventive that the ad they
put out on it was like aube YouTube ad with
the CEO kind of walking through the factory and it
(03:02):
was hilarious and it kind of changed the game for
how direct to consumer ads were done. I feel like, you,
as an ad man, you should go.
Speaker 2 (03:09):
To some industry that needed disruption, is what they would say.
And he totally did.
Speaker 1 (03:12):
He told you, and he caught the attention to people,
and I think that's why it took off in a
lot of ways. And then Harry's was another one of
those companies trying to do something similar, and I think
those were really cool. But those also bring the prices
down some, but they don't bring them down to Aldie
prices exactly.
Speaker 2 (03:25):
And I think it's totally great. You know, how I
wised up was because because I didn't realize it was painful.
I was not looking forward to shaving because I'm like, oh,
it hurts so much. I'm like, wait a minute, why
does it hurt. I was like, Oh, my gosh, I
think I've had this same razor head or whatever blade
this's on here for maybe years, I guess. And Kate
gets the cheap raisers and I like reached over the
shower and grabbed one of hers and it looked kind
(03:45):
of gross and old, but even still that thing. Oh
my gosh, it was so much better than my current razor.
And so that's when I decided, Okay, at the very least,
I can get the Likira or whatever cheap o brand
that they sell at Aldi for like seventy cents a pop.
Speaker 1 (03:59):
Yeah, okay, So again, I use an electric razer most
of the time. I just kind of trim it up.
I don't go all the way down to the face.
But my go like Madman style is like perfectly right.
But my good buddy Clark, he is he's a big
fan of drying your razor thoroughly, and he says that
makes them last a whole lot longer, degrades the blade. Yeah,
so I don't. I don't use my my razors enough,
(04:22):
like in like traditional shaving to know that, but that's
what I hear from him. He's like always trying to
test himself here how long you can make.
Speaker 2 (04:29):
A blade, So doing that helps the blade last longer.
And also running it against So what I do is
I run it against my form the opposite way, so
nonding it Yeah, yeah, exactly, you're basically honing it so well.
I didn't know how up to date you were on
the blade lingo Joel's. But it gets rid of all
those tiny little nicks and smooths the blade out.
Speaker 1 (04:47):
Okay, but yeah, all the blades for the wind. Totally
a frugal move in my book. Man, Yeah, I dig it,
all right. Malice mentioned the beer we're having on this episode.
This is a KBS by Founders, a classic beer if
there ever was one the craft beer scene. Indeed, we'll
see if it holds up. We'll give our thoughts on
this one at the end of the episode.
Speaker 2 (05:04):
A like calendar, it says the original like they don't
even need it, doesn't need any other explanation.
Speaker 1 (05:08):
Yes, sure than this. Yeah, you just see those three
letters put together and it's like irs and you know
what's coming for you.
Speaker 2 (05:16):
And then that happens for those who aren't in the
No Kentucky Breakfast out. Looking forward to sharing our thoughts
at the end of the episode.
Speaker 1 (05:21):
But yeah, man, all right, if you have a question,
by the way, a money question you want Matt and
I to tackle, or really any question. If you have
a relationship question, if you have send it our way.
Well we'll take any questions here.
Speaker 2 (05:32):
Sure, what kind of advice or how we might steer
you wrong? But it sounds like fun.
Speaker 1 (05:37):
We'll try. I'll give it if you give it a go.
If you have like a style or a wardrobe question,
send that into Matt two. He's a style genius. But
for real, if you have a money question going to
how to money dot com slash ask we would love
to take your question on an upcoming ask out How
to Money episode, maybe next week. All right, Matt, let's
get to a question specifically about what to do when
(05:57):
you're impaled by doge when occurs, Hi, Matt.
Speaker 3 (06:01):
And Joel, this is Nancy from the Washington, DC area. First,
I want to start off by thanking you both for
sharing your knowledge and making personal finance so accessible and relatable.
So here is my dilemma. I started this year off
with high optimism and some pretty big financial goals, including
plans to max out my phone one K contribution for
the first time. I also plan to max out my
(06:24):
roth Ira contribution, which I have been doing for the
last three years. Lastly, I also had plans to finish
paying off my student loans to become debt free. Unfortunately,
these financial plans for the year have taken an unexpected hit,
as I was recently affected by the mass layoffs in
the federal workforce. I wanted to reach out for your
advice on navigating this difficult transition. So here are a
(06:47):
few things that I have done so far. One is
that I have already implemented a very bones budget something
I learned from your podcast. Two is I plan to
move in with family to minimize some expenses, including rent. Lastly,
I will also be applying for the unemployment program for
the state in which I worked. So my emergency savings
(07:07):
is currently at fourteen thousand because I have been working
on building six months worth of living expenses as calculated
from my burbones budget. I would greatly appreciate any advice
on anything else that I should be doing during this time.
I truly appreciate any insights that you can share and
look forward to hearing your thoughts.
Speaker 2 (07:26):
Joel, I love that Nancy started off with all of
the awesome goals that she had laid out before her, right, Like,
that is a lot of stuff, Nancy, that you were
trying to accomplish this year in twenty five.
Speaker 1 (07:36):
Yeah. But the truth is when you get laid off
all of those other goals.
Speaker 2 (07:39):
They essentially get put on the back burner. And I
think this more than anything. It can be tough from
an emotional standpoint when you are chomping at the bit
you're trying to eliminate that you're trying to grow your wealth,
and like, we still want to see you get those
student loans paid off. We want to see you max
out of four one k off in the future, but
for the time being, it's important to look at your
finances through more of a friage kind of perspective. Right Joel,
(08:02):
you mentioned like her getting impaled by Doge, Like, right now,
what you want to do is stem the bleeding and
the ability for you to stay solvent for a longer
period of time. That is, for you, right now, incredibly crucial.
Speaker 1 (08:13):
And that can be so demoralizing. Especially Let's say you've
been listening to the podcast for a couple of years
and you're like, boom, learn so much I've cut here.
I'm like, great, I just got to raise Maybe I'm
accelerating my ability to hit all these goals, and like
I'm going to be doing some of the things that
Joel and Matt have talked about a bunch and I'm
so pumped and I can't believe like all the progress
I'm going to make and then something like this happens.
(08:34):
It's a massive setback, feels like a gut punch, And
you know it's our goal here, Nancy, to help you
the best we can. Yeah, and yeah, the sort of
trioge thing, it's the name of the game. Right now.
You're already doing a lot of what we would suggest
based on kind of how you've reacted already in your question,
which just shows I think that you didn't stay breathless
for long. Incredibly nicely done on the bare bones budget
(08:57):
front for listeners who aren't familiar, we want everyone to
have a bare bones budget. You create it, you don't
necessarily implement it though, until a need arises. But it's
a really helpful exercise to perform, and it's crucial right
to enact it if income stops following in totally. You're basically,
you know, taking expenses down to the bare minimum. No
eating out, you're cutting subscriptions, you're cutting back on travel,
(09:19):
all that kind of stuff. Because when we're trying to
make every dollar that we have go as far as possible,
we want to limit those excess expenditures that aren't necessary.
They're nice to have, but man, you don't want to
have those because you don't want to run out of
your money. You're trying to make it last as long
as possible right now. Yeah, it's like a break glass
in case of emergency type of budget. Yea, And I
mean we've.
Speaker 2 (09:39):
Got one, and I will say too, I think it
could be even helpful. So for everyone who you know,
maybe they think they are immune to getting laid off
or don't foresee an income emergency in the near future.
But even just going through the practice of creating a
budget that is slimmer than the current one can allow
you to weather different storms. And this is something that
Kate and I have done. Like we've got a bare
(09:59):
bones budget, we also have like a just a lean budget,
like where we haven't cut back to the bone, and
certain expenses in our life we're not going to change
if things were to get a little bit more tight,
Like our grocery budget every month is pretty much going
to stay the same. We're not really gonna We've realized that,
you know what, that's kind of important to us. But
there are other things that we save up for throughout
the year, like vacations or how much we spend around Christmas.
(10:22):
Things like our blow money, things like that that we
you know, it's unaccountable dollars that Kate spends, money that
I spend. Those are things that we compare back. So
like literally just being able to cut it by two
thirds allows us to have a not so bare bones budget. Yeah,
and so what's great about going through the sexist.
Speaker 1 (10:37):
Such if you're not completely devoid of income you can
implement if you're completely.
Speaker 2 (10:40):
Devoided van oh aye, you want to cut back to
the bone. But this is so I guess I'm addressing.
This is especially helpful I think for folks who might
be interested in financial independence, because you might be thinking,
all right, how much money do I have?
Speaker 1 (10:50):
Like okay, if we.
Speaker 2 (10:51):
Wanted to say or even like take a sabbatical or
something like that. We talked about that a few months ago.
The ability to stretch your dollars and have those dollars
go first there. I think that's just a great exercise
to allow you to see what your money can do
for you, which is ultimately the name of the aim
man agreed.
Speaker 1 (11:06):
Yeah, and that's how I think the bare bones budget
can be powerful even if you never actually have to
use it. Like there is something about the exercise that
opened your eyes to maybe some of the to use
a Doge term, the waste fraud abuse in your own life. Yeah,
that you might want to.
Speaker 2 (11:22):
Look out, like having a parachute, right, or like like
a life raft on a boat. It's like, well, we
don't hope that we ever have to use that thing,
but it's nice to know that it's there just in
case the worst were.
Speaker 1 (11:30):
To happen, and it would be nice. I think if
you could easily cut something like a car payment. That's
typically harder to do, right, and you don't necessarily want
to get rid of your liquid cash to eradicate a
car payment because they don't have money forward to the
other bills. But in some cases I would say it's
worth looking towards those bigger line items to see if
you can reduce or mitigate the impact of that expense. Right,
(11:51):
Nancy sounds like she doesn't have a mortgage. The fact
that she can move in with her family is huge
from a cost saving that perspective. That is a massive
That's one of those line items that typically is it's
impossible to undo, at least in the immediate short term,
maybe in more of the medium term. When your lease
is up. You can make a decision like that, but
(12:11):
the fact that Nancy has been able to reduce her
living costs to that extent is impressive. And by the way,
Nancy having amass that fourteen thousand dollars emergency fund, this
is exactly why it's there, right. Oh yeah, job loss
is often unpredictable, and you're gonna be thankful that you
had more savings rather than less if you're out of
work for a while.
Speaker 2 (12:30):
And part of the reason is because job hunting isn't
always quick like you like we think that like, oh,
I've got the ability to jump back out there and
land something. But we don't want you to feel like
you have to take the first job that comes along.
We want you to have some options. And if your
budget is tight, you've got a nice little savings nest bag.
Well you can have a bit more confidence to turn
something down that isn't necessarily going to be a good
(12:52):
fit for you, maybe something a position or a job
that doesn't make sense for your career trajectory, or even
one that doesn't pay anough. Yeah, the ability to have
more money on hand allows you to hold out for
a job that does meet those parameters. And I just
mentioned Katie North The Art of the Sabbatical. That was
the episode we recorded with her. Remember, one of the
(13:13):
things that she wrote about in her book was the
fact that it typically takes three months longer to land
a job than people think.
Speaker 1 (13:20):
Yeah.
Speaker 2 (13:20):
And what I love about that though, is that it
is that it depends on the individual. Because you can
take somebody who's super optimistic and they're like, oh, I'm
going to find something in like two weeks. It's like, okay,
maybe actually it's going to be three months in two weeks.
Speaker 1 (13:31):
Yeah.
Speaker 2 (13:31):
But then you got somebody who's a bit They're like,
you know what, I'm not totally sure what's going to
be out there for me. You know, I'm kind of
getting older. I don't have a ton of skills this.
It might take me, like, I don't know, six months
and like nine months. Okay, maybe it'll take you like
nine months or a year. But according to her clients
and the folks that she ends up coaching, she found
across the board that it typically took folks three months
(13:52):
longer than they thought it would in order to find
that next position.
Speaker 1 (13:55):
And what you're highlighting here, Matt, is that having a
robust emergency fund puts you in a position of strength,
and that's that's where you want to be, right You
don't want to be in kind of the place where
you are coerced and are taking a job not because
someone forced you to, but you had to coerce yourself
to take the first job that came along. And Nancy
Shelson mentioned that she's applying for unemployment benefits. You pay
(14:17):
into that system, Nancy, and now you get to tap it.
This is not contrary to what many people believe, Matt,
some sort of some form of government benevolence, like we
all pay into the unemployment system, and so we deserve
to get that money if we lose our job. This
is going to help bring in some income, but it's
not going to be any anywhere near the paycheck that
you're used to getting, Nancy. So just note that, And
(14:39):
what else should you be doing? I would say, tap
your network. You want to get the ball rolling on
that asap. You know, similar to unemployment benefits. You've built
this network out and now it's the time to use it.
So set up coffee dates. I mean, let them, Let
let the people in your network know that you're looking
for work and what you're looking for. And I mean
the whole point of developing that network over a long
period of time and staying in touch with people is
(15:00):
to be able to what when you're thirsty, you've already
dugged it well, as our friend Jordan Harbinger says, so
time to get out your straw and start sipping. Yeah,
if we're gonna follow the analogy, i'nel yeah, Okay. Another
piece of advice I'd share with Nancy is to not
pay down on debt anymore than she needs to in
order to maintain these minimums, and to stop completely contributing
(15:22):
to retirement accounts. She said that she went into to
max out her roth IRA this year. Well, if you
get another job like super quick, well you might still
be able to do that, but definitely don't contribute at
all until then. Like this is an instance in a
period of time in your life when cash is keen,
Like you want to be liquid, you want to have
that in hand. And we almost never tell folks to
avoid putting money into their roth ira or to decelerate
(15:46):
debt payoff. But if your income, if it dries up,
you know at least for a small season here, so
should those goals, and so you want to focus on
is triage, is keeping the boat afloat, is doing only
what's necessary in order to for you to get by.
