February 2, 2025 • 32 mins
DeepSeek sent the stock market into a tizzy this week. How should Chinese AI advances impact how you invest? We discuss!
Ask HTM: Chelsea wants to know how to avoid fees on her old HSA account.
Tax filing season has begun. There are ways to file for free. And beware the 1099-k that more filers will receive this year!
Ask HTM: Kelly wants to know how to dial back on investing to save for upcoming childcare costs.
Ask HTM: Chelsea wants to know how to avoid fees on her old HSA account.
Tax filing season has begun. There are ways to file for free. And beware the 1099-k that more filers will receive this year!
Ask HTM: Kelly wants to know how to dial back on investing to save for upcoming childcare costs.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
KFI AM six forty. You're listening to how to Money
on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel Larsgard and Matt Altmes.
Speaker 3 (00:22):
KFI AM sixty live everywhere on the iHeartRadio app.
Speaker 4 (00:26):
This is how to Money. I am Matt Altmix and
I'm Joel Larsgard.
Speaker 3 (00:29):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (00:34):
Let's start with the big one. It happened on Monday
sent the stock market into a tizzy. Do you know
what we're going to talk about right now? Of course
I do, okay. So the deep Seek AI, the Chinese
AI system that impacted tex tech stocks to a significant degree.
In Nvidia, which has been the high flying stock of
the last couple of years, shed six hundred billion dollars
(00:57):
of value in one day, which I think was the
largest dollar amountain drop for any stock in history at
any point in history, which makes sense, right, all because
of this Chinese app, this this upstart app called deep Seek,
which hit the app store, the Apple app store, and
so deep Seak is a Chinese artificial intelligence company, and
it created what some are calling a superior AI product
(01:20):
that it's at least as good, if not better, than
many of the American made artificial intelligence products currently on
the market. But the big news is that they were
able to do it at least apparently for a fraction
of the cost, for like six million bucks, using a
whole lot less of those super fancy, incredibly expensive chips
that a company like Nvidia would make, which is why
(01:40):
it impacted them. And then Mark Andresen, who's you know,
big time tech nerd, founder of many startups, he called
it AI's Sputnik moment. Matten, I wasn't alive back then
when Sputnik launched, but it's the space race when you
read about a US history, that was a big moment
in US history, essentially propelling towards greater heights and towards
(02:02):
beating the Russians into space. And since we live in
a globally connected world, that impacts American artificial intelligence and
tech companies. But as the news I think has been digested,
this is actually maybe not as bad as it initially seemed.
It could be actually good news for a whole lot
of tech companies because it means they're going to be
able to get more bang for their buck on AI
(02:23):
spending that got incredibly expensive really fast. And this what
this made me think of was Moore's law, which is
essentially the fact that chips, the silicon chips, they get
twice as good roughly every two years. And actually that's
happening at a faster rate than what Moore's law would
state right now. I believe that increased efficiency reduces energy
(02:46):
needs for artificial intelligence, which has been a problem. Something's
been talked about quite a lot how much energy artificial
intelligence is siphoning, and it should lower the cost meaningfully.
So I think ultimately this is probably a good thing,
and American companies they're not going to be left in
the dust for long. I guess some people might be wondering, oh, man,
(03:06):
should this change how I invest I saw the stock market,
you know, just get slammed on Monday, and I get
maybe that impulse. But our answer, as always is no.
But it is why you should have a diversified portfolio.
Speaker 3 (03:18):
Absolutely, this is why you do not invest in single companies.
And it makes me think about the burgeoning narrative about
stocks overall, like the wide stock market being overvalued, and
that might be true, particularly in certain segments of the
tech sector. But even if stocks in general and some
particular ones are overvalued, there's not much that you can
do besides just continuing to invest. We still like dollar
(03:41):
cost averaging because honestly, what's the alternative investors I will say,
who are let's say, getting closer to needing their money.
If you are getting closer to your retirement years and
they are, you're a little more in the wealth preservation
stage of your lives, I think it might be worth
considering a more conservative approach. For instance, Vanguard, they're suggesting
these days is the forty sixty balance instead of the
(04:02):
often touted sixty forty allocated portfolio, so more of a
forty percent exposure to stocks sixty percent bonds. And this
is largely because of their view that stocks come with
a higher volatility. But don't let these stock market stories,
these blips, the ever shifting narratives change your approach. And
you mentioned the how deep sea the Chinese company was
(04:26):
able to do it more efficiently. There's like investigations now
as to whether or not they're actually cribbon open ais.
No it's a little bit essentially, I think they're calling
it distillation, where it's like, wait a minute, this other
large language model owned by the Chinese was actually learning
from open Ai Chat GBT. Essentially it without doing all
(04:46):
the hard work.
Speaker 1 (04:47):
Which makes sense, I mean does join astarn in The
Wall Street Journal had a really funny article basically lightened
Chat GPT and Sam Altman on fire about that, say, hey,
you basically stole all this information from creator across the internet.
Speaker 3 (05:00):
Sam Altman would say, well, I'm doing the hard work though,
of creating the actual large language language model, whereas Deep see,
they're just I almost think of it as like almost
like a white label, you know, like you buy products
and it's like okay, you just slap the label on there,
and all of a sudden it's a new product.
Speaker 4 (05:13):
It's like no, no, no, no. The other companies.
Speaker 3 (05:15):
Still actually did the hard work of the initial lift.
Speaker 1 (05:18):
I guess all I know is there's a lot of
creators out there who didn't give any permission Sandman to
crib their writings the things that they've created, and yet
they got taken anyway. So maybe a little bit of
karmic justice. But Matt, it's not just artificial intelligence. That
space being upended by change. Diamonds that you dig out
of the earth are also being upstaged by lab grown diamonds.
(05:42):
This is something we've talked about in the past, but
this sea change is accelerating more quickly. Natural diamond prices
have gone down in price by eight percent recently, largely
because lab grown diamonds are becoming more popular and cheaper.
Lab grown diamond prices have actually plummeted by seventy five percent.
So wow, it's no wonder that people are saying, yeah,
(06:02):
I'll choose that option instead if you're like proposing to
your sweetheart or something like that. Right, they're essentially equal stones, Like,
the naked eye can't really perceive a difference between lab
grown diamonds and diamonds that are dug up out of
the ground. And so you know, brides and grooms they're
taking notice. And now more than half of engagement rings
(06:23):
are being sold with lab grown diamonds. You can, for real,
I like it, same size, same look, everything, you can
save eighty percent and the naked eye can't detect any difference.
I'm all for this kind of shakeup. Yeah, maybe we
should propose our wives again, Matt start buying them some bling.
Speaker 3 (06:39):
What do you think There's a part of me that
stempted like what I wish was that this would have
been available to us when we're younger. Yeah, but like
there's a part of me that gets excited, Like when
I think about it for a minute, I get like
pretty stoked. I'm like, oh sweet, I could buy a
Kate just some serious bling, and it sounds fun for
like a second, but then I'm like, well, why would
I want to do that? And I immediately talk myself
out of it. I don't think she don't really care
(07:01):
about that. They don't know, they don't and they'd rather
get a bunch of others. She loves her old ring,
even if it was just like pennies. It's just like, well,
why do I want to wear like this giant, gaudy
piece of jewelry? And oftentimes I think it comes down
to what other people think, And dude, we don't care
what anybody.
Speaker 4 (07:15):
Thinks, espureing to project anything.
Speaker 3 (07:17):
I don't even wear my I feel bad because the
ring that those ladies are hitting on you is it's
like a family heirloom kind of ring, and it means
a lot, and I actually stopped wearing it when I
started lifting more often because I didn't want to damage it.
You were the silicone I hate those. I'm really yeah,
not comfortable.
Speaker 1 (07:34):
It doesn't bother me, but it's it's cool to see,
and I'd be curious to know too if any how
the money listeners have gone the lab so and maybe
they were debating going with a real diamond dug out
of the ground, and then they were like, wait a.
Speaker 4 (07:46):
Second, no, man, no, I'm just gonna say a ton
of much synthetic. That's huge. Yeah, let us know how
it went by the way.
Speaker 3 (07:52):
I don't care, But dude, for all the folks out
there who are single or thinking about proposing, oh, one percent,
a game changer for for them, one.
