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 - Should I dial back my 401k contributions to build up an emergency fund or can I just rely on my HELOC?
2 - How should I respond to a denial letter on a rental application I filled out?
3 - I want to purchase some land but what factors should I keep in mind as I consider this investment?
4 - Is it worth going with my state’s 529 plan for the tax break… even if the fees are much higher than average?
5 - “3x your salary saved by age 40”, is this a rule of thumb that I should go with?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Out of Money. I'm Joel, I'm Matt, and
today we're answering your listener questions.
Speaker 2 (00:24):
You know, a budding We hope everyone had a fantastic weekend.
And we're gonna hear from a listener who had his
rental application denied. So we're going to talk about what
you should be doing when you've got a new pad
that you're interested in moving into. We're also going to
talk about how not all states are created equal when
it comes to saving for your kids college. We're going
to talk about five twenty nine accounts. And another listener
he's interested in investing in land for his family. He
(00:47):
wants to get his fingers in the dirt, Joel. He
wants to go full Yellowstone. He wants to Turner. Yeah,
where the buffalo ro? Did you ever eat a?
Speaker 3 (00:57):
Well?
Speaker 2 (00:57):
Shoot, does Ted's even existing more?
Speaker 1 (00:58):
Ted's of course it doesn't there around Yeah, okay, and
you could go and eat buffalo and I think I'll
get you a bison burger. That buffalo that he starts
at the restaurants comes from the ranches that ranches, and
I think he's still.
Speaker 2 (01:10):
Like the number two landowner in the entire country, Number one,
and he's number two? Is that what it is for?
The Catholic Church owns a lot of land, I think
of the country. But yeah, did you learned that from
watching Conclave? No? I did watch that though.
Speaker 1 (01:22):
Uh well, and Ted Turner actually I saw an interview
with him, so I think he's having some significant health struggles.
But he's planning on turning some of his land into
ecotourism so people can actually instead of just being privatized
land that he enjoys and works on. I think more
and more Americans are going to be awesome welcome into
touring some of that land. So almost like privatized national parks, which.
Speaker 2 (01:42):
Is why not set up a little a little retreat
for folks to head up.
Speaker 1 (01:45):
Yeah, I'd go there. I would totally go check it out.
I was hoping a four wheeler roam around those lands. Yeah,
watch the buffalo roam.
Speaker 2 (01:52):
Walk around, be silent, not talk to anybody.
Speaker 1 (01:55):
To Ted Turner's ranch. Okay, Matt, real quick. I just
wanted to highlight listener Vincent. He sent us an email
and he mentioned that he saved one hundred bucks a
month by switching from his old cell phone service to
US Mobile and then He also mentioned he saved another
forty dollars a month negotiating with his internet provider, So Man.
Speaker 2 (02:14):
Vincent, So they're stacking those wins. Yeah, I love that,
he like and that.
Speaker 1 (02:18):
I think that's actually a really good point to make, Matt,
that one win often induces another, Like you just kind
of get excited about winning.
Speaker 2 (02:23):
Discipline begets discipline. Yeah, I wouldn't know, but I'll take
your word for it. Oh please, I'm sure you've seen
this in your life, not as much as you, but yeah,
I would say that. So he's saving one hundred dollars
a month. I want to know what kind of plan,
what kind of premium Cadillac gold plated plan was he on?
If he's saving I mean he's paying I'm guessing one
fifteen a month prior and now he's paying fifteen bucks
a month. Yeah.
Speaker 1 (02:44):
That was the thing that actually shocked me the most
was when you actually when you when you see the
studies about what the average price of a cell phone
bill is for consumers in America, I think it's like
north of eighty dollars. And that always shocks me because
I'm like, man, even like average plans with the big
guys can be less than that. Who are these people?
And if I'm paying, you know, fifteen dollars a month,
(03:04):
how in the world are are people out there still
paying over eighty over one hundred and then was not
to throw shade at you, Vincent, but like, you did
the right idea, you did the right thing, you got
out of that deal. But man, it's incredible to think
that there are still cell phone.
Speaker 2 (03:17):
Plans that cost that much. Now we're we're patting Vincent
on the back here. We're not at all dragging your
name through the mud out there where the buffalo roam. Vi'scent,
but I, yeah, I don't think it's mud mount. Yeah.
So you're asking how did that happen? The way it
happens is that the prices come down over time and
you just keep it's on auto PI, auto pay, and
you keep paying the same amount and you don't think
it's all that expensive because it's just what you're used
(03:38):
to paying. But the advance is specifically when it comes
to cell phone service providers, Man, it has only gotten
cheaper and cheaper, and I will for that reason, I
would say that it's better than what it is that
home internet does because with them, you have to, like
you have to continually go back to them, yeah, because
you know, advocate for yourself, because they always bump you
back up. Whereas with a cell phone service providers, at
(03:59):
least you're just sticking on the plan and paying the
same thing. And even if there are other providers out there,
as it drops the prices come down, you know, at
least you're not paying more than what you were. That's
the thing I hate the most about home internet is
the fact that it resets and then all of a
sudden you're having to hop on the phone again, make
the call, threaten to leave, look up the other the
one other competitor that's out there that's that might be
(04:20):
offering a deal, depending on where you live.
Speaker 1 (04:22):
It's one of the only industries it's been anti inflationary
over recent years. Right when you think about most things
in our lives we pay more for, cell phone service
is one of the few things.
Speaker 2 (04:31):
That we can pay less for. It's amazing.
Speaker 1 (04:33):
Man Us Mobile even has like this this light plan
you can pay eight dollars a month for. So if
you're like, I'm not really a heavy user, I'm not
watching videos on the go, I don't use a whole
lot of data. The eight dollars a month plan is incredible.
Like it's when you think that you can pay like
Vincent was paying more than one hundred dollars a month
for cel phone service, you can pay less than one
hundred dollars a year for cell phone service.
Speaker 2 (04:53):
I think his mind would be blown. Yeah, you probably
just assume that, like, there's no way that that's legit.
I'm not even a click on that option. I'm not
even going to read any of the details because there'
no way that that's possible. But no, it is totally
is and it'm only doing a plan.
Speaker 1 (05:04):
But let's say I got an you're the ten gig plan, right, Yeah, okay,
but if I got a cell phone for my kids,
that's totally the plan i'd put them on. Yeah, so well,
in reasonably priced most likely too, they're probably hopefully not
using a ton of data.
Speaker 2 (05:15):
And I will say that that brings up a good point,
makes me think of how you do need to be
a little bit more mindful and a little more careful
if you're used to having unlimited data, because I do
think a lot of folks can't get by with the
ten gigs. But if you are spending more time on
the road or traveling where you're not at home, uh,
where you're automatically well, yeah, where you're automatically logged into
(05:36):
your WiFi or at work where you're automatically automatically logging in.
You can creep up towards that ten gig and you
have to be just a bit more thoughtful in your
media consumption. That makes me think of like Aldi.
Speaker 4 (05:47):
Right.
Speaker 2 (05:48):
I'm not going to say that Aldi is just like
Whole Foods, right, because it's not. It's not even like Costco.
There's some big differences there. But if you are willing
to be a bit more mindful and to limit your options, well,
there's certainly money to be saved, for sure. And that's
how I think about US Mobile. It's not the same
as Verizon Unlimited. But if you pay attention just a
little bit, you have, yeah, the opportunity to save a
(06:08):
good bit of money, no doubt.
Speaker 1 (06:09):
Let's mention the beer we're having on this episode, Matt.
This one's called Indominus. It's a quadruple, and we gotta
tell the quad because I don't really know how to
pronounce these quadruple rupel ruppel rupel.
Speaker 2 (06:20):
It's a quadruple. Okay, I saw the Southerner say it.
That's right, Jael. This is the Quadruple. It's by bail
Boldmunk Brewing, which is a local brewer. Here for us,
we'll give.
Speaker 1 (06:28):
Our thoughts at the end of the episode. If you
have a money question, we'd love to tackle it. We'd
love to hear from you. Just record a voice memo,
state your name at the top, then tell us your
question and hopefully we can take it on the next
ask htm episode. If you want the full instructions, good
to how to money dot com slash ask Matt. Let's
get to a question from a listener who's doing an
awesome job investing for her future, but the savings maybe
(06:52):
not so great.
Speaker 5 (06:54):
Hi guys, this is Christa from Centerville, Virginia. I'm fifty
one years and married with two elementary age kids at home,
and my question is surrounding retirement and emergency fund savings.
So I currently max out my four oh one K
(07:15):
plan with my company, and I'm also participating in the
Ketchup contribution. I haven't started on the emergency fund though,
because I'm putting in about nineteen percent of my income
into retirement. There isn't really much left to then, say,
(07:36):
for the emergency fund. So my question is is it
wise to pause retirement savings at my age in favor
of fully funding the emergency fund? Or can my existing
helock act as the emergency fund if we ever need
to use it? Thanks so much?
Speaker 2 (07:57):
Is it wise? That's the heart of Christa's question here, Joel,
But before we answer it, I will say life with
elementary age kids, man, it's a total blast, but it
can feel all encompassing, not just physically and emotionally, but
financially as well. So Christa, I want to start off
by congratulating you kudos on hitting a nineteen percent savings rate,
(08:18):
despite being a life stage where that is not always easy.
I think that's truly incredible. She said she's also got
catch up contributions as well, So we're talking thirty one
thousand dollars. That's those Mustard contributions stuck away. Dude. Yeah,
she's laid it on thick.
Speaker 1 (08:32):
Sorry, dad joke. I too have young kids, and my
kids know that I'm mustered. Yeah, run thick. But yeah, no,
you're right, Matt, that's incredible like to be to be
have a savings rate that's substantial, especially when you're kind
of the age Krista is. She's not too terribly far
off from where we are, and you are in that
kind of sandwich generation area where you might be supporting
(08:53):
or helping older parents. You've got young kids to take
care of. It can be tough to hit all those
financial goals that you have for yourself. But a savings rate,
I will say, is divided up into money you're funneling
into liquid savings, or debt you're paying off, and then
also on top of that, money that you're investing for
your future. So all three of those things could be
considered part of your savings rate. The thing is, if
(09:14):
you skip the savings portion and you go straight to investing,
there are some real potential downsides. Matt, you've shared this
story on the podcast before I made this mistake. Yeah,
you want to just briefly recount, you know, your early
Wrath mess up.
Speaker 2 (09:28):
Yeah, I'm the bottom line. I didn't have money set
aside in my savings account because I heard about the
beauty of compounding interest, and so I'd socked that money
away into a Wroth account. I saw that balanced decline
because it happened to be a down year, and boom,
I had less money on hand that I then needed
for a move back to the big city where I
was offered a job.
Speaker 1 (09:45):
So even though it sucked, investing is a great thing.
You just got too far in front of it, right,
And sure it makes you think about like the all
the federal layoffs that have been happening recently. Right, you
would be in a tough position, right if you were
to lose your job for some reason. It's not that
there aren't o places to turn for money. In Christa's case,
it's just that she'd be tapping a debt vehicle instead
(10:06):
of liquid savings. And because of her high savings rate,
it's very much possible for her to increase that liquid
savings and I think from where I'm saving, I would
prefer for her to focus on that for right now.
Speaker 2 (10:17):
Totally. Yeah, she's just funding all the savings dollars in
one direction when you should be splitting them up. So
we would suggest that you dial back, in fact, reduce
your contributions to your four to one k all the
way back to just getting the full match. We at
least want you to do that because you can't beat
that return on those dollars, but then put every other
dollar into your savings account until you achieve at least
(10:38):
three months worth of liquid expenses. And then after that
then you can ramp up your investing back to where
it currently is. Although if you are a bit more
cautious or maybe you feel the need to acquire a
little more savings, and you can put you know, let's say,
sixteen to seventeen percent towards your investments towards your four
one K, and then the rest of it can slowly
(10:58):
grow your savings until maybe you have an additional one
to two months worth of expenses on hand. Based on
the fact that she currently has no emergency fund, Yeah,
I think Christal's going to be very comfortable even having
like two to three months sure of savings and so
for and I think she'd do the trick. And I
think that's totally within the bounds of what's reasonable.
Speaker 1 (11:16):
But this brings up kind of a really important part
of Christ's question is, well, aren't there alternatives to cash
in savings? You guys are this kind of old school
Matt and Joel. You're telling me that I need money
inside of a high old savings account, But what about.
Speaker 2 (11:29):
Surely there's a more sophisticated option, Yeah, product out there
for me.
Speaker 1 (11:32):
Investment returns are going to outpace money that I have
in my savings account, So why don't I, in hopes
that I don't have to tap any sort of emergency fund,
just have the helock on the back burner in case
it's needed, like kind of one of those break glassing
case of emergency things. And so let's dive into that, Matt,
I mean we we do think. I think it is
true to a certain extent at least that it can
(11:53):
be a great potential backup efund. It's just far too
risky though, to make it your primary one. So if
you've got let's say four months worth of cash and
you're out of the job for six months, I think
the helock then can help bridge the gap. So it's
nice to have the helock as a backup to the backup,
But if you have no savings and you lose your job,
you'd have to tap the helock right away. It becomes
(12:15):
your first recourse, which I don't think is a good thing.