I think, last, but not least, what I would suggest
Nancy is to take care of yourself mentally and physically.
It can be easy to get down about being jobless,
(16:06):
but you didn't lose your job because you stink like.
You didn't get fired because you're a bad employee. This
is something that's totally out of your controls, like vibe
shifts in the political space. So just we would suggest
finding healthy outlets, maintaining your friendships, work out, go running,
do some push ups. It's hard not to be anxious,
but know that you've set yourself up to maneuver this
(16:27):
set back well, you are well prepared to handle this.
Down to her, I think for.
Speaker 2 (16:30):
Her specifically too, since she's a part of this mass layoff,
there's almost I feel like there's more of an excuse,
almost like I think folks are gonna be like, oh man, yeah,
you're a part of just like the insanity that took
place last month, totally get it. There's a part of
it that does feel a bit external to her and
hopefully there's no resume gap that needs to be explained.
It's self explanation. I think that might be able to
be helpful from an emotional sort of emotional health mental
(16:53):
health standpoint. And again, I want to go back to
the fact that the fact that you are moving back
in with your family tells me that you've got a
good relationship with your folks or with your family. I
would also lean on them. I think this could be
an awesome time for you to kind of rekindle a
relationship with them.
Speaker 1 (17:07):
Where Like I just.
Speaker 2 (17:09):
Think back to my younger years and all I wanted
to do was get out of the house, like do
my own thing and start my own life. But then,
like as you get older, you realize that, man, like
your your parents, your family, there's some wisdom there.
Speaker 1 (17:18):
Even if you don't necessarily.
Speaker 2 (17:20):
Want your life to look exactly like your parents, there's
still benefit to be gained there, or even you know,
benefit that you can share as well. So, Nancy, I
want you to look at the silver lining, I guess
of moving back in with your folks and for it
to not necessarily be this like, oh, man, I guess
I'm just not cut out to be a grown up
on my own. No, this is a great time I
think for you to kind of strengthen those relationships even further.
Speaker 1 (17:41):
Agreed, All right, We've got more to get to on
this episode, including the Costco credit card. Is it worth
the benefits that they tout? We'll talk about that and
more right after this.
Speaker 2 (17:57):
Of course, jol if you can only talk about one retailer,
it's going to be Costco, And of course my one
retailer is going to be.
Speaker 1 (18:01):
Aldi bry Fitting during this episode, do you ever like
the MTV they would have the Claymation Death Battles death match?
What if there was what if there was an Aldi
verse Costco? One who would win?
Speaker 2 (18:12):
I mean, I gotta think it'd be Aldi, just so
dang scrappy, you're so wrong. We will get to the
Costco credit card question. Maybe we'll even get to a
check secrets, a secret early retirement question. We'll get to
this here in a minute. Let's now hear from a
listener who has been a landlord here for a minute
and they're trying to figure out whether or not it's
still all that is cracked up to be.
Speaker 4 (18:33):
Hey, Matt and Joel, my name is Chris, My husband
and I bought a condo in the city in twenty
nineteen and refinanced in twenty twenty with a rate of
two point eight seventy five. We then bought a house
outside the city after having a baby in twenty twenty three.
We kept the condo and have been renting it out
for the last two years at thirty two hundred per month.
This year we lost a residential tax credit, which increased
(18:53):
the monthly mortgage payment to twenty four hundred and eight
dollars Monthly hoas are two twenty and the annual insurance
is about six sixty. We are now making only a
couple hundred dollars a month off it in cash. The
equity grows a little over nine hundred per month, and
the numbers will only go up from there. If we
were to sell right now, we would pocket about one
hundred and forty eight thousand after taxes and fees. The
(19:17):
house we bought has already appreciated about fifty percent, but
selling it would mean having to find somewhere else at
the current higher rates, and we wouldn't get as much
for our money. We planned to slowly fix up the
house and sell it in about four years. Money is
tight right now with our high rate on the house,
childcare expenses, and a home equity loan. We have after
need to pour a large chunk of money into just
making the house litable. We had to remove about forty
(19:40):
years of smoking damage that was so bad that a
major national disaster cleanup company wouldn't touch it. We both
picked up side jobs to help pay for this. I
drive for Amazon Flex a few nights a week, and
my husband works at a local retailer. Although selling the
condo could pay off our home equity debt and also
our car loan, which is only about fifteen thousand dollars
right now, I'm not sure we should give up the
(20:01):
extra income, no matter how little it is. To avoid
capital gains. We would need to sell before August thirty first,
twenty twenty six. My question for you guys is it
worth holding onto the property long term if we're making
less than six thousand dollars per year, if you incorporate
repairs and incidentals. I would hate to lose the low
mortgage rate, and we hope to use the income from
the property in the future to fund our daughter's five
(20:23):
twenty nine plan. I would love to hear your take
on this best Friends.
Speaker 1 (20:27):
Out Well, Matt allowed to cover here by the way,
that best Friends Out the smoking damage. Chris is a
longtime listener, Yes she is. She knows what's up. We
say that at the end of every episode. Yeah, and
for the folks who don't, and then we leave last
all the way till the end, which wouldn't I'm guessing
as most folks probably before cut out five? Well, that
smoking damage sounds nuts? Does damage disaster company? I had
(20:48):
a friend who worked for one, and they so they
see some crazy, nasty, mind weird stuff. Yes, yes I do.
And yeah, the man his job. I did not envy it.
I'll say that, Chris. Let's get to the heart of
your question. That condo with the sub three percent rate,
it's a gorgeous thing, and I think I just want
to talk about this for a second out because it's
hard to put a number to how much it's actually
(21:10):
worth to hold on to a low interest rate mortgage
in an environment right where inflation is higher and where
you couldn't get a mortgage anywhere close to that these days.
Friend of the Show, Ban Carlson, he tried, he tried
to kind of wrap his arms around this question recently,
and I think this is at least helpful, even if
it's not a fully sufficient answer. He said, two years ago,
you would have been paying around forty percent of the
(21:32):
purchase price in interest costs over the life of a
thirty year loan. Now interest costs are more than the
cost of the house. So so you bought a five
hundred thousand dollars house, Matt. What Ban Carls is saying
is you would have paid two hundred thousand dollars in
interest back in those or in those low mortgage rate days.
Now you're paying more than five hundred thousand dollars in
interest over the life of the loan. Sucks. We're talking
(21:53):
about hundreds of thousands of dollars saved in interest vers
buying that property today. It's insane when you put it
like that, but maybe that puts some helpful context around
how valuable it is to have that locked in low rate.
Speaker 2 (22:04):
It doesn't mean it's a slam dunk for you to
hang on to it, though it's very attractive. But let's
discuss the tax implications, because it's it's rare that a
tax that's due goes from nothing to a lot based
on one singular deadline. But in the case here of
selling a former primary residence, that's exactly what happens. If
you sell in the next year, you get to avoid
(22:26):
tax altogether. But if you wait a bit too long, yeah,
you're gonna end up owing a boat load. So if
you're not in it for the long haul, if you
don't want to continue to be a landlord, selling it
before that deadline in order to avoid capital gains taxes,
it makes a ton of sense. Yeah, I get why
she's also thinking through that, because I don't necessarily hear
her saying that she hates being a landlord, but she's
(22:47):
highlighting the numbers here. Before she was making a good
bit of money. Now she's like, man, we're not making
nearly as much. It almost feels like an insult. It's
like getting slapped in the face. But that doesn't mean
just because you're multi cash flow isn't as strong as
it used to be, doesn't mean that there's still not
a case for keeping that property, for hanging on to it.
Speaker 1 (23:03):
I wouldn't be making the decision to sell based on
the monthly profit alone, but the real value of holding
onto real estate. It's often an increase in value you're
going to realize over time, she mentioned, I think that
the property was adding nine hundred dollars a month in
equity equity. That doesn't sound far fetched. And the truth is,
when it comes to real estate, someone else is paying
off your debt. You make maybe not a whole lot
(23:26):
every month, but you also watch the value rise over time,
and so over the course of a couple of decades,
this piece of real estate can be a life changing
financial asset. It's just not as easy or as sexy,
right as some of the folks on the Instagram real
estate Right they want to make it sound, those influencers,
They make it sound like your instant path to riches
(23:46):
is owning some real estate, and as any normal person
who has bought rental real estate knows, it just doesn't
work like that. So I think the answer to buy
or sell, at least in part, comes down to whether
you want to go through pain to get those gains
or whether you want to sell and snag the games
you've made already in order to do smart stuff with
it now to relieve some of that current financial pressure.
(24:09):
It's it's a tough question. Matt, totally.
Speaker 4 (24:11):
Yeah.
Speaker 1 (24:11):
So I'll play devil's advocate.
Speaker 2 (24:13):
I'll make a case for selling because the one hundred
and forty eight thousand dollars dollars.
Speaker 1 (24:16):
That she's going to pocket it could help to pay
off that car.
Speaker 2 (24:18):
Of course, she could eliminate that home equity debt, which
I'm guessing is probably fairly high now given where interest
rates have.
Speaker 1 (24:26):
Headed close to a nine percent rate.
Speaker 2 (24:27):
And I think it could also allow a little more
flexibility to work, maybe a little bit less, maybe even
DII some of those repairs that you want to make
to your current home and then there.
Speaker 1 (24:35):
No one else will do them for you.
Speaker 2 (24:36):
Yeah, well, so sounds like she already had to do that,
but like they're looking to make additional improvements in order
to be able to reap even more of an equity
reward in a few years. But there's something to be
said for selling an investment tax free in order to
get rid of debt to cash load these expenses that
are also increasing the value of your current home. Right,
and so it's not like going on a vacation I
(24:58):
guess where it's or buying a a super fancy car
that's going to completely depreciate. But selling it could also
allow you both to focus a bit more. I think
even on growing your career. You didn't say what it
is that you and your husband do full time, but
if you're able to focus on that like a laser,
and or able to ordinarily boost your income at your
day job, I think that could be a totally reasonable
(25:19):
argument as well. And that's because I think side gigs
are good from a short term perspective, right, Like, if
you've got a near term goal that you're trying to
pursue and you got something that you want to eliminate,
I think a side gig, a side job, working nights, weekends,
even they can allow you to achieve that goal faster.
But I think that they can be detrimental for most
folks over the long haul. But I mean, it's hard
(25:41):
to sustain, especially when you once you start growing your
family and you have kids totally in the mix. Yeah, yeah, no,
I agree, But I mean I guess that being said, like,
if I were in her shoes, if I was charged,
Like and obviously we don't know all of her all
the details here, everything that's going into her decision making,
but she said that they basically have a baby at home.
It sounds like they had a baby like two years
ago or something like that. As a parent, if I
(26:02):
were in your shoes, I would be more willing to
sacrifice now while they're young, before they have permanent memories,
in order to achieve and like just go after whatever
it is that you want to do to eliminate this debt,
to get rid of that car lom, and to allow
yourself more options as they get older. And this is
a question, like I've asked a lot of older parents
to other friends of ours, because it's in my mind
(26:24):
a debate. Am I going to wish I had more
time in the here and now or like more time
down the road, like once the kids are off to college.
And like almost it's almost unanimous, Like there's been like
a couple folks who are just like, man, the kids
are off in college. The time that we've been able
to spend together as a couple in our empty nester years,
it's awesome. We're going on vacations, we're doing this, we're
doing that. But the vast majority of folks are saying, man,
(26:46):
I wish I had more time in like these prime
parenting years when they're forming these permanent memories, and like
when you are like imparting so much wisdom or at
least that you're trying to write. You know, you're like
trying to raise your kid, right or at lest you're
playing legos together. Yeah, yeah, and so like, and you
get to a point to where that's not as necessary.
Speaker 1 (27:04):
But the stage of.
Speaker 2 (27:05):
Life that they're in, they're in like this early stage
where you know their daughter is like two or three
or something like that.
Speaker 1 (27:11):
So yeah, I don't know.
Speaker 2 (27:13):
I think I'm leaning a little bit towards like getting
after it, maybe not selling the property, not selling the condo,
hanging on to it, like grinning and bearing it into
here and now knowing that this is going to be
something that's going to be when at your back for
years and decades to come.
Speaker 1 (27:26):
So one other thing that might help if Chris and
her family, if they decided to make that decision, is
to not prioritize investing in a five pointy nine plans.
She mentioned that as being a big goal, and I
think it's a noble goal, but it's also one that
should be put on the back burner, like way on
the back burner. We always want folks to prioritize their
own financial health and investing for their own future before
(27:48):
they start socking away money for their kids college. One
little caveat here, Matt. That's aside from a small early contribution,
I don't know a lot of five point nine plans,
stuff like a minimum twenty dollars investment or something like that.
Put twenty just to get the fifteen year timeline rolling
for the roth Ira conversions. It's just like a just
a small nerdy note. But I do think it's important,
So put twenty bucks in. But then don't stick anything
(28:09):
else in that five to twenty nine plan. It's there
are just no scholarships for retirement, but there are for college. Right,
There's so many ways to reduce the price that you
pay for higher education. Also, do you know if your
kid's gonna go yet? You don't, And so if you were,
I'm down with prioritizing five to twenty nine plans if
you've jumped through all those other hoops first. But please
don't feel the pressure to make a big decision like
(28:31):
selling this condo in order to accomplish what I think
is more of a secondary or tertiary money goal. You
can always ramp up contributions in the future, and maybe
maybe you don't amass as much in that five twenty
nine plan as you hope for as you thought you
were you were going to get. But that's okay. I mean,
we want to make sure that you're planning for your
own financial future and that you're not burning the candle
at both ends so hard, right, that you can to
(28:53):
achieve some of those financial goals that you've set out
for yourselves totally.
