Latest / The Personal Finance Club Show / Replacing Dollar with Crypto, Disney Adult Timeshares, and Taxable Accounts | Ep 31

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Replacing Dollar with Crypto, Disney Adult Timeshares, and Taxable Accounts | Ep 31 · The Personal Finance Club Show

0:00
Is the US launching A cryptocurrency that will make
0:02
the US dollar obsolete? Are you taxed on a brokerage
0:05
account when you withdraw money? And are Disney timeshare is a
0:08
good idea? Let's find out.
0:15
Welcome back to the Personal Finance Club show.
0:17
Hey, Jen. Jeremy, what's tea?
0:20
Did you know that yesterday was April 15th, which is tax day,
0:23
which means your taxes are due? Did y'all do your taxes?
0:27
Did you do your taxes? Jen told me this ahead of time.
0:30
A long time ago because for for S Corps, they're due on the 15th
0:34
and I just did them both at the same time.
0:35
March 15th. Sorry.
0:37
Nice. Yeah, so I have a question.
0:39
I think a lot of people really worry about being late, But
0:42
let's say you're getting a refund, for example, of $200,
0:45
for example, and you file your taxes like 6 months late.
0:49
You don't do the extension, you just are totally tardy.
0:53
Do you know how much the penalty is if you file the taxes?
0:56
Late. It's nothing.
0:58
You only owe a penalty if you owe money.
1:00
If if they owe you money, there's nothing to penalize you
1:03
on. And so they actually don't.
1:04
I feel like it's a little bit almost like high school.
1:07
You think if you're late, you just get penalty no matter what,
1:09
but you don't. It's only a penalty if there's
1:12
tax owed. But the flip side of that, it's
1:14
also true, which is if you file an extension, the extension is
1:17
only on the filing date, but there's no extension on the tax
1:20
payment date. And so while you do get to file
1:22
an extension on the on the actual filing of the paperwork,
1:26
you still have to pay any tax due before the 15th.
1:30
And I always file an extension. You're very lucky that you have
1:33
a situation where you don't have late like coming in tax
1:38
documents. But I have, I have some tax
1:40
documents I don't get to like August sometimes, which is so
1:44
annoying to me. I want to get myself out of
1:45
those situations. But yeah, I always have to file
1:48
an extension and then pay some amount of money, you know, by
1:53
yesterday. Yeah, of course it's not my
1:56
fault. Someone else's fault.
1:57
Of course it's not your fault yeah, I one day we'll do like a
2:01
personal finance club show tell all 'cause I have a such a
2:03
sordid past with like taxes that I.
2:08
One day. No, not not which I can't.
2:11
I don't even know honestly. We decided that we were going to
2:13
talk about this like 5 seconds ago, but like I've had like
2:16
where I've had waited a while to pay my taxes and I owed.
2:20
And so it was like interest on what I owed.
2:23
It was a mess. I couldn't even tell you like
2:25
actually they're pretty good about telling you this is for
2:26
this tax year. But like anyway, it, it was a,
2:30
it was a messy situation. So now I'm like very on top of
2:33
it because I am so scared about that happening ever again.
2:36
We've. All we've all had, I, I've had
2:37
stuff like that happen this year.
2:39
Like I'm kind of primarily responsible for paying the
2:41
property taxes on our house. And I missed the, this is like
2:45
so embarrassing. I don't know if I mentioned
2:46
this, but I missed the deadline not once, but twice.
2:50
And I paid like, you know, $300 in late fees or something like
2:53
that. And, you know, it wasn't like,
2:55
you know, it wasn't like I was letting it go for years and
2:57
years and years. And I was just scared.
2:59
I just like, literally was like a few weeks later, whatever.
3:02
But, you know, there's definitely times in my 20s too,
3:05
where I was just head in the sand, afraid to look at things.
3:09
Let it pile up. I think we've kind of all felt
3:12
that at some point. I think that's probably why we
3:14
still have the dream where you're in high school or college
3:17
and you realize on the day of the exam that you didn't go to
3:20
any of the classes or whatever. I think we all still have that
3:23
fear baked into us to some. Degree.
3:25
Yeah, it's just it's one day everybody's going to realize how
3:27
comical it is that I Co host a personal finance club show.
