Latest / The Personal Finance Club Show / Six Phases of Investing, Kid Money, and Slow Mortgage Payments | Ep 17

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Six Phases of Investing, Kid Money, and Slow Mortgage Payments | Ep 17 · The Personal Finance Club Show

0:16
Welcome back to the Personal Finance Club show.
0:19
Hey, Jen. Hi, Jer.
0:21
Well, we're officially deep into the new year.
0:23
It's January 8th on the day this is being released.
0:26
And January is really big for two things, people who go to the
0:32
gym, people who want to get their finances in order.
0:35
And as as personal finance club, January is always our biggest
0:38
year because people, and you know, I'm not knocking it, I'm
0:40
saying like it's like, you know, December, holidays, eating,
0:46
spending money, just getting through the end of the year.
0:51
And then January is like a fresh start.
0:52
And so finances, fitness, everyone's getting their stuff
0:56
in order. Do you have resolutions?
0:58
I don't. I haven't done a resolution in
1:00
forever. I have about like 400 unused
1:02
class pass credits. So now that you say fitness, I
1:04
should probably. 4. 100. You can do 2A day through
1:08
September. Well, it's funny because then
1:10
when I do use them, I'm like, how am I running out by like the
1:12
10th of the month? But now that they've racked up,
1:14
I'm like, OK, I guess I could use these.
1:16
Yeah, you can get like massages and things like that too.
1:19
Do they roll over? You get to keep them they.
1:21
Don't like, I like got the plan at the end of last year where
1:23
they can roll over because that was starting to piss me off when
1:26
I like couldn't use them. So yeah, I'm like, I kind of
1:29
find a happy medium of how many credits I'll actually use.
1:32
I I get a text notification every time my credit card gets
1:36
charged. That's actually a personal
1:37
finance tip I recommend because I think sometimes subscriptions,
1:42
you know, whatever your credit card starts getting charged, you
1:45
don't even know it. And so if you get a text, at
1:47
least you're like, you know, a little bit more dialed in and
1:50
it's got a text. 4999 a month for my Peloton subscription, my
1:56
wife's Peloton subscription that we both can technically use.
2:00
And I told her I was like, hey, if you're using it, you know, I
2:03
think spending money on health and fitness is 100% like a great
2:08
ROI. You know, if, if I could pay
2:10
$1000 and be in like great physical fitness health by the
2:14
end of the year, like there literally there's no better
2:17
money you could spend, right? But if I'm spending $50.00 for a
2:22
exercise bike to sit there with a, you know, clothes drawing on
2:25
it or something, I'm like, oh, that's just so brutal to me.
2:28
So yeah, I need to go look at the look at the track record of
2:33
our Peloton usage and see what we're really paying per ride.
2:37
Are we paying like $25 a ride because we use it twice a month?
2:40
Are we paying $200 a ride because we use it?
2:43
If you're paying $200 a ride, you can you can do a lot of
2:45
$200. Yeah.
2:47
That's true. You can ride someone for $200.
2:50
Oh. My God, that escalated so
2:54
quickly. I don't know.
2:55
Okay, let's pivot. Do you have resolutions?
2:58
I don't do resolutions either. I think just like everyone, I
3:02
kind of want to get fit and get my finances in order but right.
3:05
Although one thing that stuck with me lately, this is like a
3:07
tweet I saw or a threat, I guess it was that says you don't need
3:11
75 hard, you need 362 SH medium. And and I really like that
3:17
because I think, I think my resolution would be just just do
3:20
a SH medium job more consistently because because I'm
3:22
very like I'm like a yo-yo diet or yo-yo fitness person where
3:25
I'm like, like, all right, Monday legs, Tuesday chest,
3:30
Wednesday cardio, Thursday hit. And I do it for like a month.
3:34
And I'm like, yeah. And then I'm like, oh, I'm so
3:36
sick of this. I'm going to do nothing for a
3:37
month, you know? So I'm going to just try to stay
3:39
more SH medium for me. So relatable.
3:43
I did 75 hard. It was pretty amazing.
3:44
But yeah, it definitely didn't keep it up obviously.
3:46
It's insane. Yeah, I still kind of want to do
3:50
that just to see what happens, but I think like the better life
3:53
advice would be just. Just yeah.
3:55
Be more consistent. I cannot imagine doing it with
3:57
kids, like having to feed a child and then having to like
3:59
maintain this consistency and working out twice a day.
4:02
Like, I don't know by the end of it, though, I will say my
4:05
outside workout was almost always a walk, which is amazing.
4:08
Like a 45 minute walk is really good for you.
4:10
But like, it was like at the beginning I was like Culver City
4:13
steps, like hiking. And then at the end it was like,
4:16
all right, we're going to get outside, take a walk.
4:18
I'm. Going to send my rocking chair,
4:20
yeah. It's like I'm outside
4:22
technically. Push, push my toes back and
4:24
forth and rock. Got it in.
4:27
Little meditation, all right, So no resolutions, but trying to
4:31
just be better in 2026, OK. This is this is the big year.
4:35
We're trying to be better. And let's make the podcast huge.
4:38
I want to finally unseat Joe Rogan for the number one
4:41
podcast. You know, we've been in the,
4:43
we've been in the millions for long enough.
4:45
Let's get to #1. Oh my.
4:49
God, our three listeners are going to think that's hilarious.
4:51
Yeah, my, I didn't know. I just came back from North
4:53
Carolina. I didn't know my parents knew
4:55
who Charlemagne was. I was like talking about him
4:57
with my brother. And they were like, my dad goes
4:59
Charlemagne, the God. I almost fell out of my seat.
5:02
But he just signed a $200 million deal with iHeartRadio.
5:04
So let's either let's get to Charlemagne and or Joe Rogan
5:07
territory in terms of numbers maybe not ideals.
5:11
I think, I don't know who Charlemagne is, but it sounds
5:14
like he's he or they or it is successful so.
5:17
He's doing very well. I'm trying to get there all
5:19
right. Let's be found in them.
5:21
Let's get into it, explain it like I'm 5.
5:28
What's the topic this week, Jen? OK.
5:30
You have posted so many times about the six phases of
5:34
investing. We'll have Sahil put a picture
5:36
up here for us. Can you break down those phases
5:39
and tell us why the order is important?
5:42
Yeah. I call this phases of investing,
5:44
but it's more, it's really more general than that.
5:46
It's really the what do I do with this money question?
5:52
It's the answer to that. And and the reason I think that
5:56
question needs an answer is because people make their life
6:01
very complex and their financial life too.
6:05
And a typical individual, I was told once in high school English
6:11
class to never use the word person.
6:13
Like don't ever write the word person in a in a paper.
6:16
Because if you're talking about firefighters, say firefighter,
6:19
don't just say person. But I'm never talking about
6:21
firefighters. I'm always talking about humans.
6:25
Who? Yeah.
6:25
But you just said individual makes you sound like ChatGPT, so
6:28
maybe I can workshop some things.
6:30
And you know why I said individual?
6:32
Why? Because Miss Martin in 11th
6:34
grade high school said you can't say person, but you can't say
6:38
individual. So we also start individual and
6:40
we meant person and it's. Worse.
6:41
Yeah, it's worse. So what?
6:45
What do you call a person who's like, working on their finances
6:47
like a a financier like Jeffrey Epstein?
