Latest / The Personal Finance Club Show / Elon Musk says Saving is Stupid, The $50K Dow and HSA vs Roth IRA | Ep 25

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Elon Musk says Saving is Stupid, The $50K Dow and HSA vs Roth IRA | Ep 25 · The Personal Finance Club Show

0:00
The Dow just hit 50,000. What does that mean?
0:03
Elon Musk says saving money is stupid.
0:05
Is he right? And should you prioritize your
0:07
HSA over your Roth IRA? Let's find out.
0:15
Welcome back to the Personal Fans Club show.
0:18
Hey, John. Hey, Jeremy.
0:20
So it's kind of a sad day because see what's behind me.
0:24
This is the last time you're ever going to see this because
0:28
we're ending our lease at this office.
0:31
Yeah. When I got this office, it was
0:32
because I lived in like a little condo and my office was in the
0:36
living room where the kids would play.
0:38
And that was very difficult. But now we move further away and
0:42
we have a big house with like a big extra room for the office.
0:44
And so I'm going to start just working and recording from the
0:47
Home Office. I'm going to try to make it look
0:49
the same, like paint the wall and bring the same stuff.
0:52
So maybe you won't notice. But this is the end of an era.
0:56
RIP. All future podcasts will have
0:59
screaming children in the background.
1:01
I love it. Oh my gosh, that's exciting,
1:03
actually. Okay, okay, well it was good
1:08
while it lasted, and if you make the blue background, literally
1:12
no one will know. Yeah, I know it's true.
1:14
It's like very I need to I keep having this like ideas like I
1:16
need some like really dramatic YouTube studio, but it just
1:20
seems like a lot of work that I don't have time for these days.
1:23
So it. Looks great.
1:25
Yeah, it brings all that. Bring all those accoutrements on
1:27
with you and it'll be great. The two things, the little Pfc
1:30
logo and. The Hey, it's effective I.
1:32
Have a. Cake plant from Michael's.
1:35
I have a fake plant too. Nice.
1:38
It's fake. It looks very real.
1:40
There's another one over. There I know they were fake.
1:42
Wow the lore is getting busted through.
1:44
If it's far enough away, you think I can keep a plant that
1:47
alive? No chance.
1:49
Same. Got you.
1:50
No chance. OK, let's get into our hot
1:57
topics. It's a hot 1 today.
2:00
What's these? I actually like these hot topics
2:02
because they are very topical and I feel like I've seen this
2:04
with a lot of memes lately. Hot.
2:06
Topical, but not too topical. Not too topical.
2:10
OK. So the Dow just closed above
2:13
50,000 for the first time ever. We don't usually talk that much
2:17
about the Dow when we're covering the stock market.
2:18
So should I care about this? What does it mean?
2:22
Yeah. And you know, this was famously,
2:25
I think there's Pam Bondi being interviewed about the Epstein
2:27
files and she was asked, you know, something about the
2:32
victims and she answered the Dow was over 50,000.
2:36
That's what we should be talking about.
2:38
But she. Couldn't even get it out.
2:39
She's like the Dow has 50. Like she didn't even know what
2:44
to say. It's like, look at your notes,
2:45
girl. Well, I think she, I think she'd
2:47
look at her notes and was stumbling over it, but give you
2:49
a. CHEAT SHEET.
2:50
Read it. Exactly.
2:52
Someone's like, I wonder who said this is what we should be
2:55
talking about. OK.
2:57
And then it became a meme because then it's like anytime
2:59
you don't want to answer a question, you just say what the
3:02
DAO is at. But you bring up a very good
3:04
point, which is like, OK, well, what is a DAO?
3:06
And is this a big deal? And should we be excited about
3:08
this? And it's a big round Number.
3:10
It's not 100,000, but you know 50 is halfway there.
3:14
I was more curious honestly, because we just never were
3:16
always SPSPSPI mean, I know that you, you as a financial
3:20
connoisseur, you'd be talking about the Dow, but for the Pfc
3:23
purposes, we don't really touch on it a lot.
3:25
So that's kind of why I brought it here.
3:27
Well. We're about to end.
3:29
I'm going to start with the trivia question, Jen.
3:31
Oh God, Jeremy. I'm gonna ask you too.
3:33
I'm gonna ask you too. I know you always, you actually,
3:36
you always like Wince and Payne, but then you do really well.
3:39
But the point is like your answers are instructive because
3:42
we're all learning from your answers.
3:43
So how many companies do you think?
3:46
So the S&P 500 is a list of companies.
3:49
How many companies do you think are in the S&P 500?
3:52
500 all of them. That's right.
3:54
All OF500500. 500 no, that's exactly right.
3:57
Or you know, depends on how you count because like Google
4:00
actually has like 2 shows of stocks.
4:01
So it might be like five O 6 or something like that.
4:03
But that's the idea. It's like 500 representative
4:06
companies of the US, The Dow Jones industrial Average, that's
4:10
what it stands for. When they say the Dow, it's
4:12
short for the DJDJDJIA or the Dow Jones Industrial Average,
4:17
which is basically a number that represents a certain list of
4:23
stocks. How many stocks do you think are
4:26
the Dow Jones Industrial Average?