Think about how much debt you might accrue over the
course of three to six months that probably, yeah, in
these days, at like a nine percent rate, it could
take you years to pay that off, which you put
you in a weaker overall financial position. I just don't
like the idea of the helock being the first line,
(12:37):
the first fail safe. I think liquid cash shaving should
be the first thing, and then you know what, Hey,
if you have another resource that's potentially better than a
credit card for tapping some money. Yeah, maybe it's the
backup to the backup, but I just don't think you
want it being kind of that main thing and having
zero insulation between yourself and an emergency and having to
tap the helock for that emergency totally.
Speaker 2 (12:58):
In addition to that, also has the ability to reduce
your line of credit in many cases, so the access
to your home equity. It can actually dry up before.
Speaker 1 (13:07):
You need it the most, especially if there's like a
tightening in the economy. Banks might say, well, we're gonna
restrict our lending in the helock front.
Speaker 2 (13:13):
You're looking to show up their books as well. Yeah,
so that's another con to making the heelock your main,
your primary emergency fund, which brings up even like ROTH contributions,
because sometimes we'll think about that as a backup emergency
fund as well, but we also want you to avoid
typing those dollars, if at all possible, having a big rostache.
It doesn't negate the need for having those liquid savings
(13:34):
on hand. And I think, Krista, what you're trying to
do here is a good thing. You would much rather
invest than to save. And I think she's looking ahead
a little bit. She's looking at her age. She's thinking, Man,
every year that I am not maxing out my account,
that's a year lost. That's a year where I'm not
experiencing the magic of compound interest. And one other thing
(13:54):
that I don't know.
Speaker 1 (13:55):
When she started either said she's fifty one, but maybe
she's like I just started at like forty six, and
I feel like I've honest she might feel very I
mean go hard in that direction totally. And for someone
who's making the catch up contributions, I think that's the
headspace that you are in, which I totally understand. But
one thing that you mentioned but you didn't mention was
so you said that you are married, but you didn't
mention your partner's income, and it sounds like whoever it
(14:19):
is that you're working for, that you've got a good
thing going there. When it comes to investments, I.
Speaker 2 (14:22):
Would say, is there a way for you to possibly
keep investing there with your four o K Obviously you're
getting the full match, but continuing to invest those additional
dollars so that you can max that out while finding
a way to divert some of the funds, assuming I
guess there's an additional stream of income that your partner
is earning. You're in this together, I know, like when
I am saving from my retirement, it's not just for
(14:42):
me and my wife is just like sorry out of luck.
Like we're doing this together money, Like we're eaten at
the buffet and she's gonna be fas we're pulling our resources together.
We are in it together. And research has shown that
not only do is there a better result from a
numbers from a financial standpoint, but that their quality of life,
life and your levels of happiness are going to be
better too. So hopefully that that's something else that you're
(15:04):
considering as well, that you're pooling your resources together, and
that these are goals that you're both working towards. Hopefully
it's not something that you feel that you have to
shoulder completely on your own. Yeah, that would be tough.
I think two again.
Speaker 1 (15:18):
I think part of the reason Chris is doing this
is because she has realized that investing is going to
help her grow wealth, which is something we talk about
on the show often, like we talk about how how
wealth flows to owners. We did a whole episode on that,
Matt and the fact when you own a bunch of
different companies through an index fund and you're investing in
the stock market, you're an owner of American capitalism and
you will over time make money because of that. It's
(15:40):
a beautiful thing. But I think it's important to note
too that to be risk on with your investments, to
kind of say listen, I'm okay having a massive stock exposure.
It's also crucial to have a pile of what I
would say is like risk off liquid cash that allows
you some that peace of mind and also that real
financial backstop in case of an emergency. So you want
(16:00):
to take the both and approach, because it's at Morgan
Housel quote that's such a classic Matt where he says
to save like a pestimist and invest like an optimist.
But it's really hard to invest like an optimist when
you haven't saved like a pessimist, and you don't have
any sort of actual liquid cash, financial backstop or something
bad to happen to you. Because yeah, hopefully if all
(16:22):
things went perfectly, then Christa would be just fine investing
as much as she is now and not prioritizing savings.
But the truth is life is always thrown as curve
balls and you need to be prepared for that. And
that's what the emergency fund does. The helock just not
going to cut it, at least by itself. All right, man,
we got more to get to on this episode, including well,
if you get a big raise, are you suddenly behind
(16:43):
on retirement investing. We'll get to that and more right
after this.
Speaker 2 (16:54):
Right we're back from the break and Joe, it seems
like getting a rate is what actually put you ahead.
That is not how this listener how he's thinking about it.
But before we get to that one, let's know hear
from a listener who is having a tough time landing
the home or the apartment that he applied for.
Speaker 4 (17:09):
Hey, how to money listeners. My name is Dejon and
I come from Georgia. I have a question. So I've
been applying for homes to rent and I received a denial,
and what they stated was very weird. I've never had
this before, but it stated that I was denied due
to lack of real estate security loan information, and I
(17:33):
would love to know what that is. If you guys
can help me figure out what that is and what
I need to do to be able to rent, that
would be great. Thank you.
Speaker 2 (17:42):
Ballieve Matt, I'm not gonna lie.
Speaker 1 (17:44):
It feels like a weird denial letter to get I
totally agree. I interpret that to mean that since you
don't have a mortgage, you can't rent the house, which
feels like a weird thing to tell somebody who's trying
to rent your place, like you don't have a home loan,
so you can't rent this apartment at home. I just
don't understand why any landlord would would make that the
(18:06):
reason for not getting the apartment that you applied for.
So the fact that you've been turned down at least
for this reason is confusing. I would start asking questions.
I would start pushing back in a kind way, because
I would want to know, Like, I can't tell you
exactly why they would turn you down for that reason.
It doesn't make any sense to me, But I would
be asking the question.
Speaker 2 (18:25):
It would make sense if he was applying for a loan, right,
Like if he was applan for a helock, for instance,
It's like, Okay, what's the property that we're gonna take,
Like what's the collateral? Like what are you putting on
the line in case you don't pay? Because that's what
they're looking for, right, because then if you don't pay, boom,
they have access to your house. That's not the case. So, Dejohn,
did you accidentally apply for a helot or I doubt
(18:47):
that that's the case though that's not like something you
would accidentally do whoops instead of filling out the application
for that sweet apartment or that nice house. And this
could be like a glitch in the matrix, said sign
up for a helock? Yeah, where did I go wrong? No?
I think that's not the case.
Speaker 1 (19:01):
That's why you need to push back and ask questions
because this doesn't sound like a legitimate reason to be
turned around.
Speaker 2 (19:08):
Right.
Speaker 1 (19:08):
This could be a simple mistake, but you're just not
going to know if you don't ask, and it could
mean I think what they could be saying, potentially mad
is that you don't have an installment loan of any
kind on your credit report.
Speaker 2 (19:18):
And the truth is you and I have.
Speaker 1 (19:19):
Said this before on the show, having multiple types of
credit available to you can positively impact your score and
it makes you look like a more well rounded borrower
as long as you're making those payments consistently on time.
And so maybe if the installment loan thing and the
lack of an installment loan is what they're pointing to,
if that's the reason you were denied, go get yourself
an installment loan to help your chances. And wish I
have some advice for you on that front too.
Speaker 2 (19:41):
Which might sound weird to say, hey, go out and
get this loan in order to booce your credit score
so that you can get the sweet spot, but it
could increase your odds of getting accepted for the rental
property you want. And that's because a poor credit score
is often one of the top reasons for a denial.
So looking to increase that by handling your it well
and by increasing your credit diversity is pretty crucial. And
(20:04):
one of the easiest ways to go about doing that
is through a company called self and it will cost
you a little bit of money, but they've developed this product,
this great method for helping folks to increase their score
pretty significantly. By helping individuals to make loans to themselves,
and then by paying those loans loans regularly and on time,
it gets reported to the credit bureaus on your behalf,
(20:26):
which sounds totally shady and it is kind of gaming
the system, but is totally legit, and it is a reasonable,
a reasonable route to take. I will say, though, if
you already have an installment loan, you know there's a
chance maybe you have a student loan, and guess what
that counts as an installment loan as well. And so
if you're like, no, guys, I already have student loans
and I pay those off. I pay on those every
(20:46):
single month, well, then this isn't something I would recommend.
Speaker 1 (20:49):
It's even more baffling. It's clearly a mistake. I think
we're that to be the case.
Speaker 2 (20:52):
But this is for everyone else out there who doesn't
have an install installment loan. This is something seriously to consider. Yeah, yeah,
I mean it depends what your credit score is. If
you're like, my credit score is already north the seven forty,
I wouldn't jump through these hoops to try to just
get an installment loan on your credit report. But if
you have if your.
Speaker 1 (21:08):
Credit you're fairly new to the building credit game, and
you're like, I've got a credit card that's a revolving
line of credit and that's all you've got kind of
being reported to the bureaus.
Speaker 2 (21:18):
But I've heard that cash is king, and so I've
always done that. Guys, I thought credit cards are bad.
If that's the case, then you might have a pretty
low credit score.
Speaker 1 (21:25):
Taking on more lines of credit and a diversity of
types of credit can really, over time, be a boost
to your credit score. And you know that company that
you just mentioned, matt self. They they're making the installment
loan thing easy for people. It's like one of those
it's one of those early fintech companies that actually has
done a pretty good job by people to help them improve
their credit. And the truth is to the credit scoring
(21:46):
system is badly flawed. You know, there are other types
of reasons for denial too. They are typically like insufficient
income or bad references from friends or previous landlords. Credit,
I think is probably one of the main reasons. But
make sure you're buttoned up on all of those front.
It's a good idea to find other ways to stand
out as a potential tenant. To Matt, you and I
know this as landlords. There are some tenants that just
(22:07):
really stand out. It's typically the ones who show up
on time when we've talked about meeting, you're ten minutes late,
then it just it doesn't bode well from the.
Speaker 2 (22:16):
Get go, or if they're like a no show and
then they touched like later that night or like hey tomorrow,
I'm just like, I mean maybe yeah.
Speaker 1 (22:24):
But probably not, and like be respectful. Right, That's just
something else that's that's important. Fill out the application and
then follow up. It's kind of like searching for a job, Matt,
where people just submit the resume and then they forget
they ever submitted. And and the fact that like people
who follow up with an employer after the fact in
not just like hey, what's the deal, but proactively in
(22:45):
a kind way, like reach back out and say, hey,
I'm really interested in this job. What's the status? That
to me shows that you're taking initiative and you can
do the same thing as a potential tenant. On top
of that, it's a renter's market in much of the
country right now, as rents have softened and landlords are
facing more potential vacancies. Typically in many markets, Matt, when
a landlord lists their property for rent, they're getting far
(23:06):
fewer applications from from potential tenants. And so I think
tenants just doing that little bit of extra work it
can make you stand out in a much thinner field already.
So that's what I would recommend.
Speaker 2 (23:19):
I think would go a long ways. And essentially what
you're saying is to present yourself as an attractive potential
tenant to the landlord and being responsive. Man, I think
that goes a long ways because it tells me as
a landlord that hey, like this person is someone who's
great at communicating. It tells me that there's a chance
that they're going to be better about paying on time.
It tells me that if there's something wrong at the house,
(23:40):
that they're going to let me know pretty quickly, like hey,
the heat's out, Okay, great, We're going to fix that asap.
Because obviously, for you, you are very cold if it's the
middle of the winter like I experienced not too long ago.
But also for the sake of the house, I'm like,
I don't want the pipes freezing and for it to
cause additional problems, and so knowing that someone's going to communicate, well,
that's just it's kind of like icing or maybe more
(24:00):
some more like the cherry on top when it comes
to some of the different pool of applicants that you're
sorting through. Our last piece of advice that would be
to stick up for yourself. I would ask why you
weren't extended a lease offer, because if you know what
the pain points are, I think these are things that
you can directly address head on.
Speaker 1 (24:17):
Like if they say, hey, guess what, sorry, your credit
score was twenty points below what we typically accept. There
are ways to push back against that, aren't sure.
Speaker 2 (24:25):
We both have had tennants who have put down larger
security deposits, for sure. One of my favorite store instances
of this as a landlord was a couple and they,
I mean they came and saw the property. They're nice,
and everything showed up on time. But they told me
ahead of time. They're like, Hey, we're just gonna be
upfront and be honest with you. Our credit score. There's
a lot of negative information on our credit reports. This
(24:45):
is what we kind of had going on, and like
should we even apply? And I'm like, yeah, absolutely, like
please do apply. But then their credit report came back
and it was really bad. But I will say they
sent a long email over kind of explaining what they
had been going through, how their life had essentially turned
around and they were on the straight and arrow when
it came to their finances and there's still some gaps.
(25:08):
So actually I called them up and I asked the questions.
I was wanting to get some some things kind of
fleshed out, I guess, and I figure out the why
behind what's Yeah, it's like, well, okay, you explained this,
but what about this? And I was just trying to,
you know, make sure else do my due diligence. And
at the end of that, after we had that conversation,
I was satisfied, and so I just offered them the place.
And this is why this is one of my favorite
(25:29):
examples of this. But she started crying like on the
phone because she thought I had called to let them
off the hook gently, like basically to like be up,
just to be polite essentially, And man, it made me
only want to rent to them even more. The fact
that they had done the leg let the leg work,
they were honest about it and essentially to kind of
give them another shot. Like, I think that there are
(25:50):
plenty of landlords out there who are willing to have
the conversation when otherwise it's on paper. At least it
may not necessarily be a slam dunk.