3:31
No, this is we're, we're not about being like this, like
3:34
holier than thou. We do it right, you do it wrong.
3:36
This is about being relatable. And so it's perfect.
3:38
I know it's just funny because I like I'm learning.
3:41
Here's the thing. I'll say I'm like just sometimes
3:44
a podcast listener because I'm just, I'm taking my little
3:46
notes. I'm like I'm using this
3:48
information like I'm getting so much from working.
3:50
Here on a journey. That's great.
3:51
We're all on a journey. I mean, I'm still paying my
3:54
stupid property taxes. Like we're all figuring it out.
3:56
Yes, OK. On that note, let's go on the
3:59
journey. Let's go on the journey.
4:00
Let's get into hot topics. What is today's hot topic,
4:10
Jennifer? OK, not my government full.
4:13
Government. Full government.
4:16
They don't. Need to know that about if
4:17
anyone figures that out. Is that your password to all
4:19
your accounts too? Yeah, like so hard to find out
4:22
my my full name, OK, the today's Hot Topic headline reads.
4:26
Washington just confirmed plans to replace the US dollar with a
4:30
brand new digital version, sorry version.
4:34
Is there any validity to this? All right, so first of all, I
4:38
have to get this out of this the way, I I hate this post.
4:41
This post is like clickbait trash and well, just like the
4:46
poster itself, it's like it's literally created by AI.
4:49
It's just like slide after slide of like fear tactics.
4:54
You're going to lose all your money, you're going to blah.
4:56
It's like literally written by Chachi BT.
4:57
It says like that's not coincidence.
4:59
That signal, you know, it's like it's like the totally the
5:02
cadence of Chachi BT and like someone's literally sit down.
5:05
There might be a digital dollar in the future.
5:07
Write a terrifying, you know, 10 slide Instagram post that's
5:11
going to sell my course. And and that's what it does.
5:14
It's like comment this. I mean, and you know, to be
5:15
fair, we're on social media too. So sometimes we do the comment
5:18
this For more information thing. But I I don't want to like give
5:22
this specific account in this specific post like any more any
5:26
more notoriety, because I think that this I don't even know
5:30
their account. I don't know who they are.
5:31
I don't know anything about them but this account.
5:33
Didn't have very many likes. OK, well, this page says to me
5:37
like this is AI click bait scare tactics trash.
5:40
And I hate that stuff because it just serves to like grind on
5:45
people's nerves and be like, Oh my God, like is the digital sky
5:48
falling and I'm going to die? And then they get to like take
5:50
advantage of that. I hate that.
5:52
So that out of the way, you know, this idea of a digital
5:57
dollar two point O is real. And the actual formal name of
6:01
this is the central bank digital currency or CDBC.
6:06
And as of today, it fully does not exist.
6:09
And it's simply, you know, my understanding is there are
6:12
people inside of the government, the Fed, who are looking into
6:17
this as maybe a potential option somewhere in the future.
6:20
But for that to come into reality, there need to be like,
6:23
very large political, legislative hurdles.
6:26
And basically you have to get all the Congress and presidents
6:30
and everyone to agree. And we know how, you know, how
6:33
easy that is these days. And so, you know, that's the
6:37
premise, which is, you know, this isn't about to happen and
6:40
this may never happen. And so there's no reason to
6:44
freak out over it or anything, but I still think it's really
6:46
interesting. And so let's talk about.
6:49
So right now there's currently 2 main ways you can hold money
6:54
like US currency. And Jen, do you have a guess as
6:58
to what those two ways are? I know I'm like, maybe you can
7:00
see it on the sheet. So you're cheating, but what's
7:02
your? I'm not I don't I?
7:03
Don't be good. I know I love how you hate my
7:06
trivia questions more than anything, but what?
7:09
What are the two ways you think you're gonna hold money right
7:11
now? Like you personally?
7:12
Where's your money? OK.
7:13
So I'm I'm thinking cash in like a bank.
7:17
Yes, that's the two right there. Oh.
7:24
I mean, that's the two, you know, there's, there's other
7:26
ways you can hold stuff, you know, like in stocks and stuff,
7:28
but this is not stocks. This is about cash.