4:27
What's your Gus? Jennifer Mundia.
4:31
I hate it 2000. 2000 good guess you are extremely wrong the the
4:39
correct answer. One thing about Jeremy is it's
4:41
going to keep it Frank. Oh sorry, let me get another
4:44
guess. Let me OK, good.
4:45
Yeah, SP. 500 has 500, can you tell me if it's more or less?
4:49
Can you give me? That no, you need to guess
4:51
before I tell you the the answer, because I already told
4:53
you extremely wrong, so you got to go in a big way in a
4:55
different. Direction wrong.
4:56
I'm going to stay at 1:50. 150 stocks, you're much closer, but
5:00
you're still pretty wrong. The correct answer is 30.
5:04
Damn. There are literally 30 stocks in
5:07
the Dow Jones industrial average.
5:09
And the reason we don't talk about the Dow Jones or the Dow
5:12
is because it's extremely stupid.
5:15
Like, it's very, very stupid. And I'm not like that's not, you
5:19
know, an objective opinion. That's like a statistical fact.
5:22
The Dow Jones is extremely stupid.
5:24
And so I'm going to tell you exactly what it is and then I'll
5:27
tell you why we talked about it. So what it is is there's 30
5:30
companies and I'm not going to read all 30 because Despite that
5:33
being a small number, it's still kind of boring for podcasts.
5:36
But I'll tell you the top five. The top five by weight are
5:41
Goldman Sachs, Caterpillar, like the construction company,
5:45
Microsoft, Home Depot and Amgen, which I think does medical
5:49
something something. OK, so this.
5:51
Crossover S&P for sure. There's some crossover, but it's
5:54
not the same top five, that's for sure.
5:56
I think only Microsoft is in the top five of the other of the
5:59
S&P. And the crazy thing, this is the
6:03
craziest thing about the Dow Jones with the S&P 500, they
6:06
basically add up the weight of every company.
6:09
So how is the the, the biggest of the most company, the second
6:13
biggest to the second biggest company, the third biggest to
6:15
the third biggest company? And then based on how all the
6:17
companies do weighted by size, that's how they come up with the
6:21
S&P 500 value, right? And so for example, if there's a
6:26
huge company, NVIDIA or whatever are the biggest company this
6:30
days and it's flat, and then the tiniest company, the S&P 500 has
6:34
like a huge day. The impact the S&P 500 will be
6:37
almost nothing because the tightest of the company makes up
6:39
like a teeny fraction of a percent, which is kind of right.
6:43
Whereas if NVIDIA, the biggest company, goes down by 50%, you'd
6:47
expect that to have a very big impact.
6:48
So for example, like if I hear Microsoft, Meta, all the tech
6:52
giants all drop by 10% because of bad tech news, I know I can
6:55
go look at the S&P 500 and see it's going to have a terrible
6:58
day. Whereas if Caterpillar, which is
7:01
a tiny percent of the SP 500. Actually, let's use a different
7:04
example, let's use Goldman. So Goldman Sachs for example,
7:06
the biggest company by weight in the Dow is 11.55% of the Dow
7:11
Jones. Of only 30 companies in the Dow
7:14
Jones, Goldman Sachs makes up over 11%.
7:18
Goldman Sachs as a percent of the total U.S. stock market is
7:23
.4%. So it's dramatically
7:27
overweighted, right? There's way too much Goldman
7:29
Sachs in the Dow Jones because it's just these arbitrary list
7:31
of 30. It's not arbitrary.
7:32
They try to buy, they try to choose representative companies,
7:35
but it's just, you know, this list of these 30 companies, the
7:39
S&P 500 is weighted by size. The Dow Jones, do you know how
7:43
they calculate it, Jen? This is where it gets crazy.
7:45
This is where it gets stupid. Talk to me.
7:48
They. Calculate it by adding up all
7:51
the stock prices. So it's not the size of the
7:54
company, it's purely the weight. It's purely weighted by how much
7:58
that stock price is, which is irrelevant.
8:03
So I'll give you an extreme example.
8:05
Let's say the Dow Jones, instead of having 30 companies, had two
8:09
companies. It had Apple and it had, you
8:13
know, Jeremy's jams. If I went out and made a jam
8:16
company and we sold jam jellies, sure.
8:20
But we sell jams and jellies. But what's the?
8:23
Stock ticker number JMZ. J Jams JJAMZ, please invest.
8:30
And then let's say I just decide to have very few shares.
8:34
I only want really serious investors so I only I only have
8:37
4 shares of stock and they're $10,000 each.
8:40
So my whole company's worth $40,000.
8:42
But one share of stock is 10,001.
8:45
Share of Apple stock today is 264.
8:47
So if those were the only two companies in the Dow, the Dow
8:50
would be at 10,264. Then guess what?
8:56
If Jeremy's jams had a bad day and the $10,000 share price
8:59
became 5000, the Dow would plummet by 50% and it would
9:03
become 5264, right? And so obviously 30 is a big F
9:08
number where one company can't do that by itself.