Speaker 2 (28:57):
And even though you do have that ability to roll
funds from a five to twenty nine into a wrath,
keeping that money there in that condo to where that
thing's cash flowing off down the road fifteen to twenty years. No,
it gives you the option, yes, to be able to
pay for college directly, or if.
Speaker 1 (29:11):
You're not in a position to do that, to be
able to help supplement you and your husband's income. Right,
that's a great point.
Speaker 2 (29:16):
Well, it just gives you more options, like you're not
completely earmarking it and siloing that money to only go
towards higher education.
Speaker 1 (29:22):
A lot of people think the five twenty nine that's
a vehicle to save for college, but you're right holding
on to just pay for it around property as invested.
That's what when we talk with Brandon Turner back in
the day, he bought i think a quadplex for and
he's basically had this plan to pay it off in
eighteen years so that all the cash flow coming from
it could fund his daughter's college. Like it's an outside
of the box approach, but it's a good one.
Speaker 2 (29:44):
It's one of the ways that it's basically magical how
fungible money can be. Yeah, but Joel, let's hear from
our next listener. This is a listener who is looking
to cultivate a secondary source of income for herself.
Speaker 5 (29:58):
Hey, Matt and Joel. My name is Mary and I'm
from Southeast Michigan. I've been listening to your show for
years now, and I've learned so so much from the
both of you and Joel. I used to listen to
The Clark Howard Show when you were on it as well,
and so I learned a ton from you back then too.
Thank you both and keep up the good work. My
question for you today is about cultivating a secondary or
(30:20):
supplemental income source. I have a W two job and
I would like to start up essentially a side gig
that will supply me with a secondary source of income
in addition to that W two job. I would like
for that secondary income source to in ten years time
provide me at least sixty thousand dollars a year. So
(30:41):
achieving that sixty thousand dollars a year in ten years
or so, I originally planned to use rental properties to
get there, but I'd also like to get your take
on other options. Would using reads or dividend yielding ETFs
be comparable? And for your information for this question, I
plan to you the property management company when it comes
(31:01):
to the rental properties to deal with the typical day
to day activities. But I'd love to get your take
on what I might need to consider if the income
that I'll get from dividends and ETFs will be similar
to that of a rental property. And for your knowledge
as well, for rental properties, I would be looking at
(31:22):
properties that provide a six to ten percent cap rate.
Love to get your thoughts.
Speaker 1 (31:27):
Thanks guys, Oh Matt, Mary she mentioned my work with
Clark back in the day and worked with was.
Speaker 2 (31:34):
That the clerk that you mentioned earlier too? It was
as far as you likes to extend his razors yep.
So I worked with Clark Howard for fourteen plus years
it was glorious. Still stay in touch with those folks.
My little sister still works on the crew over there.
What a great, formidable period of my life. And Mary,
I love this goal that you've got, by the way,
attempting to build up another source of income to replace
(31:54):
your W two income. It's brilliant, right. The emergency fund,
it's basically short term insurance to help you if you
were to lose your job. But you're thinking about cultivating
some long term insurance too, which we think everyone should
be doing to one extent or another. And often, as
you alluded to, that takes a while to develop, right.
It doesn't happen overnight. Whether we're talking about doing it
(32:16):
through the stock market, or we're talking about building a
business on the side while you're working full time to
generate more revenue, or we're talking about owning rental properties.
It's going to take time to hit that critical mass
of sixty thousand dollars of income.
Speaker 1 (32:30):
A year that you're shooting for. But you're giving yourself
I think a long enough runway here. We really think
that you can meet this goal in a decade. But Matt,
some people want to turn on that's spiking immediately they're like,
how can I get this in a year? And it's like, well,
not going to happen, probably not yeah, but ten years
maybe that's long enough. Yeah, it depends on a few things.
Speaker 2 (32:49):
Like this makes me think of We recently interviewed Shun
and she actually had a similar goal.
Speaker 1 (32:54):
We talked to her last week.
Speaker 2 (32:55):
Even though she had a fancy job, she had that
fancy consultant gig, she still started a side hustle as
photographer in order to bring in extra money to accelerate
that goal. And so the first suggestion that we'd make
is to at least consider starting a side business as
part of the answer here, Like, you don't have to
work over ninety hours a week like Seung did, but
building up a small stream of side revenue is going
to help you to get closer to that income goal,
(33:18):
and it can increase your ability to invest at the
same time, because you're going to have more dollars flowing in.
So so much of this comes down to how much
personal time you're willing to give it. And that's my
biggest concern is that she named a lot of passive
sort of avenues to have an additional stream of income
and like, you can do that, but that's going to
take an incredibly ambitious amount of investing over the next
(33:41):
ten years. If you're looking to draw down sixty thousand
dollars annually, I'm assuming that she's expecting to continue that
stream going for the rest of her life basically. So
I don't know, let's late, we don't need to dive
into the details yet, but bottom line like that is
some seriously aggressive investing that she would have to do
in order to pull something.
Speaker 1 (33:57):
Like that off. Agreed, So yeah, I think what you're
hinting at here is Matt is probably going to take
pulling a bunch of different level levers, one of which
will be reducing expenses, another which could be increasing your income,
and aside, hustle might be a big part of that.
Speaker 2 (34:12):
Yeah, and well, the big I think the biggest difference
here is is like how much sweat equity are you
willing to put into it? Because if you're thinking like, well, no,
I just want this to be this automated thing, like
you said, it definitely can't be pulled off in one year,
but even ten years is a pretty tall ask. However,
you can change the equation, you can change the factors
that go into this cake that you're baking. If you're
(34:33):
willing to give it a little bit of sweat equity
like that changes the game. And she specifically was asking
about real estate. I mean, I think that's one of
the reasons that makes that so attractive, is that you're
combining capital but then also your ability to.
Speaker 1 (34:46):
Dive in there and like mess with it. That's exactly right. Yeah,
I mean, I think I do lean towards real estate
as the answer for this. I think that that's for
a couple of different reasons. You know, if done wisely
with the long term mindset, leverage can be your friend
on the real estate front. Right, you can buy a
property that has positive cash flow with a twenty to
twenty five percent down payment, And on top of that,
actually you might be able to get incredibly creative by
(35:07):
house hacking, with a guide to that on our website.
So if you're looking and willing to think outside the
box a little bit, I think that can accelerate your
returns and accelerate your cash flow. And by being a
more flexible homeowner slash investor, you might be able to
either decrease your timeline or increase your cash flow goal too.
It just all depends on kind of what you're highlighting
(35:28):
here about how uncomfortable you're willing to get, how much
elbow grease you're willing to put in, how much of
the suck are you willing to embrace, right, and how
much dedication are you willing to put into kind of
amassing a small real estate portfolio. You know, local real
estate markets they're less efficient than the overall stock market,
which means smart investors can find deals that are harder
(35:48):
to find in let's say the publicly traded stock market
space you mentioned, though, using a property management company that
would make the numbers harder to pull off. We always
suggest for Newbee landlords to do self management for a
couple of years at least, to learn the ropes, to
know the questions to ask, and you get pretty familiar
with the whole process by doing that. So, I don't know,
(36:09):
maybe that's another place where you could use some of
that elbow grease to manage the property yourself, make sure
those numbers are better, and then at some point down
the line you can offload that to a property manager. Totally.
Speaker 2 (36:21):
Yeah, this is why I think this is sort of
like a secret early retirement question, because there's not a
whole lot of her saying that, like I'm looking to
start a whole new side business, a whole new gig.
And that's when it gets challenging because she did mention
investing in dividend producing stocks, and I think this is
at the truly at the heart of her question. I
don't think that there is any particular magic in going
that direction right, or opting for reads that are shedding dividends,
(36:46):
that kind of thing where you are earning money that way.
Instead of focusing on dividends, just focus on creating a
diverse portfolio of investments that's going to grow meaningfully over time.
When you look at the data stocks that pay higher dividends,
they actually underperform the S and five hundred and So
maybe instead just invest in vu something as simple as
Vanguard's S and P five hundred ETF and abiding by
(37:09):
something like the four percent rule. You could tap those
funds down the road even if you aren't fully retired.
I think there's there's sort of like this mental hurdle,
like people don't want to sell their positions, they don't
want to sell their securities, but like that's what they're
there for yeah, folks, a lot there's like the oh,
how do I get income generating assets? That's what stocks are.
And so once you get past that mental hurdle of
(37:29):
knowing that, like, Okay, if I need those funds, I
then sell some shares, I'd rather grow that's your income.
Speaker 1 (37:34):
I'd rather grow the pot bigger than have a smaller
pot that throws off dividends. Right, That's kind of what
you're getting at, And when you look at the numbers,
growing the bigger pot is typically done through investing directly
in something like an SMP or total stock market index fund.
It's better than prioritizing companies who pay higher dividends totally.
Speaker 2 (37:51):
So again kind of speaking to the early retirement part
of her question, I mean, assuming like it sounds like
she's got some money, but let's just assume that she's
starting from zero. If she's looking to be able to
draw down sixty thousand dollars a year ten years from now,
so a full decade from now, that means she needs
at least seven hundred and fifteen thousand dollars on hand.
(38:11):
And that's something with like a I think I put
in like a forty year runway before that turns into
a negative number, which means investing fifty thousand dollars a
year starting now again, assuming that she has zero dollars
set aside.
Speaker 1 (38:24):
Let's just say that you woke up.
Speaker 2 (38:25):
And you're like, oh, this is a new goal of mine.
I've not prepared at all for this. This is what
it would take. It's something it's like setting aside like
a little over four thousand dollars every single month, which
is really that's really.
Speaker 1 (38:37):
Tough to take your throwing cold water on this one.
Speaker 2 (38:39):
Now, I'm just saying I want to be realistic, like
you have to You're going to need to have at
least seven hundred and fifty thousand dollars, if not more.
Speaker 1 (38:46):
On like that.
Speaker 2 (38:47):
I was gonna say, that would be that assumes a
perfect market. That assumes a perfect eight percent. So I figured,
you know, on average, you're looking at ten percent eight
percent with inflation, So that assumes a perfect eight percent
every single year of compounding.
Speaker 1 (38:59):
And then it's too assumes inflation calms down a little bit. Exactly.
There's a lot of a lot of assumptions here. A
lot of people would say you need to save, have
invested at least a million, hire.
Speaker 2 (39:08):
Even more than that in order to be able to
pull this that a minimum to be able to pull
this off. You're still looking at a pretty large sum
of money, which is totally doable. Yeah, but I'm just
trying to be realistic here when you actually crush the
numbers to see what does it take to be able.
Speaker 1 (39:22):
To pull this thing off. And again, Mary, this is
not us crapping on your goal of getting here, Like
we're all for it and we think it's possible. It
just might take extra work on your part to pull
this off and thinking outside the box a little bit more,
being willing to maybe go two links that other people
aren't willing to go to in order to get this
secondary source of income. But we've seen other people do this,
(39:42):
like we highlight people, we talk to people on the show,
Matt who have done similar things. You and I have
done similar things right in order to grow that gap
in a meaningful way so that we didn't depend nearly
as much on our w to income. We think it's
a fantastic goal and we think this is very doable
for Mary. She just might have to adjust her expectations,
I think, either on timeline or on the amount effort
(40:04):
she's gonna have to put into a reaching this goal
totally and again.
Speaker 2 (40:06):
Based on the fact that she says she used to
listen to Clark back in the day, based on the
fact that she's listened to us for a while, she's
got money on hand, I'm guessing she might have, like
she's easily got five figures on the second base already,
if not six figures, and she's just looking for how
to best deploy that money. And that's when you, Yeah,
like we said, you look more to some of the
lifestyle moves that you're willing to make if you're looking
to not change your lifestyle at all, all right, you're looking. Yeah,
(40:28):
you're looking to the market. You're looking to invest passively.
But if you're willing to roll up your sleeves a
little bit, bust out some of that elbow grease, you
can achieve that goal a bit.
Speaker 1 (40:35):
Faster, no doubt. Where did the term elbow grease come from?
By the likes, I don't know. I don't feel like
my almost terribly griefing, but maybe I'm the anomaly that.
Speaker 2 (40:42):
Is it grease that you get on your elbows from
getting down to dirty or it almost say were you
thinking that like you need to apply some grease to
your elbows.
Speaker 1 (40:50):
Man, that's poor interpretation on my part. All right, We've
got more to get to, including what about ownership timeline
of a home. That's certainly impact whether or not it's
a good decision. We'll talk about that and more right
after this. All right, buddy, we are back for the break.
Speaker 2 (41:13):
Let's now take the Facebook question of the week, which
is from Megan. She asks, does anyone have the Costco
credit card? I'm a new Costco member. Welcome to the fold, Meghan,
and I would love to hear about your experience with
their credit card.
Speaker 1 (41:26):
Thank you, Joel. Do you like the Costco credit card?
Are you a fan?
Speaker 4 (41:29):
Yeah?
Speaker 1 (41:29):
I am. I By the way, are you only a
fan of the big box for reatailer? I still itself.
I still remember the day I joined the club, and
not not really, but you get your picture taken.
Speaker 2 (41:40):
A lot of us really do remember it because it's
not often that you stand there in front of the
screen and you know, they tell you to smile at
the camera, do whatever else.
Speaker 1 (41:47):
It wasn't life changing in the way I thought it
would be, but I'm so glad it did because being
a Costco member has given me a lot of benefits.
Speaker 2 (41:54):
I actually do recall as well, because it was only
a couple of years ago or two years ago.