6:51
No. God, you are on a roll today.
6:55
How do we go to riding people on Jeffrey Epstein?
6:58
No, no. Don't say it again, all right?
7:02
This individual's fine. Individual's fine.
7:04
All right, individual, we'll go with ChatGPT, but at least you
7:06
know, this isn't AI. All right, So, but it's an
7:09
answer to the question. Like if you're a person, I'm
7:11
just going to say a person. If you're a person who has some
7:13
money, this is what you're typically doing.
7:14
You're like like, OK, I want to be investing.
7:16
So I think I'm going to buy some stocks and I'm saving for this
7:20
car. So I'm saving, but I also have
7:22
this debt. So I'm paying off the debt and I
7:24
also, I think I'm going to do my 4-O1K or maybe I'm going to buy
7:27
some insurance and maybe I'm going to, you know, maybe I'm
7:31
going to do a high yield savings account.
7:32
I heard bonds are going to think I'm going to do some bonds and
7:35
you're, and you're just kind of like flailing with these like 14
7:40
kind of all orthogonally aligned goals.
7:42
Does that sound familiar to you at all?
7:45
What orthogonally? No, no, like this, this like
7:49
feeling of just like trying to do.
7:51
Oh yeah, sounds like everybody I pretty much know.
7:54
Totally. Exactly.
7:55
So we all do this and then and then, you know, you get a bonus
7:58
of $3000 at work or whatever, or tax return or whatever.
8:02
And then you're like, OK, well, what do I do this money?
8:04
Do I, you know, and it's kind of almost like what did I hear
8:08
about most recently? Should I pass some debts?
8:10
Should I invest? Should I save for kids college?
8:12
Should I pay down my mortgage? Should I save for something?
8:15
And, and, and this is an ordering that you should do.
8:20
And it kind of simplifies all these decisions and the way I
8:24
like to. And, and by the way, like, you
8:25
know, this isn't totally novel in the world of personal
8:29
finance. If you read like 10 personal
8:31
finance books, probably six of them are going to have some
8:33
similar prioritization of what to do with your money.
8:37
And this is the one that I, you know, it's, it's pretty base.
8:40
I I think keeping it simple, it's what's really important,
8:42
which is why there's only 6. So here it goes.
8:44
This is basically what you do with your next dollar number one
8:46
phase one, Max out your 4-O1K up to your match.
8:50
So if you have a job that offers a four O 1K and they offer a
8:54
match, which means if you put in a dollar, they put a dollar or
8:57
sometimes it's a partial match like you put in a dollar, they
8:59
put in $0.50. If you don't do that, you're not
9:04
literally, but you're what's the opposite of literally?
9:07
You're metaphorically, you're figuratively.
9:10
Thank you. You're figuratively flushing
9:12
money down the toilet. Literally thrush flushing money
9:15
down the toilet would be, you know, taking cash out of your
9:18
wallet and putting the toilet and, and clicking the flush
9:20
button. Do you click it?
9:23
Although I heard that, didn't I heard Miriam Webster change the
9:26
definition literally to mean figuratively because everyone
9:30
used it wrong And and they're like, we're not telling you what
9:34
the words mean. We just record with how they're
9:37
used. No, I hate that.
9:39
I hate that. Words mean things.
9:40
That's the. Whole I agree, I think they
9:43
literally change the word literally to mean wow,
9:46
figuratively so anyway so. Terrible.
9:48
All right, phase #1 Max out your 41K.
9:50
If you don't put money into your 4-O1K.
9:52
If you have a match, then you're flushing money down the toilet.
9:56
Even if you did the worst possible thing financially,
9:58
which was too. Then the next day go drain your
10:01
4-O1K of all the money, pay the tax, pay the penalty, yadda
10:04
yadda yadda. That match is so much money,
10:06
it's more than the tax and penalty combined.
10:08
So you still end up with more money.
10:09
Could then take it out and go, you know, buy, you know, a
10:12
sports car with it or something but better yet just leave it in
10:16
there because you're going to be a little bit better for, you
10:18
know the long term. OK, that's phase one Max out
10:20
your for 1K. Phase two pay off all non
10:23
mortgage debt. So if you have car loans,
10:27
student loans, credit card loans, medical debt, personal
10:31
loans, anything that's not backed by a house paid off.
10:36
And the reason is we as Americans have become so that
10:42
crazy that we're all kind of have this like crazy backwards
10:48
way of thinking where you think you borrow money to spend money
10:51
and then you spend your whole life trying to pay the debt
10:54
back. And instead, and I think of debt
10:58
as like a down escalator when you're trying to go up, right?
11:02
And if you're trying to build wealth, debt pushes you down the
11:05
path, right? You're in debt, you're negative,
11:07
you're way in the negative and it's going down, you know,
11:11
because you're paying interest on it.
11:12
So the more debt you acquire, the faster escalators.
11:15
And so if you can pay off all that non mortgage debt, get at
11:18
the top of that down escalator, suddenly now you're not like in
11:22
this rat race just trying to keep your head above water
11:24
anymore. Now you can kind of stand on
11:26
solid ground and build some wealth.
11:28
So that's phase two path. All your non mortgage debt.
11:30
Phase three, save an emergency fund.
11:33
These first 3 phases, if you see the graphic, they're in red.
11:36
That's kind of like your defense.
11:38
You go from defense 1st and offense.
11:39
So defense is Lauren K half your Dutt and save an emergency fund.
11:44
Emergency fund is a savings account, a high yield savings
11:46
account, money market fund just a pile of cash somewhere.
11:50
It has like 3 to 6 months of your monthly expenses.
11:55
So if you spend 3000 bucks a month, there would be 9000 to
12:00
18,000 bucks. You know, call 10, call 15, pick
12:03
a number. And the reason you do this is
12:06
because shit comes up in your life.
12:08
Car breaks down, medical emergency job loss, you know,
12:12
sick kid. You know, there's this stuff
12:14
that comes up and you don't want to be living so close to the
12:17
edge that any little bump on the road like throws you back that
12:20
down escalator, right. And people are really excited by
12:23
investing as they should be. It's like the miracle of
12:26
positive compound growth is, is one of the wonders of the world.
12:29
But the best, you know, offense can be a good defense, right?
12:33
Because if you keep getting thrown down this down escalator
12:36
of debt, you're going to be in the washing machine of, of, you
12:40
know, not getting above water. I'm like mixing my metaphors,
12:43
but you get you don't want to be an escalators or underwater.
12:47
So there's your first 3 phases. Phase #4 now is invest so that
12:51
you're on pace for a healthy retirement.
12:53
And so how you basically figure out how much money per month I
12:57
need to be putting into investments to make sure that
12:59
when I'm age 65, I will be able to retire and not be, you know,
13:04
at risk of being destitute, right?
13:06
And you can go to you can use a investment growth calculator
13:10
like the one at hellonectarine.com or just
13:13
Google Nectarine calculator. It's your first hit.
13:16
And you can type in your age, your income, how much money you
13:19
currently have invested, how much money you're saving per
13:21
month. And it's going to tell you the
13:23
percent chance of a likely successful retirement, how much
13:26
money you'll have a retirement. It's really cool.
13:28
It's got inflation, it's got all these features built right in.