9:11
But it's still extremely stupid that we're even doing it this
9:13
way. And the reason we're doing it
9:15
this way is because in 1896, Jen, before computers, before
9:22
the Internet, before calculators, before did they
9:25
have electricity? I don't know.
9:27
Now we're like getting into a history lesson.
9:28
Oh my. Gosh, I googled it.
9:32
When did they invent electricity?
9:34
I think it was before that, right?
9:36
When did they invent? Electricity. 17520 OK, OK,
9:45
right. Lighting eventually the first
9:48
batter in the 1800s. So, you know, it's old enough we
9:52
have to ask that question. But this is, you know, there's
9:55
like no spreadsheets. And so basically this company
9:58
named after this dude named DAO was like, hey, this stock market
10:03
thing is emerging. Maybe we should be tracking how
10:08
instead of just the individual companies doing, we can track
10:10
how the whole, the whole stock market's doing.
10:12
And so he picked 12 companies back then and then he added up
10:17
their stock prices. And on that day, May 26th, 1896,
10:20
that number they added up to is 40.94.
10:23
I will say that's slightly more complicated than adding up the
10:26
stock prices. They also divide, they add up
10:28
all the stock prices and then they divide it by something
10:31
called the the Dow divisor because sometimes stocks split.
10:36
So for example, if Tesla's at $1000 a share and then it splits
10:41
and becomes $500 a share, they, they don't want that to impact
10:45
the Dow because that didn't really impact the company
10:48
dropping in value. It just represented there being
10:50
more shares. So they adjust this Dow divisor
10:53
to basically smooth out all those curves so that those those
10:56
splits and spin offs and companies being replaced and
11:00
things like that don't affect the Dow.
11:02
So it's kind of like a true adding up of the prices, but
11:05
still adding up the prices. And so in 1896, that's how this
11:08
dude named Dow decided to do it. In 1928, they said 12's not
11:13
enough. That's silly.
11:14
That's too few. It's the 20s now Let's get let's
11:17
get more modern. Let's make it 30 companies.
11:20
And we still use those 30 companies, say they they update
11:23
the companies throughout time based on, you know, companies
11:26
that go in and out of business and get bigger and smaller and
11:28
things like that. But we still add this up.
11:30
And so when Pam Bondi in front of Congress is saying the Dow is
11:32
over 50, what she's saying is, hey, these 30 companies that we
11:37
are somewhat arbitrarily picking.
11:38
And when you add up all their prices, not the weight, not the
11:41
size of their company, not how the company is doing, you just
11:43
add up all their prices and then divide it by the Dow divisor,
11:46
which is the number that's smoothing out the curve over the
11:49
years that adds up to 50,000. Is that meaningful?
11:55
No, it's just it's one set of random numbers.
11:58
Is bigger than one other meaningful?
12:00
You know, one other big round Number.
12:02
It literally means nothing. I mean, it's slightly, somewhat
12:05
historically interesting that the number started at 40.94 and
12:09
today it's 50,000. It just shows the, even among
12:13
thirty random stocks, the insanely powerful compound
12:16
growth of the market. You know, if you had bought
12:19
$40.94 worth of stock back then, you'd have about $50,000 today
12:24
in stock price, but doesn't even include dividends.
12:25
When you include dividends, it'd actually be dramatically more
12:28
than that in the hundreds of thousands of dollars at least,
12:31
which isn't included in the index, of course.
12:34
But that's, that's what it is. It's, that's why we don't talk
12:38
about, it's not because it's more complicated.
12:39
It's because it's much, much stupider.
12:41
And you know, and I just think it's like one of these like, you
12:45
know, financial news headline. The the doll dropped 200 today
12:50
because they've been saying it forever.
12:51
So they keep saying it. But we shouldn't be talking
12:53
about that at all. You know, if anything, we should
12:54
be talking about the S&P 500 because at least it's a much
12:58
bigger list these days. We have computers.
13:01
We could make like a total U.S. market index and track that, but
13:05
just doesn't have the it's like literally just a marketing
13:07
thing. It just sounds good.
13:08
The Doll did this, you know, but it means nothing so.
13:12
Interesting. Yeah, I know.
13:14
Did you learn something about the Dow Jones Industrial
13:16
Average? You know?
13:17
What's really crazy is I be learning on this podcast.
13:19
I really actually learn. It's kind of nuts.
13:22
Sometimes I'm just listening. I'm like, oops, that's what I
13:24
should be doing, my job. We have to tell more jokes, Jen.
13:28
Every time. I like this.
13:29
The show needs to be funnier you.
13:31
Need to be funnier and then I'll laugh.
13:33
OK, that is appreciated. I like when you laugh, but I do
13:37
need to be funnier. Yeah, tell me a good joke.
13:40
Not a Dow joke. Come on, it's hard to make good
13:43
Dow jokes. AIA, come on, that's boring.
13:46
I agree this is we've I've really put myself between a rock
13:50
and a hard place. Explain the Dow Jones industrial
13:52
average, but make it funny. Give it some flair him up for a.
13:56
Failure because I am the one who puts the questions in there.
13:58
But, you know, we'll figure it out.