Speaker 1 (41:58):
Gosh, let me hold, let me pull up, Mike, I was.
I went Costco credit card right here, busted out. Man.
You look at it because it tells you how long
you've been a member since since February twenty fourteen, So
I've been in a member nineteen over eleven decade. Okay.
Speaker 2 (42:10):
I was not willing to join because it was so
far from where we used to live. We used to
live in town and maybe you had to drive out
to the burbs. And I realized, at least for us
at that point in time, it was not going to
be worth it. Spoken like a true leab Yeah, but
now I don't even know what that means. I hear
the kids say, no, I love it.
Speaker 1 (42:24):
Yeah, Okay, let's talk about specifically the Costco credit card.
It is great, like Costco membership is fantastic, but so
is the Costco credit card. I think if you're a
Costco member, it's a no brainer. Like, I don't know
why you would be a Costco member and not have
the Costco credit card. Sometimes madam at the gas station
filling up, obviously using my Costco credit card, and I
see people using a different credit card and I'm like, huh,
(42:47):
I like scratched my head. I don't understand it. What
kind of spine you do it on? Other people? Look
at that? Whether Yeah, I don't look at anybody. I'm like,
head down.
Speaker 2 (42:56):
Oh, it's not head down, It's just I have like
I want to spend as little time I'm in the
gas line as possible.
Speaker 1 (43:01):
I'm quick. But then while it's pumping, what else are
you doing? I'm people watching? Oh are you Yeah, I'm
cleaning out the car. There's a there's free trash can
right there that I don't have to like empty the
bag every single time. You don't clean out the car,
just stand there and stare at people. Usually my kids
are like running around in there, and I'm you know,
I'm like just standing there for I like do a
little bit stretching maybe, And then I'm like, what credit
(43:22):
card do they use? No?
Speaker 2 (43:23):
Man, I go I opened the door, pull all the
trash out of the side compart, you know, like you've
got all the different pockets and there's always gum wrappers
and oh sure, like coffee cup whatever, just all sorts
of trash. That is the at least for us, the
clean out the van. Let's get this thing look a
half decent time. Okay, yeah, smart, I'll look at other
people's credit card. But I love that you do.
Speaker 1 (43:41):
Yeah. Well, I mean when I look and I see
people using something else, it makes no sense to me.
Speaker 2 (43:46):
You go there and try to explain to them that, hey,
why are you doing this?
Speaker 1 (43:50):
You should get this car because of the specifically because
the gas cash back. Right, So, so it's four percent
at gas stations, it's five percent now only recently when
you're buying gas at Costco. So you get five percent
cash back on Costco gas.
Speaker 2 (44:03):
Which is also the most affordable, highest quality of grass
that you can purchase.
Speaker 1 (44:07):
So it's a no brainer. Yes, if it's nearby and
in your in your schedule. So and you have to
pay with the visa. By the way, at Costco used
to be an AMEX. I just don't think there's any
reason to use a different visa card when you're checking out, Like,
get the Costco card, especially because there's no annual fee
attached totally.
Speaker 2 (44:23):
Yeah, and on top of that, you get three percent
cash back on travel, including if you purchase like one
of those Costco travel bundles, which I personally have never done,
but one of these days I'm gonna get around to
doing it, Joel. But you can't use one of the
cards where you're earning five percent, like the custom Cash
card is what I'm specifically thinking of.
Speaker 1 (44:40):
You have to use a visa card. The Warehouse clubs
also don't qualify as.
Speaker 2 (44:45):
A grocery store, so you can It's not like you
can get a Blue Cash preferred six percent back because
it's not a grocery store. On top of that, you
can't use the AMX and so like, and you can't
use the City Double.
Speaker 1 (44:53):
Cash either, like you got to get the Costco card,
like one two percent cash back on all Costco purchases
with the Costco credit card. So yeah, again, why would
you use anything else? I could see if there was
an annual fe attached, like you might have to run
the numbers, do some math. But there's no harm, no
foul on having an additional credit card. Even if let's
say you only use this credit card for Costco purchases
(45:15):
and for gas, then I would say this card, having
this card in your arsenal makes sense. It makes sense,
all right.
Speaker 2 (45:21):
Another quick question from this is actually a different Megan
on the Facebook group, but she wrote, anyone know of
a spreadsheet that analyzes a home purchase from an investment perspective?
We know that we're only going to be there for
five years, so we want to be more strategic about
what we buy.
Speaker 1 (45:36):
Joel, what do you think I'm gonna say, don't buy
the home? Probably that's a TLDR. That's the quick answer.
But you know, Matt, you and I we always talk
about the importance of timeline when it comes to home ownership, yep.
And whether or not it makes sense, or it's going
to pay off, or it's going to be a better
financial move for you. The expense of buying and selling
can be significant. So there are significant costs associated with
(45:59):
both of those endeavors, and so if you're bumping them
close together within a five year timeframe, the cost could
be prohibitive. Right. So, if you own a home, let's say,
for a couple of years, even if you see some
equity growth, the seller in this case often has to
come to the closing table with cash to cover closing
fees and agents costs and stuff like that. I think
big ups by the way to Megan for asking this
(46:21):
question before she buys the house. I've heard way too
many folks, Matt who buy the house. They've heard home
ownership is smart, they haven't thought through the details, and
it ends up costing them because let's say they live
in the home for three years or something like that. Well,
their own home ownership timeline wasn't long enough and they
ended up losing in the process. They would have been
better off renting totally.
Speaker 2 (46:39):
Yeah, And Megan also said she's looking at this from
an investment perspective, but I don't think that she wants
to own this as a rental property. I think what
she's asking about is whether the financial benefit will be
superior when you are considering owning a home versus renting
a home, given those transaction costs that you just mentioned
their Joel, and when you look at what home prices
(47:00):
have done over the past fifteen years or so, that
you know, the typical reaction for most folks, especially realtors,
folks in the real estate space, they're going to tell
you to buy every single time instead of rent. They
would say that you'd be you'd be an idiot to
not purchase a home, you're going to come out ahead.
And in one sense, they have a vested interest in
telling you that, Matt, of course you've got that. But like, like, yeah,
(47:21):
like if you look at history, yeah, your homeowners they
have made out like bandits in recent years. But you
also can't count on these recent trends continuing far off
into the future, or even for the next five years specifically.
Speaker 1 (47:33):
Right, I mean, the truth is it's highly unlikely that
the housing market is going to experience similar, ongoing significant
price increases over the coming fifteen years. I would be
shocked if the coming fifteen years looked a lot like
the last fifteen years in terms of home price acceleration.
That's because price increases can't out pace inflation. They can't
(47:53):
outpace wages forever. Right, we're already seeing prices stalling and
predictions of price declines in the near term from some outlets.
The truth is, if you look back you bought in
twenty thirteen you sold in twenty eighteen, or if you'd
bought in twenty eighteen and sold in twenty twenty three,
those are both five year timelines, you would have done
quite well for yourself. But those might be the exception,
not the rule. And so if you look just a
(48:13):
recent history instead of a longer stretch of history, you
might be doing yourself a disservice assuming that something's going
to be true that likely isn't going to be when
you zoom out. The five year ownership timeline, it's really
the minimum to avoid potentially losing real money in that transaction,
at least when we're talking about a longer perspective. And
I'm just I'm worried, Matt, about someone sticking to a
(48:35):
five year ownership time but we always say five to seven,
and typically we prefer seven. Five years just might not
be long enough.
Speaker 2 (48:41):
Yeah, well, especially given the massive disparity between rent prices
right now and then the typical mortgage payment these days
in most cities, and specifically because she said that she
knows she's only going to be there for five years,
like maybe they're moving to a college town and they're
there for like a graduate degree or something. I don't know,
especially given that I would suggest renting. It's what I
would do if I were in your shoes given a
(49:03):
similar timeline. And we don't have a so because of that,
we don't have a spreadsheet recommendation when it comes to
something like this, But do check out the New York
Times rent versus by calculator, which is totally great.
Speaker 1 (49:14):
And the only other way.
Speaker 2 (49:16):
That this that I would change from mind, were I
in your situation, is if the what it is that
the NRA is like if the industry gets a massive
shake up, basically when it comes to commissions fees paid.
Speaker 1 (49:27):
Towards realtors because we haven't seen that. But we haven't
seen that like there's been talking about, are not the NRA.
Speaker 2 (49:32):
I always say that very different organization, National Association of Realtors.
Speaker 1 (49:36):
They've had a stranglehold.
Speaker 2 (49:38):
Where you're paying six percent and if that completely gets
up ended, well, my answer is also going to change,
because all of a sudden, the vast majority of the
transaction costs gets eliminated. Housing prices for the most part,
are fairly stable over time. We see them typically go
up into the right cross your fingers. We don't see
another massive decline like we saw in No set A
(50:00):
with a great recession, but that's like a once in
a lifetime thing in my opinion, you eliminate these massive
transaction costs. I think we do see people purchasing at home,
living there for two or three years. Maybe they see
a little bit appreciation, maybe they don't. But it's not
even that big of a deal because the transaction costs,
the known expense that comes with selling a home is
no longer there.
Speaker 1 (50:19):
It would make the whole real estate market more liquid,
people would be willing to buy and sell a whole
lot more easily. But because the transaction costs are so prohibitive,
we have to basically prescribe an ownership timeline of a
minimum of five better to be seven, ten is ideal
or I don't know the long mister conservative, paying some
maybe then you move, you move elsewhere, and you hold
on to that home and you rent it out. That's
(50:40):
like the ideal ideal. But yeah, I think given a
five year timeline and what's happening in the market right now,
and how much you could save every month by renting
instead of paying that mortgage, renting makes sense for the
vast majority of people on a short time scale, totally.
Speaker 2 (50:55):
Man, Let's get back to the beer that you and
I enjoyed, which was a KBS by Founders Thing.
Speaker 1 (51:00):
Man, this is a beer we've had many a time. Yeah,
but it's been a while it's been a long while
for me and this is which we had some more. Yeah,
this is a classic, I will say though, A good
a really good barrel age stout, but it can't compete
with some of the modern incarnations at a lot of
smaller craft breweries now of a barrel aged out. I
just don't think it has as much going on as
some of the some of my favorite local players maybe
(51:22):
are able to bring, but don't.
Speaker 2 (51:23):
Don't you think sometimes there's too much going on? Like
what I love about this it's like a classic tuxedo man.
Like it's so freaking sharp, not like like in a
taste like how it tastes kind of a way, but
like it's it's classic, Like you got those classic cocoa
nib chocolatey notes, you've got those coffee notes.
Speaker 1 (51:40):
It could use a little more barrel, in my opinion,
a little more wood.
Speaker 2 (51:43):
It's like Will Ferrell more cowbo or wood and I
would be I'd be happier.
Speaker 1 (51:47):
Yeah, still so good. That's the thing. I'm like, it's
it's really really good. It's like a solid B. But
it's not like an A. It's not an A. It's
just not it's those a lot of fighting words. I
think for most das, I guess at some point it's
kind of like you go back to some of those
early beers that were highly touted. I'm thinking of like
Pliny the Elder or whatever, like that's a great IPA
(52:08):
from out on the West Coast, but it doesn't compare
to us some of the IPAs coming out of let's
say Bissell Brothers or different style. Yeah, they are, but
different style. I'll take Missile Brothers every day. I would.
Speaker 2 (52:18):
Still this is a barrel aige style. I still give
it a solid A. Is it my absolute favorite? No,
There's some super interesting ones that that I've had out there,
but in my opinion, this one still holds up. And
the cool thing is this is readilarly available on shelvesease days.
It never was in the past. I literally just went
in grabbed a single and I was like, Oh, that's amazing.
I thought of that when buying that. I was like,
(52:39):
that's it's amazing how we live in now. Yeah, it
really is an abundance.
Speaker 1 (52:43):
Of riches for sure. So Matt, that's going to do
it for this episode. We'll put links in the show
notes to some of the resources we mentioned on today's episode.
If you have a money question for us, please do
send it our way, recorded in the Voicema moment app
of your phone. Email it over to us at Howdomoneypod
at gmail dot com. Matt, that's going to do it.
Until next time. Best Friends Out, Best Friends Out,
Welcome to Had of Money. I'm Joel, I'm Matt, and
today we're gonna answer some of your listener questions.
Speaker 2 (00:24):
Yeah, some questions like what to do when someone is
without work. We've got a listener Joel, who is part
of the mass government layoff. Another listener is wondering if
it's worth continuing to rent the condo that they used
to live in. They're currently in a tight spot financially,
so they're trying to like weigh the pros and cons there.
And another listener she's got her eyes on some passive
income streams. She's specifically, she's trying to figure out, like
(00:47):
what is the best way to achieve this. She's got
a few options she's that she's considering. But uh, hey man,
you notice I got a nice clean shave over here.
Speaker 1 (00:56):
Oh yeah, I do see that. You want to do
you want to touch it? I'm good offer.
Speaker 2 (01:00):
Have you ever been invited by another friend to touch
their face? Not that I know, I feel normally it's
the opposite. You're the one normally reaching out to touch
touch other people's faces uninvited, which is like I'm a hugger,
borderline assault.
Speaker 1 (01:12):
I get in people zones sometimes I asked that because
I had uh for the longest time, I will touch
your face. Bring it over here, you can do it
all right. That's pretty soft, baby, pretty smooth.
Speaker 2 (01:22):
Luckily you touched where whiskers don't normally grow, which is
most of my face. Yeah, you don't ever have hair there,
but I do chin in the upper lip of course.
And for the longest time I had Harry's. You like
the orange handled Harry's razor. They're one of the first
direct to consumer models.
Speaker 1 (01:36):
Did we voice for them like years ago? I think
we did.