13:30
And so figure out how much you're doing there.
13:32
So like let's say just and the way these phases work is you
13:35
just do the the first one until you're fully done with it, then
13:39
you just do the second one until you're fully done with it.
13:41
So these are like 14 different orthogonal means like like not
13:46
perpendicular like. Is that what it means?
13:49
I this is the first time I'm hearing this word.
13:52
Really. That's like I used it.
13:53
Twice. I mean, well, I know now I feel
13:55
like I need to explain it because you, you acted confused
13:58
before, but I'm like a computer programmer.
14:00
So sometimes, like words, I think are like normal every
14:04
single day. Words are words people like,
14:06
don't even use ever. Do you ever use the word
14:08
default? Like, oh, that's like the
14:10
default option. Yeah, OK, I used that once and
14:13
someone's like, oh, I never said it where I was like, what's that
14:15
word mean? I was like, really?
14:16
I was like, that's like like a, that's like, I thought maybe it
14:18
was like a computer programming thing.
14:20
No. I mean, maybe it's something
14:21
different to you, but it's very. Basic, yeah, it's like the
14:23
default option. It's like, OK, if you don't
14:25
choose, that's what you get. OK.
14:26
Yeah. Anyway, this is not our default.
14:29
It's not orthogonal. And orthogonal means these
14:32
things are all pointing in different directions, right?
14:33
Like parallel means, OK, we're all aligned.
14:36
Orthogonal means they're going in different directions.
14:39
And if you're all going in different directions, it's very
14:41
hard to make progress. And so that's why you do these
14:43
things in order. You do phase one until you're
14:45
fully done. You pay off all loan, you know,
14:47
you Max out your 41K until you're totally done with the
14:51
match again. And that should take like 5
14:53
minutes. Either you have it if you don't,
14:54
if you don't, you skip it. If you have it, you just fill
14:56
out your form at work. Done.
14:57
Phase two, you pass on on mortgage debt for some of you,
15:00
for many of you, you might already be there.
15:02
You're like, oh, I don't have any debt besides my house.
15:04
Great. If you have 100 grand in debt,
15:07
then that's going to take a few years to get out of it.
15:09
And then you're in phase two for a few years.
15:12
But it's way better to be in phase two for a few years than
15:15
for the rest of your life. Because when you're focused on
15:18
phase two, getting out of debt and not trying to do the 14
15:21
other thing things, then you can actually get out of phase two
15:24
and get out of that down escalator, OK?
15:26
Once you're out of debt, then you save the emergency fund and
15:29
of course you have some cash. It's going to be in your
15:31
checking account. You're not going to like be
15:32
totally cash broke this time, but you're going to save a more
15:35
significant emergency fund. Once you pay off all your debt,
15:38
then phase 4, figure out how much per month you have to
15:41
invest tilling on pace for healthy retirement.
15:43
Once you can fulfill that and you're beyond that and you have
15:46
more money, you're now you're getting to be in pretty good
15:49
shape here. Now time to save for a house,
15:52
save for a down payment for a house or kids college.
15:55
Anybody's saying whoa, whoa, whoa, you don't want me to save
15:57
for a house until I'm like on pace for healthy retirement.
16:01
And my answer is no, I don't like if you aren't going to even
16:05
be able to like retire, it means you're going to be broke.
16:09
That means you're going to like not be able to eat.
16:11
Then I don't think it's time to get into more debt to buy this
16:14
massive asset, right. So you know, I want you to at
16:19
least be debt free and being able to take care of yourself
16:23
face for is kind of the minimum for I'm going to be able to make
16:26
it through through life here and I'm not drowning in in financial
16:29
problems. Then you can talk about being a
16:31
homeowner if you want to, but you don't have to be.
16:33
You can be a renter. That's totally fine too.
16:35
And saving for kids college. Same thing for kids college.
16:37
I think the oxygen math school. I've been flying with kids a lot
16:40
lately and every single time I fly the flight attendant comes
16:43
to our row and says when the masks come down, do yours 1st
16:46
and then do the kids. The reason is because if you're
16:49
monkeying with your little toddler who's like squirming,
16:51
you're going to pass out and die and then you're both going to
16:54
die. So you put yours on in 2
16:55
seconds, then you do the kids get your own finances in order
16:58
first, then help save for kids college, right?
17:01
If you aren't even able to save enough to retire, it's not time
17:05
to worry about your kids college.
17:06
Like your kids going to maybe get financially.
17:09
Maybe you have to work through college and maybe take some
17:11
debt. Maybe you're going to help them
17:12
later when you have more money, when they're college age.
17:14
Whatever it is, you'll help them then.
17:16
But now is not the time. But phase 5 is a time.
17:19
Once you're investing for health, retirement, then phase
17:22
six. Phase 6 means you've maxed out
17:24
your 4-O1K. You're paid off all non non
17:26
mortgage debt. You have an emergency fund.
17:28
You're investing at least enough to retire at age 65 based on a
17:32
retirement calculator like at hellonectarine.com.
17:35
You've saved enough for a house if you want one, and you've
17:38
saved enough for kids college. Now you're like in very, very
17:41
good, very solid financial footing.
17:42
You're probably on pace to be a millionaire multimillionaire.
17:45
Phase 6 is invest more or pay off your mortgage or do both.
17:50
And I always get this question from people in phase six, which
17:53
one do I do? And the answer is whichever 1
17:56
you want. You know, if you have a 2%
17:58
mortgage that you got in 2021 and your your house is worth 4
18:04
times your debt and you're super comfortable with your super low
18:07
mortgage payment, then maybe don't pay it off.
18:10
Or maybe do you know, because some people just don't want debt
18:13
and they want to not have a mortgage payment all and take
18:15
that mortgage payment that they used to be making and put into
18:17
investing, that'd be fine too. This was no really wrong answer
18:20
there. And there's not one that's going
18:21
to like guarantee you a better outcome.
18:23
It's really more about just what you want out of life.
18:25
You know, if you have like a six or seven or 8% mortgage, then
18:28
I'd probably say, yeah, go hard on that mortgage or just order
18:31
to do a little bit of both during phase six.
18:33
So yeah, this is really the forget the 14 different
18:36
orthogonal arrows pointing. You can't really have 14
18:40
orthogonal arrows. You can have like, you know, 2
18:42
on a flat surface and three and a three plane beyond that.
18:46
Come on, isn't this personal physics club?
18:49
PPC physics starts with an F sound.
18:54
But yeah, you can't. So instead of having these 14
18:56
different arrows pointing different direction, this is
18:59
just going in order. And this is a really tough pill
19:02
for a lot of people to swallow because they're like, oh, just
19:05
because I've got student loans, you don't want to be a my buy
19:07
house. I was like, hey, I want you to
19:08
own a house. I just don't want you to like be
19:11
in like this crippling debt forever.
19:12
I want you to get out of debt fast, which is what which is
19:16
requires focus. Then you can get on to buying a
19:19
house. Boom, love the breakdown aids of
19:23
investing y'all Check it out. OK, Should we move on to our
19:27
next segment? Can I ask a dumb one?
19:32
OK, we have a question from Cilicia.
19:34
OK, Cilicia asks. And that you know that actually
19:38
it's quite topical. Or explain it like I'm 5.