Speaker 1 (07:58):
Hundred percent spot on. All right, we've actually more to
get to on today's show.
Speaker 2 (08:02):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:10):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Let's get to a question about an old
retirement account and some fees that this listener is really
worried about Hi.
Speaker 5 (08:23):
Joelan Matt. My name's Chelsea, and I really enjoyed your
podcast and I was hoping you might be able to
help answer a question for me. So my family, which
is my husband, our two young daughters, and myself. We've
been on my employer's high deductible healthcare plan for the
past several years, and I've contributed the annual maximum to
(08:45):
my HSA Health Savings account. But earlier this year, my
husband got a new job and we switched to his
healthcare plan and I now max contributions to an FSA,
but that means I can no longer contribute to my HSA,
and I just noticed that I'm now paying a five
dollars per month maintenance fee on my HSA account since
(09:08):
I'm no longer making new contributions. So I was wondering
if you had any advice on a no fee HSA
account that I could transfer it to. I looked into Fidelity,
but the fees for balances over twenty five thousand dollars
would be more than what I'm currently paying. And I
guess did you have any other ideas, potentially too, about
(09:28):
how we might maximize both of our health insurance plans.
I kind of looked into this when we initially switched,
but it seemed pretty complex with trying to combine FSAs
and hsas, and I honestly just went with one plan
for simplicity. But I'm wondering if I maybe I am
not maximizing the options we have there. So yeah, I
(09:52):
would just really appreciate any advice that you had for
I guess using the two healthcare plans or just options
for no hsas. Thanks a lot, Joe.
Speaker 3 (10:02):
I noticed that you said a retirement account, which is
exactly how we should be thinking about the health savings account,
not as a way to cover health care expenses.
Speaker 1 (10:10):
It's just not how most people think about it, and
indeed it's probably because of the naming convention.
Speaker 3 (10:15):
So condolences Chelsea on the loss of your retirement account,
which feels overly dramatic.
Speaker 4 (10:20):
Can we play some like funeral dirge music?
Speaker 3 (10:23):
The FSA is the flexible spending account for health care
expensive that's solid, but it's not nearly as good from
a long term perspective, which is how we like to
view the health savings account. But still, it's amazing that
you've been able to sock away more than twenty five
thousand dollars into your HSA, And honestly, that's a good
problem to have. The fact that you have this account
that's available to you because it's open, because you have
(10:43):
money in there, that you've been so diligent about putting
money in there that they're now saying, hey, you can't
get something for nothing once you send some of your
dollars our way. This is something that we want you
to avoid it, especially given the fact that this is
something that you're going to pay in perpetuity, right, the
fact that like we're talking five dollars a month, but
like chanses are that dollar amounts will going to go
up from here, and the fact is you're probably planning
(11:04):
to hang onto this account for twenty, possibly thirty years.
Speaker 4 (11:08):
Yeah, that's right.
Speaker 3 (11:08):
It's not a month of paying this perpetual fee.
Speaker 1 (11:11):
So if you can find a way to nip it
in the bud, now, yeah, five bucks a month sounds minimal,
but five bucks a month repeating every single month for decades,
that's the worst play.
Speaker 4 (11:22):
It adds up. Yeah.
Speaker 1 (11:23):
The truth is though, on the HSA front, Matt, the
average AHSA comes with fees like this, So you know,
Almost all HSA providers charge an annual or a monthly
account fee. Many have really subhar investment options too. So
while we love hsas from a tax perspective, but when
you look at the providers who are offering hsas, they
(11:46):
impose more fees than what you're able to get typically
in the four to one k or IRA sphere. So
these accounts, they have their issues to contend with. Even
though we like them, it doesn't mean they're perfect. And
again that varies significantly.
Speaker 3 (11:59):
Provided a provider, sure, and even within providers. So you know,
I'm sure you thought you turned to the right place
when it came to go into Fidelity, especially all that
we've said about them having the best HSA in existence
with essentially zero fees, we realated no, no. So there
are two versions of the Fidelity HSA. One doesn't charge
(12:20):
any account fees, and this is the one that we've
talked about here on the show. No five dollars a month, nothing,
no percentage of your assets once you reach a certain threshold.
But I think that possibly what you saw is that
is that if you are a Fidelity Go customer, which
is there, it's more of a it's a newer offering.
It's kind of like a robo advisory sort of service.
You'll have to pay a zero point three to five
(12:41):
percent fee, which can really add up. It would it
would quickly be more than the five dollars a month
that you're currently being charged. That's one balances over twenty
five thousand dollars. So even that right there you're looking at,
I think it's something closer to eighty eight bucks right
out of the gate every single year, as opposed to
paying that flat five dollars a month leading to six.
Speaker 1 (13:00):
Yeah, and as the balance grows like that, eighty eight
is going to turn into a he couple lot more
as your HSA continues to crush if invested in the
stock market, right, and Matt, this is actually this makes
me think of something we've talked about in the past
is Fidelity's target date fund offerings. They have two different
versions of that as well, and so this can be
confusing to people who go to Fidelity's website. It has
(13:22):
confused me in the past. And one of those target
date offerings is vastly inferior to the other. One comes
with like a point eight expen ray show and the
others like a point eight expens ray show.
Speaker 4 (13:34):
So the ever so similar oh so different, Yes.
Speaker 1 (13:37):
Exactly, so the same thing is true here with this
AHSA if you go the wrong path, and you can
opt for the expensive one, but you certainly don't have to,
and we would recommend the cheaper version on both accounts.
So you want to opt specifically for the self directed
fidelity HSA, not the managed fidelity go HSA accounts. This
(13:58):
also means you're gonna be able to choose your own investments,
including and this is what we recommend typically for the
average investor in the wealth building phase of their life,
a super low cost s and P five hundred fund.
They also have their better target date funds at your
disposal inside of the self directed HSA as well. So
(14:19):
we would say, yes, go ahead and make the switch to fidelity.
You will get rid of all those account fees, let
those HSA dollars grow without paying any fees at all.
Just got to make sure you choose the right one totally.
Speaker 3 (14:30):
And my guess is that you switch to your husband's
new healthcare plan because it just makes more financial sense
for your family.
Speaker 4 (14:36):
You mentioned your two daughters, you know.
Speaker 3 (14:38):
Like that, despite losing access to an HSA I'm assuming
that you've got superior coverage for less money, and that's great.
This is an instance where we don't want the tail
to wag the dog. And I'm actually gonna go revisit
something I said about the condolences on the HSA, because
because I would like to maybe let's change the language
around here a little bit.
Speaker 4 (14:54):
I'm gonna say that there is a prospective shift.
Speaker 3 (14:57):
When it comes to how you view your HSA, Like
I want to look back at your HSA and think,
you know what, it was so great to be able
to sock that money away away when I had it,
but now there are other benefits that are available to
move or even if there's not additional benefits, let's say
just as decent of a plan, things change, seasons changed,
Joe as the philosopher group Future Islands once no once
(15:19):
say not to get too sappy. It makes me think
of a friend who recently was talking about how she
misses her babies, like her girls are growing up now
and they're no longer babies are no longer in that
kindergarten sort of phase of life. But you know what,
there are some massive advantages. So when your kids are
able to wine their own butt and feed themselves and
to clean their own room.
Speaker 4 (15:39):
I'm not mad about that.
Speaker 3 (15:40):
I'm mad about it, like, and so it's just a
different stage of life. And so as opposed to thinking
man like just pining for the HSA and what was
at that point the sweetest account that you had access to,
things are different.
Speaker 4 (15:51):
Now.
Speaker 3 (15:52):
You still have that account, certainly invested, invested aggressively, let
it grow, but then look on to just maybe some
of these other ways that you can grow your wealth
over time.
Speaker 1 (16:00):
And you and I we have always sung the praises
of HSA's and talked about the massive benefits that they
can bring all the while, you and I neither of
us have had access to an.
Speaker 4 (16:09):
Hs I've never contributed to an HSA ever.
Speaker 1 (16:11):
Yeah, so part of me is like, oh, man, wouldn't
it have been nice? But also you kind of have
to work with what you got. And some people, a
lot of people listening don't have access to an HSA.
Either they're not in a high deductible healthcare plan or
they don't have the additional funds to stick into an HSA.