14:00
We're working on this episode 25.
14:01
OK. Hey, it's a milestone I'd say.
14:04
By the time we are 100 and 30 years old, like the Dow Jones,
14:11
we'll have a funny episode. We'll see.
14:14
All right. Shall we move on to our next
14:16
segment? Yes.
14:20
Can I ask a dumb one? You're asking dumb people smart
14:23
questions. What is today's question?
14:26
OK, so someone asks, what are your thoughts on either my wife
14:30
or I pausing our retirement contributions temporarily to
14:33
back up our emergency fund? Last year we had the Central Air
14:37
unit replaced and had our basement flood.
14:39
Thankfully, we had the money to pay for these expenses.
14:42
We have a path to build the emergency fund back up to where
14:44
it was, but it will likely take 12 to 18 months.
14:47
But if we pause retirement contributions for one of us, we
14:50
can get the emergency fund completed in half the time.
14:53
Maybe I'm splitting hairs, but was curious how you dissect this
14:55
scenario. Splitting hairs, You know what
14:58
that sounds like. Sounds like we need to get out
15:00
the nuance. Marching bands I.
15:05
Don't know the songs I'll be written, John.
15:08
Yeah, that's a Seuss. John Seuss is going to come
15:11
after us. Maybe he's old enough.
15:13
That's in the in the. Public domain, yeah.
15:16
All right. So that's a good question.
15:18
And and I and I will say, you know, I think you are splitting
15:22
hair to some degree because it probably doesn't matter that
15:25
much. But I do have an answer and I
15:28
like to follow what I call the phases of investing and there
15:31
are 6 phases and here they go. Phase one, Max out your 4-O1K up
15:35
to your match. And so to answer you, who is
15:37
this from? This is from Chris in Bristol,
15:39
CT. Chris in Bristol, CT Sorry, I
15:42
didn't say that Chris so to. Answer you, Chris.
15:44
It's my fault. OK, well there you go.
15:47
OK, so to answer you Chris, in Connecticut, I would not stop
15:53
your 41 KS below the match. So for example, if you and, or
15:56
your wife have a 5% match, make sure you're at least doing that
16:00
#2 we're going to talk about this.
16:02
But if you have any debt, if you have non mortgage debt, I would
16:05
pay that off because that debt is making it harder for you to
16:09
build wealth because you're paying interest.
16:10
That debt is making it harder for you to build an emergency
16:12
fund. And these phases are designed to
16:15
be done all at once. And then you don't move on until
16:18
you finish that phase. So go to your Form K plan, make
16:24
sure you're doing the exact match, 5%, whatever it is, then
16:27
you're done with that phase. Then pay off all your debt, then
16:29
you're done with that phase. It sounds like you are on phase
16:31
three, which is save an emergency fund.
16:34
It'll take you 12 to 18 months, but you can do it in half the
16:36
time if you pause your retirement contributions.
16:39
So I would pause what's happening beyond your match.
16:45
And you might be saying if you're listening, hey, but he
16:48
gets a tax advantage and that's use it or lose it.
16:50
Yeah, but part of a good offense is a good defense, right?
16:55
If we are so focused on, if we're living so lean without an
16:59
emergency fund, that something else could happen.
17:03
Like you said, your central air broke and you got a basement
17:06
flood. Like if another weird thing like
17:08
that happens that you're not prepared for, you lose a job,
17:11
medical emergency, you need to move whatever it is.
17:15
And then you're in the situation where you're racking up a credit
17:18
card debt or you have to do a four O 1K loan or whatever it
17:20
is, you'd be much worse off, right?
17:22
And so part of a good offense is a good defense.
17:24
And so you want to build that foundation first, even if it
17:27
means temporarily pausing your retirement contributions.
17:31
And like you said, you can get there in half the time.
17:34
So instead of talking about 12 to 18 months, we're talking
17:36
about 6 to 9 months. That means by the end of the
17:38
year, you can turn them back on and you won't have, you won't be
17:42
saving anymore. You won't be doing both.
17:44
So you'll be, you'll be going even faster than right, because
17:47
then instead of splitting your money some to emergency fund
17:51
come to retirement contributions, you can really
17:52
ramp it back up for the remainder of the year.
17:54
And so I would do that. I would say, hey, I think your
17:57
thought process is right. Get that emergency fund back up
18:00
to where you feel comfortable with it as fast as possible.
18:04
And then you're done with that. Then you can go back to
18:07
investing, which is phase four, invest until you're on pace for
18:10
a healthy retirement. Go to a retirement calculator
18:13
like the one at hellonectary.com and put in all your numbers and
18:16
see if you're at least can be healthy at the age of 65.
18:21
Phase 5 is save for a house down payment and kids college.
18:24
That's kind of not super necessary stuff to survive, but
18:28
things a lot of people want to do.
18:29
So once you're at least saving up for retirement to say, OK,
18:33
I'm going to be good at 65, then go save for your house, go save
18:37
for your kids college. And then once those things are
18:39
covered, phase six, which is the final phase, invest more or pay
18:43
off your mortgage. And that's where you're saying,
18:45
hey, that's paid off. We've got the emergency fund,
18:49
retirement is healthy. We've got our house down
18:52
payment. We've got kids, college kids
18:54
college covered. Now it's time to path that
18:56
house, invest more, retire early, get wealthy.