19:41
Should I pay off my student loans quickly after I finish
19:44
paying my car off or put the extra money towards investing
19:47
and the minimum monthly payments on my student loans?
19:50
I would be done in 10 years that way while putting all the extra
19:52
cash towards investing. I'm 39 with $27,000 in my 401K.
19:58
Currently investing up to my company match at 6%.
20:01
I have a $5000 emergency fund, no other savings and no other
20:04
investing accounts. My debt is a car at 7.55%
20:08
interest with 36,000 left to pay and my student loans are at 5.5%
20:13
interest with 77,000 left to pay.
20:16
I currently rent and have no desire to buy a house.
20:18
Currently I'm paying my car but wondering what I should do when
20:21
that's done. Jeremy.
20:23
That is topical. How nice, Jen.
20:26
Whoever organizes these episodes is just crushing it.
20:29
So Cilicia. Cilicia's asking.
20:33
I hope I'm saying your name right.
20:34
Cilicia. Cilicia yes, I like your name.
20:38
And it's really, it's spelled really beautiful.
20:39
SALISEA Cilicia It's got a lot of vowels in it and a lot of
20:45
sounds. I love it.
20:47
So Cilicia is asking, OK, I'm going to pay off this car, but
20:50
after I'm done paying the car, she's talking about these
20:53
orthogonal arrows. Should I?
20:56
Which? Which one should I do?
20:57
Your cap no more. That's the one we.
20:58
Don't say orthogonal 16 more times this episode.
21:02
I'm just going to delete it. There's not.
21:04
There's not a minimum orthogonal orthogonality.
21:07
How about that? I'm I'm counting it.
21:10
There's a minimum orthogonality. I doubt that's a word.
21:12
I feel like something's either orthogonal or it's not.
21:15
There's not a level of orthognality.
21:18
Yeah, it's binary. Thank you for binary count.
21:20
That too. This.
21:21
This is a great episode of Personal Computer Programmer
21:23
Club. OK, so Solis is asking about
21:26
these arrows, like, OK, what? How do I prioritize?
21:30
And my answer is, you know, my answer to her, to her question
21:35
is the phases of investing. Pay off all your debt first,
21:38
then worry about investing. But my real answer is, is, girl,
21:43
I need to be a little bit real with you right now.
21:47
You're 39, you're about, you're generalized age and we're not
21:50
the springiest of chickens, if you know what I'm saying.
21:53
We've we've been in the been in the world for a few years.
21:56
You've got $27,000 invested. You know, this is a little
22:00
question. I don't know your entire
22:01
financial situation, but it sounds like you have $27,000
22:03
invested. You just bought a car that you
22:08
still owe $36,000 on. So you're a car that you drive
22:14
around in that's losing 10% of its value every single year.
22:18
That's going to be worth like 10 grand in a few years.
22:21
When you go to sell it. That's just plummeting in value.
22:24
Plus you have to pay for insurance, plus you have to pay
22:27
for gas, plus you have to pay for maintenance.
22:29
This thing is a money pit. You spent more money on that
22:35
than you have money in the world.
22:38
You do not have a should I pay this, that off or this?
22:42
That's not your problem. And by the way, I'm saying this
22:45
with like a heart of love and caring because I only would
22:50
speak so dramatically if I because I care and want the best
22:54
of you. But you don't have like a pay
22:56
this off or that off prom. You have a 2 rules prom.
23:00
You are not living below your means and you're not investing
23:02
early enough and you're living way above your means.
23:05
I never bought, I never went to debt for $36,000 for a car.
23:10
That would be crazy to me. One time in my life I borrowed
23:13
money for a car. It was a used car.
23:15
It cost $10,000 and I borrowed and I put down $5000 and I I
23:19
borrowed $5000 for that. This was a while ago.
23:22
This was, you know, 2006 or something.
23:24
So it was 20 years ago. So, you know, if you're going to
23:27
cry inflation sales are made-up numbers double it Say it was a
23:29
$20,000 car and I put down $10 and I borrowed 10,000 fine.
23:33
But still, I'm not borrowing $40,000 for a car at 7.55%
23:38
interest, you know, and I don't, I don't even need.
23:40
I just want to apologize on behalf of the Personal Violence
23:43
Club podcast that Jeremy's yelling at.
23:45
You just getting out of control, but go ahead.
23:47
I agree. I mean, I agree because you
23:50
know, I hate would be like, oh, Jeremy's like the the finger
23:52
wagger and telling people that they're naughty or whatever, and
23:55
I don't want to, but like, you know, that's the reality here.
23:58
And The thing is like, I want you to drive a beautiful car.
24:02
I bet your car is beautiful. I bet it's got a moonroof.
24:05
I bet it's got alloy wheels. Moonroof, not a sunroof, OK.
24:08
Cool. No, the moonroof, man.
24:09
That's what's on all the the descriptions.
24:11
Oh, I haven't bought a new car in a long time.
24:13
Yeah, I've seen a. Sunroof.
24:15
My my Honda Civic has a sunroof. That's a rust hole gem that's on
24:19
a sunroof. I'm like Fred Flintstone.
24:21
I'm like I'm peddling with my feet.
24:23
I know she stays on gas and she's getting in shape.
24:25
That's how you do it. All my resolutions at once.
24:28
Well, yeah, sleazy. I'm sure your car is beautiful.
24:30
I want you to drive a beautiful car.
24:32
But this car, it's going to make you broke, and I'm telling you
24:36
why. OK, I just ran some baseline
24:38
numbers and I don't know your entire situation.
24:39
So I'm going to like kind of make some assumptions here to
24:41
give you an example. But I'm going to assume you make
24:43
the US median household income of $80,000 a year about.
24:47
And you said that you have $29,000 or sorry, $27,000 in
24:52
your 4-O1K. And you're doing your full 1K
24:54
math, which is 6 percent, 6% of $80,000.
24:58
Your income is $4000. So if you have $27,000
25:03
investments and you add $4000 a year, I went to the Nectarine
25:07
investment growth calculator to do this.
25:10
That predicts age 65, you'll have $463,000.
25:16
By the way, that accounts for inflation.
25:17
So you can think of that as today's dollars, which is
25:20
nothing to sneeze at, by the way, but to maintain your
25:24
current standard of living, it gives you a 3% chance of
25:27
success. You cannot live like you're
25:30
living now on $463,000, which means you are going to keep
25:35
working until your 70s or 80s or have to dramatically like move
25:39
to a apartment community or, you know, definitely downsize your
25:42
car. You know, you don't want to be
25:44
in a situation where you're in financial desperation when it's
25:49
time for retirement, right? And so right now, you have a 97%
25:52
chance of failure based on where you're going right now.
25:54
But let's look at this, let's say you sell your car and from
25:58
now on you buy cars in cash. I bet you have an $800 a month
26:02
car payment. Having a, you know, buying a
26:03
$40,000 car and 8%, you know, do the math, whatever the term is,
26:08
it's probably around 800 bucks a month, which is about crazy
26:11
enough as it sounds. The US median new car payment,
26:14
now $800 a month times 12 months times 12 months, is $9600 per
26:21
year. If you add that $9600 to the
26:23
$4800 you're already investing, that's 14,400.
26:27
So you could go from investing about $5000 a year to investing
26:31
about $15,000 a year just by not having this $800 a month car
26:36
payment. That is $14,400 a year of your
26:42
$80,000 salary. Not crazy, right?