Speaker 3 (16:26):
And so yeah, they're like, oh, great, guys, I wish
I could use all those dollars to be able to
invest from my future as well. But I gotta spend
that on whatever sick visits though. Yeah, that are bleeding
us dry every time we have to go and to
see the doctor.
Speaker 1 (16:37):
Sir, especially newer How to Money listeners, right, they're like,
I'm trying to pay off the credit card. Dead guys,
let's talk about that, and we will. We talk about
that on the show too. That's right, buddy.
Speaker 2 (16:45):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (16:51):
If you have a money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how to Money dot com forward slash ask.
Speaker 1 (17:04):
Let's talk about taxes. As of Monday, you can start
filing your taxes.
Speaker 4 (17:08):
Hooray.
Speaker 1 (17:08):
I know everyone's so excited for tax season. It's so
much fun, and there are some ways that you can
file for free. You don't have to pay a time
to fire or taxes, which is really the way it
should be. And the IRS's direct file system is up
and running for the second year. In a row and
is now available in twenty five states. There actually are
some rumors that the current administration might try to do
(17:30):
away with this direct filesystem. We will see. And there
are income limitations by the way filing direct file through
the IRS if it's available in your state. Single folks
can't make more than two hundred thousand bucks. Married folks
can't make more than two fifty Sorry, Matt, you're out
because I know I'm out. You're loaded, and.
Speaker 4 (17:47):
Not because of that because of how complicated are are.
Oh that's yeah, that's true too. It's about the real estate.
Speaker 3 (17:52):
Man.
Speaker 1 (17:52):
Well, we haven't used it ourselves, not because we're making millions,
but we haven't heard any ringing endorsements either from anyone.
I haven't heard anyone and say this was so great.
But I guess still free is free, and I think
it's worth pointing out math that there are other free
options as well. Turbo Tax has a free option for
people with basic tax situations, and they're available to people
(18:13):
who file on the Turbo Tax app before February eighteenth.
Apparently that's their deadline for some reason. But if you
do file before then, it's legit free this year and
the cash App still the best free tax software that
we're aware of, with zero hoops to jump through, free, federal,
free state. So I don't know why that doesn't get
more pressed. But cash app taxes everyone should know about that.
Speaker 4 (18:35):
Pretty solid.
Speaker 3 (18:36):
Yeah, I will say today is the deadline for so
I got to send out some ten ninety ninees out
so the folks who help us here with the podcast
and on the website. Today's January thirty first, last last
day to make that happen. Hey wait to the last minute.
But going back to what I what I mentioned though,
as far as the complexity of your tax situation, I
think it's worth highlighting that because I think for some
(18:56):
folks free filing it might be a cheap move, not
a frugal move, and it's worth paying up. If you
have a more complicated CADD scenario, it would be worth
it to do that. The savings that a seasoned tax
professional would be able to find for you, that's actually
the frugal move.
Speaker 1 (19:13):
Yeah, if you're prioritizing, I don't want to pay that
person four or five hundred bucks to do something I
could do myself, or I could use the inexpensive software
for But then you're not getting all the tax credits
or deductions that are available to Yeah, and keeping up
with all those forms is potentially that's true.
Speaker 4 (19:27):
That's true.
Speaker 3 (19:27):
I wanted to mention, so ten ninety nine ks don't
forget those. They might start showing up in your mailbox.
If you use stub hub, eBay or Etsy regularly for
some side hustle income, you might be getting a ten
ninety nine K.
Speaker 4 (19:42):
Five thousand dollars in sales.
Speaker 3 (19:43):
Is the threshold for this past year for your twenty
twenty four taxes, And basically millions of Americans who have
never received a ten ninety nine K will be getting
one this year. You were already supposed to report this income,
but honestly, many folks don't do that.
Speaker 1 (20:00):
It's kind of like you remember when the advent of
the Internet and you could buy stuff on Amazon, you
didn't have.
Speaker 4 (20:05):
To pay sales tax. Oh, I think this that golden era.
Speaker 1 (20:08):
There's like a period of time but you were supposed
to self report, but nobody did.
Speaker 3 (20:11):
Oh really, I don't remember that, just like voluntary sales
tax paid.
Speaker 6 (20:15):
Yeah.
Speaker 3 (20:15):
Wow, So we bring this up because even more folks
are going to get these forms next year, and even
more the following year in twenty twenty six, as the
reporting thresholds drop for ten ninety nine K income. And
one more wrench to throw in the gears is crypto sales.
If you are a regular trader of the cryptocurrencies, don't
(20:37):
forget to account for capital gains taxes. I think this
is more something that folks were dealing with back in
twenty twenty twenty one. When there's a little more cash
sloshing around. I still cash quote unquote investing in crypto. Yeah,
there is cash.
Speaker 1 (20:51):
You saw the Trump coin, the Millennia coin. You saw bitcoin.
Speaker 3 (20:55):
When folks file their twenty five taxes, they're only going
to be reporting losses when it comes.
Speaker 4 (20:59):
To when it comes to those ones. Yeah, exactly.
Speaker 1 (21:02):
Let's talk about tax refunds for just a second, Matt.
Friend of the show, Michelle Singletary, she just wrote in
the Washington Post about why she really dislikes tax refunds,
and I think you and I we mostly agree with
her on this. You get a tax refund because you
have too much money withheld, and essentially you're giving the
government an interest free loan. Some folks, though, use this
(21:24):
methodology as like a forced method of savings. I think
it's important to think about what that refund money could
have done for you throughout the year instead of getting
in a one lump sum right the following year. So
if you had, let's say, not gotten a big tax refund,
you could have had more money in every single paycheck,
putting it into a hield savings account or into the
stock market in twenty twenty four. What if you'd been
(21:46):
doing that the whole time you've been dollar cost averaging,
throwing more money into the market instead of waiting essentially
fourteen fifteen months to get that money back in a
lump sum, you could have been more optimized, more efficient.
But I think the reason too, Matt that I so
maybe I mostly agree with Michelle here but not all
the way is because you could have also done stupid
stuff with that money. That's true, and for some people
(22:08):
who aren't as buttoned up like this really is one
of the best opportunities that comes along to jumpstart a
financial goal that you have, Like the average tax refund's
like thirty one hundred.
Speaker 4 (22:18):
Bucks, and it's like a little launch pad for yeah, for.
Speaker 1 (22:22):
Saving up that E fund, for paying off a big
debt that you've got that you were working towards getting
rid of and so, yeah, I get the interest free
loan thing, but I also think that if this is
the best way for you to disallow yourself from, you know,
just frittering that money away getting that big tax refund,
If it is like this chance to do something big
(22:43):
and great, if you use that as an opportunity to
do something epic, to kind of supercharge where you're going
with your money, I think that's fine too.
Speaker 4 (22:51):
Totally agree.
Speaker 2 (22:53):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:00):
If you're on.
Speaker 1 (23:00):
Facebook, by the way, you want to join a group
of like minded folks who have money questions, who have
money insights, please go join.
Speaker 4 (23:07):
The how to Money Facebook group.
Speaker 1 (23:08):
Matt, this next question is one that I think is
on the minds of a lot of parents of young children.
Speaker 3 (23:14):
Hi, Joel and Matt.
Speaker 6 (23:15):
My name is Kelly and I'm from Richmond, Virginia. I've
been an avid follower since twenty twenty. With your help,
I've become really confident with saving money and investing. My
husband and I are expecting our second child in March,
and we'll be paying for two kids in daycare. We
are going to need to come up with thirteen hundred
more a month or fifteen thousand, six hundred a year
(23:37):
to be able to afford this. In the meantime, we've
done well saving. We have a fully funded emergency fund,
a car payment at zero percent interest, and a mortgage payment.
We max out a dependent care FSA and HSA as
a family to roth iras, and we both contribute to
our companies for one k to at least or see
(24:00):
the match. My question is which accounts do I decrease
or completely stop contributing to to have more liquid income
to afford this new change. My initial thought is to
keep everything the same and only contribute thirty five hundred
a year to each roth ira so we can take
(24:20):
advantage of that before we are over the income limit,
and then use the FSA and HSA to reimburse ourselves
for daycare. Let me know your thoughts. Looking forward to
hearing your advice. If you make it to Richmond, there's
at least twenty breweries to visit, most are in walking distance.