Speaker 2 (01:38):
Yeah, Okay, so literally I still have the same razor.
This is so embarrassing, but literally the same razor from them.
I've never embarrassing because it's been dull for a long
time and I continue to use the same I didn't
buy new heads. I still have the same It came
with two heads. Yeah, and that's what I've been using
for I don't know. I guess we can look it
up for years.
Speaker 1 (01:56):
I shaped so rarely, partly because I have a similar
uh thought little fussful challenges you it. I have to
buy new blades almost never. I also use like an
electric razer most of the time.
Speaker 2 (02:06):
Okay, Well, I do like a clean shape because when
need it grows out, it gets itchy. That's what I
don't like is laying down to bed having the whiskers
scratch against the pillowcase and it's just a little bit scratchy.
Speaker 1 (02:16):
So I haven't shaving more recently.
Speaker 2 (02:18):
But you want to know the best way to convince
yourself that the razors that they saw at Aldi are
the absolute best. I guess keep using your nice razor
for maybe a year past when you should then get
the four pack for three dollars. And oh my gosh,
I shaved this warning dude, and it's like I was
in heaven.
Speaker 1 (02:35):
Yeah, it felt glorious.
Speaker 2 (02:37):
But I was curious what your thoughts were on the
uber cheap disposable razors that you can get.
Speaker 1 (02:42):
I'm fine with it. I think big razor makes everything
cost too much. You remember when dollar shave Club first
came about. It was a it was a revelation only
it's like twenty dollars shave club. Yeah, I still remember
that ad that they that was like, I don't potentially
the best. It was so inventive that the ad they
put out on it was like aube YouTube ad with
the CEO kind of walking through the factory and it
(03:02):
was hilarious and it kind of changed the game for
how direct to consumer ads were done. I feel like, you,
as an ad man, you should go.
Speaker 2 (03:09):
To some industry that needed disruption, is what they would say.
And he totally did.
Speaker 1 (03:12):
He told you, and he caught the attention to people,
and I think that's why it took off in a
lot of ways. And then Harry's was another one of
those companies trying to do something similar, and I think
those were really cool. But those also bring the prices
down some, but they don't bring them down to Aldie
prices exactly.
Speaker 2 (03:25):
And I think it's totally great. You know, how I
wised up was because because I didn't realize it was painful.
I was not looking forward to shaving because I'm like, oh,
it hurts so much. I'm like, wait a minute, why
does it hurt. I was like, Oh, my gosh, I
think I've had this same razor head or whatever blade
this's on here for maybe years, I guess. And Kate
gets the cheap raisers and I like reached over the
shower and grabbed one of hers and it looked kind
(03:45):
of gross and old, but even still that thing. Oh
my gosh, it was so much better than my current razor.
And so that's when I decided, Okay, at the very least,
I can get the Likira or whatever cheap o brand
that they sell at Aldi for like seventy cents a pop.
Speaker 1 (03:59):
Yeah, okay, So again, I use an electric razer most
of the time. I just kind of trim it up.
I don't go all the way down to the face.
But my go like Madman style is like perfectly right.
But my good buddy Clark, he is he's a big
fan of drying your razor thoroughly, and he says that
makes them last a whole lot longer, degrades the blade. Yeah,
so I don't. I don't use my my razors enough,
(04:22):
like in like traditional shaving to know that, but that's
what I hear from him. He's like always trying to
test himself here how long you can make.
Speaker 2 (04:29):
A blade, So doing that helps the blade last longer.
And also running it against So what I do is
I run it against my form the opposite way, so
nonding it Yeah, yeah, exactly, you're basically honing it so well.
I didn't know how up to date you were on
the blade lingo Joel's. But it gets rid of all
those tiny little nicks and smooths the blade out.
Speaker 1 (04:47):
Okay, but yeah, all the blades for the wind. Totally
a frugal move in my book. Man, Yeah, I dig it,
all right. Malice mentioned the beer we're having on this episode.
This is a KBS by Founders, a classic beer if
there ever was one the craft beer scene. Indeed, we'll
see if it holds up. We'll give our thoughts on
this one at the end of the episode.
Speaker 2 (05:04):
A like calendar, it says the original like they don't
even need it, doesn't need any other explanation.
Speaker 1 (05:08):
Yes, sure than this. Yeah, you just see those three
letters put together and it's like irs and you know
what's coming for you.
Speaker 2 (05:16):
And then that happens for those who aren't in the
No Kentucky Breakfast out. Looking forward to sharing our thoughts
at the end of the episode.
Speaker 1 (05:21):
But yeah, man, all right, if you have a question,
by the way, a money question you want Matt and
I to tackle, or really any question. If you have
a relationship question, if you have send it our way.
Well we'll take any questions here.
Speaker 2 (05:32):
Sure, what kind of advice or how we might steer
you wrong? But it sounds like fun.
Speaker 1 (05:37):
We'll try. I'll give it if you give it a go.
If you have like a style or a wardrobe question,
send that into Matt two. He's a style genius. But
for real, if you have a money question going to
how to money dot com slash ask we would love
to take your question on an upcoming ask out How
to Money episode, maybe next week. All right, Matt, let's
get to a question specifically about what to do when
(05:57):
you're impaled by doge when occurs, Hi, Matt.
Speaker 3 (06:01):
And Joel, this is Nancy from the Washington, DC area. First,
I want to start off by thanking you both for
sharing your knowledge and making personal finance so accessible and relatable.
So here is my dilemma. I started this year off
with high optimism and some pretty big financial goals, including
plans to max out my phone one K contribution for
the first time. I also plan to max out my
(06:24):
roth Ira contribution, which I have been doing for the
last three years. Lastly, I also had plans to finish
paying off my student loans to become debt free. Unfortunately,
these financial plans for the year have taken an unexpected hit,
as I was recently affected by the mass layoffs in
the federal workforce. I wanted to reach out for your
advice on navigating this difficult transition. So here are a
(06:47):
few things that I have done so far. One is
that I have already implemented a very bones budget something
I learned from your podcast. Two is I plan to
move in with family to minimize some expenses, including rent. Lastly,
I will also be applying for the unemployment program for
the state in which I worked. So my emergency savings
(07:07):
is currently at fourteen thousand because I have been working
on building six months worth of living expenses as calculated
from my burbones budget. I would greatly appreciate any advice
on anything else that I should be doing during this time.
I truly appreciate any insights that you can share and
look forward to hearing your thoughts.
Speaker 2 (07:26):
Joel, I love that Nancy started off with all of
the awesome goals that she had laid out before her, right, Like,
that is a lot of stuff, Nancy, that you were
trying to accomplish this year in twenty five.
Speaker 1 (07:36):
Yeah. But the truth is when you get laid off
all of those other goals.
Speaker 2 (07:39):
They essentially get put on the back burner. And I
think this more than anything. It can be tough from
an emotional standpoint when you are chomping at the bit
you're trying to eliminate that you're trying to grow your wealth,
and like, we still want to see you get those
student loans paid off. We want to see you max
out of four one k off in the future, but
for the time being, it's important to look at your
finances through more of a friage kind of perspective. Right Joel,
(08:02):
you mentioned like her getting impaled by Doge, Like, right now,
what you want to do is stem the bleeding and
the ability for you to stay solvent for a longer
period of time. That is, for you, right now, incredibly crucial.
Speaker 1 (08:13):
And that can be so demoralizing. Especially Let's say you've
been listening to the podcast for a couple of years
and you're like, boom, learn so much I've cut here.
I'm like, great, I just got to raise Maybe I'm
accelerating my ability to hit all these goals, and like
I'm going to be doing some of the things that
Joel and Matt have talked about a bunch and I'm
so pumped and I can't believe like all the progress
I'm going to make and then something like this happens.
(08:34):
It's a massive setback, feels like a gut punch, And
you know it's our goal here, Nancy, to help you
the best we can. Yeah, and yeah, the sort of
trioge thing, it's the name of the game. Right now.
You're already doing a lot of what we would suggest
based on kind of how you've reacted already in your question,
which just shows I think that you didn't stay breathless
for long. Incredibly nicely done on the bare bones budget
(08:57):
front for listeners who aren't familiar, we want everyone to
have a bare bones budget. You create it, you don't
necessarily implement it though, until a need arises. But it's
a really helpful exercise to perform, and it's crucial right
to enact it if income stops following in totally. You're basically,
you know, taking expenses down to the bare minimum. No
eating out, you're cutting subscriptions, you're cutting back on travel,
(09:19):
all that kind of stuff. Because when we're trying to
make every dollar that we have go as far as possible,
we want to limit those excess expenditures that aren't necessary.
They're nice to have, but man, you don't want to
have those because you don't want to run out of
your money. You're trying to make it last as long
as possible right now. Yeah, it's like a break glass
in case of emergency type of budget. Yea, And I
mean we've.
Speaker 2 (09:39):
Got one, and I will say too, I think it
could be even helpful. So for everyone who you know,
maybe they think they are immune to getting laid off
or don't foresee an income emergency in the near future.
But even just going through the practice of creating a
budget that is slimmer than the current one can allow
you to weather different storms. And this is something that
Kate and I have done. Like we've got a bare
(09:59):
bones budget, we also have like a just a lean budget,
like where we haven't cut back to the bone, and
certain expenses in our life we're not going to change
if things were to get a little bit more tight,
Like our grocery budget every month is pretty much going
to stay the same. We're not really gonna We've realized that,
you know what, that's kind of important to us. But
there are other things that we save up for throughout
the year, like vacations or how much we spend around Christmas.
(10:22):
Things like our blow money, things like that that we
you know, it's unaccountable dollars that Kate spends, money that
I spend. Those are things that we compare back. So
like literally just being able to cut it by two
thirds allows us to have a not so bare bones budget. Yeah,
and so what's great about going through the sexist.
Speaker 1 (10:37):
Such if you're not completely devoid of income you can
implement if you're completely.
Speaker 2 (10:40):
Devoided van oh aye, you want to cut back to
the bone. But this is so I guess I'm addressing.
This is especially helpful I think for folks who might
be interested in financial independence, because you might be thinking,
all right, how much money do I have?
Speaker 1 (10:50):
Like okay, if we.
Speaker 2 (10:51):
Wanted to say or even like take a sabbatical or
something like that. We talked about that a few months ago.
The ability to stretch your dollars and have those dollars
go first there. I think that's just a great exercise
to allow you to see what your money can do
for you, which is ultimately the name of the aim
man agreed.
Speaker 1 (11:06):
Yeah, and that's how I think the bare bones budget
can be powerful even if you never actually have to
use it. Like there is something about the exercise that
opened your eyes to maybe some of the to use
a Doge term, the waste fraud abuse in your own life. Yeah,
that you might want to.
Speaker 2 (11:22):
Look out, like having a parachute, right, or like like
a life raft on a boat. It's like, well, we
don't hope that we ever have to use that thing,
but it's nice to know that it's there just in
case the worst were.
Speaker 1 (11:30):
To happen, and it would be nice. I think if
you could easily cut something like a car payment. That's
typically harder to do, right, and you don't necessarily want
to get rid of your liquid cash to eradicate a
car payment because they don't have money forward to the
other bills. But in some cases I would say it's
worth looking towards those bigger line items to see if
you can reduce or mitigate the impact of that expense. Right,
(11:51):
Nancy sounds like she doesn't have a mortgage. The fact
that she can move in with her family is huge
from a cost saving that perspective. That is a massive
That's one of those line items that typically is it's
impossible to undo, at least in the immediate short term,
maybe in more of the medium term. When your lease
is up. You can make a decision like that, but
(12:11):
the fact that Nancy has been able to reduce her
living costs to that extent is impressive. And by the way,
Nancy having amass that fourteen thousand dollars emergency fund, this
is exactly why it's there, right. Oh yeah, job loss
is often unpredictable, and you're gonna be thankful that you
had more savings rather than less if you're out of
work for a while.
Speaker 2 (12:30):
And part of the reason is because job hunting isn't
always quick like you like we think that like, oh,
I've got the ability to jump back out there and
land something. But we don't want you to feel like
you have to take the first job that comes along.
We want you to have some options. And if your
budget is tight, you've got a nice little savings nest bag.
Well you can have a bit more confidence to turn
something down that isn't necessarily going to be a good
(12:52):
fit for you, maybe something a position or a job
that doesn't make sense for your career trajectory, or even
one that doesn't pay anough. Yeah, the ability to have
more money on hand allows you to hold out for
a job that does meet those parameters. And I just
mentioned Katie North The Art of the Sabbatical. That was
the episode we recorded with her. Remember, one of the
(13:13):
things that she wrote about in her book was the
fact that it typically takes three months longer to land
a job than people think.
Speaker 1 (13:20):
Yeah.
Speaker 2 (13:20):
And what I love about that though, is that it
is that it depends on the individual. Because you can
take somebody who's super optimistic and they're like, oh, I'm
going to find something in like two weeks. It's like, okay,
maybe actually it's going to be three months in two weeks.
Speaker 1 (13:31):
Yeah.
Speaker 2 (13:31):
But then you got somebody who's a bit They're like,
you know what, I'm not totally sure what's going to
be out there for me. You know, I'm kind of
getting older. I don't have a ton of skills this.
It might take me, like, I don't know, six months
and like nine months. Okay, maybe it'll take you like
nine months or a year. But according to her clients
and the folks that she ends up coaching, she found
across the board that it typically took folks three months
(13:52):
longer than they thought it would in order to find
that next position.
Speaker 1 (13:55):
And what you're highlighting here, Matt, is that having a
robust emergency fund puts you in a position of strength,
and that's that's where you want to be, right You
don't want to be in kind of the place where
you are coerced and are taking a job not because
someone forced you to, but you had to coerce yourself
to take the first job that came along. And Nancy
Shelson mentioned that she's applying for unemployment benefits. You pay
(14:17):
into that system, Nancy, and now you get to tap it.