18:59
That's what I do. And so, you know, Chris, I would
19:01
say it's splitting hairs a little bit, but I like where
19:03
your head's at. I'd say, hey, go through these
19:06
things in order the phases of investing.
19:08
That's how you're going to really stay focused, get that
19:12
defense going, build wealth, all the great things.
19:14
And then if the emergency happens, cause emergencies tend
19:19
to all happen at the same time where you lose your job, the car
19:23
breaks down, the flood happens through family emergency and
19:27
then you're worried about credit card debt, things like that.
19:29
You don't want. You know, these things happen
19:31
all at once. So that's why you've got that
19:33
cash buffer to get you through it like it just did when you
19:36
have the unexpected basement flood.
19:38
How nice was it that you didn't have to go live on credit cards
19:40
and like be stressing out about just paying your bills because
19:43
you took care of that in the past?
19:46
Set yourself up again for success in the future.
19:49
Get your emergency fund back up in phase three, and then you can
19:52
go back to plowing that money into investing.
19:56
Nice. Sometimes I try and answer the
19:59
questions before you answer them.
20:00
Like as I get them, I do a little WWJD and I'm like what
20:05
would Jeremy do? And I got this one.
20:07
What? Would Jen do?
20:09
No. No, no, no, never that.
20:11
Trust me, it's never that. I got always outsource, you
20:14
know. Did you guess?
20:14
This one right I. I did I was like, I think he's
20:16
going to say that that's OK. Yeah, good.
20:19
We're we're a lot. You did not guess the.
20:21
Number of companies in the dollar, right?
20:23
You were way off 2. 1036 Oh, even you.
20:29
Guys do, I thought you guys like 10,000?
20:30
I don't know, I said. 2000 This is recorded Media OK.
20:34
OK, we're going to People can. Just rewind.
20:36
You're going. To impeach me.
20:37
Don't don't slander my name, OK are.
20:39
You lying now or are you lying then?
20:41
OK, exactly. All right.
20:43
Should we go on to our favorite segment of the episode?
20:46
It's our. Favorite.
20:47
It's my favorite. OK, what is it?
20:53
Scroll patrol, scroll. Patrol.
20:56
Somebody wrote it into the show and said that they say scroll
21:01
patrol with you when you do it. They.
21:03
Do. Oh good.
21:05
And then it was. Funny because I think the last
21:06
episode you forgot to do it. So I was thinking about them.
21:08
I was like, Oh my God, they're they're over there with egg on
21:10
their face saying scroll patrol. You didn't even say it.
21:13
Come on, Dick. I'm like people give me high
21:15
fives. I just leave them hanging.
21:18
I think I saw it from the Kelsey Brothers podcast where they go
21:20
new news. I'm.
21:22
Like, do you watch that? I've seen like 2 episodes.
21:25
Our crossover is not exactly I. Picked it up.
21:29
So far, our only crossover in all this time has been wait,
21:33
wait, don't tell me. That's the only thing that we
21:36
both, we both. Watch that Super Bowl commercial
21:38
with the Backstreet Boys singing.
21:39
Enough. OK, stop glazing me as the kids
21:42
say. All right, let's click on this
21:44
link. Jeremy has not seen this video.
21:46
It's another quick one. He's going to react in real time
21:49
and we're going to talk about it all.
21:51
Right. One like side recommendation I
21:52
have is like, don't worry about like squirreling money away for
21:55
retirement in like 10 or 20 years in one matter.
22:00
OK? Either either we're not going to
22:02
be here or it just like it's you won't need to save for
22:08
retirement. If any of the things that we've
22:11
said are true, saving for retirement will be irrelevant.
22:15
OK, so first of all let me. Just say this was sent in.
22:17
This was sent in from Kenton. So shout out to you Kenton
22:20
because and and the e-mail was so funny because they were like
22:22
for Jen's eyes only. I was like, what is this e-mail
22:24
going to say? And it was just scroll.
22:26
I was like, maybe they thought that you like are in the inbox
22:28
too. And I was like, thank you for
22:29
the secrecy sometimes. I am, but there's nothing that
22:32
would make me click on an e-mail faster.
22:34
I. Know right?
22:36
I'm like, what kind of sick stuff is she doing in this
22:39
having? People send me in only for.
22:40
Inbox. Info Inbox.
22:43
Oh is this is not Epstein files thing Jen?
22:47
I'm an Epstein files. That's what it is.
22:49
So thank you, Kenton and Jeremy. Thoughts on this video?
22:53
So yeah, if you didn't recognize that voice, that was Elon Musk
22:55
saying in 10, in 1020 years, saving will be relevant.
23:00
Interviewing him is like. I know I love his reaction
23:04
because Elon Musk meant it to be this really traumatic thing.
23:07
And he's like, what do you mean? Do you mean we're going to be
23:09
dead? Or do you mean money will be
23:12
infinite or like, what the hell is this thing?