Speaker 3 (24:40):
Thanks so much, all right, Kelly, thank you so much
for listening to the podcast.
Speaker 4 (24:45):
Since twenty twenty.
Speaker 3 (24:46):
Joel that's back when. I feel like that's when we
started taking a little more seriously back then. But Kelly,
I also want to take congrats on the soon to
be additioned there to your family.
Speaker 4 (24:55):
It sounds like you.
Speaker 3 (24:56):
Have set yourself up well for the ability to make
this pivot, to be able to grow your family, to
take on additional daycare costs, which are pretty significant. There's
been plenty written about the rising costs of daycare, and
my guess is that it's at least a part of
the reason for the declining birth rates. That we're seeing
folks who are like I just can't afford like even
(25:17):
just somebody watching my kid while I'm able to go
out there and try to earn a living.
Speaker 4 (25:21):
It does make you think twice.
Speaker 3 (25:22):
The economics of growing your family has been getting a
bit more difficult, and I think in most families they
have to decide whether or not they can afford it.
Many families and make the difficult decision of having a
parent quit their job or at least maybe take a
sabbatical hiatus. I don't know, once they reach the point
of having two or three kids, right like once there's
a double triple ward score when it comes to those
(25:43):
daycare costs, it gets a lot more expensive and it
doesn't make financial sense given the tax savings and not
having to pay for childcare, especially if they're preschool aged, right,
because once they can start getting into kindergarten, first grade,
and you've got a couple at least in school, and
then you're talking about maybe daycare for just one or two,
(26:04):
then you can make a different decision.
Speaker 4 (26:06):
But you're right management.
Speaker 1 (26:07):
Let's say you got three kids five and under, the
childcare bill can be astronomical.
Speaker 3 (26:11):
I don't want to go back to you to mention
the diaper bill. It was an awesome time, but I
appreciate where we are now.
Speaker 1 (26:18):
Also, yeah, I'm a little bit less tired these days
than I was back then as well. But there's actually
some new data out specifically about the cost of childcare
and out of the state of Tennessee. Well, they found
that it costs more to pay for your child's daycare
than it does to afford in state tuition for college.
Speaker 4 (26:36):
Jez.
Speaker 1 (26:37):
So you think about as a parent, You're like, oh, man,
you got tons of time to save up for college.
Speaker 4 (26:42):
Well you don't for daycare, right, and you got nine
months sucker, right, exactly, get your act together.
Speaker 1 (26:48):
So childcare now costs more than college in thirty four
out of the fifty states. So again, for college, you
have let's say eighteen years to save to invest to
prepare for the high expense. But you know, you just
don't have that when you're talking about saving up and
affording that. Childcare and having a kid has always involved
trade offs and it has always impacted family finances, but
(27:11):
it just does seem like the stakes are higher these days.
And Kelly mentioned what fifteen thousand dollars a year is
what it's going to cost for kind of full time childcare.
Speaker 3 (27:20):
Well, I think she said fifteen thousand dollars more to
come up, so maybe thirty.
Speaker 4 (27:24):
Maybe she's even.
Speaker 3 (27:25):
Paying like fourking out thirty annually for both of her
kids with childcare.
Speaker 1 (27:29):
That's it's a lot, it's a lot of money, but
it also doesn't seem out of the realm of normalcy
for like fifteen thousand dollars a kid.
Speaker 3 (27:36):
So specifically, she's asking which particular accounts should you dial
back on, And I'm going to say that your analysis
I think is spot on. Definitely keep that dependent care FSA,
because that's just getting a straight up tax break for
money that you are going to be spending no matter what.
And then you know you're mentioning dropping contributing to your
(27:57):
roth IRA. I would one hundred percent do that. I
would because you mentioned you've got that HSA and rather
than dialing back on that account because of the fact
that the HSA is so tax advantage, it's got a
lot of times you hear it referred to as like
the triple tax advantage, but really it's a quadruple tax
advantage because you're also not paying payroll on any of
the funds that are going into your HSA.
Speaker 1 (28:18):
Payroll taxes underrated and how expensive. Yeah, and you compare
that to roths are awesome.
Speaker 3 (28:23):
We love wroth IRA's, but they only grow tax free
and only get to be withdrawn once you hear retirement
tax free. But that's only two out of the four
With an HSA that truly is the ultimate retirement account.
And given I guess how disciplined it sounds like you
are and just how organized you are.
Speaker 4 (28:41):
For some folks, I would say that HSA.
Speaker 3 (28:42):
Isn't the way to go when it comes to retirement savings. Instead,
you know what, just kind of hit the easy button.
Let's just keep definitely get the match like you're doing
with your full one case, but then beyond that.
Speaker 4 (28:52):
Let's just do the roth IRA. It's super easy.
Speaker 3 (28:53):
But if you have the ability to stay organized to
keep up with qualified expenses over.
Speaker 4 (28:58):
The years, the HSA from.
Speaker 3 (29:01):
An optimization standpoint, is one hundred percent the route I
think you should be taking when it comes to prioritizing
a retirement account.
Speaker 4 (29:09):
Yeah, you're I think you're right, man.
Speaker 1 (29:10):
It's kind of tough to know which accounts to keep
and which ones to cut back on. I think if
Kelly was contributing above and beyond the match amount and
the four one K, well maybe I dial that back
to just the match amount because I would prioritize the
HSA and the roth IRA above four one K contributions
that exceed the match If that makes sense, Yeah, because.
Speaker 3 (29:31):
There's more flexibility, yeah with the roth IRA, but beyond
the flexibility just the tax advantage though with the HSA,
baby come out, you can't beat that.
Speaker 1 (29:38):
I think it's also important to mention here, and this
might sound just trite or silly, but what about cutting
back on expenses so that you can I think you're
still gonna have to cut back on your investments. But
if you can cut back on some expenses, you might
be able to continue investing more than you thought you
would be able to write. So it's highly unlikely that
(29:59):
you're gonna be able cut fifteen thousand dollars out of
your expenses and you know, dial that back overnight so
that you're able to invest just as much as you
were before and then also afford this incredibly expensive childcare bill.
But look at everything, leave no stone unturned, insurance, cell
phone bills, streaming, eating out right, even even just like
one hundred bucks a month.
Speaker 3 (30:18):
Let's be honest, they're probably not going to be doing
a whole lot of eating out right in the coming
months as well. That's true too, the lady kind of
pair back on the monthly budget, that's right.
Speaker 1 (30:27):
Like I think in those you know, first months and
first year, you're just eating out a whole lot less
because it's just a pain in the butt right to
get out there with a newborn. If you save one
hundred bucks a month, that's twelve hundred bucks a year,
and that's not nothing. So yeah, I mean you might
be able to save a few hundred bucks and that
coupled with dialing back to roth iras. I mean, if
they both have been or typically at least max out
(30:48):
the roth iras, you're looking at fourteen thousand dollars right there,
and so just by shaving some expenses here and there,
I think you could pretty easily hit that fifteen thousand
dollars mark that dollar amount for childcare. Something else I
would say, too, is I think that Kelly could use
this opportunity to push for a raise because there's something
tangible that has impacted her life that she can kind
of point to. Because I think for a lot of
(31:09):
folks they might find it difficult to advocate for themselves.
They might be doing amazing work, they might do an
incredible job, but when it comes to the annual review
or kind of being the squeaky wheel, they have a
harder time saying, hey, you know, I think I'm worth
this much. But when there's something that sort of feels
like is outside of you that you can kind of
point to, I think for some folks at least, it
could be easier to say, hey, i've got this bigger
(31:30):
monthly bill that I've got to fork out every single month. Now, Hey,
some companies they offer childcare. That's a benefit, that's a
perk that they provide. We don't really do that here.
Speaker 3 (31:40):
So maybe there's a way that I could get see
some of those expenses deferred a little bit. It's just
I think an easier way to advocate for yourself when
it comes to maybe your next pay raise and the
ability to continue investing while also covering this larger daycare costs.
Speaker 5 (31:56):
Yeah.
Speaker 1 (31:56):
I like the way you framed it too. It's not
just like I had a baby, pay me more. It's like, Hey, actually,
other companies who do something similar to what we do.
We have these additional perks that they offer people who
who have who have young kids. I think there are
ways to noodle out ways to save on childcare. It's
not easy though.