This is not contrary to what many people believe, Matt,
some sort of some form of government benevolence, like we
all pay into the unemployment system, and so we deserve
to get that money if we lose our job. This
is going to help bring in some income, but it's
not going to be any anywhere near the paycheck that
you're used to getting, Nancy. So just note that, And
(14:39):
what else should you be doing? I would say, tap
your network. You want to get the ball rolling on
that asap. You know, similar to unemployment benefits. You've built
this network out and now it's the time to use it.
So set up coffee dates. I mean, let them, Let
let the people in your network know that you're looking
for work and what you're looking for. And I mean
the whole point of developing that network over a long
period of time and staying in touch with people is
(15:00):
to be able to what when you're thirsty, you've already
dugged it well, as our friend Jordan Harbinger says, so
time to get out your straw and start sipping. Yeah,
if we're gonna follow the analogy, i'nel yeah, Okay. Another
piece of advice I'd share with Nancy is to not
pay down on debt anymore than she needs to in
order to maintain these minimums, and to stop completely contributing
(15:22):
to retirement accounts. She said that she went into to
max out her roth IRA this year. Well, if you
get another job like super quick, well you might still
be able to do that, but definitely don't contribute at
all until then. Like this is an instance in a
period of time in your life when cash is keen,
Like you want to be liquid, you want to have
that in hand. And we almost never tell folks to
avoid putting money into their roth ira or to decelerate
(15:46):
debt payoff. But if your income, if it dries up,
you know at least for a small season here, so
should those goals, and so you want to focus on
is triage, is keeping the boat afloat, is doing only
what's necessary in order to for you to get by.
I think, last, but not least, what I would suggest
Nancy is to take care of yourself mentally and physically.
It can be easy to get down about being jobless,
(16:06):
but you didn't lose your job because you stink like.
You didn't get fired because you're a bad employee. This
is something that's totally out of your controls, like vibe
shifts in the political space. So just we would suggest
finding healthy outlets, maintaining your friendships, work out, go running,
do some push ups. It's hard not to be anxious,
but know that you've set yourself up to maneuver this
(16:27):
set back well, you are well prepared to handle this.
Down to her, I think for.
Speaker 2 (16:30):
Her specifically too, since she's a part of this mass layoff,
there's almost I feel like there's more of an excuse,
almost like I think folks are gonna be like, oh man, yeah,
you're a part of just like the insanity that took
place last month, totally get it. There's a part of
it that does feel a bit external to her and
hopefully there's no resume gap that needs to be explained.
It's self explanation. I think that might be able to
be helpful from an emotional sort of emotional health mental
(16:53):
health standpoint. And again, I want to go back to
the fact that the fact that you are moving back
in with your family tells me that you've got a
good relationship with your folks or with your family. I
would also lean on them. I think this could be
an awesome time for you to kind of rekindle a
relationship with them.
Speaker 1 (17:07):
Where Like I just.
Speaker 2 (17:09):
Think back to my younger years and all I wanted
to do was get out of the house, like do
my own thing and start my own life. But then,
like as you get older, you realize that, man, like
your your parents, your family, there's some wisdom there.
Speaker 1 (17:18):
Even if you don't necessarily.
Speaker 2 (17:20):
Want your life to look exactly like your parents, there's
still benefit to be gained there, or even you know,
benefit that you can share as well. So, Nancy, I
want you to look at the silver lining, I guess
of moving back in with your folks and for it
to not necessarily be this like, oh, man, I guess
I'm just not cut out to be a grown up
on my own. No, this is a great time I
think for you to kind of strengthen those relationships even further.
Speaker 1 (17:41):
Agreed, All right, We've got more to get to on
this episode, including the Costco credit card. Is it worth
the benefits that they tout? We'll talk about that and
more right after this.
Speaker 2 (17:57):
Of course, jol if you can only talk about one retailer,
it's going to be Costco, And of course my one
retailer is going to be.
Speaker 1 (18:01):
Aldi bry Fitting during this episode, do you ever like
the MTV they would have the Claymation Death Battles death match?
What if there was what if there was an Aldi
verse Costco? One who would win?
Speaker 2 (18:12):
I mean, I gotta think it'd be Aldi, just so
dang scrappy, you're so wrong. We will get to the
Costco credit card question. Maybe we'll even get to a
check secrets, a secret early retirement question. We'll get to
this here in a minute. Let's now hear from a
listener who has been a landlord here for a minute
and they're trying to figure out whether or not it's
still all that is cracked up to be.
Speaker 4 (18:33):
Hey, Matt and Joel, my name is Chris, My husband
and I bought a condo in the city in twenty
nineteen and refinanced in twenty twenty with a rate of
two point eight seventy five. We then bought a house
outside the city after having a baby in twenty twenty three.
We kept the condo and have been renting it out
for the last two years at thirty two hundred per month.
This year we lost a residential tax credit, which increased
(18:53):
the monthly mortgage payment to twenty four hundred and eight
dollars Monthly hoas are two twenty and the annual insurance
is about six sixty. We are now making only a
couple hundred dollars a month off it in cash. The
equity grows a little over nine hundred per month, and
the numbers will only go up from there. If we
were to sell right now, we would pocket about one
hundred and forty eight thousand after taxes and fees. The
(19:17):
house we bought has already appreciated about fifty percent, but
selling it would mean having to find somewhere else at
the current higher rates, and we wouldn't get as much
for our money. We planned to slowly fix up the
house and sell it in about four years. Money is
tight right now with our high rate on the house,
childcare expenses, and a home equity loan. We have after
need to pour a large chunk of money into just
making the house litable. We had to remove about forty
(19:40):
years of smoking damage that was so bad that a
major national disaster cleanup company wouldn't touch it. We both
picked up side jobs to help pay for this. I
drive for Amazon Flex a few nights a week, and
my husband works at a local retailer. Although selling the
condo could pay off our home equity debt and also
our car loan, which is only about fifteen thousand dollars
right now, I'm not sure we should give up the
(20:01):
extra income, no matter how little it is. To avoid
capital gains. We would need to sell before August thirty first,
twenty twenty six. My question for you guys is it
worth holding onto the property long term if we're making
less than six thousand dollars per year, if you incorporate
repairs and incidentals. I would hate to lose the low
mortgage rate, and we hope to use the income from
the property in the future to fund our daughter's five
(20:23):
twenty nine plan. I would love to hear your take
on this best Friends.
Speaker 1 (20:27):
Out Well, Matt allowed to cover here by the way,
that best Friends Out the smoking damage. Chris is a
longtime listener, Yes she is. She knows what's up. We
say that at the end of every episode. Yeah, and
for the folks who don't, and then we leave last
all the way till the end, which wouldn't I'm guessing
as most folks probably before cut out five? Well, that
smoking damage sounds nuts? Does damage disaster company? I had
(20:48):
a friend who worked for one, and they so they
see some crazy, nasty, mind weird stuff. Yes, yes I do.
And yeah, the man his job. I did not envy it.
I'll say that, Chris. Let's get to the heart of
your question. That condo with the sub three percent rate,
it's a gorgeous thing, and I think I just want
to talk about this for a second out because it's
hard to put a number to how much it's actually
(21:10):
worth to hold on to a low interest rate mortgage
in an environment right where inflation is higher and where
you couldn't get a mortgage anywhere close to that these days.
Friend of the Show, Ban Carlson, he tried, he tried
to kind of wrap his arms around this question recently,
and I think this is at least helpful, even if
it's not a fully sufficient answer. He said, two years ago,
you would have been paying around forty percent of the
(21:32):
purchase price in interest costs over the life of a
thirty year loan. Now interest costs are more than the
cost of the house. So so you bought a five
hundred thousand dollars house, Matt. What Ban Carls is saying
is you would have paid two hundred thousand dollars in
interest back in those or in those low mortgage rate days.
Now you're paying more than five hundred thousand dollars in
interest over the life of the loan. Sucks. We're talking
(21:53):
about hundreds of thousands of dollars saved in interest vers
buying that property today. It's insane when you put it
like that, but maybe that puts some helpful context around
how valuable it is to have that locked in low rate.
Speaker 2 (22:04):
It doesn't mean it's a slam dunk for you to
hang on to it, though it's very attractive. But let's
discuss the tax implications, because it's it's rare that a
tax that's due goes from nothing to a lot based
on one singular deadline. But in the case here of
selling a former primary residence, that's exactly what happens. If
you sell in the next year, you get to avoid
(22:26):
tax altogether. But if you wait a bit too long, yeah,
you're gonna end up owing a boat load. So if
you're not in it for the long haul, if you
don't want to continue to be a landlord, selling it
before that deadline in order to avoid capital gains taxes,
it makes a ton of sense. Yeah, I get why
she's also thinking through that, because I don't necessarily hear
her saying that she hates being a landlord, but she's
(22:47):
highlighting the numbers here. Before she was making a good
bit of money. Now she's like, man, we're not making
nearly as much. It almost feels like an insult. It's
like getting slapped in the face. But that doesn't mean
just because you're multi cash flow isn't as strong as
it used to be, doesn't mean that there's still not
a case for keeping that property, for hanging on to it.
Speaker 1 (23:03):
I wouldn't be making the decision to sell based on
the monthly profit alone, but the real value of holding
onto real estate. It's often an increase in value you're
going to realize over time, she mentioned, I think that
the property was adding nine hundred dollars a month in
equity equity. That doesn't sound far fetched. And the truth is,
when it comes to real estate, someone else is paying
off your debt. You make maybe not a whole lot
(23:26):
every month, but you also watch the value rise over time,
and so over the course of a couple of decades,
this piece of real estate can be a life changing
financial asset. It's just not as easy or as sexy,
right as some of the folks on the Instagram real
estate Right they want to make it sound, those influencers,
They make it sound like your instant path to riches
(23:46):
is owning some real estate, and as any normal person
who has bought rental real estate knows, it just doesn't
work like that. So I think the answer to buy
or sell, at least in part, comes down to whether
you want to go through pain to get those gains
or whether you want to sell and snag the games
you've made already in order to do smart stuff with
it now to relieve some of that current financial pressure.
(24:09):
It's it's a tough question. Matt, totally.
Speaker 4 (24:11):
Yeah.
Speaker 1 (24:11):
So I'll play devil's advocate.
Speaker 2 (24:13):
I'll make a case for selling because the one hundred
and forty eight thousand dollars dollars.
Speaker 1 (24:16):
That she's going to pocket it could help to pay
off that car.
Speaker 2 (24:18):
Of course, she could eliminate that home equity debt, which
I'm guessing is probably fairly high now given where interest
rates have.
Speaker 1 (24:26):
Headed close to a nine percent rate.
Speaker 2 (24:27):
And I think it could also allow a little more
flexibility to work, maybe a little bit less, maybe even
DII some of those repairs that you want to make
to your current home and then there.
Speaker 1 (24:35):
No one else will do them for you.
Speaker 2 (24:36):
Yeah, well, so sounds like she already had to do that,
but like they're looking to make additional improvements in order
to be able to reap even more of an equity
reward in a few years. But there's something to be
said for selling an investment tax free in order to
get rid of debt to cash load these expenses that
are also increasing the value of your current home. Right,
and so it's not like going on a vacation I
(24:58):
guess where it's or buying a a super fancy car
that's going to completely depreciate. But selling it could also
allow you both to focus a bit more. I think
even on growing your career. You didn't say what it
is that you and your husband do full time, but
if you're able to focus on that like a laser,
and or able to ordinarily boost your income at your
day job, I think that could be a totally reasonable
(25:19):
argument as well. And that's because I think side gigs
are good from a short term perspective, right, Like, if
you've got a near term goal that you're trying to
pursue and you got something that you want to eliminate,
I think a side gig, a side job, working nights, weekends,
even they can allow you to achieve that goal faster.
But I think that they can be detrimental for most
folks over the long haul. But I mean, it's hard
(25:41):
to sustain, especially when you once you start growing your
family and you have kids totally in the mix. Yeah, yeah, no,
I agree, But I mean I guess that being said, like,
if I were in her shoes, if I was charged,
Like and obviously we don't know all of her all
the details here, everything that's going into her decision making,
but she said that they basically have a baby at home.
It sounds like they had a baby like two years
ago or something like that. As a parent, if I
(26:02):
were in your shoes, I would be more willing to
sacrifice now while they're young, before they have permanent memories,
in order to achieve and like just go after whatever
it is that you want to do to eliminate this debt,
to get rid of that car lom, and to allow
yourself more options as they get older. And this is
a question, like I've asked a lot of older parents
to other friends of ours, because it's in my mind
(26:24):
a debate. Am I going to wish I had more
time in the here and now or like more time
down the road, like once the kids are off to college.
And like almost it's almost unanimous, Like there's been like
a couple folks who are just like, man, the kids
are off in college. The time that we've been able
to spend together as a couple in our empty nester years,
it's awesome. We're going on vacations, we're doing this, we're
doing that. But the vast majority of folks are saying, man,
(26:46):
I wish I had more time in like these prime
parenting years when they're forming these permanent memories, and like
when you are like imparting so much wisdom or at
least that you're trying to write. You know, you're like
trying to raise your kid, right or at lest you're
playing legos together. Yeah, yeah, and so like, and you
get to a point to where that's not as necessary.
Speaker 1 (27:04):
But the stage of.
Speaker 2 (27:05):
Life that they're in, they're in like this early stage
where you know their daughter is like two or three
or something like that.
Speaker 1 (27:11):
So yeah, I don't know.