Speaker 1 (25:58):
Decision, which you might be high in here too, Matt
is that small time mom and pop landlords might be
might be easier to actually negotiate with. Talk about some
massive apartment corporate landlord, giant corporate landlord, they probably have
stringent requirements and you know, barking up that tree, you
might not get really get anywhere. But if you're able
to proactively honestly engage that conversation and hey, say, hey,
(26:21):
my income and I might not be quite what you're
looking for, but actually have like money and savings, I
can even like I can prove that to you, and
here I actually have great reference from my from my
last landlord. That's that's the perfect way to kind of
maybe say, hey, maybe some of the metrics aren't living
up to your ideal tenant, but I've got all these
other things going for me.
Speaker 2 (26:40):
I want to make up for it in all these
other ways.
Speaker 1 (26:42):
It can help you sway sway to the landlord so
that they rent that place to you that you actually want.
Speaker 2 (26:46):
Plus they're like, I'll cut the grass too. Yeah.
Speaker 1 (26:50):
So I just ultimately don't take this lying down. There
are ways to push back, and that's a really weird
reason to get tonight. So please do let us know
what you find out as you do pushback. Matt, let's
get to another question from a listener who's excited about investing.
But wait a second, isn't investing supposed to be born?
Speaker 3 (27:07):
Hey, Matt, Joel, this is Josh coming to you from Michigan,
and I have a land purchase question for you today.
My wife and I are in money gear six. I
feel like we're kind of finally hitting our stride financially.
We have a couple kids, and we are now kind
of getting to the stage where we're wanting to pursue
(27:28):
some other investment opportunity, something a little more exciting, but
trying to balance that with obviously being you risk adverse
a bit with kids, and then also being just financially responsible.
The dream would be to purchase land to then someday
build on it like a vacation home that we could
(27:49):
potentially have as a short term rental within the thought
of this being kind of the family vacation spot to
someday pass this down to our children, kind of for
that legacy aspect, something we've never had in our families,
but kind of always dreamed of having a meding able
to kind of build upon our family tradition. And so
I guess my question today is really just how do
(28:11):
I think about striking the right balance between this is
something that would kind of put us a bit tighter
in our budget, something that's doable but obviously depend on
the cost of this investment and the timetable, something that
could put a bit of a financial constraint on us,
but also be very exciting at the same time, and
something we're looking forward to. So thanks so much for
(28:34):
taking time to answer this. If you're ever in Michigan,
check out Eastern Market Brewing Company in Detroit. Awesome, just Detroit,
nostalgic vibes, and just a fantastic place to start your
exploration of the city.
Speaker 2 (28:48):
Take care Detroit, Joel, specifically Eastern Market Brewing. I looked
it up. Yeah, looks cool. Does its got like this
giant brick build it makes It's like what you think
of when you think of Detroit, like the little brick building.
Speaker 1 (29:00):
Yeah, it's pretty cool. And I will say it's still
never been to Detroit, but it's high on my list.
I want to go same, you know.
Speaker 2 (29:05):
It's it's interesting because I wonder like we hear from
foot listeners a good bit and part of me feels
that I don't travel enough because but it's also because
we were hearing from folks who live all across the
country and oftentimes they are recommending their favorite breweries, which, oh,
it so happens that those are my favorite things to do.
Visit these towns. I need to do this more often.
(29:26):
But then, like I'm a fan of the is it
that the happiness hypothesis not hypothesis, the happiness potent or
something like that, right where it's like that your reality
divided by your expectations, And so if my expectations are
always exceeding my reality, I'm always there's always all these
breweries in towns I want to visit, and if that
number is larger on the bottom, I'm never going to
be happy a troll. So I just need to be
(29:48):
content with the amount of travel and the amount of
breweries that I'm visiting. And if I or you just
need to go out there and experience more awesome brewdis
and if I so happen to visit Eastern Market, then
my happiness is going to shoot through the roof.
Speaker 1 (29:59):
Well, we will of course reach out to Josh and
other Detroit listeners if we do make it out there.
Speaker 2 (30:03):
So another reason I wanted to bring up the Eastern
Market is because I was like, as I was checking
it out, one of the first things that came across
was a little listing or a page, and it was
just like, you can be a co owner of Eastern
Market brewing company, which you would think, oh, what a cool, fun,
exciting way to invest your money. But just like Josh's question,
we think that there might be better ways to handle
(30:25):
your money than to kind of go with the more
exciting option. You know what I'm saying.
Speaker 1 (30:29):
I think excitement might be overrated, and oftentimes almost always
is overrated when it comes to investing. We typically highlight
why boring is better, and it's just typically because you
get the job done with less headache, which with much
time less needed to But I will say this too, Matt.
As Josh's question unfolded, it's clear to me that he's
not just looking for excitement. That was kind of how
(30:52):
he prefaced it in the beginning, but as he elaborated,
he basically said, he's looking to make an investment that
can also allow for personal use, which I totally get.
Neither you or I have owned a vacation rental, but
that can be a decent combo and a reasonable choice
for some people. It kind of allows you to have
your cake and eat it too, ish and we'll talk
about the ish and the downsides of that as well.
(31:13):
You might be able to make some money while simultaneously
having a family travelhaven, which allows you to make memories
in the same location year after year, thinking about those
those pictures, and not only are the pictures on your phone,
but they're hung up in eight X tens around that
house that you go back to every year, and you
get to relive the memories of your kids growing up
in that awesome rental property that you own. I just
(31:34):
want to say it's important to note, Josh, this type
of investment, it doesn't typically provide the highest return, so
you're making significant trade offs in order to go in
that direction.
Speaker 2 (31:45):
Yeah, you have to be okay with making less than
if you opted for a different type of investment, even
just the overall stock market, because you might be in
fact seeing less of a return on your investment. But
I will say you are in money year number six,
so you are at the point in your money journey
where you can opt for a less optimized investment route
without feeling like you're completely derailing your financial future. You
(32:09):
mentioned buying land, though, and jol you kind of immediately
started thinking about what it is that he should do.
But I think it's worth directly addressing the fact that
if you're talking about built purchasing land in order to
potentially build a home in the future, well that's a
lot riskier of a proposition because there are more potential
pitfalls to purchasing land, to buying that dirt, than there
(32:31):
are to buying let's just say a rental property that's
already functional, that already exists, that's already been built. So
for instance, you could opt to buy let's say a
lake lot, but then you realize down the road, when
it is that you saved the money you try to
build there, that the terrain doesn't allow you to, or
maybe there are some sort of like infrastructure problems.
Speaker 1 (32:50):
So it's happened with a lot of people, specifically with
lake lots, and you hear those radio radio advertisements when.
Speaker 2 (32:54):
You get the flyers on the mail, and you're like,
why wouldn't I do that?
Speaker 1 (32:57):
It's ten thousand dollars for an acre around this Lake's
was like a no brainer, But there's a reason that
that land is being sold so cheap.
Speaker 2 (33:04):
It feels like getting your foot in the door, right,
like the ability to get in on the ground floor.
But then instead what you just ended up doing is
like you slammed the door on your foot, as opposed
to getting your foot in the door. Yeah, and we've
got a friend who did something kind of similar to this, Joe,
Like this is a while back now, but he came
across a good deal to purchase some property in the
neighborhood that we were living, and in the end he
(33:27):
ended up I can't remember how much he paid for that,
like maybe thirty or forty thousand, like my memory is correct,
but he couldn't build on it. He purchased it hoping
to build his family's dreamhouse essentially, and in the end
it's I don't even know what he ended up doing.
Wing there as like a natural space because you couldn't
build on it.
Speaker 1 (33:44):
Well, I want to say it was like a FEMA
flood map that prevented him from building there and the
flow issues. Actually he did build one thing on that property,
team or what.
Speaker 2 (33:51):
It was a sidewalk. Well, this city required him to
build the sidewalk, and he didn't put it there. He
stuck it somewhere else. Okay, but like as they said,
it doesn't have to be you just have to whatever
frontage of your lot you are required to develop that
much sidewalk somewhere else. And so he but there's no
sidewalks on either side of him. So he's like, that's stupid.
I'm not gonna build a sidewalk only in front of
(34:12):
my lot. And so he added onto a sidewalk in
a part of the little downtown area that we would frequent.
Speaker 1 (34:17):
The lot that he owned that was unbuildable was also
taxable on an annual basis. And so you just have
to terrible that there are massive potential pitfalls in buying
land because unless you are a builder who really knows
what they're doing, Josh I would just say avoid that
and look to buy in rental properties. It's something that's
already there, even if that's already built. Yeah, even if
(34:39):
it takes you longer to save up and actually make
that thing. I think what Josh is saying is like, oh,
if I get the land, then we can look forward
to this, we can start planning for it, and it's
gonna take us year is probably to pull off, but
we'll get there eventually. I would rather you just save
the money and then uh, or.
Speaker 2 (34:51):
By a more affordable piece of more affordable property than
maybe had. It doesn't have quite as much land, but
like let's say it's just got the little cabin, but
enough land that you can still have some of those
rustic adventures. I'm picturing him. Maybe he's thinking like, oh,
we're gonna go camping there for the first wyoming or
something five to ten years, and then eventually we'll save
up enough to be able to build. But I think
there's ways that you can do that affordably now without
taking on the undue risk. Okay, so let's talk about
(35:13):
other potential downfalls. Matt.
Speaker 1 (35:16):
Let's blow some more holes in Josh's plan. Not on purpose, Josh,
but just to hopefully play devil's advocate and help you
think about this before you take the plunge and sink
big bucks into it and then realize, oh man, that
wasn't all that I hoped it would be. There are
other significant downsides of owning a vacation rental. I think
for a lot of people it sounds better in theory
then it ends up being in reality because think about this, like, well,
(35:38):
you need to paint or make repairs every time you visit.
That's one of the downsides I hear from some folks
who go down that path, like every time they go.
One of my friends, one of our friends is has
a rental property in Nashville. He has been there so
much recently, trying to fix it up every time they go.
They don't get to enjoy it. They're working, right, And
I think that is the tale I hear from a
(35:59):
lot of people who owned vacation rentals.
Speaker 2 (36:01):
It's far less relaxing.
Speaker 1 (36:02):
Than you hope for because there's always something to do,
and so yeah, it's more than okay. I think to
make the trade off of a smaller return for personal enjoyment,
but make sure you've either got the extra cash or
the personal willingness to do those fixes that are inevitably
going to be required. I have another friend, Matt, who
bought a condo at the beach and then it turns
(36:24):
out the HOA was being poorly run. He has to
run for HOA president in order to kind of help
get the board back in line and get the finances
of the HOA back in shape. That's a part time
job for him and it's been a massive pain, which.
Speaker 2 (36:38):
Is fine if you want to sign up for a
part time.
Speaker 1 (36:40):
Job, but he didn't know he was getting into that
when he bought the condo. And then so just you
have to realize that there are all these potential pitfalls
that you can't see. They're like, finally they're nicely covered
up right with what looks to be a patch of dirt.
It looks like you're it looks like you're stepping into
a safe spot. But ultimately you fall in, you break
your leg, and you're like, ah, what happened there? And
(37:01):
that's just Yeah, there are significant potential downsides, I think
more so with buying land, but just to buying vacation
property in general.
Speaker 2 (37:08):
Yeah, I mean, and it's not all that different than
how we approach folks who are interested in becoming real
estate investors as well. Like it is kind of a
part time job, and so you have to be okay
with either spending more than you otherwise would because you've
got management, or you need to have the time on
hand to be able to diiyat which I was going
to say, that's totally fine if that's a goal of yours, Josh, Like,
so you mentioned your kids, and if you are okay
(37:30):
with when you go on vacation and when you go
to visit that house spending your time painting, fixing toilets,
things like that, that's totally fine. If those are lessons
that you're trying to impart and it's kind of like
something No, there's a little bit of sweat equity that
you're doing alongside your kids. I think that that could
be I think that could potentially be cool. But if
you're thinking that, like, oh, all my vacation, I can't
spend any time during the week doing that because I've
(37:52):
got a full time job. You're like, oh, well, we'll
be able to do that during vacation. What you're actually doing, though,
is eating into your vacation and all of a sudden
you're doing the opposite of what you maybe expected to
do on the front end, which is like relax, and
I'm just saying, instead of being your home away from home,
it becomes your job away from your job away from home. Yeah, exactly,
which is totally fine. Though if that's a goal of yours.
It makes me think of a friend of ours, Carl
(38:13):
Mister fifteen hundred. I've heard him talk about what I
think he calls construction tourism, or he'll go and visit
a friend and hang out for a week or two,
that kind of thing while he helps him to do
some sort of big house project. If that's how you're
thinking about this, Josh, I think it it could pay off.
I've been waiting for him to pay me a visit.
But otherwise, we do want you to be extremely cautious
(38:34):
when it comes to how it is you're approaching this regardless.