7:30
And so you can hold physical paper cash like 10's and 20s,
7:33
you fold up and put on your wall and you can touch with your
7:35
hands or you can have money in a bank that's like a, you know,
7:39
it's a digital. Yeah, you 100%.
7:42
You even know you got both answers right when you thought
7:44
you just said one. But that's the that's the way we
7:47
can basically transact cash now. It's either done through a bank
7:50
or done through paper currency. And this essentially is
7:54
suggesting, hey, maybe there's a third way we can do this, which
7:59
in short is really crypto is saying basically, hey, instead
8:03
of the banks just maintaining your balance and keeping track
8:05
themselves and being these organizations, you can have a
8:08
physical, you know, not a physical, you have a personal
8:11
digital wallet that isn't necessarily even controlled by a
8:14
bank. And then the US government can
8:17
issue this CBDC, the central bank digital currency, this U.S.
8:23
government sponsored crypto that has like a 1 to $1.00 to dollar
8:29
ratio and send it directly to your account.
8:32
Or you can, you could take your wallet or your account and send
8:34
it directly to your friend's account.
8:36
And you know, this is very different than current digital
8:41
currency because it's not relying on the current banking
8:47
technology. Essentially, you know, bank
8:49
technology is kind of servers and databases and, you know,
8:55
backups and keeping track. And they have that.
8:57
And if you lose your password, you call them and you go to them
9:00
and get your statement. And, and banks basically are
9:02
these very well regulated entities that keep track.
9:06
This is saying, Hey, what if you personally had your own wallet?
9:09
And this, this, you know, this new crypto technology is what
9:13
keeps track, which is an interesting idea.
9:16
And then the reason it's interesting is because, you
9:20
know, the banking technology is kind of outdated.
9:22
If anyone has ever done an ACH transfer, which is how most
9:26
payrolls done, how you would transfer money to, you know,
9:30
make payments on something person to person a little bit,
9:33
it takes days. It's it's like this really, you
9:36
know, kind of very outdated technology that takes days to go
9:41
through and and it has all these other kind of like 1970s eras
9:45
quirks. You know, wires exist, but wires
9:49
are expensive, a hassle. They're potentially inaccessible
9:52
to a lot of people. Actually, Jen, like how often or
9:54
how many times have you sent or received a wire?
9:57
Do you know? I feel like I've only done wire
10:00
when it's the only option. Like they're like you have to do
10:03
a wire transfer for this payment or something, which like what,
10:06
like five times in my life? Five times in your life can you
10:09
think of a specific time you've done it?
10:13
I can't. I'm like, why would I have done
10:15
a wire? I don't know.
10:16
No, I can't think of anything. What about you?
10:18
Yeah, I, I think I never did one until I like had significant
10:23
money. And I think maybe one of the
10:24
first wires I ever did was selling my first company when it
10:27
was going to be like a lot of money.
10:30
And it's a lot of money. I think people don't like these
10:32
checks because checks have like are lost out there in the
10:36
ecosystem for a while and don't go through instantly.
10:39
And so, and also this was a different time, you know, checks
10:41
are just becoming less and less common.
10:43
But yeah, I think, you know, wires often, you know, my, I
10:46
just sent the wire the other day, charged me 20 bucks.
10:48
I'm like 20 bucks to like so you know, and so it definitely
10:52
becomes totally inaccessible for anything less than like, you
10:55
know, many thousands of dollars at least if sending like $100,
10:59
you lose 20, you know, ruins the entire point.
11:03
Also, these these things only operate during banking hours.
11:07
Whenever I need to send a wire these days, I'm always looking
11:09
at the clock. I'm like, OK, well, I'm in
11:11
Pacific Time, which means if I don't send it by like morning,
11:15
there's no way it's going to happen that day.
11:16
And so I just have to wait for the bank.
11:17
You know, right now I'm looking at the clock, it's 1:50 PM.
11:20
Like there's no way if I sent a wire.
11:21
Around 11 minutes. Yeah, but there's no way because
11:24
like, they're like, oh, after 3:00 PM in New York, we don't
11:27
want to deal with it anymore. So we'll see you in the morning.
11:28
So I'm like, OK, you're right. And usually wires are big
11:31
amounts of money too, so, you know, and then there's.
11:35
So that's why wires are problematic.
11:37
They're expensive and inaccessible.