23:17
And you know, like, I, I didn't prepare for this, but I don't
23:20
think it's that much of A stretch to say you, you can go
23:22
look at the 1000 things that Elon Musk has said about the
23:26
future. And to his credit, you know, I
23:30
do think he, he like is part of the envelope pushing with like,
23:33
you know, electric cars and SpaceX and things like that.
23:37
But a lot of things he says don't come true, you know, as,
23:40
as as is true for all of us. You know, he's not the magical
23:44
fortune teller. And, you know, I can't imagine a
23:49
world. I can't, you know, I can't
23:52
imagine a world in 10 or 20 years where saving is less
23:55
important. I can only imagine a world where
23:57
saving is more important because social safety Nets have fallen
24:00
apart. And Social Security goes
24:03
bankrupt and there's, you know, that's, that's been the trend
24:07
forever. Pensions are dropping away.
24:10
You know, maybe inflation gets worse, you know, whatever it is,
24:13
it seems like if anything, buying assets and saving is
24:17
going to become more important. And so, you know, and this is a
24:21
22 second clip and, you know, it's the kind of thing that goes
24:24
viral on social media and, and even Elon Musk is like, if any
24:27
of the things we have said come true, I'm like, what'd you just
24:29
say? Like you just say, you know,
24:32
there's a meteor like sprawling towards Earth that's about to
24:36
wipe us out. Like if that's true, then yeah,
24:38
saving it becomes very relevant. And so if that's true, so, you
24:42
know, maybe there was an hour of this looks like a very long form
24:46
sit down conversation that they're having and maybe there's
24:48
an hour of context this of which all that becomes true, then same
24:52
becomes irrelevant. Sure.
24:53
But I think this kind of thing worries me because, you know,
24:56
are yoloers out there. God bless you all.
24:59
I'm not a religious person. I don't know why I always like
25:01
use these. I sometimes say like you're our
25:04
Lord 2026. I think sometimes I say that
25:06
people are like, is he really religious?
25:08
And I'm don't happen to be, but I just think it's, I don't know,
25:13
a nice thing to say or something it's.
25:15
Internet lawyer. You're just, you know, inner
25:16
language. That got you.
25:18
There's an elder millennial who's talking for the Internet.
25:22
Elder Millennial, thank you. I'll take it, even though I
25:24
think I might have missed millennial sass by like 40 days
25:27
or something. But hilarious.
25:29
That you know that. Well, 'cause I'm, I was an 80s
25:32
baby, you know, I didn't say it. Let's not get do it.
25:35
But yeah. So anyway, I worry that people
25:38
like the Yoloers out there are going to say, oh, I knew I'm
25:40
going to buy the speedboat. Elon Musk says in 10 years,
25:43
like, you know, I'm going to have all this money.
25:45
But that's probably not going to happen.
25:48
Speed boaters, Yoloers, wave runner enthusiasts, I still And
25:54
I want you to have a wave runner if you want to have a wave
25:55
runner. Frankly, it'd be better if your
25:57
friend had a wave runner because then you don't have to do the
26:00
maintenance and stuff. But it's most likely saving will
26:04
still be very important in the future.
26:06
And that's what I'm doing. So I give this clip an F because
26:10
it just seems really stupid. Yeah, well, you're giving me a
26:14
shocked emoji face. I thought it would get like
26:17
Elisa D for just how hilarious it is to say something like
26:21
that. I mean, like, it's one of our
26:24
rules, our rule #1 live below your means.
26:26
He's literally saying don't do rule #1 he has to fail.
26:29
He fails. This is the personal finance
26:32
clip show and he failed. You're right.
26:33
OK, keeping it real over here. OK, short and sweet.
26:38
Let's go on to our I'm not. An Elon Musk hater, by the way,
26:40
I'm an Elon Musk. I don't know, Indifferentiator,
26:46
you know, I think no, I don't. Know what it is, but I don't
26:51
think it's that. No, yeah, I, I, you know, I'm
26:54
not an Elon Musk, like fanboy either.
26:56
I just, you know, I think that he's probably going to be worth
27:00
a trillion dollars one of these days, and that's pretty
27:02
interesting. But I don't think that really
27:03
makes him a great person or I don't think that alone
27:07
necessarily makes him a horrible person.
27:09
But it's hard to say that without looking at the rest of
27:12
his behavior. And be like, that doesn't seem
27:14
great. Yeah.
27:15
But yeah, quit. While you're ahead here, OK.
27:17
All right. Fair enough.
27:18
What's our next segment? OK.
27:20
Our next segment is money, money.
27:24
Jeremy had time today all. Right, you're in the comments
27:28
blowing me up and I'm going to blow you right back for Jen's
27:33
eyes only. OK, I don't even know how to get
27:36
into this. OK, so we're still at the
27:39
beginning of the year. It's February or maybe it's
27:41
March when this comes out. But either way, you should still
27:43
be looking at your finances, so it's a great time to look at the
27:46
Ultimate Investing checklist for 2026.
27:48
Do you want to give us a little rundown of this before we get
27:50
into the comment? Yeah, it's basically, you know,
27:53
people think investing the Super duper complicated.