Make sure that you continue like you're in money year six,
so you are maxing out your other accounts. Make sure
that you're continuing to do the boring things before taking
on this lifestyle plunge. But at the end of the day,
I would do it. I mean, so I spent, we
spent this whole time, kind of put puent on his
on his dream. But that's the thing multiple times in
(38:54):
the question he said this was a dream of theirs. Yeah,
and so if this is a massive goal for you
and your family, go for it. Man, it just makes
you your eyes are wide open as you are performing
your due.
Speaker 1 (39:03):
Dealis just make sure, because Matt, the thing about dreams
is so much of the time you wake up and
you're like, Oh, wouldn't that be fun if that actually existed?
But that's not real life. And so you want to
know think about imagine what that dream would look like
in real life, and not just what it looks like
in the dream state. You want to walk through some
of those actual scenarios. Put yourself in the shoes. Worst
case scenario you owning mental property. And I guess the
(39:25):
other thing to think through is how much time would
you actually spend there. I think the more time you
plan on spending there, the more sense it makes to
actually own it. If you're like, ah, we'd go one
to two weeks a year, it makes sense for the
most part from a financial perspective to rent it. Also,
would you have somebody managing the property to rent that
out when you're not there so that it was bringing
in income. Those are all really important questions. They're financial questions,
but they're also just kind of emotional questions about how
(39:48):
you're going to approach the property and how significant of
a role it's going to play.
Speaker 2 (39:52):
In your life.
Speaker 1 (39:53):
But yeah, not trying to poot poo on the goal altogether.
If this is a legit dream and you have thought
through all the details, Josh, I think you're in the
place to be able to make this a priority.
Speaker 2 (40:02):
That's right. All right, We got more to get to,
including we're gonna hear from a listener who has recently
gotten a fat raise. We'll get to that and more
right after this.
Speaker 1 (40:17):
All right, Matt, We've got more money questions to get to.
Now it's time for the Facebook question of the week.
This one comes from Emily in the how to Money
Facebook group. She says, currently looking at opening a five
to twenty nine for each of my twins. I was
trying to decide whether to go through Vanguard directly or
through a state plan. The expense ratios seem to be
(40:37):
lower through Vanguard. We're in Mississippi, though, and the end
state plan that would give us a tax break is
not great.
Speaker 2 (40:43):
That's right, Yeah, So, Emily, almost all five twenty nine
plans that are out there, they've gotten a lot better
over the past few years. That being said, Mississippi is
still one of the holdouts who is still charging their
residence way too much. When it comes to the investments
within a five twenty nine on every investment option that
they offer is north of point five percent, with most
(41:06):
of the options being closer to point seven percent. But
there is at least a meaningful state income tax reduction
on up to twenty thousand dollars per year, that is
if you are married filing jointly, So despite these pretty
high fees, the tax deduction would easily more than make
up for it. We hate fees, and we would love,
(41:26):
in fact, to see Mississippi correct this injustice. But I
would totally still participate if I were you, as long
as you are doing great when it comes to investing
in all the other ways. You don't want to, you know,
you don't want to over prioritize the five to twenty
nine account before you are investing for your own retirement.
But it essentially comes down to fees and point seven
Like you're either you're paying fees no matter what, You're
either paying point seven to expense ratios with the investment or.
(41:50):
So in Mississippi, the state income tax is four point seven,
so you're even paying point seven to your investment or
paying four point seven to the state for the income
tax on that money that you would otherwise get essentially
a buye.
Speaker 1 (42:03):
So yeah, the year low fees, it's about a four
percent spread. If you're trying to reduce fees, well, reducing
the fee that comes to you in the form of
state taxes quote unquote fee more important in this space.
Speaker 2 (42:12):
Yeah, exactly.
Speaker 1 (42:12):
And to get the sweet tax break, you've actually got
to contribute directly to the Mississippi State Plan itself. So
that's why we'd suggest doing that. But I will say this,
you might be able to move those five to twenty
nine dollars from the Mississippi State Plan over to Vanguard
later down the line, like that strategy. Yeah, that way
you can get the deduction but move the funds at
(42:32):
a later date to reduce ongoing fees. So you're trying
to get the best of both worlds here. Just check
to see whether your state has a clawback rule or not.
Sometimes they say, oh, well, if you contributed to the
plan and you got the deduction, but you pulled that
money back out or you moved it down the road
to Vanguard too soon, Well, actually you're gonna have to
pay that state tax and so yeah, there might be
(42:55):
a chance that if you did it too soon, within
twelve months or something like that, that they want that
tax money back. You don't want to have that tax
benefit revoked. That's half the reason, or not half the
reason doing that. But that is a substantial benefit of
contributing to your five twenty nine plan. That would be
a massive loss.
Speaker 2 (43:12):
Matt.
Speaker 1 (43:12):
This kind of makes me think about four or one
K plans that have a match but also have high fees.
We have listeners reach out about that from time to time.
Should I just abandon my workplace retirement account my four
O one K because the fees are so crappy And
the answer is always almost always to say, well, if
you have a match, make sure you get the match
no matter what, even though the fees are terrible, and
(43:33):
you have to hold your nose and invest inside of
that four one K despite the fees being high, because
the match more than makes up for it. I think
in this case, the state tax break, the state tax deduction,
more than makes up for the crummy fees. Inside of
the Mississippi state plan.
Speaker 2 (43:46):
Totally yeah. I will say, if you are listening and
you aren't in a state that has a state income
tax deduction, head over to a morning Star and look
up some of the better state plans that are that
anyone is eligible to participate in. I think Utah has
been like at the top for a while, like they're
always ranked under the their gold plans. Oh, Georgia, those
(44:06):
are great plans, those are I think those? Yeah, those
are more like the silver range. But guess who doesn't
even make bronze, Joel miss Mississippi. They're not ranked at all.
So no metal for Mississippi, Emily, not on this front.
We got one more though, at least hear from Tyler.
He writes, I am almost thirty seven. A couple of
years ago, I switched employers and now am doubling my
salary compared to the last employer win. But now, because
(44:28):
of this big change, I am all of a sudden
kind of far behind the three times your salary in
the four to one k by age forty goal, when
I was previously way ahead. Logically, I know that this
is still a win, But is it really necessary to
push hard to get back on track to meet this
new goal. I'm contributing eleven percent to a four one
K and Max on a separate roth Ira, I don't
(44:51):
want to pull more right now if I don't need to.
It just turns my head to now be considered behind.
Tyler's had a paradigm shift. Should he be concerned about
this drole? It sounds like.
Speaker 1 (45:02):
Tyler and you're snatching defeat from the jobs of victory here.
I don't want that to be the case. I think
is this is a huge This is a time to
say congratulations, because doubling your salary is insane. Yeah, and
maybe it was happening more like two years ago, two
and a half years ago in the heart of where
employees kind of got to call the shots when it
came to marching down the road and getting a better
(45:25):
offer from another employer. It's happening less and less these days.
So that's a massive money win. You should be super
pleased and definitely celebrate. This is a logical question though
in some ways, Matt, that follows after you pop the
champagne getting super pumped about your raise. You're way ahead
and now you feel behind. But the truth is, Tyler
you're not. You're not behind because those three times salary
by forty goals, it's not that they're they're lame, but
(45:47):
they aren't the real sign of success. And if it was,
I think you could have met your goal by keeping
your salary artificially low.
Speaker 2 (45:52):
And then of course that would have obviously been a
dumb move. So this is why we typically think about
saving these goals in relation to not what it is
that you earn, but what you spend. And so if
you do that, you'll be able to meet whatever goals
you'll have much faster. Now, if you are able to
keep your lifestyle in check, you're saving, and you're investing
a good portion of that raise, you're going to find
(46:14):
that you're going to grow your net worth at a
much more rapid clip. So for you, specifically, Tyler, I
see this being the perfect time for you to ramp
up your savings. You're saying that you don't want to
do it if you don't have to, but man, what
better time to up your savings rate than when you
can continue living like you used to be living. The
white Coat investor, he talks about doing this when it
(46:35):
comes to they appeal to doctors, right white coat investor.
And if you can continue living like an intern or
a resident once you are officially a doctor, you are
going to get so far ahead. But the problem is
oftentimes as soon as you're graduate. I don't know what
it is when you're a doctor, like you are making
(46:55):
that doctor salary, and all of a sudden you sign
up for all the payments, you take on, all the loans,
you buy the house. As opposed to delaying some of
that spending. Like, we want you, Tyler, to be behind
the curve when it comes to consumption. Yeah, Like we
want you to be a late bloomer when it comes
to some of the money that you're spending, not forever,
but just long enough to where you will essentially be
(47:16):
perpetually right in that wave of having invested your money
and seeing that and having seen that asset, that net
worth amount continue to grow.
Speaker 1 (47:24):
And one of the things you're highlighting here too, Matt,
is to have a different goal that doesn't throw shade
on the bigger paycheck. And so instead of saying, well,
it needs to be this much X my salary, say no, no, no,
I'm trying to amass this much X my spending. And
we'd suggest Tyler, tracking your net worth increasing. You know,
while that rate of that going up is a good goal,
(47:45):
you want to see your net worth continue to grow,
and it's not going to every single year, especially when
they're stock market downturns. But what you want to achieve
at a minimum is twenty five times your annual expenses.
This then takes doesn't take your pay into consideration, and again,
if you're spending doesn't rock it upward, you're going to
be able to get closer to that goal much more quickly.
Speaker 2 (48:05):
Now.
Speaker 1 (48:06):
I'm not sure how far off you are at this
current moment, but you're likely well on your way. And then,
you know, eleven percent for one K and maxing out
your ROTH is great. But like Matt, you're hinting at
like now is the perfect time to kind of ratchet
that up in a more significant way. But more than anything,
just make sure your metrics are tracking the important stuff
that you really want to achieve, not the artificial things
(48:27):
that aren't really that helpful. So hopefully, hopefully that makes
you feel better, Tyler, you should already feel great that
you're making so much more money, but hopefully that makes
you feel feel better about.
Speaker 2 (48:37):
Not being behind because I don't think. I don't think
you are behind. I think he's lashed onto the saying
that it's a rule of thumb that for some folks
can be helpful, but sometimes we have like we read
an article and we come across something that sticks with us,
or we have a conversation with a coworker and we're thinking, man,
that guy is smart or she's pretty brilliant, so I'm
going to do it, she said, or even the advice
we hear from our parents, Like, there are certain sayings
(48:58):
that kind of get embedded in our brain and it
can be hard to shake those. Like everyone's always heard that, oh,
renting is throwing away money, but like what about the
six plus percent thirty year mortgage rates right now and
home prices that are through the roof? Yeah, what if
I'm only going to live there for a couple couple
of years and the transaction cause are so incredibly high.
There are ways that some of these sayings can completely
(49:20):
derail our finances if we I think, if we overly
fixate on them, as opposed to them at times being helpful.
Speaker 1 (49:27):
Godline, And what if my mortgage is going to be
five grand, but my rent is going to be twenty
five hundred a month for a really similar place. Yeah,
you know, those are all the things you have to
take into account. But the simplistic first personal finance approaches
is to say, must buy house. That's the way to
build wealth, right. Yeah, so that's why we try to
have the nuanced condo and hopefully this the nuanced in
regards to your question is helpful to But.
Speaker 2 (49:48):
Joe, let's get back to the beer that you and
I enjoyed, which was an Indominus, which is a quad
my bald Monk, and I'm going to say, I really
like this one. Man. I think you're going to launch
into a Gregorian chant. This is so good. It's been
a while since we've had a quad here on the show.
And I will say six ounces of a quad. So
you and I we split this twelve ounce beer. It's
(50:08):
the perfect amount because any more than that starts feeling
a bit indulgent. Let's just be honest to even hear
at how the money for us to enjoy something overly
nice here in the middle of the day. I don't know,
it feels healthy, you know, like six ounces that seem
limiting our intake.
Speaker 1 (50:23):
Well, yeah, this I thought this was creamy, robust. It
had like brown sugar and figgy vibes too. And by
the way, that this brewery local brewery here, they have
one of the best actual like brewery setups in terms
of is Nope, it's so. It's such a lovely family.
I'll go there all the time. Yeah, we really love
that place. The food's good, the vibe is great, and
(50:44):
they have a great outdoor space when the weather's nice.
So I like this beer, but it's a beer. Some
of their beers are just okay, this is one of
their better beers. Yeah, I would totally yeah, this is uh,
this gets above a four. Yeah, if if I was,
if I were to check in rate this thing on untapped.
But it's got that multi brown bread kind of flavor.
It reminds me of the molasses bread that my grandma
(51:04):
used to make. She would make it, and I think
back in the day the way they would do it.
They would always make it in essentially in a coffee can,
and so it kind of had the you know, like.
Speaker 2 (51:12):
The big oh weah, the old folders cans. Yeah, and
so it had like the lines around it, and I
remember as a kid thinking and it had raisins in it.
Maybe that's when I fell in love with raisins in
different different bait goods. But it has this incredibly nostalgic
sort of flavor profile that it's hard for me to
to find something else that I want more than that
right now. Yeah, maybe I'm gonna go home and make
(51:32):
some bread.
Speaker 1 (51:34):
Yeah, this is a tasty one for sure. All right, man,
that's going to do it For this episode. We'll put
links to some of the resources that we mentioned in
today's show up on the website at how to money
dot com, and there are other helpful resources. Literally, you
just click on one of the top tabs and you
can find a list of resources that we have I
think are important for everyone out there trying to get
their personal finances in order. That's up at town of
(51:55):
money dot com.