11:38
And then there's the coal credit card system, which does like
11:41
small transactions really well. But now there's like our Visa
11:45
MasterCard overlord that charge 3% per transaction to to vendors
11:50
and you know. Have all these.
11:52
Sorts, you know, and interest rates to the customers and it's
11:55
like like why are those companies anointed as they get a
11:58
piece of every single transaction in the world?
12:01
And so you know, this digital dollar two point O or this
12:05
central digital bank currency or this US crypto or whatever you
12:09
call it. I hate the word crypto, by the
12:10
way, just like reeks of scam and crypto Bros or other whatever.
12:15
But you know, that's kind of the technology they're talking about
12:17
here. It could mean positive things,
12:19
things like instant settlement. Like I could send you 7 bucks
12:22
from my wallet to your wallet and you could get it instantly,
12:25
you know, 24/7 payments. No more waiting for the banks to
12:28
be open, you know, lower transaction cost.
12:30
Maybe it's like a fraction of a penny to do this based on how
12:33
the, you know, server technology works.
12:35
Or maybe the government just covers it just like they, you
12:37
know, subsidized the post office.
12:39
Maybe they cover the transactions for this CBDC and
12:44
it could be an instant government payouts, things like
12:46
Social Security tax refunds, stimulus payments, instead of
12:50
getting a check in the mail or waiting for your tax refund to
12:53
come in or whatever, it could be 3:00 AM, the IRS processes it,
12:57
Boom, it's in your account. And so it's, you know, to me as
13:01
a technologist, as a software engineer, as a modern, you know,
13:05
child of the Internet, you know, those sorts of things are very
13:10
attractive. That said, there's some
13:12
concerns. Concerns are things like
13:14
privacy. You know, right now, if I hold
13:18
like if I give you Jen 100 bucks, no one knows about it but
13:22
me and you, right? And I think that like privacy
13:24
advocates think that's how it should be.
13:26
Like your money is your business.
13:28
Whereas if I sent you 100 bucks in this CBDC central bank
13:34
digital currency, now the government knows who sent who to
13:38
what. And you know, maybe privacy
13:40
advocates don't want the bank being up in your business
13:42
because maybe they don't, or not the bank, but the government,
13:46
maybe they don't trust the government because then they
13:50
could say things like the government has direct control of
13:52
the money. If the government controls this
13:54
crypto, they could have it do stuff like for example, they
13:57
could just say, all right, now there's spending limits.
14:00
This is like, you know, a little bit like 1984 Orwellian tinfoil
14:04
hat. But it does point to a good
14:06
concern, which is this has makes things possible that wouldn't
14:12
possibly be true for cash and the extreme other end of the
14:15
spectrum, right? And banks are kind of this
14:18
intermediate third party, which makes it harder for the
14:21
government to do stuff like this.
14:22
But they could say, hey, you know, you can't spend more than
14:25
X percent of your money because we say so.
14:27
Or we could say, hey, you can only buy certain things.
14:30
You're not you can't put your money there.
14:32
Or you could, you could say, hey, there's a restriction or
14:37
there's an expiration on your, your money where if you haven't
14:40
spent it in so long, we take it back, right?
14:43
And there's even, we even talked about a recent episode like a
14:45
wealth tax. This would certainly make wealth
14:47
tax opponents be very, very nervous.
14:49
The government could say, OK, we just passed a law that there's a
14:53
10% wealth tax. And before we even heard the
14:55
news, we've taken it out of your wallet because we can do that.
15:00
You know, that is potentially true, right?
15:05
And another concern is that banking, the whole banking
15:08
system could be put at more risk.
15:12
There might be less deposits of banks.
15:14
Banks have less ability or control to do, you know, lending
15:18
and things like that. And so maybe everyone's hoarding
15:21
their money in their digital wallet.
15:23
And then they go to the bank and say, give me money for a house
15:27
so I can buy a new house. And they say we don't have any
15:29
money. It's not in that.
15:30
It's not in our banks anymore. We can't, we can't do this
15:33
whole, you know, lending thing we've been doing because we
15:35
don't have the money anymore. And so those are kind of like
15:38
the, you know, hypothetical risks I think that opponents or
15:43
concerned parties are bringing up.
15:47
And, and, and I think a lot of that speaks to how much
15:50
political headwind something like this has.