Speaker 4 (32:13):
Yeah, that's true.
Speaker 1 (32:13):
Man, you've been listening to How To Money with Joel Larsgard.
You can always hear us live on KFI AM six
forty twelve pm to two pm on Sunday and anytime
on demand on the iHeartRadio app.
KFI AM six forty. You're listening to how to Money
on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel Larsgard and Matt Altmes.
Speaker 3 (00:22):
KFI AM sixty live everywhere on the iHeartRadio app.
Speaker 4 (00:26):
This is how to Money. I am Matt Altmix and
I'm Joel Larsgard.
Speaker 3 (00:29):
By the way, you can always find more money saving
information over at howtomoney dot com.
Speaker 1 (00:34):
Let's start with the big one. It happened on Monday
sent the stock market into a tizzy. Do you know
what we're going to talk about right now? Of course
I do, okay. So the deep Seek AI, the Chinese
AI system that impacted tex tech stocks to a significant degree.
In Nvidia, which has been the high flying stock of
the last couple of years, shed six hundred billion dollars
(00:57):
of value in one day, which I think was the
largest dollar amountain drop for any stock in history at
any point in history, which makes sense, right, all because
of this Chinese app, this this upstart app called deep Seek,
which hit the app store, the Apple app store, and
so deep Seak is a Chinese artificial intelligence company, and
it created what some are calling a superior AI product
(01:20):
that it's at least as good, if not better, than
many of the American made artificial intelligence products currently on
the market. But the big news is that they were
able to do it at least apparently for a fraction
of the cost, for like six million bucks, using a
whole lot less of those super fancy, incredibly expensive chips
that a company like Nvidia would make, which is why
(01:40):
it impacted them. And then Mark Andresen, who's you know,
big time tech nerd, founder of many startups, he called
it AI's Sputnik moment. Matten, I wasn't alive back then
when Sputnik launched, but it's the space race when you
read about a US history, that was a big moment
in US history, essentially propelling towards greater heights and towards
(02:02):
beating the Russians into space. And since we live in
a globally connected world, that impacts American artificial intelligence and
tech companies. But as the news I think has been digested,
this is actually maybe not as bad as it initially seemed.
It could be actually good news for a whole lot
of tech companies because it means they're going to be
able to get more bang for their buck on AI
(02:23):
spending that got incredibly expensive really fast. And this what
this made me think of was Moore's law, which is
essentially the fact that chips, the silicon chips, they get
twice as good roughly every two years. And actually that's
happening at a faster rate than what Moore's law would
state right now. I believe that increased efficiency reduces energy
(02:46):
needs for artificial intelligence, which has been a problem. Something's
been talked about quite a lot how much energy artificial
intelligence is siphoning, and it should lower the cost meaningfully.
So I think ultimately this is probably a good thing,
and American companies they're not going to be left in
the dust for long. I guess some people might be wondering, oh, man,
(03:06):
should this change how I invest I saw the stock market,
you know, just get slammed on Monday, and I get
maybe that impulse. But our answer, as always is no.
But it is why you should have a diversified portfolio.
Speaker 3 (03:18):
Absolutely, this is why you do not invest in single companies.
And it makes me think about the burgeoning narrative about
stocks overall, like the wide stock market being overvalued, and
that might be true, particularly in certain segments of the
tech sector. But even if stocks in general and some
particular ones are overvalued, there's not much that you can
do besides just continuing to invest. We still like dollar
(03:41):
cost averaging because honestly, what's the alternative investors I will say,
who are let's say, getting closer to needing their money.
If you are getting closer to your retirement years and
they are, you're a little more in the wealth preservation
stage of your lives, I think it might be worth
considering a more conservative approach. For instance, Vanguard, they're suggesting
these days is the forty sixty balance instead of the
(04:02):
often touted sixty forty allocated portfolio, so more of a
forty percent exposure to stocks sixty percent bonds. And this
is largely because of their view that stocks come with
a higher volatility. But don't let these stock market stories,
these blips, the ever shifting narratives change your approach. And
you mentioned the how deep sea the Chinese company was
(04:26):
able to do it more efficiently. There's like investigations now
as to whether or not they're actually cribbon open ais.
No it's a little bit essentially, I think they're calling
it distillation, where it's like, wait a minute, this other
large language model owned by the Chinese was actually learning
from open Ai Chat GBT. Essentially it without doing all
(04:46):
the hard work.
Speaker 1 (04:47):
Which makes sense, I mean does join astarn in The
Wall Street Journal had a really funny article basically lightened
Chat GPT and Sam Altman on fire about that, say, hey,
you basically stole all this information from creator across the internet.
Speaker 3 (05:00):
Sam Altman would say, well, I'm doing the hard work though,
of creating the actual large language language model, whereas Deep see,
they're just I almost think of it as like almost
like a white label, you know, like you buy products
and it's like okay, you just slap the label on there,
and all of a sudden it's a new product.
Speaker 4 (05:13):
It's like no, no, no, no. The other companies.
Speaker 3 (05:15):
Still actually did the hard work of the initial lift.
Speaker 1 (05:18):
I guess all I know is there's a lot of
creators out there who didn't give any permission Sandman to
crib their writings the things that they've created, and yet
they got taken anyway. So maybe a little bit of
karmic justice. But Matt, it's not just artificial intelligence. That
space being upended by change. Diamonds that you dig out
of the earth are also being upstaged by lab grown diamonds.
(05:42):
This is something we've talked about in the past, but
this sea change is accelerating more quickly. Natural diamond prices
have gone down in price by eight percent recently, largely
because lab grown diamonds are becoming more popular and cheaper.
Lab grown diamond prices have actually plummeted by seventy five percent.
So wow, it's no wonder that people are saying, yeah,
(06:02):
I'll choose that option instead if you're like proposing to
your sweetheart or something like that. Right, they're essentially equal stones, Like,
the naked eye can't really perceive a difference between lab
grown diamonds and diamonds that are dug up out of
the ground. And so you know, brides and grooms they're
taking notice. And now more than half of engagement rings
(06:23):
are being sold with lab grown diamonds. You can, for real,
I like it, same size, same look, everything, you can
save eighty percent and the naked eye can't detect any difference.
I'm all for this kind of shakeup. Yeah, maybe we
should propose our wives again, Matt start buying them some bling.
Speaker 3 (06:39):
What do you think There's a part of me that
stempted like what I wish was that this would have
been available to us when we're younger. Yeah, but like
there's a part of me that gets excited, Like when
I think about it for a minute, I get like
pretty stoked. I'm like, oh sweet, I could buy a
Kate just some serious bling, and it sounds fun for
like a second, but then I'm like, well, why would
I want to do that? And I immediately talk myself
out of it. I don't think she don't really care
(07:01):
about that. They don't know, they don't and they'd rather
get a bunch of others. She loves her old ring,
even if it was just like pennies. It's just like, well,
why do I want to wear like this giant, gaudy
piece of jewelry? And oftentimes I think it comes down
to what other people think, And dude, we don't care
what anybody.
Speaker 4 (07:15):
Thinks, espureing to project anything.
Speaker 3 (07:17):
I don't even wear my I feel bad because the
ring that those ladies are hitting on you is it's
like a family heirloom kind of ring, and it means
a lot, and I actually stopped wearing it when I
started lifting more often because I didn't want to damage it.
You were the silicone I hate those. I'm really yeah,
not comfortable.
Speaker 1 (07:34):
It doesn't bother me, but it's it's cool to see,
and I'd be curious to know too if any how
the money listeners have gone the lab so and maybe
they were debating going with a real diamond dug out
of the ground, and then they were like, wait a.
Speaker 4 (07:46):
Second, no, man, no, I'm just gonna say a ton
of much synthetic. That's huge. Yeah, let us know how
it went by the way.
Speaker 3 (07:52):
I don't care, But dude, for all the folks out
there who are single or thinking about proposing, oh, one percent,
a game changer for for them, one.
Speaker 1 (07:58):
Hundred percent spot on. All right, we've actually more to
get to on today's show.
Speaker 2 (08:02):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (08:10):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Let's get to a question about an old
retirement account and some fees that this listener is really
worried about Hi.