Speaker 2 (51:56):
You know what, man, So until next time, best Friends Out,
BUYE best Friends Out.
Welcome to Out of Money. I'm Joel, I'm Matt, and
today we're answering your listener questions.
Speaker 2 (00:24):
You know, a budding We hope everyone had a fantastic weekend.
And we're gonna hear from a listener who had his
rental application denied. So we're going to talk about what
you should be doing when you've got a new pad
that you're interested in moving into. We're also going to
talk about how not all states are created equal when
it comes to saving for your kids college. We're going
to talk about five twenty nine accounts. And another listener
he's interested in investing in land for his family. He
(00:47):
wants to get his fingers in the dirt, Joel. He
wants to go full Yellowstone. He wants to Turner. Yeah,
where the buffalo ro? Did you ever eat a?
Speaker 3 (00:57):
Well?
Speaker 2 (00:57):
Shoot, does Ted's even existing more?
Speaker 1 (00:58):
Ted's of course it doesn't there around Yeah, okay, and
you could go and eat buffalo and I think I'll
get you a bison burger. That buffalo that he starts
at the restaurants comes from the ranches that ranches, and
I think he's still.
Speaker 2 (01:10):
Like the number two landowner in the entire country, Number one,
and he's number two? Is that what it is for?
The Catholic Church owns a lot of land, I think
of the country. But yeah, did you learned that from
watching Conclave? No? I did watch that though.
Speaker 1 (01:22):
Uh well, and Ted Turner actually I saw an interview
with him, so I think he's having some significant health struggles.
But he's planning on turning some of his land into
ecotourism so people can actually instead of just being privatized
land that he enjoys and works on. I think more
and more Americans are going to be awesome welcome into
touring some of that land. So almost like privatized national parks, which.
Speaker 2 (01:42):
Is why not set up a little a little retreat
for folks to head up.
Speaker 1 (01:45):
Yeah, I'd go there. I would totally go check it out.
I was hoping a four wheeler roam around those lands. Yeah,
watch the buffalo roam.
Speaker 2 (01:52):
Walk around, be silent, not talk to anybody.
Speaker 1 (01:55):
To Ted Turner's ranch. Okay, Matt, real quick. I just
wanted to highlight listener Vincent. He sent us an email
and he mentioned that he saved one hundred bucks a
month by switching from his old cell phone service to
US Mobile and then He also mentioned he saved another
forty dollars a month negotiating with his internet provider, So Man.
Speaker 2 (02:14):
Vincent, So they're stacking those wins. Yeah, I love that,
he like and that.
Speaker 1 (02:18):
I think that's actually a really good point to make, Matt,
that one win often induces another, Like you just kind
of get excited about winning.
Speaker 2 (02:23):
Discipline begets discipline. Yeah, I wouldn't know, but I'll take
your word for it. Oh please, I'm sure you've seen
this in your life, not as much as you, but yeah,
I would say that. So he's saving one hundred dollars
a month. I want to know what kind of plan,
what kind of premium Cadillac gold plated plan was he on?
If he's saving I mean he's paying I'm guessing one
fifteen a month prior and now he's paying fifteen bucks
a month. Yeah.
Speaker 1 (02:44):
That was the thing that actually shocked me the most
was when you actually when you when you see the
studies about what the average price of a cell phone
bill is for consumers in America, I think it's like
north of eighty dollars. And that always shocks me because
I'm like, man, even like average plans with the big
guys can be less than that. Who are these people?
And if I'm paying, you know, fifteen dollars a month,
(03:04):
how in the world are are people out there still
paying over eighty over one hundred and then was not
to throw shade at you, Vincent, but like, you did
the right idea, you did the right thing, you got
out of that deal. But man, it's incredible to think
that there are still cell phone.
Speaker 2 (03:17):
Plans that cost that much. Now we're we're patting Vincent
on the back here. We're not at all dragging your
name through the mud out there where the buffalo roam. Vi'scent,
but I, yeah, I don't think it's mud mount. Yeah.
So you're asking how did that happen? The way it
happens is that the prices come down over time and
you just keep it's on auto PI, auto pay, and
you keep paying the same amount and you don't think
it's all that expensive because it's just what you're used
(03:38):
to paying. But the advance is specifically when it comes
to cell phone service providers, Man, it has only gotten
cheaper and cheaper, and I will for that reason, I
would say that it's better than what it is that
home internet does because with them, you have to, like
you have to continually go back to them, yeah, because
you know, advocate for yourself, because they always bump you
back up. Whereas with a cell phone service providers, at
(03:59):
least you're just sticking on the plan and paying the
same thing. And even if there are other providers out there,
as it drops the prices come down, you know, at
least you're not paying more than what you were. That's
the thing I hate the most about home internet is
the fact that it resets and then all of a
sudden you're having to hop on the phone again, make
the call, threaten to leave, look up the other the
one other competitor that's out there that's that might be
(04:20):
offering a deal, depending on where you live.
Speaker 1 (04:22):
It's one of the only industries it's been anti inflationary
over recent years. Right when you think about most things
in our lives we pay more for, cell phone service
is one of the few things.
Speaker 2 (04:31):
That we can pay less for. It's amazing.
Speaker 1 (04:33):
Man Us Mobile even has like this this light plan
you can pay eight dollars a month for. So if
you're like, I'm not really a heavy user, I'm not
watching videos on the go, I don't use a whole
lot of data. The eight dollars a month plan is incredible.
Like it's when you think that you can pay like
Vincent was paying more than one hundred dollars a month
for cel phone service, you can pay less than one
hundred dollars a year for cell phone service.
Speaker 2 (04:53):
I think his mind would be blown. Yeah, you probably
just assume that, like, there's no way that that's legit.
I'm not even a click on that option. I'm not
even going to read any of the details because there'
no way that that's possible. But no, it is totally
is and it'm only doing a plan.
Speaker 1 (05:04):
But let's say I got an you're the ten gig plan, right, Yeah, okay,
but if I got a cell phone for my kids,
that's totally the plan i'd put them on. Yeah, so well,
in reasonably priced most likely too, they're probably hopefully not
using a ton of data.
Speaker 2 (05:15):
And I will say that that brings up a good point,
makes me think of how you do need to be
a little bit more mindful and a little more careful
if you're used to having unlimited data, because I do
think a lot of folks can't get by with the
ten gigs. But if you are spending more time on
the road or traveling where you're not at home, uh,
where you're automatically well, yeah, where you're automatically logged into
(05:36):
your WiFi or at work where you're automatically automatically logging in.
You can creep up towards that ten gig and you
have to be just a bit more thoughtful in your
media consumption. That makes me think of like Aldi.
Speaker 4 (05:47):
Right.
Speaker 2 (05:48):
I'm not going to say that Aldi is just like
Whole Foods, right, because it's not. It's not even like Costco.
There's some big differences there. But if you are willing
to be a bit more mindful and to limit your options, well,
there's certainly money to be saved, for sure. And that's
how I think about US Mobile. It's not the same
as Verizon Unlimited. But if you pay attention just a
little bit, you have, yeah, the opportunity to save a
(06:08):
good bit of money, no doubt.
Speaker 1 (06:09):
Let's mention the beer we're having on this episode, Matt.
This one's called Indominus. It's a quadruple, and we gotta
tell the quad because I don't really know how to
pronounce these quadruple rupel ruppel rupel.
Speaker 2 (06:20):
It's a quadruple. Okay, I saw the Southerner say it.
That's right, Jael. This is the Quadruple. It's by bail
Boldmunk Brewing, which is a local brewer. Here for us,
we'll give.
Speaker 1 (06:28):
Our thoughts at the end of the episode. If you
have a money question, we'd love to tackle it. We'd
love to hear from you. Just record a voice memo,
state your name at the top, then tell us your
question and hopefully we can take it on the next
ask htm episode. If you want the full instructions, good
to how to money dot com slash ask Matt. Let's
get to a question from a listener who's doing an
awesome job investing for her future, but the savings maybe
(06:52):
not so great.
Speaker 5 (06:54):
Hi guys, this is Christa from Centerville, Virginia. I'm fifty
one years and married with two elementary age kids at home,
and my question is surrounding retirement and emergency fund savings.
So I currently max out my four oh one K
(07:15):
plan with my company, and I'm also participating in the
Ketchup contribution. I haven't started on the emergency fund though,
because I'm putting in about nineteen percent of my income
into retirement. There isn't really much left to then, say,
(07:36):
for the emergency fund. So my question is is it
wise to pause retirement savings at my age in favor
of fully funding the emergency fund? Or can my existing
helock act as the emergency fund if we ever need
to use it? Thanks so much?
Speaker 2 (07:57):
Is it wise? That's the heart of Christa's question here, Joel,
But before we answer it, I will say life with
elementary age kids, man, it's a total blast, but it
can feel all encompassing, not just physically and emotionally, but
financially as well. So Christa, I want to start off
by congratulating you kudos on hitting a nineteen percent savings rate,
(08:18):
despite being a life stage where that is not always easy.
I think that's truly incredible. She said she's also got
catch up contributions as well, So we're talking thirty one
thousand dollars. That's those Mustard contributions stuck away. Dude. Yeah,
she's laid it on thick.
Speaker 1 (08:32):
Sorry, dad joke. I too have young kids, and my
kids know that I'm mustered. Yeah, run thick. But yeah, no,
you're right, Matt, that's incredible like to be to be
have a savings rate that's substantial, especially when you're kind
of the age Krista is. She's not too terribly far
off from where we are, and you are in that
kind of sandwich generation area where you might be supporting
(08:53):
or helping older parents. You've got young kids to take
care of. It can be tough to hit all those
financial goals that you have for yourself. But a savings rate,
I will say, is divided up into money you're funneling
into liquid savings, or debt you're paying off, and then
also on top of that, money that you're investing for
your future. So all three of those things could be
considered part of your savings rate. The thing is, if
(09:14):
you skip the savings portion and you go straight to investing,
there are some real potential downsides. Matt, you've shared this
story on the podcast before I made this mistake. Yeah,
you want to just briefly recount, you know, your early
Wrath mess up.
Speaker 2 (09:28):
Yeah, I'm the bottom line. I didn't have money set
aside in my savings account because I heard about the
beauty of compounding interest, and so I'd socked that money
away into a Wroth account. I saw that balanced decline
because it happened to be a down year, and boom,
I had less money on hand that I then needed
for a move back to the big city where I
was offered a job.
Speaker 1 (09:45):
So even though it sucked, investing is a great thing.
You just got too far in front of it, right,
And sure it makes you think about like the all
the federal layoffs that have been happening recently. Right, you
would be in a tough position, right if you were
to lose your job for some reason. It's not that
there aren't o places to turn for money. In Christa's case,
it's just that she'd be tapping a debt vehicle instead
(10:06):
of liquid savings. And because of her high savings rate,
it's very much possible for her to increase that liquid
savings and I think from where I'm saving, I would
prefer for her to focus on that for right now.
Speaker 2 (10:17):
Totally. Yeah, she's just funding all the savings dollars in
one direction when you should be splitting them up. So
we would suggest that you dial back, in fact, reduce
your contributions to your four to one k all the
way back to just getting the full match. We at
least want you to do that because you can't beat
that return on those dollars, but then put every other
dollar into your savings account until you achieve at least
(10:38):
three months worth of liquid expenses. And then after that
then you can ramp up your investing back to where
it currently is. Although if you are a bit more
cautious or maybe you feel the need to acquire a
little more savings, and you can put you know, let's say,
sixteen to seventeen percent towards your investments towards your four
one K, and then the rest of it can slowly
(10:58):
grow your savings until maybe you have an additional one
to two months worth of expenses on hand. Based on
the fact that she currently has no emergency fund, Yeah,
I think Christal's going to be very comfortable even having
like two to three months sure of savings and so
for and I think she'd do the trick. And I
think that's totally within the bounds of what's reasonable.
Speaker 1 (11:16):
But this brings up kind of a really important part
of Christ's question is, well, aren't there alternatives to cash
in savings? You guys are this kind of old school
Matt and Joel. You're telling me that I need money
inside of a high old savings account, But what about.
Speaker 2 (11:29):
Surely there's a more sophisticated option, Yeah, product out there
for me.
Speaker 1 (11:32):
Investment returns are going to outpace money that I have
in my savings account, So why don't I, in hopes
that I don't have to tap any sort of emergency fund,
just have the helock on the back burner in case
it's needed, like kind of one of those break glassing
case of emergency things. And so let's dive into that, Matt,
I mean we we do think. I think it is
true to a certain extent at least that it can
(11:53):
be a great potential backup efund. It's just far too
risky though, to make it your primary one. So if
you've got let's say four months worth of cash and
you're out of the job for six months, I think
the helock then can help bridge the gap. So it's
nice to have the helock as a backup to the backup,
But if you have no savings and you lose your job,
you'd have to tap the helock right away. It becomes
(12:15):
your first recourse, which I don't think is a good thing.