15:52
I think there's a trial of this that's going on in China right
15:55
now. And China is not really a
15:58
democracy capitalist place like we are.
16:01
They're more of like an authoritarian communist type
16:04
country. And so they can make things like
16:06
this happen much more quickly if the centralized government just
16:08
decides it's in the people's best interest, for better or for
16:12
worse. But they're testing it right
16:14
now, whereas I think it's in the US, it'd be much more slow to
16:17
adopt. So that's what this this whole
16:20
thing is about. It's just this idea that it
16:22
could happen. You know, frankly, I'm a huge
16:25
proponent of modernizing the technology of the banking
16:28
system. Like like I mentioned the whole
16:30
ACH wire, credit card, this whole, you know, checks with,
16:34
you know, if I, if I send someone a check right now, they
16:37
can just take my account number is printed on that.
16:39
It's crazy. They can just take the account
16:42
number and type it into another website and try to send money
16:44
out of my account. And there's just this, like,
16:46
series of band aids that have been put on this crazy, like,
16:49
public, you know, public account number system that's been going
16:53
on for 50 or 60 years now or longer.
16:57
And so I'm all about modernizing that.
16:58
But I admit, those concerns are scary.
17:02
Wild. OK, you really broke it down for
17:05
us. Appreciate it.
17:06
Do. You want digital currency, Jen?
17:08
No, thank you. I'm just gonna keep my cash in a
17:12
mattress as usual. You're still, I mean, yeah, as
17:15
long as cash still exists. You know, the, the slippery
17:18
slope slope arguments could be once the crypto thing exists,
17:22
then they're going to start saying cash is no longer a legal
17:24
tender. And then we have no choice but
17:26
to, you know, abide by our government banking overlords.
17:33
You know, I think there might be some sort of hybrid solution
17:35
where banks still exist and are the only way to access this
17:40
thing to prevent, you know, a lot of those concerns I
17:44
mentioned, but still get a lot of the benefits like the more is
17:46
the transaction, so I don't. Know, I mean, I also feel like
17:51
we're either going to get pushed into something where it's just
17:54
more convenient to do it one way, or it'll be something like
17:57
how we all tap to pay now because it's just like it's,
18:02
it's popularized, right? So you just people, less people
18:05
are carrying cash. So you just, you know, people
18:08
are slipping away from cards and now just tap to pay and all this
18:10
stuff. So I feel like it's going to be
18:11
one of the other. It's either going to be a legal
18:13
thing where this is the new legal tender or it's going to be
18:17
everybody does it. So why don't you just buy an
18:18
iPhone like everyone else you know?
18:21
Yeah, I mean, I think tap to pay would still work.
18:23
It'd just be like, you know, in Apple Wall, you instead of
18:27
putting your Bank of America account, you put your digital
18:31
wall account or whatever. But yeah, I don't know.
18:34
It's, it's interesting stuff, but I don't think you need to
18:36
go. I guess I also didn't really say
18:39
my take away, which is as I say with like all these
18:42
macroeconomic terrifying headlines, like you don't need
18:45
to really do anything here. This, this post I really don't
18:48
like implies if only in 19 or only in 1740 when the French got
18:55
rid of their franc, you would have made some clever moves and
18:58
you know, you could be a French 1700s millionaire.
19:02
You know, they say stuff like that implying that if you do
19:05
something now about this, you're going to make a lot of money or
19:09
you avoid losing a lot of money or whatever the scariest thing
19:11
they can do to elicit them, you 2, you know, click in and buy
19:15
their course or something. But I don't think that's true.
19:18
I don't think there's really any action item here.
19:19
I think focus on your lane, spend less, earn more, invest
19:24
early and often. If digital currency changes how
19:28
we make bank transfers one of these years, that's probably not
19:32
going to be how you get rich. Like if we could go back to
19:35
2010, I could tell you to buy Bitcoin at six cents a coin.
19:38
That's how you could have gone rich.
19:39
But we didn't know that back then.
19:40
So we just, we do the best we can.
19:43
Period. Yeah, let's move on.
19:46
Two money. Can I ask a dumb one?
19:50
This is one of the smartest dumb questions or the dumbest smart
19:53
question? No, I think it's the smartest
19:55
dumb question because it sounds like a dumb question.