26:44
Like you can still live on a lot.
26:47
So that what that one change, that one change, what difference
26:53
would it make? Instead of having forty,
26:54
$463,000 of retirement, you'd have $1.2 million of retirement.
27:00
It would triple your retirement and it would take your chance of
27:03
success from 3% to 98%. And so this whole like, should I
27:09
pay off the Student Loans or like, pay off, you know, like
27:12
that ain't your problem. And like, you know, the answer
27:14
is like, yeah, I'd pay off your debt first.
27:15
The problem is you're living above your means.
27:17
If you're doing it at 39, you're going to be doing it at 44.
27:19
You're going to be doing it at 49.
27:20
You're going to be doing it at 54.
27:22
You're going to be doing it at 59.
27:23
You got to make a change, girl. So housing, car, job, the big
27:28
things. Get those in order.
27:30
Live below your means, invest early and often.
27:32
Pay off your debt fast, fast, fast.
27:34
I'd sell the car. I mean, that's crazy.
27:35
Sell this $40,000 car, buy a $10,000 car.
27:38
Take your $30,000 path alone, path the other 6000 path.
27:42
Pay off your student loans. Then you're going to have, you
27:45
know, 2 or $3000 a month extra. Put that towards investing,
27:49
upgrading car then. But you got to make a change
27:52
because this is you kind of on a collision course for not being
27:54
able to retire. Girl.
27:58
I know, sorry. My friends selling a 2014 Ford
28:04
Fiesta for like 5000 bucks so you know slide of my DMS. And
28:08
you know, like you laugh at that, but 2014 was like a blink
28:11
of an eye ago when people bought a 2014, they're like, oh, this
28:14
like, you know, it was this super modern car.
28:16
I remember driving the 98 car and it had an airbag and an
28:19
automatic seat belt and it had like all the stuff.
28:21
And then people like, Oh, I need a modern car.
28:23
I'm like 2014 that's like this futuristic year.
28:25
And you know, it's going to take a little bit of maintenance.
28:27
You know, you got to go to the mechanic and send them 500 bucks
28:29
once a year or so when you when you drive a 2014 Ford, but 500
28:33
bucks a year is a heck of a lot less than 10,000 bucks a year
28:37
for a new car payment. And it's just about it's just
28:40
people found this like keeping up with the Joneses trap, you
28:44
know, like, oh, like even I'm falling to do I talk.
28:49
I was listening to one of our recent episodes in the drive in
28:51
today and I was talking about how I want this Rivian and it's
28:53
just like, do I really need an $80,000 car?
28:56
And you know 1000% of. My dollar car payment.
29:01
Right, exactly. I think it's a $700.00 lease or
29:03
whatever. Like, you know, my net worth
29:05
saves about $6 million and $80,000 car would be what, like
29:08
about 1% of that. So yeah, I could buy it if I
29:11
wanted, but like, it still is a terrible financial decision.
29:13
Celicia, you're not talking about 1% of your net worth.
29:16
You're talking about like 200% of your net worth.
29:19
You're talking about more than all the money you have in the
29:21
world. So yeah, you got to, you got to
29:24
get it over. But, but trust me, when you
29:28
drive a car and you paid in cash and you have no debt in this
29:32
world, it's going to drive so sweet.
29:34
It's going to sound so good. It's going to feel so good.
29:36
You're going to sleep better. You're going to feel better,
29:38
like your life is going to be better and your future's going
29:41
to be better. And so the lesson here isn't,
29:45
you know, you have to live this like life of poverty to drive a
29:47
shitty car. Now, I want you to drive an
29:49
amazing car, but you can't do it out of order or else you're
29:52
going to always be, you know, you're going to be unhappy.
29:55
It's going to the debt's going to eat away at you from the
29:57
inside. I can tell it's eating away at
29:58
you because you're asking this question.
30:00
You just the numbers in your numbers in this question, you
30:02
have $110,000 of debt here. That's going to suck thinking
30:06
about that and paying into it every single day.
30:08
If you can go nuts and get rid of that in two to three years by
30:11
just picking up some side hustles, extra shifts at work,
30:14
getting a raise, switching jobs, getting rid of the car, just
30:17
dumping money after money after money for two to three years.
30:20
Go hard when you're 42, which by the way is still pretty young
30:24
because I'm 45. And then you have 0 debt and you
30:27
have thousands of dollars free and clear cash flow that you can
30:30
invest and save and buy cars with in cash.
30:34
Life's going to be good, but you're not going to get there
30:36
unless you make some dramatic changes temporarily.
30:39
OK. Tough, this is a long rant.
30:40
Sorry Cilicia, it was a long run.
30:44
Call off the dogs for a minute. But you know, tough love, you
30:46
need it, you need it. OK.
30:48
All right, let's move on to our next segment, Scroll Patrol.
30:56
Scroll Patrol. This is a little bit longer.
30:59
This came to us in Adm to our Personal Finance club inbox on
31:02
Instagram. Feel free to send over any
31:03
videos you want us to review. It's a little bit long, but I
31:07
like the way she breaks it down so well.
31:11
I kind of spoiled it a little bit, but.
31:14
I already know she and I already know breaks it down.
31:18
But go ahead and click on that and we'll watch this together.
31:20
I hope this is a similar gender. Let's see what?
31:22
Let's see what she says. All right.
31:24
Do not overpay your mortgage. I love what this person did, but
31:28
it could have potentially cost them millions.
31:30
Let's take it to the whiteboard. Don't get lost in the numbers.
31:33
Understand the concept. Let's take a $500,000 loan at 4%
31:39
for 30 years. The principal and interest
31:43
payment would be about $2400. If we make this monthly payment
31:49
for 30 years, we will end up paying $859,000 on the loan.
31:54
We owed 500, so in interest alone we pay $359,000.
32:01
OK, let's talk about what it will look like if we pay over
32:05
that to get it paid off by year 15.
32:08
To get this loan paid off in 15 years, the borrower would have
32:13
to contribute $3730 per month. If they did that for 15 years,
32:21
they would end up paying $671,000 on the loan.
32:27
They owed 500, so the interest on the loan would only be 171.
32:33
So instead of paying 359 in interest, they pay 171 in
32:37
interest. They end up saving about
32:40
$188,000 over that time. OK, that's a win.
32:47
But we spent $1343 per month in overpayment.
32:54
If instead of overpaying the mortgage, what if we would have
32:57
taken that and invested it? What would that look like?
33:01
So instead of overpaying the mortgage, we take this.
33:03
We invested in the S&P 500 average is 10% and we do that
33:08
for 15 years. At the end of that, you'd have
33:13
$550,000. So here's the question, would
33:18
you rather save 188 in interest or would you rather have
33:22
$550,000 in an investment account at the end of that 15
33:25
years? Let's keep it going, let this
33:28
money only compound at 10% for another 15 years.
33:33
You have about $2.3 million and a paid off house.
33:37
Now I know some of you guys value Peace of Mind having debt
33:40
paid off. So at the end of that 15 years
33:42
you have this 5:50. You can take it, pay off the
33:45
loan. You would owe 359 about at that
33:49
point, pay it off and you'd still have another 219 in the
33:54
account. Then you could let that 219
33:58
compound for 15 years and have $914,000 and a paid off house K.