Speaker 5 (08:23):
Joelan Matt. My name's Chelsea, and I really enjoyed your
podcast and I was hoping you might be able to
help answer a question for me. So my family, which
is my husband, our two young daughters, and myself. We've
been on my employer's high deductible healthcare plan for the
past several years, and I've contributed the annual maximum to
(08:45):
my HSA Health Savings account. But earlier this year, my
husband got a new job and we switched to his
healthcare plan and I now max contributions to an FSA,
but that means I can no longer contribute to my HSA,
and I just noticed that I'm now paying a five
dollars per month maintenance fee on my HSA account since
(09:08):
I'm no longer making new contributions. So I was wondering
if you had any advice on a no fee HSA
account that I could transfer it to. I looked into Fidelity,
but the fees for balances over twenty five thousand dollars
would be more than what I'm currently paying. And I
guess did you have any other ideas, potentially too, about
(09:28):
how we might maximize both of our health insurance plans.
I kind of looked into this when we initially switched,
but it seemed pretty complex with trying to combine FSAs
and hsas, and I honestly just went with one plan
for simplicity. But I'm wondering if I maybe I am
not maximizing the options we have there. So yeah, I
(09:52):
would just really appreciate any advice that you had for
I guess using the two healthcare plans or just options
for no hsas. Thanks a lot, Joe.
Speaker 3 (10:02):
I noticed that you said a retirement account, which is
exactly how we should be thinking about the health savings account,
not as a way to cover health care expenses.
Speaker 1 (10:10):
It's just not how most people think about it, and
indeed it's probably because of the naming convention.
Speaker 3 (10:15):
So condolences Chelsea on the loss of your retirement account,
which feels overly dramatic.
Speaker 4 (10:20):
Can we play some like funeral dirge music?
Speaker 3 (10:23):
The FSA is the flexible spending account for health care
expensive that's solid, but it's not nearly as good from
a long term perspective, which is how we like to
view the health savings account. But still, it's amazing that
you've been able to sock away more than twenty five
thousand dollars into your HSA, And honestly, that's a good
problem to have. The fact that you have this account
that's available to you because it's open, because you have
(10:43):
money in there, that you've been so diligent about putting
money in there that they're now saying, hey, you can't
get something for nothing once you send some of your
dollars our way. This is something that we want you
to avoid it, especially given the fact that this is
something that you're going to pay in perpetuity, right, the
fact that like we're talking five dollars a month, but
like chanses are that dollar amounts will going to go
up from here, and the fact is you're probably planning
(11:04):
to hang onto this account for twenty, possibly thirty years.
Speaker 4 (11:08):
Yeah, that's right.
Speaker 3 (11:08):
It's not a month of paying this perpetual fee.
Speaker 1 (11:11):
So if you can find a way to nip it
in the bud, now, yeah, five bucks a month sounds minimal,
but five bucks a month repeating every single month for decades,
that's the worst play.
Speaker 4 (11:22):
It adds up. Yeah.
Speaker 1 (11:23):
The truth is though, on the HSA front, Matt, the
average AHSA comes with fees like this, So you know,
Almost all HSA providers charge an annual or a monthly
account fee. Many have really subhar investment options too. So
while we love hsas from a tax perspective, but when
you look at the providers who are offering hsas, they
(11:46):
impose more fees than what you're able to get typically
in the four to one k or IRA sphere. So
these accounts, they have their issues to contend with. Even
though we like them, it doesn't mean they're perfect. And
again that varies significantly.
Speaker 3 (11:59):
Provided a provider, sure, and even within providers. So you know,
I'm sure you thought you turned to the right place
when it came to go into Fidelity, especially all that
we've said about them having the best HSA in existence
with essentially zero fees, we realated no, no. So there
are two versions of the Fidelity HSA. One doesn't charge
(12:20):
any account fees, and this is the one that we've
talked about here on the show. No five dollars a month, nothing,
no percentage of your assets once you reach a certain threshold.
But I think that possibly what you saw is that
is that if you are a Fidelity Go customer, which
is there, it's more of a it's a newer offering.
It's kind of like a robo advisory sort of service.
You'll have to pay a zero point three to five
(12:41):
percent fee, which can really add up. It would it
would quickly be more than the five dollars a month
that you're currently being charged. That's one balances over twenty
five thousand dollars. So even that right there you're looking at,
I think it's something closer to eighty eight bucks right
out of the gate every single year, as opposed to
paying that flat five dollars a month leading to six.
Speaker 1 (13:00):
Yeah, and as the balance grows like that, eighty eight
is going to turn into a he couple lot more
as your HSA continues to crush if invested in the
stock market, right, and Matt, this is actually this makes
me think of something we've talked about in the past
is Fidelity's target date fund offerings. They have two different
versions of that as well, and so this can be
confusing to people who go to Fidelity's website. It has
(13:22):
confused me in the past. And one of those target
date offerings is vastly inferior to the other. One comes
with like a point eight expen ray show and the
others like a point eight expens ray show.
Speaker 4 (13:34):
So the ever so similar oh so different, Yes.
Speaker 1 (13:37):
Exactly, so the same thing is true here with this
AHSA if you go the wrong path, and you can
opt for the expensive one, but you certainly don't have to,
and we would recommend the cheaper version on both accounts.
So you want to opt specifically for the self directed
fidelity HSA, not the managed fidelity go HSA accounts. This
(13:58):
also means you're gonna be able to choose your own investments,
including and this is what we recommend typically for the
average investor in the wealth building phase of their life,
a super low cost s and P five hundred fund.
They also have their better target date funds at your
disposal inside of the self directed HSA as well. So
(14:19):
we would say, yes, go ahead and make the switch to fidelity.
You will get rid of all those account fees, let
those HSA dollars grow without paying any fees at all.
Just got to make sure you choose the right one totally.
Speaker 3 (14:30):
And my guess is that you switch to your husband's
new healthcare plan because it just makes more financial sense
for your family.
Speaker 4 (14:36):
You mentioned your two daughters, you know.
Speaker 3 (14:38):
Like that, despite losing access to an HSA I'm assuming
that you've got superior coverage for less money, and that's great.
This is an instance where we don't want the tail
to wag the dog. And I'm actually gonna go revisit
something I said about the condolences on the HSA, because
because I would like to maybe let's change the language
around here a little bit.
Speaker 4 (14:54):
I'm gonna say that there is a prospective shift.
Speaker 3 (14:57):
When it comes to how you view your HSA, Like
I want to look back at your HSA and think,
you know what, it was so great to be able
to sock that money away away when I had it,
but now there are other benefits that are available to
move or even if there's not additional benefits, let's say
just as decent of a plan, things change, seasons changed,
Joe as the philosopher group Future Islands once no once
(15:19):
say not to get too sappy. It makes me think
of a friend who recently was talking about how she
misses her babies, like her girls are growing up now
and they're no longer babies are no longer in that
kindergarten sort of phase of life. But you know what,
there are some massive advantages. So when your kids are
able to wine their own butt and feed themselves and
to clean their own room.
Speaker 4 (15:39):
I'm not mad about that.
Speaker 3 (15:40):
I'm mad about it, like, and so it's just a
different stage of life. And so as opposed to thinking
man like just pining for the HSA and what was
at that point the sweetest account that you had access to,
things are different.
Speaker 4 (15:51):
Now.
Speaker 3 (15:52):
You still have that account, certainly invested, invested aggressively, let
it grow, but then look on to just maybe some
of these other ways that you can grow your wealth
over time.
Speaker 1 (16:00):
And you and I we have always sung the praises
of HSA's and talked about the massive benefits that they
can bring all the while, you and I neither of
us have had access to an.
Speaker 4 (16:09):
Hs I've never contributed to an HSA ever.
Speaker 1 (16:11):
Yeah, so part of me is like, oh, man, wouldn't
it have been nice? But also you kind of have
to work with what you got. And some people, a
lot of people listening don't have access to an HSA.
Either they're not in a high deductible healthcare plan or
they don't have the additional funds to stick into an HSA.
Speaker 3 (16:26):
And so yeah, they're like, oh, great, guys, I wish
I could use all those dollars to be able to
invest from my future as well. But I gotta spend
that on whatever sick visits though. Yeah, that are bleeding
us dry every time we have to go and to
see the doctor.