27:55
And I basically put on one little post it note size thing,
27:58
handwritten the investing checklist, which I'm not going
28:02
to go through in total, but says which accounts to invest in,
28:06
invest in index funds, turn on dividend reinvestment, set up
28:10
automatic investments, rebalance on a fixed schedule.
28:12
Like really simple stuff like that, that if you do all these
28:15
things on this little tiny post a note, you're going to be like
28:18
a super duper expert investor. And that's really what all boils
28:22
down to. And everything else we hear
28:23
about in the world of investing is, you know, distraction,
28:26
noise. OK.
28:28
So the comment is why do you recommend giving priority to the
28:33
HSA before the Roth IRAI would have thought that Roth would be
28:36
#2 and HSA would be #3. All right, so just to get
28:41
context, there's five accounts listed on this post note, by the
28:46
way, if you're self-employed, your yours would be a little bit
28:48
different. But the five accounts are four O
28:52
1K up to your match. And this again is like a
28:54
waterfall where you where you fill up a bucket and then go to
28:57
the next 1. So 4 O1 kept your match HSA,
29:00
which in 2026 you can contribute $4400 to as a single person.
29:04
It's I think it's 8000 something as a family #3 Roth IRA 7500 and
29:12
then #4 the rest of your four O 1 K 24,500 and then #5 taxable
29:18
brokerage, which is unlimited. And so basically you fill up
29:21
each of these buckets in order and you don't do the next one
29:23
until the previous one is filled.
29:25
But if you don't have access to one of those buckets, then you
29:29
can just skip it. So for example, if your employer
29:31
doesn't have a four O 1K, just skip it.
29:33
If your health insurance isn't an HSA compatible health
29:36
insurance plan, then you don't open an HSA, just skip it.
29:40
But this question asker is saying, hey, why is HSA before
29:43
Roth IRA? I would have thought that like
29:45
Roth is better because Roth is the better tax break.
29:48
And the answer is HSA kind of is a Roth tax break and it's a
29:56
traditional tax break. You get both tax breaks.
29:59
Usually it's one or the other. And so I'll explain it.
30:02
And it's called the triple tax break of the HSA.
30:05
First, if you put money into an HSA, you don't pay income tax on
30:10
it this year. So for example, let's say you
30:12
make $50,000 a year and you contribute $4000 to an HSA.
30:18
The government pretends that you only made $46,000, that that
30:22
$4000 comes off right from the top, goes directly into your HSA
30:27
bank account or investment account, and then you only pay
30:29
income tax on what's left. Those types of tax deductions
30:32
are huge because they, they come off your marginal tax rate,
30:37
right? Your highest tax rate is
30:38
whatever is at the top. And so you can, if you can take
30:40
money off the top by reducing your taxable income, like
30:43
through an HSA, you save a bunch of tax money this year.
30:47
That's tax benefit #1 tax benefit number 2 is the money
30:51
grows tax free. So let's say you open up a
30:55
investment account for your HSA, which you can do at a site like
30:59
fidelity.com. You can click open account,
31:01
click HSA. You do need to have a HSA
31:04
compatible health plan, so you should go look at your health
31:07
plan to see if it works, but you probably know about it if you
31:10
do. So you go to Fidelity, open one
31:12
up, or maybe you have one through your employer.
31:13
Then you invest the money that's inside.
31:16
So I put that $4000 in, got a tax break, then I invest the
31:19
money, and then for the next, let's say 20 years, it grows and
31:22
grows and grows. It pays dividends, it kicks off
31:24
earnings, yadda, yadda, yadda. I don't pay any of the tax on
31:28
that growth, which is tax benefit #2 normally in a taxable
31:34
brokerage account, if my investments pay dividends, I
31:37
would be getting an annual tax bill saying, hey, your
31:40
investments paid. In my case, they pay like 60 or
31:44
$70,000 a year just in dividends.
31:48
And so I have to pay tax on that as though it's my income.
31:50
Inside of an HSA. You don't then tax benefit
31:53
benefit #3 is when you take the money out, you don't pay taxes
31:58
on it as long as it's for a qualified medical expense.
32:02
And so with a Roth IRA, you pay tax when it goes in.
32:07
You know, you pay tax on the income when you earn it, but
32:10
then once you put the money in, you never pay tax again.
32:12
With an HSA, it's the same. You never pay tax again as long
32:16
as it's on qualified medical expenses.
32:18
And prevailing wisdom in the personal finance world is that
32:21
as we age, we're going to have enough medical expenses to use
32:26
all this up. And so you want to have that HSA
32:31
there so you can use this triple tax benefit money that you never
32:34
pay tax on ever. When you earned it, when it
32:36
grew, when you pulled out, you never pay tax on any of it.
32:41
That's why the HSA is better than the Roth IRA, because you
32:43
save tax now on the income tax and you save tax later when you
32:47
pulled out. You might be thinking, hey, but
32:50
what if I don't have enough medical expenses?
32:53
Then what? I'm screwed, right?
32:54
Well, you're not screwed. Worst case scenario, you just
32:56
pay a penalty of 10%. So it's not like a huge deal.