34:08
Don't get lost in the numbers. I know mortgages vary and homes
34:11
vary and things like that. It's the concept you have to
34:13
compound your money. Paying your mortgage early
34:17
almost is never going to be the best financial move.
34:19
All right, the money, Mom, I don't think I know that creator.
34:24
You know, us influencers use the word crater to sound just every
34:30
a little tiny bit less obnoxious or pretentious and it doesn't
34:34
work. So yeah, you know, I haven't, I
34:39
didn't. You know, I'm watching this in
34:41
real time, so I didn't check the math, but everything there looks
34:43
correct to me. You know, I do think that you
34:46
took a long time to basically say investing at 10% will grow
34:51
faster than that at 4% will cost you.
34:55
And that's not news to me. You know, her advice there is
35:01
kind of baked into the phases of investing we just talked about,
35:07
which is don't pay off your mortgage early until you're at
35:11
least on pace for a healthy retirement.
35:13
And then phase six, like we talked about is choose, you
35:18
know, if you were actually at phase six and you know, you've
35:22
paid off your debt, your non mortgage debt and you've saved
35:24
emergency on yadda, yadda, yadda.
35:26
And you're choosing between paying off your mortgage or
35:28
investing. The whole point of her video is
35:30
saying don't do the mortgage invest.
35:33
And I actually disagree with that.
35:37
I think that's a fine option, but I'm not as emphatic about it
35:41
for a few reasons. One, 4% loans aren't happening
35:47
right now. You know, right now they're like
35:49
7% to 10% is the historical average of the S&P 500.
35:54
But that's over long periods of time.
35:57
If you have a bad 10 year run, there's been bad 10 year runs
36:00
like from the year 2000 to 2010 where your total return was
36:03
around 0. And so if you are like, let's
36:07
say you have a 7% loan and for the next 10 years the stock
36:10
market returns zero and you do what she suggests, you'd put
36:14
yourself in a dramatically worse situation.
36:16
And so while the very simple spreadsheet math says 10% will
36:20
be 4%, of course it will, but it's not a guaranteed for 10% or
36:24
the 4% debt is guaranteed. So I think that isn't
36:29
represented in that video. And she also kind of mentions if
36:34
you have Peace of Mind by paying off debt, she's like just paid
36:39
off in 15 years. And I'm like, yeah, you could do
36:41
that. It's not fully fair because you
36:43
have to pay capital gains tax and some some income tax and the
36:47
dividends along the way. And so you know, it's and and
36:50
you know, to her crash, she's like don't get lost in numbers.
36:52
And you know, some of these things are kind of rounding
36:54
error. But she's saying basically you
36:56
could just invest for 15 years and then take some of the
36:59
investments, pay it all off in one fell swoop, still get done
37:01
in 15 years and start up with $1,000,000.
37:03
Yeah, that's true too. And so like All in all, like I
37:07
think what she's saying is correct.
37:08
I think the math is good to know.
37:09
I think it's good to understand that.
37:11
But I think it's kind of missing the risk aspect and the
37:14
psychology aspect, which is like, let's say you go ham and
37:18
you do pay off in 15 years, then you can put that whole mortgage
37:22
payment plus all the extra you're putting into investments
37:25
and get yourself into an equally good situation down the road.
37:28
And so when you're making that decision for yourself, do I pay
37:31
off the mortgage or do I invest more?
37:34
I think it really comes down to what makes you sleep better at
37:38
night, feel better, give you a better life.
37:40
And if you're someone who's like, hey, I really like, I'm
37:43
really comfortable with my two or three or 4% mortgage.
37:46
I really want to be investing more.
37:48
I'm I'm accepting the risk that maybe this is going to go on for
37:51
10 years and I'll have made the wrong choice and I'll be
37:53
accruing, I'll be paying more in interest, even though the market
37:56
did bad for 10 years. If that's all cool with you,
38:00
then do what she says, you know, just invest instead of paying
38:03
extra towards your mortgage. If that's not cool with you and
38:05
say, hey, I don't like the idea of putting more money at risk in
38:09
the market when I'm have this guaranteed debt that I'm paying
38:11
pay on that debt, right? You know, it's hard to find
38:14
someone who has zero mortgage and has thousands of dollars in
38:18
free and clear cash flow that they can invest and become a
38:21
millionaire very quickly through investing.
38:23
Who's like, oh, damn, I wish I didn't pay off this mortgage,
38:25
right? And so I feel like there's some
38:27
like, you know, more squishy, like soft, soft issues at play.
38:34
They're like the risk and the, and the mentality stuff.
38:36
But overall, you know, the math's correct.
38:38
Sometimes I see people with these whiteboard things.
38:40
I'm like, oh, no. And it just like there's like
38:42
some big lie that's being, being hidden there.
38:46
There's not like I think all the math is correct.
38:48
And I think her conclusion is perfectly fine, but I'm not as
38:53
like militaristic about it. I think if you want to be debt
38:55
free, including your home, go for it.
38:57
And that's like a perfectly good thing to do.
38:59
There's this great book called the psychology of money by
39:02
Morgan Housel, who goes into issues like this and he really
39:05
makes great arguments, which is this is never really a black and
39:08
white issue. And there's not, there's not
39:09
right and wrong. It's kind of right for you and
39:12
what you know brings you peace and joy and, and leads to a
39:17
successful outcome is the right decision for you.
39:20
And so, you know, the, you know, the video is kind of saying, oh,
39:24
if you buy the spreadsheet, if you end up behind where you
39:26
could have been, you've lost. I, I disagree with that, you
39:29
know, because we don't know that that's going to come true.
39:31
It depends what the market does. And maybe you've lived a more
39:34
stressful life along the way because you hate having a
39:36
mortgage payment, you hate having the bank on your home,
39:39
whatever. So, you know, I'm not as
39:41
militaristic about that. But still, I think I think it's
39:43
a good video and I like her and I think it's like good, it's
39:45
good math to understand. So I'd give it AB plus good job.
39:50
Good job the money mom. I have to check out more of her
39:53
content. OK, last segment, Jeremy had
40:00
time today. We're in the comments section.
40:04
It's a post, actually, of the cutie baby tie.
40:08
He's so cute. He's so cute.
40:10
He has a very. Biased because he's my child.
40:12
But well, I can say from the outside, although you are my
40:16
boss, so maybe it's not so objective.
40:18
He's really cute. Nothing like telling your boss
40:21
they have an ugly baby to. Imagine telling anybody for
40:25
being honest. Like, yeah, he's all right.
40:27
Like that's crazy. I know, no, not like, I don't
40:31
know if he's cute because like, I think he's extraordinarily
40:33
cute, but I know that like, my, my brain is wired to believe
40:36
that. So I don't like strangle him and
40:39
he's a nice baby too. And I know that everyone is like
40:42
societally obligated to lie to me, so I have no way to get a
40:45
truthful answer. And I asked chachi PT.
40:48
I was like, maybe chachi PT will be honest.
40:50
I did this. This is true.
40:51
And I put a picture of my baby in the chachi PT.
40:53
I said, is this a cute baby and chat.
40:55
I didn't say I wasn't crazy. I just said I did it.
40:57
And chachi PT said it's a very cute baby.