Speaker 1 (16:37):
Sir, especially newer How to Money listeners, right, they're like,
I'm trying to pay off the credit card. Dead guys,
let's talk about that, and we will. We talk about
that on the show too. That's right, buddy.
Speaker 2 (16:45):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (16:51):
If you have a money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how to Money dot com forward slash ask.
Speaker 1 (17:04):
Let's talk about taxes. As of Monday, you can start
filing your taxes.
Speaker 4 (17:08):
Hooray.
Speaker 1 (17:08):
I know everyone's so excited for tax season. It's so
much fun, and there are some ways that you can
file for free. You don't have to pay a time
to fire or taxes, which is really the way it
should be. And the IRS's direct file system is up
and running for the second year. In a row and
is now available in twenty five states. There actually are
some rumors that the current administration might try to do
(17:30):
away with this direct filesystem. We will see. And there
are income limitations by the way filing direct file through
the IRS if it's available in your state. Single folks
can't make more than two hundred thousand bucks. Married folks
can't make more than two fifty Sorry, Matt, you're out
because I know I'm out. You're loaded, and.
Speaker 4 (17:47):
Not because of that because of how complicated are are.
Oh that's yeah, that's true too. It's about the real estate.
Speaker 3 (17:52):
Man.
Speaker 1 (17:52):
Well, we haven't used it ourselves, not because we're making millions,
but we haven't heard any ringing endorsements either from anyone.
I haven't heard anyone and say this was so great.
But I guess still free is free, and I think
it's worth pointing out math that there are other free
options as well. Turbo Tax has a free option for
people with basic tax situations, and they're available to people
(18:13):
who file on the Turbo Tax app before February eighteenth.
Apparently that's their deadline for some reason. But if you
do file before then, it's legit free this year and
the cash App still the best free tax software that
we're aware of, with zero hoops to jump through, free, federal,
free state. So I don't know why that doesn't get
more pressed. But cash app taxes everyone should know about that.
Speaker 4 (18:35):
Pretty solid.
Speaker 3 (18:36):
Yeah, I will say today is the deadline for so
I got to send out some ten ninety ninees out
so the folks who help us here with the podcast
and on the website. Today's January thirty first, last last
day to make that happen. Hey wait to the last minute.
But going back to what I what I mentioned though,
as far as the complexity of your tax situation, I
think it's worth highlighting that because I think for some
(18:56):
folks free filing it might be a cheap move, not
a frugal move, and it's worth paying up. If you
have a more complicated CADD scenario, it would be worth
it to do that. The savings that a seasoned tax
professional would be able to find for you, that's actually
the frugal move.
Speaker 1 (19:13):
Yeah, if you're prioritizing, I don't want to pay that
person four or five hundred bucks to do something I
could do myself, or I could use the inexpensive software
for But then you're not getting all the tax credits
or deductions that are available to Yeah, and keeping up
with all those forms is potentially that's true.
Speaker 4 (19:27):
That's true.
Speaker 3 (19:27):
I wanted to mention, so ten ninety nine ks don't
forget those. They might start showing up in your mailbox.
If you use stub hub, eBay or Etsy regularly for
some side hustle income, you might be getting a ten
ninety nine K.
Speaker 4 (19:42):
Five thousand dollars in sales.
Speaker 3 (19:43):
Is the threshold for this past year for your twenty
twenty four taxes, And basically millions of Americans who have
never received a ten ninety nine K will be getting
one this year. You were already supposed to report this income,
but honestly, many folks don't do that.
Speaker 1 (20:00):
It's kind of like you remember when the advent of
the Internet and you could buy stuff on Amazon, you
didn't have.
Speaker 4 (20:05):
To pay sales tax. Oh, I think this that golden era.
Speaker 1 (20:08):
There's like a period of time but you were supposed
to self report, but nobody did.
Speaker 3 (20:11):
Oh really, I don't remember that, just like voluntary sales
tax paid.
Speaker 6 (20:15):
Yeah.
Speaker 3 (20:15):
Wow, So we bring this up because even more folks
are going to get these forms next year, and even
more the following year in twenty twenty six, as the
reporting thresholds drop for ten ninety nine K income. And
one more wrench to throw in the gears is crypto sales.
If you are a regular trader of the cryptocurrencies, don't
(20:37):
forget to account for capital gains taxes. I think this
is more something that folks were dealing with back in
twenty twenty twenty one. When there's a little more cash
sloshing around. I still cash quote unquote investing in crypto. Yeah,
there is cash.
Speaker 1 (20:51):
You saw the Trump coin, the Millennia coin. You saw bitcoin.
Speaker 3 (20:55):
When folks file their twenty five taxes, they're only going
to be reporting losses when it comes.
Speaker 4 (20:59):
To when it comes to those ones. Yeah, exactly.
Speaker 1 (21:02):
Let's talk about tax refunds for just a second, Matt.
Friend of the show, Michelle Singletary, she just wrote in
the Washington Post about why she really dislikes tax refunds,
and I think you and I we mostly agree with
her on this. You get a tax refund because you
have too much money withheld, and essentially you're giving the
government an interest free loan. Some folks, though, use this
(21:24):
methodology as like a forced method of savings. I think
it's important to think about what that refund money could
have done for you throughout the year instead of getting
in a one lump sum right the following year. So
if you had, let's say, not gotten a big tax refund,
you could have had more money in every single paycheck,
putting it into a hield savings account or into the
stock market in twenty twenty four. What if you'd been
(21:46):
doing that the whole time you've been dollar cost averaging,
throwing more money into the market instead of waiting essentially
fourteen fifteen months to get that money back in a
lump sum, you could have been more optimized, more efficient.
But I think the reason too, Matt that I so
maybe I mostly agree with Michelle here but not all
the way is because you could have also done stupid
stuff with that money. That's true, and for some people
(22:08):
who aren't as buttoned up like this really is one
of the best opportunities that comes along to jumpstart a
financial goal that you have, Like the average tax refund's
like thirty one hundred.
Speaker 4 (22:18):
Bucks, and it's like a little launch pad for yeah, for.
Speaker 1 (22:22):
Saving up that E fund, for paying off a big
debt that you've got that you were working towards getting
rid of and so, yeah, I get the interest free
loan thing, but I also think that if this is
the best way for you to disallow yourself from, you know,
just frittering that money away getting that big tax refund,
If it is like this chance to do something big
(22:43):
and great, if you use that as an opportunity to
do something epic, to kind of supercharge where you're going
with your money, I think that's fine too.
Speaker 4 (22:51):
Totally agree.
Speaker 2 (22:53):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 4 (23:00):
If you're on.
Speaker 1 (23:00):
Facebook, by the way, you want to join a group
of like minded folks who have money questions, who have
money insights, please go join.
Speaker 4 (23:07):
The how to Money Facebook group.
Speaker 1 (23:08):
Matt, this next question is one that I think is
on the minds of a lot of parents of young children.
Speaker 3 (23:14):
Hi, Joel and Matt.
Speaker 6 (23:15):
My name is Kelly and I'm from Richmond, Virginia. I've
been an avid follower since twenty twenty. With your help,
I've become really confident with saving money and investing. My
husband and I are expecting our second child in March,
and we'll be paying for two kids in daycare. We
are going to need to come up with thirteen hundred
more a month or fifteen thousand, six hundred a year
(23:37):
to be able to afford this. In the meantime, we've
done well saving. We have a fully funded emergency fund,
a car payment at zero percent interest, and a mortgage payment.
We max out a dependent care FSA and HSA as
a family to roth iras, and we both contribute to
our companies for one k to at least or see
(24:00):
the match. My question is which accounts do I decrease
or completely stop contributing to to have more liquid income
to afford this new change. My initial thought is to
keep everything the same and only contribute thirty five hundred
a year to each roth ira so we can take
(24:20):
advantage of that before we are over the income limit,
and then use the FSA and HSA to reimburse ourselves
for daycare. Let me know your thoughts. Looking forward to
hearing your advice. If you make it to Richmond, there's
at least twenty breweries to visit, most are in walking distance.
Speaker 3 (24:40):
Thanks so much, all right, Kelly, thank you so much
for listening to the podcast.
Speaker 4 (24:45):
Since twenty twenty.
Speaker 3 (24:46):
Joel that's back when. I feel like that's when we
started taking a little more seriously back then. But Kelly,
I also want to take congrats on the soon to
be additioned there to your family.