Speaker 2 (27:13):
I think I'm leaning a little bit towards like getting
after it, maybe not selling the property, not selling the condo,
hanging on to it, like grinning and bearing it into
here and now knowing that this is going to be
something that's going to be when at your back for
years and decades to come.
Speaker 1 (27:26):
So one other thing that might help if Chris and
her family, if they decided to make that decision, is
to not prioritize investing in a five pointy nine plans.
She mentioned that as being a big goal, and I
think it's a noble goal, but it's also one that
should be put on the back burner, like way on
the back burner. We always want folks to prioritize their
own financial health and investing for their own future before
(27:48):
they start socking away money for their kids college. One
little caveat here, Matt. That's aside from a small early contribution,
I don't know a lot of five point nine plans,
stuff like a minimum twenty dollars investment or something like that.
Put twenty just to get the fifteen year timeline rolling
for the roth Ira conversions. It's just like a just
a small nerdy note. But I do think it's important,
So put twenty bucks in. But then don't stick anything
(28:09):
else in that five to twenty nine plan. It's there
are just no scholarships for retirement, but there are for college. Right,
There's so many ways to reduce the price that you
pay for higher education. Also, do you know if your
kid's gonna go yet? You don't, And so if you were,
I'm down with prioritizing five to twenty nine plans if
you've jumped through all those other hoops first. But please
don't feel the pressure to make a big decision like
(28:31):
selling this condo in order to accomplish what I think
is more of a secondary or tertiary money goal. You
can always ramp up contributions in the future, and maybe
maybe you don't amass as much in that five twenty
nine plan as you hope for as you thought you
were you were going to get. But that's okay. I mean,
we want to make sure that you're planning for your
own financial future and that you're not burning the candle
at both ends so hard, right, that you can to
(28:53):
achieve some of those financial goals that you've set out
for yourselves totally.
Speaker 2 (28:57):
And even though you do have that ability to roll
funds from a five to twenty nine into a wrath,
keeping that money there in that condo to where that
thing's cash flowing off down the road fifteen to twenty years. No,
it gives you the option, yes, to be able to
pay for college directly, or if.
Speaker 1 (29:11):
You're not in a position to do that, to be
able to help supplement you and your husband's income. Right,
that's a great point.
Speaker 2 (29:16):
Well, it just gives you more options, like you're not
completely earmarking it and siloing that money to only go
towards higher education.
Speaker 1 (29:22):
A lot of people think the five twenty nine that's
a vehicle to save for college, but you're right holding
on to just pay for it around property as invested.
That's what when we talk with Brandon Turner back in
the day, he bought i think a quadplex for and
he's basically had this plan to pay it off in
eighteen years so that all the cash flow coming from
it could fund his daughter's college. Like it's an outside
of the box approach, but it's a good one.
Speaker 2 (29:44):
It's one of the ways that it's basically magical how
fungible money can be. Yeah, but Joel, let's hear from
our next listener. This is a listener who is looking
to cultivate a secondary source of income for herself.
Speaker 5 (29:58):
Hey, Matt and Joel. My name is Mary and I'm
from Southeast Michigan. I've been listening to your show for
years now, and I've learned so so much from the
both of you and Joel. I used to listen to
The Clark Howard Show when you were on it as well,
and so I learned a ton from you back then too.
Thank you both and keep up the good work. My
question for you today is about cultivating a secondary or
(30:20):
supplemental income source. I have a W two job and
I would like to start up essentially a side gig
that will supply me with a secondary source of income
in addition to that W two job. I would like
for that secondary income source to in ten years time
provide me at least sixty thousand dollars a year. So
(30:41):
achieving that sixty thousand dollars a year in ten years
or so, I originally planned to use rental properties to
get there, but I'd also like to get your take
on other options. Would using reads or dividend yielding ETFs
be comparable? And for your information for this question, I
plan to you the property management company when it comes
(31:01):
to the rental properties to deal with the typical day
to day activities. But I'd love to get your take
on what I might need to consider if the income
that I'll get from dividends and ETFs will be similar
to that of a rental property. And for your knowledge
as well, for rental properties, I would be looking at
(31:22):
properties that provide a six to ten percent cap rate.
Love to get your thoughts.
Speaker 1 (31:27):
Thanks guys, Oh Matt, Mary she mentioned my work with
Clark back in the day and worked with was.
Speaker 2 (31:34):
That the clerk that you mentioned earlier too? It was
as far as you likes to extend his razors yep.
So I worked with Clark Howard for fourteen plus years
it was glorious. Still stay in touch with those folks.
My little sister still works on the crew over there.
What a great, formidable period of my life. And Mary,
I love this goal that you've got, by the way,
attempting to build up another source of income to replace
(31:54):
your W two income. It's brilliant, right. The emergency fund,
it's basically short term insurance to help you if you
were to lose your job. But you're thinking about cultivating
some long term insurance too, which we think everyone should
be doing to one extent or another. And often, as
you alluded to, that takes a while to develop, right.
It doesn't happen overnight. Whether we're talking about doing it
(32:16):
through the stock market, or we're talking about building a
business on the side while you're working full time to
generate more revenue, or we're talking about owning rental properties.
It's going to take time to hit that critical mass
of sixty thousand dollars of income.
Speaker 1 (32:30):
A year that you're shooting for. But you're giving yourself
I think a long enough runway here. We really think
that you can meet this goal in a decade. But Matt,
some people want to turn on that's spiking immediately they're like,
how can I get this in a year? And it's like, well,
not going to happen, probably not yeah, but ten years
maybe that's long enough. Yeah, it depends on a few things.
Speaker 2 (32:49):
Like this makes me think of We recently interviewed Shun
and she actually had a similar goal.
Speaker 1 (32:54):
We talked to her last week.
Speaker 2 (32:55):
Even though she had a fancy job, she had that
fancy consultant gig, she still started a side hustle as
photographer in order to bring in extra money to accelerate
that goal. And so the first suggestion that we'd make
is to at least consider starting a side business as
part of the answer here, Like, you don't have to
work over ninety hours a week like Seung did, but
building up a small stream of side revenue is going
to help you to get closer to that income goal,
(33:18):
and it can increase your ability to invest at the
same time, because you're going to have more dollars flowing in.
So so much of this comes down to how much
personal time you're willing to give it. And that's my
biggest concern is that she named a lot of passive
sort of avenues to have an additional stream of income
and like, you can do that, but that's going to
take an incredibly ambitious amount of investing over the next
(33:41):
ten years. If you're looking to draw down sixty thousand
dollars annually, I'm assuming that she's expecting to continue that
stream going for the rest of her life basically. So
I don't know, let's late, we don't need to dive
into the details yet, but bottom line like that is
some seriously aggressive investing that she would have to do
in order to pull something.
Speaker 1 (33:57):
Like that off. Agreed, So yeah, I think what you're
hinting at here is Matt is probably going to take
pulling a bunch of different level levers, one of which
will be reducing expenses, another which could be increasing your income,
and aside, hustle might be a big part of that.
Speaker 2 (34:12):
Yeah, and well, the big I think the biggest difference
here is is like how much sweat equity are you
willing to put into it? Because if you're thinking like, well, no,
I just want this to be this automated thing, like
you said, it definitely can't be pulled off in one year,
but even ten years is a pretty tall ask. However,
you can change the equation, you can change the factors
that go into this cake that you're baking. If you're
(34:33):
willing to give it a little bit of sweat equity
like that changes the game. And she specifically was asking
about real estate. I mean, I think that's one of
the reasons that makes that so attractive, is that you're
combining capital but then also your ability to.
Speaker 1 (34:46):
Dive in there and like mess with it. That's exactly right. Yeah,
I mean, I think I do lean towards real estate
as the answer for this. I think that that's for
a couple of different reasons. You know, if done wisely
with the long term mindset, leverage can be your friend
on the real estate front. Right, you can buy a
property that has positive cash flow with a twenty to
twenty five percent down payment, And on top of that,
actually you might be able to get incredibly creative by
(35:07):
house hacking, with a guide to that on our website.
So if you're looking and willing to think outside the
box a little bit, I think that can accelerate your
returns and accelerate your cash flow. And by being a
more flexible homeowner slash investor, you might be able to
either decrease your timeline or increase your cash flow goal too.
It just all depends on kind of what you're highlighting
(35:28):
here about how uncomfortable you're willing to get, how much
elbow grease you're willing to put in, how much of
the suck are you willing to embrace, right, and how
much dedication are you willing to put into kind of
amassing a small real estate portfolio. You know, local real
estate markets they're less efficient than the overall stock market,
which means smart investors can find deals that are harder
(35:48):
to find in let's say the publicly traded stock market
space you mentioned, though, using a property management company that
would make the numbers harder to pull off. We always
suggest for Newbee landlords to do self management for a
couple of years at least, to learn the ropes, to
know the questions to ask, and you get pretty familiar
with the whole process by doing that. So, I don't know,
(36:09):
maybe that's another place where you could use some of
that elbow grease to manage the property yourself, make sure
those numbers are better, and then at some point down
the line you can offload that to a property manager. Totally.
Speaker 2 (36:21):
Yeah, this is why I think this is sort of
like a secret early retirement question, because there's not a
whole lot of her saying that, like I'm looking to
start a whole new side business, a whole new gig.
And that's when it gets challenging because she did mention
investing in dividend producing stocks, and I think this is
at the truly at the heart of her question. I
don't think that there is any particular magic in going
that direction right, or opting for reads that are shedding dividends,
(36:46):
that kind of thing where you are earning money that way.
Instead of focusing on dividends, just focus on creating a
diverse portfolio of investments that's going to grow meaningfully over time.
When you look at the data stocks that pay higher dividends,
they actually underperform the S and five hundred and So
maybe instead just invest in vu something as simple as
Vanguard's S and P five hundred ETF and abiding by
(37:09):
something like the four percent rule. You could tap those
funds down the road even if you aren't fully retired.
I think there's there's sort of like this mental hurdle,
like people don't want to sell their positions, they don't
want to sell their securities, but like that's what they're
there for yeah, folks, a lot there's like the oh,
how do I get income generating assets? That's what stocks are.
And so once you get past that mental hurdle of
(37:29):
knowing that, like, Okay, if I need those funds, I
then sell some shares, I'd rather grow that's your income.
Speaker 1 (37:34):
I'd rather grow the pot bigger than have a smaller
pot that throws off dividends. Right, That's kind of what
you're getting at, And when you look at the numbers,
growing the bigger pot is typically done through investing directly
in something like an SMP or total stock market index fund.
It's better than prioritizing companies who pay higher dividends totally.
Speaker 2 (37:51):
So again kind of speaking to the early retirement part
of her question, I mean, assuming like it sounds like
she's got some money, but let's just assume that she's
starting from zero. If she's looking to be able to
draw down sixty thousand dollars a year ten years from now,
so a full decade from now, that means she needs
at least seven hundred and fifteen thousand dollars on hand.
(38:11):
And that's something with like a I think I put
in like a forty year runway before that turns into
a negative number, which means investing fifty thousand dollars a
year starting now again, assuming that she has zero dollars
set aside.
Speaker 1 (38:24):
Let's just say that you woke up.
Speaker 2 (38:25):
And you're like, oh, this is a new goal of mine.
I've not prepared at all for this. This is what
it would take. It's something it's like setting aside like
a little over four thousand dollars every single month, which
is really that's really.
Speaker 1 (38:37):
Tough to take your throwing cold water on this one.
Speaker 2 (38:39):
Now, I'm just saying I want to be realistic, like
you have to You're going to need to have at
least seven hundred and fifty thousand dollars, if not more.
Speaker 1 (38:46):
On like that.
Speaker 2 (38:47):
I was gonna say, that would be that assumes a
perfect market. That assumes a perfect eight percent. So I figured,
you know, on average, you're looking at ten percent eight
percent with inflation, So that assumes a perfect eight percent
every single year of compounding.
Speaker 1 (38:59):
And then it's too assumes inflation calms down a little bit. Exactly.
There's a lot of a lot of assumptions here. A
lot of people would say you need to save, have
invested at least a million, hire.
Speaker 2 (39:08):
Even more than that in order to be able to
pull this that a minimum to be able to pull
this off. You're still looking at a pretty large sum
of money, which is totally doable. Yeah, but I'm just
trying to be realistic here when you actually crush the
numbers to see what does it take to be able.
Speaker 1 (39:22):
To pull this thing off. And again, Mary, this is
not us crapping on your goal of getting here, Like
we're all for it and we think it's possible. It
just might take extra work on your part to pull
this off and thinking outside the box a little bit more,
being willing to maybe go two links that other people
aren't willing to go to in order to get this
secondary source of income. But we've seen other people do this,
(39:42):
like we highlight people, we talk to people on the show,
Matt who have done similar things. You and I have
done similar things right in order to grow that gap
in a meaningful way so that we didn't depend nearly
as much on our w to income. We think it's
a fantastic goal and we think this is very doable
for Mary. She just might have to adjust her expectations,
I think, either on timeline or on the amount effort
(40:04):
she's gonna have to put into a reaching this goal
totally and again.
Speaker 2 (40:06):
Based on the fact that she says she used to
listen to Clark back in the day, based on the
fact that she's listened to us for a while, she's
got money on hand, I'm guessing she might have, like
she's easily got five figures on the second base already,
if not six figures, and she's just looking for how
to best deploy that money. And that's when you, Yeah,
like we said, you look more to some of the
lifestyle moves that you're willing to make if you're looking
to not change your lifestyle at all, all right, you're looking. Yeah,
(40:28):
you're looking to the market. You're looking to invest passively.
But if you're willing to roll up your sleeves a
little bit, bust out some of that elbow grease, you
can achieve that goal a bit.
Speaker 1 (40:35):
Faster, no doubt. Where did the term elbow grease come from?