41:00
Then I then I put the ugliest baby I could find on the
41:03
Internet in the chachi PT. And chachi PT was like a little
41:06
bit less confidence like, oh, it's kind of like got one of
41:09
those unique looks or something like that.
41:11
I'm like, no, that's an ugly baby.
41:14
And you did say it's ugly. So how can I get?
41:16
How can I get straight answer? In the real world, how many ugly
41:20
babies have you seen in your life?
41:22
A lot of newborns look like aliens, like if they just come
41:26
home from the hospital. Yeah, they're like, they need to
41:29
bake a little bit more, you know, they need to like, get
41:31
like, right. No, and their heads are squished
41:33
and stuff. I'm like an ugly baby.
41:36
Like I haven't seen like maybe. No, I see lots of life, not that
41:39
cute babies. That's probably there's like
41:42
Gerber cute and there's like just like average babies.
41:44
You can't compare everybody to model baby.
41:46
That's like comparing everybody to like.
41:48
But my son's model? Cute.
41:50
OK, well he OK, we're we have Gerber baby Thai over here.
41:53
Do you want to explain this post?
41:55
This kids cash gift post? Yeah, so Thai got my My wife is
42:00
half Chinese and so my son is 1/4 Chinese and Ty got a red
42:04
envelope full of $50.00 in cash for Christmas and he's 0 years
42:09
old still. And so he personally has frankly
42:14
terrible financial habits. He well, his spending is very
42:17
good. He spends nothing because he
42:18
doesn't know how to. He's living below his means.
42:20
Doesn't even know what money is. He kind of liked the red
42:23
envelope, but it doesn't matter if it had anything inside of it.
42:26
It's kind of a. Moocher though, yeah, it's kind
42:28
of a. Definitely a moocher.
42:29
Yeah, but he's found cheap rent in 0.
42:33
All right, so, so I said, what do you do with this money?
42:35
And I've always thought that like, you know, if like what do
42:37
you do with a baby's money? And what I what I did with it is
42:41
I went and opened like literally like on a Christmas Day, I think
42:44
I opened a custodial brokerage account, which is an investment
42:47
account, like a bank account that you are the custodian of.
42:51
That means you control it on behalf of the owner of the
42:55
account. And the owner of the account is
42:57
my son. And so I literally had to put my
42:59
son's name and Social Security number.
43:01
He like literally owns them money.
43:02
But it's not legal for kids to control investments until
43:06
they're 18. And so it has to be like a joint
43:08
account or a custodial account. And it's either 18 or 21
43:12
depending on your state. And then I went and bought 2
43:16
mutual funds. I bought FZROX&FZILX, which is
43:20
the the total U.S. stock market mutual fund and the total
43:24
international stock market mutual fund.
43:25
I think I did 6040. So I did like 30 bucks and the
43:28
120 bucks and the other and there's going to sit.
43:31
What'd you say? Which one did you do more of?
43:33
More US, you know, 60% US, 40% international.
43:37
Good question. And there it's going to sit
43:41
until, you know, once he's like, you know, old enough to
43:45
understand, I'm going to show it to him and explain to him what
43:47
we're doing. And invest is going to be, you
43:48
know, saving, spending, giving. It's all going to be part of his
43:52
money world. And then when he becomes an
43:55
adult, 18 or 21, I think it's 18 in California, he's just going
43:58
to get it all. And, you know, some people like,
44:00
wow, you know, some. And I guess this is like the the
44:03
comment says. What?
44:05
Oh yes, this is the comment. Actually, while you were
44:07
talking, I was thinking about how I think in California, they
44:10
passed some kind of influencer law where like you can't use
44:13
money or you have to contribute a certain amount of money.
44:16
If you, if you are famous on Instagram, for instance, from
44:18
your kids and like that's the main reason you have an account.
44:21
You can't, you have to put a certain amount like an
44:24
investment I believe is part of the law.
44:26
So like there's all these families that move to like
44:28
Minnesota, That's like how they were like we're not actually
44:31
going to follow this rule. We're just going to move because
44:33
we don't. Want to keep embezzling money
44:34
for my children? But that's what I was thinking,
44:37
sorry. I kind of like that was what my
44:38
mind was on. But anyway, the comment says why
44:40
not just keep it in your own name?
44:42
Says someone who's moving to Minnesota, packing their bags
44:45
right now. OK, so I have, I have 4 reasons
44:51
why I don't keep in my own name. And it's, and it's a good
44:53
question because, you know, why did I go through all these hoops
44:56
like open an account as a name? And, and there's, there's like
44:58
kind of one good reason not to this, which I'm again to, but
45:00
I'll tell you the reasons too. First of all, I think it's, you
45:03
know, technically illegal. I can't just put that in my wall
45:06
and spend it on something that's, that's stealing.
45:10
I can't even put in my wall and say, well, it comes on the wash
45:12
because I'm covering housing and food.
45:14
No, like I legally owe my child food to housing.
45:19
I could keep it in a, an account and make sure it's earmarked to
45:24
like go towards his like college or I could like, you know, give
45:28
it to him and let him buy a toy with it or something.
45:30
And obviously we're getting into like the very fine
45:33
technicalities, like how could this ever go to court, right?
45:36
Like especially for small dollar amounts, if you know, if a child
45:41
is like given $1,000,000 or something as part of a will and
45:43
then the the parent steals it, that could go to court.
45:45
But you know, how good is $50 go to court?
45:47
It never, it never could, right? And so in practice, parents
45:51
probably are stealing their kids money all the time is like
45:53
stupid as that sounds, because they're obviously like giving
45:55
the kids a lot of money too. But for me, technically it's
45:59
legal. That money is his.
46:00
It's not to be spent on me. It's not to be spent on his
46:02
housing. It's not to be, in my opinion,
46:04
commingled with my bank account. It's his.
46:06
So it's going to his account. That's that's reason number one
46:08
reason #2 I think it's morally like kind of squishy.
46:11
Like if I put it in an account in earmarket, I was like, well,
46:14
like, is that really going to go to him?
46:16
Or is that kind of getting lost in the mix?
46:18
With all my other funds, I could keep it in a separate account
46:22
under my name and call it, you know, just casually the tie
46:25
account and then, you know, give it to him later when I feel like
46:29
it, which I think would be fine. You know, I don't think saying
46:31
you're a bad person if you do that.
46:33
But for me, I think it's more about setting clear boundaries.
46:37
If I actually have it in his name.
46:39
Three, I think it's a learning opportunity.
46:40
We're talking about 50 bucks here, right?
46:42
Like on my drive to work, my I got a credit card tax while my
46:47
wife spent more than 50 bucks in DoorDash while I was while I was
46:51
leaving, right? So like, you know, 50 bucks.
46:54
Is catching strays today. I know.
46:56
Well, she's sick, you know. Leave her alone.
46:59
I know you have an electric car but like my gas is like 40-50
47:02
bucks so you could have said that OK.
47:04
OK, well for a. Tank of gas.
47:06
Come on, she's laugher. No 100% did I?
47:10
She got another stray. She's.
47:11
Amazing. I feel like we mentioned her.
47:13
Oh, we just talked about how yeah, you have a baby with her.
47:18
So I guess that's not a stray technically spending.
47:20
That is some sort of insult, though, for poor choice of men
47:24
be like that. OK.