32:59
But at age 65, HSAS can convert to a regular Traditional IRA.
33:06
Well, that means you do have to pay tax on the withdrawals at
33:09
that point. But since you never pay tax on
33:11
the money going in, that is actually OK.
33:13
And then you can use that money on anything.
33:15
And so at age 65, your HSA can just become a regular old
33:19
retirement account. We pull money out and pay the
33:21
tax on it later. And so even then, it's strictly
33:23
better because you only pay tax once, just like you do with the
33:25
Roth IRA. And so that said, this is still
33:28
a nuanced issue. If you don't like an HSA for
33:31
whatever reason and you want to skip it, that's 100% fine.
33:34
Hsas through employers often have higher fees and things like
33:37
that, or they're a little bit more complicated to use, or you
33:40
might just not want the complexity in your life, and
33:42
that's legit too. But that said, strictly by the
33:46
rules of the tax code, you will likely end up with more money if
33:51
you prioritize in this order because you're going to pay less
33:55
tax. Whoa, I know you're getting good
33:59
at this. I have an HSAI, have a little
34:02
debit card, it says HSA on it and when I go to the dentist or
34:04
when I buy glasses or go to the doctor, I swipe my HSA card.
34:09
It kind of feels like free money because I don't have to pay for
34:11
it out of my checking account And I'm I rest very happy
34:14
knowing that most of the money in my HSA is invested in
34:17
growing. I personally keep about 2000
34:19
bucks cash in my HSA at all times.
34:21
So I can, you know, go swipe it to the doctor and not worry
34:23
about it bouncing and then and then I feel like I still am
34:28
getting that triple tax benefit. Some people little bit of an
34:30
advanced Pfc tip. What they'll do is they'll never
34:33
spend HSA money. What they'll do is they'll
34:35
whenever they have a medical expense, they'll create a
34:38
spreadsheet and they'll save the receipt, put it on the
34:41
spreadsheet, keep track of it in their Google Drive, keep all the
34:44
records, and then pay for it out out of their checking account,
34:47
out of their tax money. Then the idea is years later you
34:50
can go and reimburse yourself for all those receipts all at
34:53
once and say, OK, over the years I've had $100,000 in medical
34:56
expenses. Now I'm going to take $100,000
34:58
out of my HSA all at once, reimburse myself, reimburse my
35:01
taxable money, and then pull it all out 100% tax free with that
35:05
money that's been growing tax free for years.
35:07
That's cool. If you want to do it, If you're
35:09
like into the whole like spreadsheet thing, you'll pay.
35:14
You'll end up a little bit better off that way.
35:16
But you know, with all these things, there's like kind of a
35:19
balance between how much of an annoyance you want in your life
35:22
versus just living your life. And for me, I kind of spend my
35:25
HSA money when I need to so I don't have to keep track of
35:29
receipts for 20 years. Yeah, and also you have like
35:32
5011 kids, so you got to more medical expenses than the
35:35
average bear did. You say 5011, is that a?
35:38
50115011 you never heard that? Two kids.
35:43
Guys might as well be 5011 they. Are I agree with that does seem
35:47
like it's an outrageous number of kids though and they are very
35:51
expensive there. You go, this is might be our
35:54
shortest episode ever. Proud of you.
35:56
The earlier episodes were like in the 20s.
35:58
This is 36 minutes. I think those.
35:59
Were our test episode though. This is not our shortest episode
36:03
ever. This was a good episode.
36:05
I hope this. Was good.
36:06
You did great. I.
36:07
Could I could launch into my stand up routine?
36:10
I've got type 40. All right, hit us with the rules
36:12
so we can get out of here. All right.
36:14
Jen is slowly leaving, backing away in the chair.
36:20
There's nothing she wants less than to hear my stand up
36:23
routine. It's not tight either.
36:25
It's a very loose 40, so it would be horrible a loose. 40
36:28
it's. A very loose 40 sounds good they
36:32
they don't want you have a tight five.
36:33
I know nothing about stand up, obviously clearly what do I do
36:37
what I do know about Jen listen to the Segway.
36:39
What I do know about is building wealth and if you want to build
36:42
wealth you follow 2 rules. That's what you do rule #1 is
36:45
you live below your means and rule #2 is invest early and
36:47
often. That's it.
36:49
See you next week the. Personal Finance Club Show is
36:51
produced by Jeremy Schneider and Jen Mundia, music by Essa Balu
36:54
and Homie. Send your questions to podcast
36:57
at personalfinanceclub.com. The Personal Finance Club show
37:00
is Co hosted by Jeremy Schneider who is a co-owner of Nectarine,
37:04
an SEC registered investment advisor.
37:07
The views expressed on this show are those of the hosts and
37:09
guests and do not necessarily reflect the views of Nectarine.
37:13
Please refer to hellonectarine.com for all
37:15
relevant disclosures. This podcast is for
37:17
informational and educational purposes only and should not be
37:20
construed as personalized investment advice or a
37:23
solicitation to buy or sell any security.
37:26
Listeners should consult their own financial, legal or tax
37:29
professionals for advice specific to their situation.