19:57
But I love this question as you're asking a really smart
20:00
question to a dumb person. So what is the question?
20:03
OK, Monica in Albany, NY asks my dumb question.
20:08
How does one pay taxes on the growth of investments in a
20:11
standard brokerage account only when something is sold, or on
20:15
the growth every year even if nothing has been sold and no
20:18
money withdrawn? I love this question because
20:21
it's so honest and you know, tootin flutin finance
20:26
influencers like me, like I'm a two and five, this is an
20:30
unrealized capital gain and blah, blah, blah.
20:32
And I use all this like, you know, it's a taxable account, so
20:34
you're going to pay tax on the growth.
20:36
And you know, we can tend to use all this fancy.
20:42
You know what's the word for fancy talk?
20:45
Jargon. Jargon.
20:47
Yeah, exactly. You can tend to use like just
20:49
fall into this jargon world. And I really hate jargon because
20:52
I think the use of jargon is like a crutch against really
20:56
understanding the simplicity of what's going on.
20:58
And what if you can make it simple?
21:00
Then I think it shows better understanding.
21:02
And so relying on jargon I don't like.
21:06
Thank you for that jargon assist.
21:08
How many times are you going to say that word?
21:10
Well now I'm saying jargon from now on so I never forget it
21:13
again. And plus it starts with AJ.
21:14
Like my name Jeremy. Jargon.
21:18
Jeremy. Yeah.
21:18
Jargon, jargon, jargon, jargon. Do you ever do that where you
21:21
like, write a word like 20 times row and then you're like, what
21:24
even is this crazy series of symbols in front of me that
21:28
can't be the way you spell this word?
21:30
Jargon, Jargon, jargon, jargon. It looks like dragon to.
21:32
Me. It's starting to feel like
21:34
dragon. OK, so that'd be cool.
21:37
Dragon. We should really talk a lot more
21:39
dragon terminology and less jargon terminology.
21:42
Now they sound the same to me. What's dragon terminology?
21:46
You know, like fire breathing and talons and and Dungeons and
21:50
Dragons. I don't know.
21:52
Yeah, exactly. Game of Thrones.
21:54
I should have said the you said the cool reference.
21:55
I said the nerdy reference. Yeah.
21:57
That's what I meant. Game of Thrones.
22:00
People have sex in Game of Thrones.
22:02
Wow, now we have to flag this video.
22:05
Flagged We talked ahead of time about how our videos keep
22:07
needing to be self reported as not for kids.
22:14
Anyway, this one question of what about Dragons?
22:18
How are taxes? How are how are taxable
22:21
brokerage accounts taxed? And I love this question because
22:24
it's, it's like such a simple question and I think most people
22:26
kind of don't really fully have a grasp on it.
22:29
So here it is. I'm going to do the my best job
22:32
I can to make it simple. And taxable brokerage accounts
22:36
are taxed in two ways. And this is very different from
22:40
Roth IRA4O1K, TSPHSA. All those accounts are tax
22:47
advantage accounts that operate under a different set of rules.
22:50
Let's ignore them for now because we're answering this
22:52
question. And so if you have a taxable
22:54
brokerage account, it's taxed in two different ways.
22:57
One on dividends, dividends are money that are, that is paid out
23:03
throughout the year from the growth or profit of the
23:06
companies or when something inside the company is sold and
23:09
paid out to the investors. It's basically these payments
23:11
made just for holding an investment that's deposited as
23:15
cash into your account. That's called a dividend or a a
23:18
capital gain, you know, dividends and capital gains that
23:21
can be paid out to you. But basically these payments
23:23
throughout the years, that's number one and #2 is realized
23:28
gains and losses. That's when something goes up in
23:31
value. Notably, I didn't say when you
23:35
take money in or out of the account.
23:38
And so when you put money in or take money out of the account,
23:40
it doesn't matter. That is not a taxable that
23:43
that's not how you're taxed. It's just those two things.
23:45
It's dividends and realized capital gains.