Speaker 4 (24:55):
It sounds like you.
Speaker 3 (24:56):
Have set yourself up well for the ability to make
this pivot, to be able to grow your family, to
take on additional daycare costs, which are pretty significant. There's
been plenty written about the rising costs of daycare, and
my guess is that it's at least a part of
the reason for the declining birth rates. That we're seeing
folks who are like I just can't afford like even
(25:17):
just somebody watching my kid while I'm able to go
out there and try to earn a living.
Speaker 4 (25:21):
It does make you think twice.
Speaker 3 (25:22):
The economics of growing your family has been getting a
bit more difficult, and I think in most families they
have to decide whether or not they can afford it.
Many families and make the difficult decision of having a
parent quit their job or at least maybe take a
sabbatical hiatus. I don't know, once they reach the point
of having two or three kids, right like once there's
a double triple ward score when it comes to those
(25:43):
daycare costs, it gets a lot more expensive and it
doesn't make financial sense given the tax savings and not
having to pay for childcare, especially if they're preschool aged, right,
because once they can start getting into kindergarten, first grade,
and you've got a couple at least in school, and
then you're talking about maybe daycare for just one or two,
(26:04):
then you can make a different decision.
Speaker 4 (26:06):
But you're right management.
Speaker 1 (26:07):
Let's say you got three kids five and under, the
childcare bill can be astronomical.
Speaker 3 (26:11):
I don't want to go back to you to mention
the diaper bill. It was an awesome time, but I
appreciate where we are now.
Speaker 1 (26:18):
Also, yeah, I'm a little bit less tired these days
than I was back then as well. But there's actually
some new data out specifically about the cost of childcare
and out of the state of Tennessee. Well, they found
that it costs more to pay for your child's daycare
than it does to afford in state tuition for college.
Speaker 4 (26:36):
Jez.
Speaker 1 (26:37):
So you think about as a parent, You're like, oh, man,
you got tons of time to save up for college.
Speaker 4 (26:42):
Well you don't for daycare, right, and you got nine
months sucker, right, exactly, get your act together.
Speaker 1 (26:48):
So childcare now costs more than college in thirty four
out of the fifty states. So again, for college, you
have let's say eighteen years to save to invest to
prepare for the high expense. But you know, you just
don't have that when you're talking about saving up and
affording that. Childcare and having a kid has always involved
trade offs and it has always impacted family finances, but
(27:11):
it just does seem like the stakes are higher these days.
And Kelly mentioned what fifteen thousand dollars a year is
what it's going to cost for kind of full time childcare.
Speaker 3 (27:20):
Well, I think she said fifteen thousand dollars more to
come up, so maybe thirty.
Speaker 4 (27:24):
Maybe she's even.
Speaker 3 (27:25):
Paying like fourking out thirty annually for both of her
kids with childcare.
Speaker 1 (27:29):
That's it's a lot, it's a lot of money, but
it also doesn't seem out of the realm of normalcy
for like fifteen thousand dollars a kid.
Speaker 3 (27:36):
So specifically, she's asking which particular accounts should you dial
back on, And I'm going to say that your analysis
I think is spot on. Definitely keep that dependent care FSA,
because that's just getting a straight up tax break for
money that you are going to be spending no matter what.
And then you know you're mentioning dropping contributing to your
(27:57):
roth IRA. I would one hundred percent do that. I
would because you mentioned you've got that HSA and rather
than dialing back on that account because of the fact
that the HSA is so tax advantage, it's got a
lot of times you hear it referred to as like
the triple tax advantage, but really it's a quadruple tax
advantage because you're also not paying payroll on any of
the funds that are going into your HSA.
Speaker 1 (28:18):
Payroll taxes underrated and how expensive. Yeah, and you compare
that to roths are awesome.
Speaker 3 (28:23):
We love wroth IRA's, but they only grow tax free
and only get to be withdrawn once you hear retirement
tax free. But that's only two out of the four
With an HSA that truly is the ultimate retirement account.
And given I guess how disciplined it sounds like you
are and just how organized you are.
Speaker 4 (28:41):
For some folks, I would say that HSA.
Speaker 3 (28:42):
Isn't the way to go when it comes to retirement savings. Instead,
you know what, just kind of hit the easy button.
Let's just keep definitely get the match like you're doing
with your full one case, but then beyond that.
Speaker 4 (28:52):
Let's just do the roth IRA. It's super easy.
Speaker 3 (28:53):
But if you have the ability to stay organized to
keep up with qualified expenses over.
Speaker 4 (28:58):
The years, the HSA from.
Speaker 3 (29:01):
An optimization standpoint, is one hundred percent the route I
think you should be taking when it comes to prioritizing
a retirement account.
Speaker 4 (29:09):
Yeah, you're I think you're right, man.
Speaker 1 (29:10):
It's kind of tough to know which accounts to keep
and which ones to cut back on. I think if
Kelly was contributing above and beyond the match amount and
the four one K, well maybe I dial that back
to just the match amount because I would prioritize the
HSA and the roth IRA above four one K contributions
that exceed the match If that makes sense, Yeah, because.
Speaker 3 (29:31):
There's more flexibility, yeah with the roth IRA, but beyond
the flexibility just the tax advantage though with the HSA,
baby come out, you can't beat that.
Speaker 1 (29:38):
I think it's also important to mention here, and this
might sound just trite or silly, but what about cutting
back on expenses so that you can I think you're
still gonna have to cut back on your investments. But
if you can cut back on some expenses, you might
be able to continue investing more than you thought you
would be able to write. So it's highly unlikely that
(29:59):
you're gonna be able cut fifteen thousand dollars out of
your expenses and you know, dial that back overnight so
that you're able to invest just as much as you
were before and then also afford this incredibly expensive childcare bill.
But look at everything, leave no stone unturned, insurance, cell
phone bills, streaming, eating out right, even even just like
one hundred bucks a month.
Speaker 3 (30:18):
Let's be honest, they're probably not going to be doing
a whole lot of eating out right in the coming
months as well. That's true too, the lady kind of
pair back on the monthly budget, that's right.
Speaker 1 (30:27):
Like I think in those you know, first months and
first year, you're just eating out a whole lot less
because it's just a pain in the butt right to
get out there with a newborn. If you save one
hundred bucks a month, that's twelve hundred bucks a year,
and that's not nothing. So yeah, I mean you might
be able to save a few hundred bucks and that
coupled with dialing back to roth iras. I mean, if
they both have been or typically at least max out
(30:48):
the roth iras, you're looking at fourteen thousand dollars right there,
and so just by shaving some expenses here and there,
I think you could pretty easily hit that fifteen thousand
dollars mark that dollar amount for childcare. Something else I
would say, too, is I think that Kelly could use
this opportunity to push for a raise because there's something
tangible that has impacted her life that she can kind
of point to. Because I think for a lot of
(31:09):
folks they might find it difficult to advocate for themselves.
They might be doing amazing work, they might do an
incredible job, but when it comes to the annual review
or kind of being the squeaky wheel, they have a
harder time saying, hey, you know, I think I'm worth
this much. But when there's something that sort of feels
like is outside of you that you can kind of
point to, I think for some folks at least, it
could be easier to say, hey, i've got this bigger
(31:30):
monthly bill that I've got to fork out every single month. Now, Hey,
some companies they offer childcare. That's a benefit, that's a
perk that they provide. We don't really do that here.
Speaker 3 (31:40):
So maybe there's a way that I could get see
some of those expenses deferred a little bit. It's just
I think an easier way to advocate for yourself when
it comes to maybe your next pay raise and the
ability to continue investing while also covering this larger daycare costs.
Speaker 5 (31:56):
Yeah.
Speaker 1 (31:56):
I like the way you framed it too. It's not
just like I had a baby, pay me more. It's like, Hey, actually,
other companies who do something similar to what we do.
We have these additional perks that they offer people who
who have who have young kids. I think there are
ways to noodle out ways to save on childcare. It's
not easy though.
Speaker 4 (32:13):
Yeah, that's true.
Speaker 1 (32:13):
Man, you've been listening to How To Money with Joel Larsgard.
You can always hear us live on KFI AM six
forty twelve pm to two pm on Sunday and anytime
on demand on the iHeartRadio app.
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