By the likes, I don't know. I don't feel like
my almost terribly griefing, but maybe I'm the anomaly that.
Speaker 2 (40:42):
Is it grease that you get on your elbows from
getting down to dirty or it almost say were you
thinking that like you need to apply some grease to
your elbows.
Speaker 1 (40:50):
Man, that's poor interpretation on my part. All right, We've
got more to get to, including what about ownership timeline
of a home. That's certainly impact whether or not it's
a good decision. We'll talk about that and more right
after this. All right, buddy, we are back for the break.
Speaker 2 (41:13):
Let's now take the Facebook question of the week, which
is from Megan. She asks, does anyone have the Costco
credit card? I'm a new Costco member. Welcome to the fold, Meghan,
and I would love to hear about your experience with
their credit card.
Speaker 1 (41:26):
Thank you, Joel. Do you like the Costco credit card?
Are you a fan?
Speaker 4 (41:29):
Yeah?
Speaker 1 (41:29):
I am. I By the way, are you only a
fan of the big box for reatailer? I still itself.
I still remember the day I joined the club, and
not not really, but you get your picture taken.
Speaker 2 (41:40):
A lot of us really do remember it because it's
not often that you stand there in front of the
screen and you know, they tell you to smile at
the camera, do whatever else.
Speaker 1 (41:47):
It wasn't life changing in the way I thought it
would be, but I'm so glad it did because being
a Costco member has given me a lot of benefits.
Speaker 2 (41:54):
I actually do recall as well, because it was only
a couple of years ago or two years ago.
Speaker 1 (41:58):
Gosh, let me hold, let me pull up, Mike, I was.
I went Costco credit card right here, busted out. Man.
You look at it because it tells you how long
you've been a member since since February twenty fourteen, So
I've been in a member nineteen over eleven decade. Okay.
Speaker 2 (42:10):
I was not willing to join because it was so
far from where we used to live. We used to
live in town and maybe you had to drive out
to the burbs. And I realized, at least for us
at that point in time, it was not going to
be worth it. Spoken like a true leab Yeah, but
now I don't even know what that means. I hear
the kids say, no, I love it.
Speaker 1 (42:24):
Yeah, Okay, let's talk about specifically the Costco credit card.
It is great, like Costco membership is fantastic, but so
is the Costco credit card. I think if you're a
Costco member, it's a no brainer. Like, I don't know
why you would be a Costco member and not have
the Costco credit card. Sometimes madam at the gas station
filling up, obviously using my Costco credit card, and I
see people using a different credit card and I'm like, huh,
(42:47):
I like scratched my head. I don't understand it. What
kind of spine you do it on? Other people? Look
at that? Whether Yeah, I don't look at anybody. I'm like,
head down.
Speaker 2 (42:56):
Oh, it's not head down, It's just I have like
I want to spend as little time I'm in the
gas line as possible.
Speaker 1 (43:01):
I'm quick. But then while it's pumping, what else are
you doing? I'm people watching? Oh are you Yeah, I'm
cleaning out the car. There's a there's free trash can
right there that I don't have to like empty the
bag every single time. You don't clean out the car,
just stand there and stare at people. Usually my kids
are like running around in there, and I'm you know,
I'm like just standing there for I like do a
little bit stretching maybe, And then I'm like, what credit
(43:22):
card do they use? No?
Speaker 2 (43:23):
Man, I go I opened the door, pull all the
trash out of the side compart, you know, like you've
got all the different pockets and there's always gum wrappers
and oh sure, like coffee cup whatever, just all sorts
of trash. That is the at least for us, the
clean out the van. Let's get this thing look a
half decent time. Okay, yeah, smart, I'll look at other
people's credit card. But I love that you do.
Speaker 1 (43:41):
Yeah. Well, I mean when I look and I see
people using something else, it makes no sense to me.
Speaker 2 (43:46):
You go there and try to explain to them that, hey,
why are you doing this?
Speaker 1 (43:50):
You should get this car because of the specifically because
the gas cash back. Right, So, so it's four percent
at gas stations, it's five percent now only recently when
you're buying gas at Costco. So you get five percent
cash back on Costco gas.
Speaker 2 (44:03):
Which is also the most affordable, highest quality of grass
that you can purchase.
Speaker 1 (44:07):
So it's a no brainer. Yes, if it's nearby and
in your in your schedule. So and you have to
pay with the visa. By the way, at Costco used
to be an AMEX. I just don't think there's any
reason to use a different visa card when you're checking out, Like,
get the Costco card, especially because there's no annual fee
attached totally.
Speaker 2 (44:23):
Yeah, and on top of that, you get three percent
cash back on travel, including if you purchase like one
of those Costco travel bundles, which I personally have never done,
but one of these days I'm gonna get around to
doing it, Joel. But you can't use one of the
cards where you're earning five percent, like the custom Cash
card is what I'm specifically thinking of.
Speaker 1 (44:40):
You have to use a visa card. The Warehouse clubs
also don't qualify as.
Speaker 2 (44:45):
A grocery store, so you can It's not like you
can get a Blue Cash preferred six percent back because
it's not a grocery store. On top of that, you
can't use the AMX and so like, and you can't
use the City Double.
Speaker 1 (44:53):
Cash either, like you got to get the Costco card,
like one two percent cash back on all Costco purchases
with the Costco credit card. So yeah, again, why would
you use anything else? I could see if there was
an annual fe attached, like you might have to run
the numbers, do some math. But there's no harm, no
foul on having an additional credit card. Even if let's
say you only use this credit card for Costco purchases
(45:15):
and for gas, then I would say this card, having
this card in your arsenal makes sense. It makes sense,
all right.
Speaker 2 (45:21):
Another quick question from this is actually a different Megan
on the Facebook group, but she wrote, anyone know of
a spreadsheet that analyzes a home purchase from an investment perspective?
We know that we're only going to be there for
five years, so we want to be more strategic about
what we buy.
Speaker 1 (45:36):
Joel, what do you think I'm gonna say, don't buy
the home? Probably that's a TLDR. That's the quick answer.
But you know, Matt, you and I we always talk
about the importance of timeline when it comes to home ownership, yep.
And whether or not it makes sense, or it's going
to pay off, or it's going to be a better
financial move for you. The expense of buying and selling
can be significant. So there are significant costs associated with
(45:59):
both of those endeavors, and so if you're bumping them
close together within a five year timeframe, the cost could
be prohibitive. Right. So, if you own a home, let's say,
for a couple of years, even if you see some
equity growth, the seller in this case often has to
come to the closing table with cash to cover closing
fees and agents costs and stuff like that. I think
big ups by the way to Megan for asking this
(46:21):
question before she buys the house. I've heard way too
many folks, Matt who buy the house. They've heard home
ownership is smart, they haven't thought through the details, and
it ends up costing them because let's say they live
in the home for three years or something like that. Well,
their own home ownership timeline wasn't long enough and they
ended up losing in the process. They would have been
better off renting totally.
Speaker 2 (46:39):
Yeah, And Megan also said she's looking at this from
an investment perspective, but I don't think that she wants
to own this as a rental property. I think what
she's asking about is whether the financial benefit will be
superior when you are considering owning a home versus renting
a home, given those transaction costs that you just mentioned
their Joel, and when you look at what home prices
(47:00):
have done over the past fifteen years or so, that
you know, the typical reaction for most folks, especially realtors,
folks in the real estate space, they're going to tell
you to buy every single time instead of rent. They
would say that you'd be you'd be an idiot to
not purchase a home, you're going to come out ahead.
And in one sense, they have a vested interest in
telling you that, Matt, of course you've got that. But like, like, yeah,
(47:21):
like if you look at history, yeah, your homeowners they
have made out like bandits in recent years. But you
also can't count on these recent trends continuing far off
into the future, or even for the next five years specifically.
Speaker 1 (47:33):
Right, I mean, the truth is it's highly unlikely that
the housing market is going to experience similar, ongoing significant
price increases over the coming fifteen years. I would be
shocked if the coming fifteen years looked a lot like
the last fifteen years in terms of home price acceleration.
That's because price increases can't out pace inflation. They can't
(47:53):
outpace wages forever. Right, we're already seeing prices stalling and
predictions of price declines in the near term from some outlets.
The truth is, if you look back you bought in
twenty thirteen you sold in twenty eighteen, or if you'd
bought in twenty eighteen and sold in twenty twenty three,
those are both five year timelines, you would have done
quite well for yourself. But those might be the exception,
not the rule. And so if you look just a
(48:13):
recent history instead of a longer stretch of history, you
might be doing yourself a disservice assuming that something's going
to be true that likely isn't going to be when
you zoom out. The five year ownership timeline, it's really
the minimum to avoid potentially losing real money in that transaction,
at least when we're talking about a longer perspective. And
I'm just I'm worried, Matt, about someone sticking to a
(48:35):
five year ownership time but we always say five to seven,
and typically we prefer seven. Five years just might not
be long enough.
Speaker 2 (48:41):
Yeah, well, especially given the massive disparity between rent prices
right now and then the typical mortgage payment these days
in most cities, and specifically because she said that she
knows she's only going to be there for five years,
like maybe they're moving to a college town and they're
there for like a graduate degree or something. I don't know,
especially given that I would suggest renting. It's what I
would do if I were in your shoes given a
(49:03):
similar timeline. And we don't have a so because of that,
we don't have a spreadsheet recommendation when it comes to
something like this, But do check out the New York
Times rent versus by calculator, which is totally great.
Speaker 1 (49:14):
And the only other way.
Speaker 2 (49:16):
That this that I would change from mind, were I
in your situation, is if the what it is that
the NRA is like if the industry gets a massive
shake up, basically when it comes to commissions fees paid.
Speaker 1 (49:27):
Towards realtors because we haven't seen that. But we haven't
seen that like there's been talking about, are not the NRA.
Speaker 2 (49:32):
I always say that very different organization, National Association of Realtors.
Speaker 1 (49:36):
They've had a stranglehold.
Speaker 2 (49:38):
Where you're paying six percent and if that completely gets
up ended, well, my answer is also going to change,
because all of a sudden, the vast majority of the
transaction costs gets eliminated. Housing prices for the most part,
are fairly stable over time. We see them typically go
up into the right cross your fingers. We don't see
another massive decline like we saw in No set A
(50:00):
with a great recession, but that's like a once in
a lifetime thing in my opinion, you eliminate these massive
transaction costs. I think we do see people purchasing at home,
living there for two or three years. Maybe they see
a little bit appreciation, maybe they don't. But it's not
even that big of a deal because the transaction costs,
the known expense that comes with selling a home is
no longer there.
Speaker 1 (50:19):
It would make the whole real estate market more liquid,
people would be willing to buy and sell a whole
lot more easily. But because the transaction costs are so prohibitive,
we have to basically prescribe an ownership timeline of a
minimum of five better to be seven, ten is ideal
or I don't know the long mister conservative, paying some
maybe then you move, you move elsewhere, and you hold
on to that home and you rent it out. That's
(50:40):
like the ideal ideal. But yeah, I think given a
five year timeline and what's happening in the market right now,
and how much you could save every month by renting
instead of paying that mortgage, renting makes sense for the
vast majority of people on a short time scale, totally.
Speaker 2 (50:55):
Man, Let's get back to the beer that you and
I enjoyed, which was a KBS by Founders Thing.
Speaker 1 (51:00):
Man, this is a beer we've had many a time. Yeah,
but it's been a while it's been a long while
for me and this is which we had some more. Yeah,
this is a classic, I will say though, A good
a really good barrel age stout, but it can't compete
with some of the modern incarnations at a lot of
smaller craft breweries now of a barrel aged out. I
just don't think it has as much going on as
some of the some of my favorite local players maybe
(51:22):
are able to bring, but don't.
Speaker 2 (51:23):
Don't you think sometimes there's too much going on? Like
what I love about this it's like a classic tuxedo man.
Like it's so freaking sharp, not like like in a
taste like how it tastes kind of a way, but
like it's it's classic, Like you got those classic cocoa
nib chocolatey notes, you've got those coffee notes.
Speaker 1 (51:40):
It could use a little more barrel, in my opinion,
a little more wood.
Speaker 2 (51:43):
It's like Will Ferrell more cowbo or wood and I
would be I'd be happier.
Speaker 1 (51:47):
Yeah, still so good. That's the thing. I'm like, it's
it's really really good. It's like a solid B. But
it's not like an A. It's not an A. It's
just not it's those a lot of fighting words. I
think for most das, I guess at some point it's
kind of like you go back to some of those
early beers that were highly touted. I'm thinking of like
Pliny the Elder or whatever, like that's a great IPA
(52:08):
from out on the West Coast, but it doesn't compare
to us some of the IPAs coming out of let's
say Bissell Brothers or different style. Yeah, they are, but
different style. I'll take Missile Brothers every day. I would.
Speaker 2 (52:18):
Still this is a barrel aige style. I still give
it a solid A. Is it my absolute favorite? No,
There's some super interesting ones that that I've had out there,
but in my opinion, this one still holds up. And
the cool thing is this is readilarly available on shelvesease days.
It never was in the past. I literally just went
in grabbed a single and I was like, Oh, that's amazing.
I thought of that when buying that. I was like,
(52:39):
that's it's amazing how we live in now. Yeah, it
really is an abundance.
Speaker 1 (52:43):
Of riches for sure. So Matt, that's going to do
it for this episode. We'll put links in the show
notes to some of the resources we mentioned on today's episode.
If you have a money question for us, please do
send it our way, recorded in the Voicema moment app
of your phone. Email it over to us at Howdomoneypod
at gmail dot com. Matt, that's going to do it.
Until next time. Best Friends Out, Best Friends Out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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