Think about how much debt you might accrue over the
course of three to six months that probably, yeah, in
these days, at like a nine percent rate, it could
take you years to pay that off, which you put
you in a weaker overall financial position. I just don't
like the idea of the helock being the first line,
(12:37):
the first fail safe. I think liquid cash shaving should
be the first thing, and then you know what, Hey,
if you have another resource that's potentially better than a
credit card for tapping some money. Yeah, maybe it's the
backup to the backup, but I just don't think you
want it being kind of that main thing and having
zero insulation between yourself and an emergency and having to
tap the helock for that emergency totally.
Speaker 2 (12:58):
In addition to that, also has the ability to reduce
your line of credit in many cases, so the access
to your home equity. It can actually dry up before.
Speaker 1 (13:07):
You need it the most, especially if there's like a
tightening in the economy. Banks might say, well, we're gonna
restrict our lending in the helock front.
Speaker 2 (13:13):
You're looking to show up their books as well. Yeah,
so that's another con to making the heelock your main,
your primary emergency fund, which brings up even like ROTH contributions,
because sometimes we'll think about that as a backup emergency
fund as well, but we also want you to avoid
typing those dollars, if at all possible, having a big rostache.
It doesn't negate the need for having those liquid savings
(13:34):
on hand. And I think, Krista, what you're trying to
do here is a good thing. You would much rather
invest than to save. And I think she's looking ahead
a little bit. She's looking at her age. She's thinking, Man,
every year that I am not maxing out my account,
that's a year lost. That's a year where I'm not
experiencing the magic of compound interest. And one other thing
(13:54):
that I don't know.
Speaker 1 (13:55):
When she started either said she's fifty one, but maybe
she's like I just started at like forty six, and
I feel like I've honest she might feel very I
mean go hard in that direction totally. And for someone
who's making the catch up contributions, I think that's the
headspace that you are in, which I totally understand. But
one thing that you mentioned but you didn't mention was
so you said that you are married, but you didn't
mention your partner's income, and it sounds like whoever it
(14:19):
is that you're working for, that you've got a good
thing going there. When it comes to investments, I.
Speaker 2 (14:22):
Would say, is there a way for you to possibly
keep investing there with your four o K Obviously you're
getting the full match, but continuing to invest those additional
dollars so that you can max that out while finding
a way to divert some of the funds, assuming I
guess there's an additional stream of income that your partner
is earning. You're in this together, I know, like when
I am saving from my retirement, it's not just for
(14:42):
me and my wife is just like sorry out of luck.
Like we're doing this together money, Like we're eaten at
the buffet and she's gonna be fas we're pulling our resources together.
We are in it together. And research has shown that
not only do is there a better result from a
numbers from a financial standpoint, but that their quality of life,
life and your levels of happiness are going to be
better too. So hopefully that that's something else that you're
(15:04):
considering as well, that you're pooling your resources together, and
that these are goals that you're both working towards. Hopefully
it's not something that you feel that you have to
shoulder completely on your own. Yeah, that would be tough.
I think two again.
Speaker 1 (15:18):
I think part of the reason Chris is doing this
is because she has realized that investing is going to
help her grow wealth, which is something we talk about
on the show often, like we talk about how how
wealth flows to owners. We did a whole episode on that,
Matt and the fact when you own a bunch of
different companies through an index fund and you're investing in
the stock market, you're an owner of American capitalism and
you will over time make money because of that. It's
(15:40):
a beautiful thing. But I think it's important to note
too that to be risk on with your investments, to
kind of say listen, I'm okay having a massive stock exposure.
It's also crucial to have a pile of what I
would say is like risk off liquid cash that allows
you some that peace of mind and also that real
financial backstop in case of an emergency. So you want
(16:00):
to take the both and approach, because it's at Morgan
Housel quote that's such a classic Matt where he says
to save like a pestimist and invest like an optimist.
But it's really hard to invest like an optimist when
you haven't saved like a pessimist, and you don't have
any sort of actual liquid cash, financial backstop or something
bad to happen to you. Because yeah, hopefully if all
(16:22):
things went perfectly, then Christa would be just fine investing
as much as she is now and not prioritizing savings.
But the truth is life is always thrown as curve
balls and you need to be prepared for that. And
that's what the emergency fund does. The helock just not
going to cut it, at least by itself. All right, man,
we got more to get to on this episode, including well,
if you get a big raise, are you suddenly behind
(16:43):
on retirement investing. We'll get to that and more right
after this.
Speaker 2 (16:54):
Right we're back from the break and Joe, it seems
like getting a rate is what actually put you ahead.
That is not how this listener how he's thinking about it.
But before we get to that one, let's know hear
from a listener who is having a tough time landing
the home or the apartment that he applied for.
Speaker 4 (17:09):
Hey, how to money listeners. My name is Dejon and
I come from Georgia. I have a question. So I've
been applying for homes to rent and I received a denial,
and what they stated was very weird. I've never had
this before, but it stated that I was denied due
to lack of real estate security loan information, and I
(17:33):
would love to know what that is. If you guys
can help me figure out what that is and what
I need to do to be able to rent, that
would be great. Thank you.
Speaker 2 (17:42):
Ballieve Matt, I'm not gonna lie.
Speaker 1 (17:44):
It feels like a weird denial letter to get I
totally agree. I interpret that to mean that since you
don't have a mortgage, you can't rent the house, which
feels like a weird thing to tell somebody who's trying
to rent your place, like you don't have a home loan,
so you can't rent this apartment at home. I just
don't understand why any landlord would would make that the
(18:06):
reason for not getting the apartment that you applied for.
So the fact that you've been turned down at least
for this reason is confusing. I would start asking questions.
I would start pushing back in a kind way, because
I would want to know, Like, I can't tell you
exactly why they would turn you down for that reason.
It doesn't make any sense to me, But I would
be asking the question.
Speaker 2 (18:25):
It would make sense if he was applying for a loan, right,
Like if he was applan for a helock, for instance,
It's like, Okay, what's the property that we're gonna take,
Like what's the collateral? Like what are you putting on
the line in case you don't pay? Because that's what
they're looking for, right, because then if you don't pay, boom,
they have access to your house. That's not the case. So, Dejohn,
did you accidentally apply for a helot or I doubt
(18:47):
that that's the case though that's not like something you
would accidentally do whoops instead of filling out the application
for that sweet apartment or that nice house. And this
could be like a glitch in the matrix, said sign
up for a helock? Yeah, where did I go wrong? No?
I think that's not the case.
Speaker 1 (19:01):
That's why you need to push back and ask questions
because this doesn't sound like a legitimate reason to be
turned around.
Speaker 2 (19:08):
Right.
Speaker 1 (19:08):
This could be a simple mistake, but you're just not
going to know if you don't ask, and it could
mean I think what they could be saying, potentially mad
is that you don't have an installment loan of any
kind on your credit report.
Speaker 2 (19:18):
And the truth is you and I have.
Speaker 1 (19:19):
Said this before on the show, having multiple types of
credit available to you can positively impact your score and
it makes you look like a more well rounded borrower
as long as you're making those payments consistently on time.
And so maybe if the installment loan thing and the
lack of an installment loan is what they're pointing to,
if that's the reason you were denied, go get yourself
an installment loan to help your chances. And wish I
have some advice for you on that front too.
Speaker 2 (19:41):
Which might sound weird to say, hey, go out and
get this loan in order to booce your credit score
so that you can get the sweet spot, but it
could increase your odds of getting accepted for the rental
property you want. And that's because a poor credit score
is often one of the top reasons for a denial.
So looking to increase that by handling your it well
and by increasing your credit diversity is pretty crucial. And
(20:04):
one of the easiest ways to go about doing that
is through a company called self and it will cost
you a little bit of money, but they've developed this product,
this great method for helping folks to increase their score
pretty significantly. By helping individuals to make loans to themselves,
and then by paying those loans loans regularly and on time,
it gets reported to the credit bureaus on your behalf,
(20:26):
which sounds totally shady and it is kind of gaming
the system, but is totally legit, and it is a reasonable,
a reasonable route to take. I will say, though, if
you already have an installment loan, you know there's a
chance maybe you have a student loan, and guess what
that counts as an installment loan as well. And so
if you're like, no, guys, I already have student loans
and I pay those off. I pay on those every
(20:46):
single month, well, then this isn't something I would recommend.
Speaker 1 (20:49):
It's even more baffling. It's clearly a mistake. I think
we're that to be the case.
Speaker 2 (20:52):
But this is for everyone else out there who doesn't
have an install installment loan. This is something seriously to consider. Yeah, yeah,
I mean it depends what your credit score is. If
you're like, my credit score is already north the seven forty,
I wouldn't jump through these hoops to try to just
get an installment loan on your credit report. But if
you have if your.
Speaker 1 (21:08):
Credit you're fairly new to the building credit game, and
you're like, I've got a credit card that's a revolving
line of credit and that's all you've got kind of
being reported to the bureaus.
Speaker 2 (21:18):
But I've heard that cash is king, and so I've
always done that. Guys, I thought credit cards are bad.
If that's the case, then you might have a pretty
low credit score.
Speaker 1 (21:25):
Taking on more lines of credit and a diversity of
types of credit can really, over time, be a boost
to your credit score. And you know that company that
you just mentioned, matt self. They they're making the installment
loan thing easy for people. It's like one of those
it's one of those early fintech companies that actually has
done a pretty good job by people to help them improve
their credit. And the truth is to the credit scoring
(21:46):
system is badly flawed. You know, there are other types
of reasons for denial too. They are typically like insufficient
income or bad references from friends or previous landlords. Credit,
I think is probably one of the main reasons. But
make sure you're buttoned up on all of those front.
It's a good idea to find other ways to stand
out as a potential tenant. To Matt, you and I
know this as landlords. There are some tenants that just
(22:07):
really stand out. It's typically the ones who show up
on time when we've talked about meeting, you're ten minutes late,
then it just it doesn't bode well from the.
Speaker 2 (22:16):
Get go, or if they're like a no show and
then they touched like later that night or like hey tomorrow,
I'm just like, I mean maybe yeah.
Speaker 1 (22:24):
But probably not, and like be respectful. Right, That's just
something else that's that's important. Fill out the application and
then follow up. It's kind of like searching for a job, Matt,
where people just submit the resume and then they forget
they ever submitted. And and the fact that like people
who follow up with an employer after the fact in
not just like hey, what's the deal, but proactively in
(22:45):
a kind way, like reach back out and say, hey,
I'm really interested in this job. What's the status? That
to me shows that you're taking initiative and you can
do the same thing as a potential tenant. On top
of that, it's a renter's market in much of the
country right now, as rents have softened and landlords are
facing more potential vacancies. Typically in many markets, Matt, when
a landlord lists their property for rent, they're getting far
(23:06):
fewer applications from from potential tenants. And so I think
tenants just doing that little bit of extra work it
can make you stand out in a much thinner field already.
So that's what I would recommend.
Speaker 2 (23:19):
I think would go a long ways. And essentially what
you're saying is to present yourself as an attractive potential
tenant to the landlord and being responsive. Man, I think
that goes a long ways because it tells me as
a landlord that hey, like this person is someone who's
great at communicating. It tells me that there's a chance
that they're going to be better about paying on time.
It tells me that if there's something wrong at the house,
(23:40):
that they're going to let me know pretty quickly, like hey,
the heat's out, Okay, great, We're going to fix that asap.
Because obviously, for you, you are very cold if it's the
middle of the winter like I experienced not too long ago.
But also for the sake of the house, I'm like,
I don't want the pipes freezing and for it to
cause additional problems, and so knowing that someone's going to communicate, well,
that's just it's kind of like icing or maybe more
(24:00):
some more like the cherry on top when it comes
to some of the different pool of applicants that you're
sorting through. Our last piece of advice that would be
to stick up for yourself. I would ask why you
weren't extended a lease offer, because if you know what
the pain points are, I think these are things that
you can directly address head on.
Speaker 1 (24:17):
Like if they say, hey, guess what, sorry, your credit
score was twenty points below what we typically accept. There
are ways to push back against that, aren't sure.
Speaker 2 (24:25):
We both have had tennants who have put down larger
security deposits, for sure. One of my favorite store instances
of this as a landlord was a couple and they,
I mean they came and saw the property. They're nice,
and everything showed up on time. But they told me
ahead of time. They're like, Hey, we're just gonna be
upfront and be honest with you. Our credit score. There's
a lot of negative information on our credit reports. This
(24:45):
is what we kind of had going on, and like
should we even apply? And I'm like, yeah, absolutely, like
please do apply. But then their credit report came back
and it was really bad. But I will say they
sent a long email over kind of explaining what they
had been going through, how their life had essentially turned
around and they were on the straight and arrow when
it came to their finances and there's still some gaps.
(25:08):
So actually I called them up and I asked the questions.
I was wanting to get some some things kind of
fleshed out, I guess, and I figure out the why
behind what's Yeah, it's like, well, okay, you explained this,
but what about this? And I was just trying to,
you know, make sure else do my due diligence. And
at the end of that, after we had that conversation,
I was satisfied, and so I just offered them the place.
And this is why this is one of my favorite
(25:29):
examples of this. But she started crying like on the
phone because she thought I had called to let them
off the hook gently, like basically to like be up,
just to be polite essentially, And man, it made me
only want to rent to them even more. The fact
that they had done the leg let the leg work,
they were honest about it and essentially to kind of
give them another shot. Like, I think that there are
(25:50):
plenty of landlords out there who are willing to have
the conversation when otherwise it's on paper. At least it
may not necessarily be a slam dunk.