47:27
But yeah, so I'd say rule #3 it's a learning opportunity.
47:31
Because like I said, it's not, it's not a huge amount of money.
47:33
But when my kids 10, it understands math.
47:37
I'm going to say, hey, look, here's your account, here's your
47:38
name. When you get a gift when you're
47:40
10, we're going to have some new roles.
47:43
You're going to spend a third. You're going to invest 1/3 into
47:46
this account, and you're going to gift a third.
47:48
We're going to go, you know, give it to someone in need.
47:50
And then they're going to start to understand, OK, Money, some
47:52
money grows. Somebody spends some monies to
47:54
help people, whatever it is. And they also will get that
48:00
money when they're 18, right? So when they're 18, maybe
48:02
there's going to be 5 grand in there.
48:03
Over the years it grows or whatever they're going to say,
48:05
OK, now I'm not going to go and borrow $40,000 to buy a car.
48:09
Maybe I can buy a 2014 Ford Fiesta for five grand in cash
48:13
because I've got this birthday money over the years that's
48:15
that's compounded, right? So I think that's like a
48:18
learning opportunity about how to save and how to invest. 4
48:21
There's a modest tax benefit since it's in Ty's name.
48:25
All the growth and dividends are taxed at Ty's tax rate.
48:30
Now, as you may know, Ty's lazy and doesn't have a job.
48:33
He's 10 months old and so his income 0.
48:36
And so, you know, this year or twenty, Yeah, actually in 2025
48:41
he's probably going to get a tax form.
48:43
That says 2026 when these people are listening.
48:46
Oh yeah, that's true. But when I started, I started
48:48
the account last year in 2025. And so I'm going to, I think he
48:52
might actually get, no, maybe he won't because it's too small.
48:54
I think they just like if it's under a dollar, they don't even
48:56
send you the tax from, but you know, for 2026, I might get a
48:58
tax from that says, hey, you got $1.00 of dividends.
49:02
And if that was on, you know, Jeremy's taxes, I have to pay
49:05
that $1.00, I have to pay tax on that dollar as it's income.
49:09
But since it's his, there's no tax on it because he's like way
49:11
under the standard deduction. And so, you know, why have all
49:16
of his money adding to my tax bill when he could be getting it
49:19
tax free essentially. And so those are the four
49:21
reasons illegal, morally squishy learning opportunity tax
49:25
benefit. I also want his money in his
49:26
account. And I think it's a really cool
49:28
opportunity for him to have his first introduction to investing.
49:31
The, the other big comment I saw was, hey, what about financial
49:35
aid? If he has a lot of money in his
49:37
name, that's going to impact him more for financial aid than it
49:41
is if it's in your name. And that's technically true.
49:43
But my answer to that is kind of like it's supposed to, right?
49:47
Like let's say he was gifted $100,000 and I said, Hey, give
49:50
me your money kid. I'm going to put it in my
49:52
account. That way we can go get some more
49:55
loans or grants or whatever for financial aid.
50:00
You know, that's essentially fraud in my opinion.
50:03
No, that's, that's like concealing the true origin of
50:05
money to, to, to be more attractive for, you know, gifts
50:10
from the, the government or for donors or whatever.
50:13
And you know, what we're talking about here isn't a big amount of
50:17
money. If it's like 5000 bucks, the
50:19
times 18, we're going to be talking about like a few 100
50:21
bucks a year that he might not be eligible for student aid.
50:25
So I don't really think it's that big of a deal and I think
50:26
it's technically not the right thing to do.
50:28
So I don't know like strict moral ground.
50:30
I just say it's his money. If he has a lot of money, then
50:32
he should be counted. You know, according to the
50:35
financial aid people should be counted towards financial aid.
50:38
So and. I think one or two episodes ago
50:40
we we dive to like a little deeper into that.
50:43
Yeah, we need to talk about this.
50:45
Yeah. So if you want to know more.
50:46
Welcome my role, Jen. We just answer the same
50:48
questions over and over and over and over.
50:50
Just. In case they want more of a deep
50:52
dives into you, you know this. Is.
50:53
That's a good point. Yeah, that's a throwback.
50:55
Yeah, by the time they get here, maybe they would be like, oh, we
50:58
kind of already answered my question.
51:00
Cool, Thank you. That was like, that comment
51:02
wasn't necessarily like a mean comment, but I thought it was
51:04
something that would be cool to address here so.
51:07
No, it's not a mean comment. And and you know, like I said,
51:09
if you don't do this, like I'm obviously a very, you know,
51:13
organized money nerd kind of person that wants to do
51:15
everything very strictly to buy the books.
51:17
Like if you take your kids 50 bucks and put in your wallet
51:19
and, you know, go shopping with your kids or, you know, you
51:22
know, put in a separate account and save it for him, that'd be
51:25
fine. Like my brother had this thing
51:27
called like Bank of Dad where whenever they got money, they
51:29
would just give him the money. And then he had like a
51:31
spreadsheet that basically kept track of like how much they had,
51:35
which I think is kind of cool too, because then they, you
51:37
know, it wasn't technically a bank house.
51:38
It's just a spreadsheet. Then like they're like, hey,
51:41
dad, I gave you 120 bucks. I want to go spend 30 bucks and
51:44
he's like, OK, you can because, you know, the Bank of Dad
51:47
spreadsheet says so. So there's other ways to do it,
51:49
yeah, but yeah. My mom did that with my little
51:52
brother so that he could buy a car because he would never have
51:55
saved the money on his own. Kind of like the kind that like
51:57
as soon as he gets a paycheck is gone.
51:59
So somehow he agreed to it. And you hear that Cilicia?
52:03
Is that Cilicia shade? He she did get him like a $3000
52:08
car paid in cash because she kept that money for him for a
52:10
couple. Of years.
52:10
Oh, see, there you go. He wouldn't.
52:13
Have done otherwise. So all right, cool.
52:15
Great score patrol. That's that's our last segment.
52:18
That was Scroll Patrol. That was Jeremy had time today.
52:21
Oh my gosh, I don't know why I always get those two confused.
52:24
Yeah, I don't either. We are scrolling through our
52:27
comments. Well, great last segment.
52:30
Jeremy had time today and that is all we have time for today on
52:33
the Personal Finance Club show. Thank you for listening and we
52:36
will see you again next week. And don't forget the 2 Rules of
52:39
Personal Finance Club. Rule #1 live below your means
52:42
and rule #2 invest early and often.
52:44
See you next week. Bye, the personal finance club
52:47
show is produced by Jeremy Schneider and Jen Mundia, music
52:51
by Esabalu and Homie. Send your questions to podcasts
52:54
at personalfinanceclub.com. The Personal Finance Club show
52:57
is Co hosted by Jeremy Schneider who is a co-owner of Nectarine
53:01
and SEC Registered Investment Advisor.
53:04
The views expressed on this show are those of the hosts and
53:06
guests and do not necessarily reflect the views of Nectarine.
53:09
Please refer to hellonectarine.com for all
53:12
relevant disclosures. This podcast is for
53:14
informational and educational purposes only and should not be
53:17
construed as personalized investment advice or a
53:20
solicitation to buy or sell any security.
53:23
Listeners should consult their own financial, legal or tax
53:26
professionals for advice specific to their situation.