23:48
So let's break it down. First of all, dividends when you
23:53
like. Let's say you hold a share of
23:54
Apple stock and Apple pays a $0.25 per quarter dividend per
24:00
share that you own. So if you own 4 shares, every
24:02
three months you're going to have a dollar automatically
24:06
deposit to your account. First of all, it doesn't matter
24:10
if that dollar is reinvested. A lot of times people ask what
24:13
if I have the little check box for automatically reinvest
24:17
turned on where you take that dollar and buy more Apple stock,
24:19
or you take that dollar and buy more index fund, whatever it is,
24:22
these things all pay dividends. Index funds, ETFs, mutual funds,
24:26
stocks, they all can and most do pay dividends.
24:31
And so if you reinvest, you take those that cash payment and have
24:34
your brokerage website automatically buy more.
24:37
Doesn't matter. You still have to pay tax in
24:41
that calendar year on all the dividends.
24:44
And so it doesn't matter if you reinvest, it doesn't matter if
24:47
you take the money in or out of the account.
24:49
All that matters is if those funds or those stocks pay you
24:54
payout throughout the year, you have to pay tax on it that year.
24:58
How does the government know? Well the government gives you a
25:03
tax form called 1099 division which stands for dividends.
25:08
And it actually this right here is my 1099 division form from
25:13
2025 because tax day was yesterday.
25:16
So you can see on my Form 1099 Division 1A, the very first
25:21
number there, it says total ordinary dividends.
25:23
That's the total number of dividends that I was paid out
25:28
throughout the year from all my investments.
25:29
And so in my case, it was $58,000, which by the way is
25:33
incredible news for me because just for doing absolutely
25:36
nothing, you talk about passive income, there's very little
25:38
passive income except for what we're looking at.
25:40
I got $58,000 of cash deposited to my taxable investment account
25:46
because of those dividends internally paid.
25:49
That second line there is worth noting because it says qualified
25:53
dividends. That second line is a subset of
25:56
the first one. So the first one is all
25:58
dividends, it says ordinary, but should just say total dividends.
26:02
And then the second one is qualified dividends, which means
26:04
these are dividends that for some reason qualify for
26:07
preferential track tax treatment, which is basically
26:10
long term capital gains. And so we're getting kind of
26:14
into the weeds here, but just again, big picture investments
26:17
make money two different ways, paying out dividends and going
26:20
up in value. And you're taxed on both of
26:22
those ways in investment accounts and taxable accounts. 1
26:25
the dividends through Form 1099 division.
26:29
And it shows you how much you make right there.
26:31
And it's, and the tax rate depends on if they're qualified
26:33
or not. That's it.
26:35
And then the other way is capital gains.
26:39
And so capital gains is when you buy something and sell something
26:44
for more than you bought it for. And so for example, if I buy a
26:49
bar of gold for $1000 and then sell it for $3000, I had a
26:53
capital gain of $2000. And technically, unless I'm like
26:56
doing this on the, you know, backroom deal on the, you know,
27:01
untracked market, I should report that to the government
27:04
and say, hey, I bought something for 1000 and sold it for 3000.
27:09
Therefore I owe capital gains tax on $2000 of gains.
27:15
And so you only owe tax on the gains.
27:19
When you realize the gains, that word realize all it means is you
27:24
basically lock in your gain or your loss in the case of a
27:28
negative gain. And so, for example, if I again
27:32
buy a bar of gold and it's about, I buy it for $1000, then
27:36
I'm walking around the market and someone says, hey, I see you
27:38
a bar of gold, I'll pay you $4000 for it.
27:41
And I say, Nah, I'm good. I'm going to keep holding it.
27:44
I didn't realize that gain. All I have is a bar of gold that
27:47
someone said they'd pay $4000 for but I don't actually have
27:50
the $4000 in cash so I owe 0 tax on that even though it's
27:54
appreciated in value. By all accounts it's worth
27:58
$4000. Now I don't know tax on it, but
28:01
then the second I say, OK, here is you're here's the gold, give
28:06
me the $4000. That means it's realized.
28:08
That means I now have the cash. That means that year, the year
28:11
in which I sell it, I have to pay tax on that realized gain
28:15
of, in this example now $3000. OK, how does the government know
28:21
and how do you know how many gains you've realized?
28:24
Well, again, your brokerage website gives you a tax form at
28:28
the end of the year. It's called 1099 Dash BI.
28:32
Think the B might stand for brokerage or barter exchange
28:35
transactions? That's what mine says.
28:36
And you can see my 1099 B right here.