Speaker 1 (25:58):
Decision, which you might be high in here too, Matt
is that small time mom and pop landlords might be
might be easier to actually negotiate with. Talk about some
massive apartment corporate landlord, giant corporate landlord, they probably have
stringent requirements and you know, barking up that tree, you
might not get really get anywhere. But if you're able
to proactively honestly engage that conversation and hey, say, hey,
(26:21):
my income and I might not be quite what you're
looking for, but actually have like money and savings, I
can even like I can prove that to you, and
here I actually have great reference from my from my
last landlord. That's that's the perfect way to kind of
maybe say, hey, maybe some of the metrics aren't living
up to your ideal tenant, but I've got all these
other things going for me.
Speaker 2 (26:40):
I want to make up for it in all these
other ways.
Speaker 1 (26:42):
It can help you sway sway to the landlord so
that they rent that place to you that you actually want.
Speaker 2 (26:46):
Plus they're like, I'll cut the grass too. Yeah.
Speaker 1 (26:50):
So I just ultimately don't take this lying down. There
are ways to push back, and that's a really weird
reason to get tonight. So please do let us know
what you find out as you do pushback. Matt, let's
get to another question from a listener who's excited about investing.
But wait a second, isn't investing supposed to be born?
Speaker 3 (27:07):
Hey, Matt, Joel, this is Josh coming to you from Michigan,
and I have a land purchase question for you today.
My wife and I are in money gear six. I
feel like we're kind of finally hitting our stride financially.
We have a couple kids, and we are now kind
of getting to the stage where we're wanting to pursue
(27:28):
some other investment opportunity, something a little more exciting, but
trying to balance that with obviously being you risk adverse
a bit with kids, and then also being just financially responsible.
The dream would be to purchase land to then someday
build on it like a vacation home that we could
(27:49):
potentially have as a short term rental within the thought
of this being kind of the family vacation spot to
someday pass this down to our children, kind of for
that legacy aspect, something we've never had in our families,
but kind of always dreamed of having a meding able
to kind of build upon our family tradition. And so
I guess my question today is really just how do
(28:11):
I think about striking the right balance between this is
something that would kind of put us a bit tighter
in our budget, something that's doable but obviously depend on
the cost of this investment and the timetable, something that
could put a bit of a financial constraint on us,
but also be very exciting at the same time, and
something we're looking forward to. So thanks so much for
(28:34):
taking time to answer this. If you're ever in Michigan,
check out Eastern Market Brewing Company in Detroit. Awesome, just Detroit,
nostalgic vibes, and just a fantastic place to start your
exploration of the city.
Speaker 2 (28:48):
Take care Detroit, Joel, specifically Eastern Market Brewing. I looked
it up. Yeah, looks cool. Does its got like this
giant brick build it makes It's like what you think
of when you think of Detroit, like the little brick building.
Speaker 1 (29:00):
Yeah, it's pretty cool. And I will say it's still
never been to Detroit, but it's high on my list.
I want to go same, you know.
Speaker 2 (29:05):
It's it's interesting because I wonder like we hear from
foot listeners a good bit and part of me feels
that I don't travel enough because but it's also because
we were hearing from folks who live all across the
country and oftentimes they are recommending their favorite breweries, which, oh,
it so happens that those are my favorite things to do.
Visit these towns. I need to do this more often.
(29:26):
But then, like I'm a fan of the is it
that the happiness hypothesis not hypothesis, the happiness potent or
something like that, right where it's like that your reality
divided by your expectations, And so if my expectations are
always exceeding my reality, I'm always there's always all these
breweries in towns I want to visit, and if that
number is larger on the bottom, I'm never going to
be happy a troll. So I just need to be
(29:48):
content with the amount of travel and the amount of
breweries that I'm visiting. And if I or you just
need to go out there and experience more awesome brewdis
and if I so happen to visit Eastern Market, then
my happiness is going to shoot through the roof.
Speaker 1 (29:59):
Well, we will of course reach out to Josh and
other Detroit listeners if we do make it out there.
Speaker 2 (30:03):
So another reason I wanted to bring up the Eastern
Market is because I was like, as I was checking
it out, one of the first things that came across
was a little listing or a page, and it was
just like, you can be a co owner of Eastern
Market brewing company, which you would think, oh, what a cool, fun,
exciting way to invest your money. But just like Josh's question,
we think that there might be better ways to handle
(30:25):
your money than to kind of go with the more
exciting option. You know what I'm saying.
Speaker 1 (30:29):
I think excitement might be overrated, and oftentimes almost always
is overrated when it comes to investing. We typically highlight
why boring is better, and it's just typically because you
get the job done with less headache, which with much
time less needed to But I will say this too, Matt.
As Josh's question unfolded, it's clear to me that he's
not just looking for excitement. That was kind of how
(30:52):
he prefaced it in the beginning, but as he elaborated,
he basically said, he's looking to make an investment that
can also allow for personal use, which I totally get.
Neither you or I have owned a vacation rental, but
that can be a decent combo and a reasonable choice
for some people. It kind of allows you to have
your cake and eat it too, ish and we'll talk
about the ish and the downsides of that as well.
(31:13):
You might be able to make some money while simultaneously
having a family travelhaven, which allows you to make memories
in the same location year after year, thinking about those
those pictures, and not only are the pictures on your phone,
but they're hung up in eight X tens around that
house that you go back to every year, and you
get to relive the memories of your kids growing up
in that awesome rental property that you own. I just
(31:34):
want to say it's important to note, Josh, this type
of investment, it doesn't typically provide the highest return, so
you're making significant trade offs in order to go in
that direction.
Speaker 2 (31:45):
Yeah, you have to be okay with making less than
if you opted for a different type of investment, even
just the overall stock market, because you might be in
fact seeing less of a return on your investment. But
I will say you are in money year number six,
so you are at the point in your money journey
where you can opt for a less optimized investment route
without feeling like you're completely derailing your financial future. You
(32:09):
mentioned buying land, though, and jol you kind of immediately
started thinking about what it is that he should do.
But I think it's worth directly addressing the fact that
if you're talking about built purchasing land in order to
potentially build a home in the future, well that's a
lot riskier of a proposition because there are more potential
pitfalls to purchasing land, to buying that dirt, than there
(32:31):
are to buying let's just say a rental property that's
already functional, that already exists, that's already been built. So
for instance, you could opt to buy let's say a
lake lot, but then you realize down the road, when
it is that you saved the money you try to
build there, that the terrain doesn't allow you to, or
maybe there are some sort of like infrastructure problems.
Speaker 1 (32:50):
So it's happened with a lot of people, specifically with
lake lots, and you hear those radio radio advertisements when.
Speaker 2 (32:54):
You get the flyers on the mail, and you're like,
why wouldn't I do that?
Speaker 1 (32:57):
It's ten thousand dollars for an acre around this Lake's
was like a no brainer, But there's a reason that
that land is being sold so cheap.
Speaker 2 (33:04):
It feels like getting your foot in the door, right,
like the ability to get in on the ground floor.
But then instead what you just ended up doing is
like you slammed the door on your foot, as opposed
to getting your foot in the door. Yeah, and we've
got a friend who did something kind of similar to this, Joe,
Like this is a while back now, but he came
across a good deal to purchase some property in the
neighborhood that we were living, and in the end he
(33:27):
ended up I can't remember how much he paid for that,
like maybe thirty or forty thousand, like my memory is correct,
but he couldn't build on it. He purchased it hoping
to build his family's dreamhouse essentially, and in the end
it's I don't even know what he ended up doing.
Wing there as like a natural space because you couldn't
build on it.
Speaker 1 (33:44):
Well, I want to say it was like a FEMA
flood map that prevented him from building there and the
flow issues. Actually he did build one thing on that property,
team or what.
Speaker 2 (33:51):
It was a sidewalk. Well, this city required him to
build the sidewalk, and he didn't put it there. He
stuck it somewhere else. Okay, but like as they said,
it doesn't have to be you just have to whatever
frontage of your lot you are required to develop that
much sidewalk somewhere else. And so he but there's no
sidewalks on either side of him. So he's like, that's stupid.
I'm not gonna build a sidewalk only in front of
(34:12):
my lot. And so he added onto a sidewalk in
a part of the little downtown area that we would frequent.
Speaker 1 (34:17):
The lot that he owned that was unbuildable was also
taxable on an annual basis. And so you just have
to terrible that there are massive potential pitfalls in buying
land because unless you are a builder who really knows
what they're doing, Josh I would just say avoid that
and look to buy in rental properties. It's something that's
already there, even if that's already built. Yeah, even if
(34:39):
it takes you longer to save up and actually make
that thing. I think what Josh is saying is like, oh,
if I get the land, then we can look forward
to this, we can start planning for it, and it's
gonna take us year is probably to pull off, but
we'll get there eventually. I would rather you just save
the money and then uh, or.
Speaker 2 (34:51):
By a more affordable piece of more affordable property than
maybe had. It doesn't have quite as much land, but
like let's say it's just got the little cabin, but
enough land that you can still have some of those
rustic adventures. I'm picturing him. Maybe he's thinking like, oh,
we're gonna go camping there for the first wyoming or
something five to ten years, and then eventually we'll save
up enough to be able to build. But I think
there's ways that you can do that affordably now without
taking on the undue risk. Okay, so let's talk about
(35:13):
other potential downfalls. Matt.
Speaker 1 (35:16):
Let's blow some more holes in Josh's plan. Not on purpose, Josh,
but just to hopefully play devil's advocate and help you
think about this before you take the plunge and sink
big bucks into it and then realize, oh man, that
wasn't all that I hoped it would be. There are
other significant downsides of owning a vacation rental. I think
for a lot of people it sounds better in theory
then it ends up being in reality because think about this, like, well,
(35:38):
you need to paint or make repairs every time you visit.
That's one of the downsides I hear from some folks
who go down that path, like every time they go.
One of my friends, one of our friends is has
a rental property in Nashville. He has been there so
much recently, trying to fix it up every time they go.
They don't get to enjoy it. They're working, right, And
I think that is the tale I hear from a
(35:59):
lot of people who owned vacation rentals.
Speaker 2 (36:01):
It's far less relaxing.
Speaker 1 (36:02):
Than you hope for because there's always something to do,
and so yeah, it's more than okay. I think to
make the trade off of a smaller return for personal enjoyment,
but make sure you've either got the extra cash or
the personal willingness to do those fixes that are inevitably
going to be required. I have another friend, Matt, who
bought a condo at the beach and then it turns
(36:24):
out the HOA was being poorly run. He has to
run for HOA president in order to kind of help
get the board back in line and get the finances
of the HOA back in shape. That's a part time
job for him and it's been a massive pain, which.
Speaker 2 (36:38):
Is fine if you want to sign up for a
part time.
Speaker 1 (36:40):
Job, but he didn't know he was getting into that
when he bought the condo. And then so just you
have to realize that there are all these potential pitfalls
that you can't see. They're like, finally they're nicely covered
up right with what looks to be a patch of dirt.
It looks like you're it looks like you're stepping into
a safe spot. But ultimately you fall in, you break
your leg, and you're like, ah, what happened there? And
(37:01):
that's just Yeah, there are significant potential downsides, I think
more so with buying land, but just to buying vacation
property in general.
Speaker 2 (37:08):
Yeah, I mean, and it's not all that different than
how we approach folks who are interested in becoming real
estate investors as well. Like it is kind of a
part time job, and so you have to be okay
with either spending more than you otherwise would because you've
got management, or you need to have the time on
hand to be able to diiyat which I was going
to say, that's totally fine if that's a goal of yours, Josh, Like,
so you mentioned your kids, and if you are okay
(37:30):
with when you go on vacation and when you go
to visit that house spending your time painting, fixing toilets,
things like that, that's totally fine. If those are lessons
that you're trying to impart and it's kind of like
something No, there's a little bit of sweat equity that
you're doing alongside your kids. I think that that could
be I think that could potentially be cool. But if
you're thinking that, like, oh, all my vacation, I can't
spend any time during the week doing that because I've
(37:52):
got a full time job. You're like, oh, well, we'll
be able to do that during vacation. What you're actually doing, though,
is eating into your vacation and all of a sudden
you're doing the opposite of what you maybe expected to
do on the front end, which is like relax, and
I'm just saying, instead of being your home away from home,
it becomes your job away from your job away from home. Yeah, exactly,
which is totally fine. Though if that's a goal of yours.
It makes me think of a friend of ours, Carl
(38:13):
Mister fifteen hundred. I've heard him talk about what I
think he calls construction tourism, or he'll go and visit
a friend and hang out for a week or two,
that kind of thing while he helps him to do
some sort of big house project. If that's how you're
thinking about this, Josh, I think it it could pay off.
I've been waiting for him to pay me a visit.
But otherwise, we do want you to be extremely cautious
(38:34):
when it comes to how it is you're approaching this regardless.
Make sure that you continue like you're in money year six,
so you are maxing out your other accounts. Make sure
that you're continuing to do the boring things before taking
on this lifestyle plunge. But at the end of the day,
I would do it. I mean, so I spent, we
spent this whole time, kind of put puent on his
on his dream. But that's the thing multiple times in
(38:54):
the question he said this was a dream of theirs. Yeah,
and so if this is a massive goal for you
and your family, go for it. Man, it just makes
you your eyes are wide open as you are performing
your due.
Speaker 1 (39:03):
Dealis just make sure, because Matt, the thing about dreams
is so much of the time you wake up and
you're like, Oh, wouldn't that be fun if that actually existed?
But that's not real life. And so you want to
know think about imagine what that dream would look like
in real life, and not just what it looks like
in the dream state. You want to walk through some
of those actual scenarios. Put yourself in the shoes. Worst
case scenario you owning mental property. And I guess the
(39:25):
other thing to think through is how much time would
you actually spend there. I think the more time you
plan on spending there, the more sense it makes to
actually own it. If you're like, ah, we'd go one
to two weeks a year, it makes sense for the
most part from a financial perspective to rent it. Also,
would you have somebody managing the property to rent that
out when you're not there so that it was bringing
in income. Those are all really important questions. They're financial questions,
but they're also just kind of emotional questions about how
(39:48):
you're going to approach the property and how significant of
a role it's going to play.
Speaker 2 (39:52):
In your life.
Speaker 1 (39:53):
But yeah, not trying to poot poo on the goal altogether.
If this is a legit dream and you have thought
through all the details, Josh, I think you're in the
place to be able to make this a priority.
Speaker 2 (40:02):
That's right. All right, We got more to get to,
including we're gonna hear from a listener who has recently
gotten a fat raise. We'll get to that and more
right after this.
Speaker 1 (40:17):
All right, Matt, We've got more money questions to get to.
Now it's time for the Facebook question of the week.
This one comes from Emily in the how to Money
Facebook group. She says, currently looking at opening a five
to twenty nine for each of my twins. I was
trying to decide whether to go through Vanguard directly or
through a state plan. The expense ratios seem to be
(40:37):
lower through Vanguard. We're in Mississippi, though, and the end
state plan that would give us a tax break is
not great.
Speaker 2 (40:43):
That's right, Yeah, So, Emily, almost all five twenty nine
plans that are out there, they've gotten a lot better
over the past few years. That being said, Mississippi is
still one of the holdouts who is still charging their
residence way too much. When it comes to the investments
within a five twenty nine on every investment option that
they offer is north of point five percent, with most
(41:06):
of the options being closer to point seven percent. But
there is at least a meaningful state income tax reduction
on up to twenty thousand dollars per year, that is
if you are married filing jointly, So despite these pretty
high fees, the tax deduction would easily more than make
up for it. We hate fees, and we would love,
(41:26):
in fact, to see Mississippi correct this injustice. But I
would totally still participate if I were you, as long
as you are doing great when it comes to investing
in all the other ways. You don't want to, you know,
you don't want to over prioritize the five to twenty
nine account before you are investing for your own retirement.
But it essentially comes down to fees and point seven
Like you're either you're paying fees no matter what, You're
either paying point seven to expense ratios with the investment or.
(41:50):
So in Mississippi, the state income tax is four point seven,
so you're even paying point seven to your investment or
paying four point seven to the state for the income
tax on that money that you would otherwise get essentially
a buye.
Speaker 1 (42:03):
So yeah, the year low fees, it's about a four
percent spread. If you're trying to reduce fees, well, reducing
the fee that comes to you in the form of
state taxes quote unquote fee more important in this space.
Speaker 2 (42:12):
Yeah, exactly.
Speaker 1 (42:12):
And to get the sweet tax break, you've actually got
to contribute directly to the Mississippi State Plan itself. So
that's why we'd suggest doing that. But I will say this,
you might be able to move those five to twenty
nine dollars from the Mississippi State Plan over to Vanguard
later down the line, like that strategy. Yeah, that way
you can get the deduction but move the funds at
(42:32):
a later date to reduce ongoing fees. So you're trying
to get the best of both worlds here. Just check
to see whether your state has a clawback rule or not.
Sometimes they say, oh, well, if you contributed to the
plan and you got the deduction, but you pulled that
money back out or you moved it down the road
to Vanguard too soon, Well, actually you're gonna have to
pay that state tax and so yeah, there might be
(42:55):
a chance that if you did it too soon, within
twelve months or something like that, that they want that
tax money back. You don't want to have that tax
benefit revoked. That's half the reason, or not half the
reason doing that. But that is a substantial benefit of
contributing to your five twenty nine plan. That would be
a massive loss.
Speaker 2 (43:12):
Matt.
Speaker 1 (43:12):
This kind of makes me think about four or one
K plans that have a match but also have high fees.
We have listeners reach out about that from time to time.
Should I just abandon my workplace retirement account my four
O one K because the fees are so crappy And
the answer is always almost always to say, well, if
you have a match, make sure you get the match
no matter what, even though the fees are terrible, and
(43:33):
you have to hold your nose and invest inside of
that four one K despite the fees being high, because
the match more than makes up for it. I think
in this case, the state tax break, the state tax deduction,
more than makes up for the crummy fees. Inside of
the Mississippi state plan.
Speaker 2 (43:46):
Totally yeah. I will say, if you are listening and
you aren't in a state that has a state income
tax deduction, head over to a morning Star and look
up some of the better state plans that are that
anyone is eligible to participate in. I think Utah has
been like at the top for a while, like they're
always ranked under the their gold plans. Oh, Georgia, those
(44:06):
are great plans, those are I think those? Yeah, those
are more like the silver range. But guess who doesn't
even make bronze, Joel miss Mississippi. They're not ranked at all.
So no metal for Mississippi, Emily, not on this front.
We got one more though, at least hear from Tyler.
He writes, I am almost thirty seven. A couple of
years ago, I switched employers and now am doubling my
salary compared to the last employer win. But now, because
(44:28):
of this big change, I am all of a sudden
kind of far behind the three times your salary in
the four to one k by age forty goal, when
I was previously way ahead. Logically, I know that this
is still a win, But is it really necessary to
push hard to get back on track to meet this
new goal. I'm contributing eleven percent to a four one
K and Max on a separate roth Ira, I don't
(44:51):
want to pull more right now if I don't need to.
It just turns my head to now be considered behind.
Tyler's had a paradigm shift. Should he be concerned about
this drole? It sounds like.
Speaker 1 (45:02):
Tyler and you're snatching defeat from the jobs of victory here.
I don't want that to be the case. I think
is this is a huge This is a time to
say congratulations, because doubling your salary is insane. Yeah, and
maybe it was happening more like two years ago, two
and a half years ago in the heart of where
employees kind of got to call the shots when it
came to marching down the road and getting a better
(45:25):
offer from another employer. It's happening less and less these days.
So that's a massive money win. You should be super
pleased and definitely celebrate. This is a logical question though
in some ways, Matt, that follows after you pop the
champagne getting super pumped about your raise. You're way ahead
and now you feel behind. But the truth is, Tyler
you're not. You're not behind because those three times salary
by forty goals, it's not that they're they're lame, but
(45:47):
they aren't the real sign of success. And if it was,
I think you could have met your goal by keeping
your salary artificially low.
Speaker 2 (45:52):
And then of course that would have obviously been a
dumb move. So this is why we typically think about
saving these goals in relation to not what it is
that you earn, but what you spend. And so if
you do that, you'll be able to meet whatever goals
you'll have much faster. Now, if you are able to
keep your lifestyle in check, you're saving, and you're investing
a good portion of that raise, you're going to find
(46:14):
that you're going to grow your net worth at a
much more rapid clip. So for you, specifically, Tyler, I
see this being the perfect time for you to ramp
up your savings. You're saying that you don't want to
do it if you don't have to, but man, what
better time to up your savings rate than when you
can continue living like you used to be living. The
white Coat investor, he talks about doing this when it
(46:35):
comes to they appeal to doctors, right white coat investor.
And if you can continue living like an intern or
a resident once you are officially a doctor, you are
going to get so far ahead. But the problem is
oftentimes as soon as you're graduate. I don't know what
it is when you're a doctor, like you are making
(46:55):
that doctor salary, and all of a sudden you sign
up for all the payments, you take on, all the loans,
you buy the house. As opposed to delaying some of
that spending. Like, we want you, Tyler, to be behind
the curve when it comes to consumption. Yeah, Like we
want you to be a late bloomer when it comes
to some of the money that you're spending, not forever,
but just long enough to where you will essentially be
(47:16):
perpetually right in that wave of having invested your money
and seeing that and having seen that asset, that net
worth amount continue to grow.
Speaker 1 (47:24):
And one of the things you're highlighting here too, Matt,
is to have a different goal that doesn't throw shade
on the bigger paycheck. And so instead of saying, well,
it needs to be this much X my salary, say no, no, no,
I'm trying to amass this much X my spending. And
we'd suggest Tyler, tracking your net worth increasing. You know,
while that rate of that going up is a good goal,
(47:45):
you want to see your net worth continue to grow,
and it's not going to every single year, especially when
they're stock market downturns. But what you want to achieve
at a minimum is twenty five times your annual expenses.
This then takes doesn't take your pay into consideration, and again,
if you're spending doesn't rock it upward, you're going to
be able to get closer to that goal much more quickly.
Speaker 2 (48:05):
Now.
Speaker 1 (48:06):
I'm not sure how far off you are at this
current moment, but you're likely well on your way. And then,
you know, eleven percent for one K and maxing out
your ROTH is great. But like Matt, you're hinting at
like now is the perfect time to kind of ratchet
that up in a more significant way. But more than anything,
just make sure your metrics are tracking the important stuff
that you really want to achieve, not the artificial things
(48:27):
that aren't really that helpful. So hopefully, hopefully that makes
you feel better, Tyler, you should already feel great that
you're making so much more money, but hopefully that makes
you feel feel better about.
Speaker 2 (48:37):
Not being behind because I don't think. I don't think
you are behind. I think he's lashed onto the saying
that it's a rule of thumb that for some folks
can be helpful, but sometimes we have like we read
an article and we come across something that sticks with us,
or we have a conversation with a coworker and we're thinking, man,
that guy is smart or she's pretty brilliant, so I'm
going to do it, she said, or even the advice
we hear from our parents, Like, there are certain sayings
(48:58):
that kind of get embedded in our brain and it
can be hard to shake those. Like everyone's always heard that, oh,
renting is throwing away money, but like what about the
six plus percent thirty year mortgage rates right now and
home prices that are through the roof? Yeah, what if
I'm only going to live there for a couple couple
of years and the transaction cause are so incredibly high.
There are ways that some of these sayings can completely
(49:20):
derail our finances if we I think, if we overly
fixate on them, as opposed to them at times being helpful.
Speaker 1 (49:27):
Godline, And what if my mortgage is going to be
five grand, but my rent is going to be twenty
five hundred a month for a really similar place. Yeah,
you know, those are all the things you have to
take into account. But the simplistic first personal finance approaches
is to say, must buy house. That's the way to
build wealth, right. Yeah, so that's why we try to
have the nuanced condo and hopefully this the nuanced in
regards to your question is helpful to But.
Speaker 2 (49:48):
Joe, let's get back to the beer that you and
I enjoyed, which was an Indominus, which is a quad
my bald Monk, and I'm going to say, I really
like this one. Man. I think you're going to launch
into a Gregorian chant. This is so good. It's been
a while since we've had a quad here on the show.
And I will say six ounces of a quad. So
you and I we split this twelve ounce beer. It's
(50:08):
the perfect amount because any more than that starts feeling
a bit indulgent. Let's just be honest to even hear
at how the money for us to enjoy something overly
nice here in the middle of the day. I don't know,
it feels healthy, you know, like six ounces that seem
limiting our intake.
Speaker 1 (50:23):
Well, yeah, this I thought this was creamy, robust. It
had like brown sugar and figgy vibes too. And by
the way, that this brewery local brewery here, they have
one of the best actual like brewery setups in terms
of is Nope, it's so. It's such a lovely family.
I'll go there all the time. Yeah, we really love
that place. The food's good, the vibe is great, and
(50:44):
they have a great outdoor space when the weather's nice.
So I like this beer, but it's a beer. Some
of their beers are just okay, this is one of
their better beers. Yeah, I would totally yeah, this is uh,
this gets above a four. Yeah, if if I was,
if I were to check in rate this thing on untapped.
But it's got that multi brown bread kind of flavor.
It reminds me of the molasses bread that my grandma
(51:04):
used to make. She would make it, and I think
back in the day the way they would do it.
They would always make it in essentially in a coffee can,
and so it kind of had the you know, like.
Speaker 2 (51:12):
The big oh weah, the old folders cans. Yeah, and
so it had like the lines around it, and I
remember as a kid thinking and it had raisins in it.
Maybe that's when I fell in love with raisins in
different different bait goods. But it has this incredibly nostalgic
sort of flavor profile that it's hard for me to
to find something else that I want more than that
right now. Yeah, maybe I'm gonna go home and make
(51:32):
some bread.
Speaker 1 (51:34):
Yeah, this is a tasty one for sure. All right, man,
that's going to do it For this episode. We'll put
links to some of the resources that we mentioned in
today's show up on the website at how to money
dot com, and there are other helpful resources. Literally, you
just click on one of the top tabs and you
can find a list of resources that we have I
think are important for everyone out there trying to get
their personal finances in order. That's up at town of
(51:55):
money dot com.
Speaker 2 (51:56):
You know what, man, So until next time, best Friends Out,
BUYE best Friends Out.
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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