28:39
And actually I had to go back to 2024 because in 2025 I didn't
28:43
sell anything. How great.
28:45
I was somehow able to live off of my dividends and my my
28:48
income. And so I didn't sell anything in
28:50
2025. I just let all my investments
28:53
rolled all year. MY1099-B in 2025 was all zeros.
28:56
But that doesn't make a very good example for a show.
29:00
So here's my 2024 in which I bought a house and so I needed
29:04
some money. And so you can see here, for
29:08
example, I had it, it lists every single sale on its own
29:11
row. And so there's a sale there
29:12
where I sold $30,000 worth of FSR and X.
29:16
So I had a ticker symbol FSR and X, I had $30,000.
29:20
The second column that says cost or basis which is 24,778.
29:26
And then the next column that's filled out says the gain, which
29:29
so it says 5000 to 21. And so that right there is my
29:33
realized gain. And so the government says, hey,
29:35
based on that sale there you owe tax on a $5000 gain.
29:40
And then you can see the rest of them down there.
29:42
And so the total is down at the bottom for all of 2024 I sold
29:47
$154,000 worth of investments. My basis that's what I paid for
29:53
it was 127,000. And so my total gain was 32,000.
29:58
And then even down at the bottom there says box D long term
30:02
realized gain, long term realized loss.
30:04
I gained 32,000 and I lost 5000, and so my net of that was
30:10
actually 27,000, not 32,000. Actually at 32,000 was the wrong
30:14
number because your losses offset your gains.
30:19
I know this is the portion of the show where I'm screaming
30:22
numbers into a microphone, which apologies if you lose interest.
30:25
I'm doing my best. But again, big picture
30:28
investments make money in two ways.
30:31
Dividends paid out throughout the year and realize gains when
30:34
you sell something for a profit or a loss.
30:36
And then you get 2 tax forms to match those two ways, a 1099
30:40
division and A1099-B which is for capital gains.
30:44
It's worth noting capital gains also are broken down into two
30:47
different buckets. Short term capital gains which
30:50
means you held the thing for less than a year.
30:53
So for example, if I am day trading NVIDIA stock and I buy
30:57
today and I sell tomorrow, the government's going to say, hey,
30:59
if you had a gain on that, we're going to tax you as though it's
31:03
income, ordinary income rates, which is a higher tax rate.
31:06
Whereas if you hold it for at least a year, we're going to tax
31:09
you at the long term capital gains rate, which is lower.
31:13
And so generally you get better tax treatment if you hold things
31:15
for longer. And you can see on my form here,
31:18
I didn't sell anything with short term capital gains.
31:20
You know, I rarely make transactions.
31:22
I just hold my investments forever.
31:23
And when I do sell, I'm selling under the more preferential tax
31:28
rate of long term gains. And so if you blacked out during
31:33
this whole boring tax talk, then welcome to the April 16th
31:36
episode. Apologies.
31:38
And you just want to know what, what's the bottom line here?
31:41
The bottom line is how are taxable brokerage accounts
31:44
taxed? Well, they give you tax forms at
31:47
the end of the year, 2 tax forms.
31:49
And you know, and my brokerage account actually gives me one
31:52
single PDF that they call a combined tax form, which with a
31:55
1099 division and the 1099 B and maybe even some other ones like
31:58
a 1099 INT, which is like bank interest, which is reported
32:02
slightly differently than dividends because it's interest
32:05
from a bank, not dividends from a company.
32:07
But all this stuff is just numbers you type into your tax
32:09
software. And so it's going to say, do you
32:11
have any tax forms report? You have a 1099-B great, type
32:14
the numbers in. You have a 1099 division, great
32:17
type the numbers in. And then it just works it out.
32:20
You're taxed after or if you have a tax preparer, you
32:22
probably send them a bunch of PDFs or upload them to their tax
32:26
preparation website and that's it.
32:28
That's how it's taxed. And so, you know, the important
32:31
notes are it doesn't matter going in or out of the account.
32:34
The things that matter are were dividends paid out this calendar
32:37
year, always taxed this calendar year?
32:39
And then did you realize any gains by selling then If so,
32:43
taxed on that long or short term capital gains?
32:49
Monica, Monica. Monica.
32:52
Monica. I have left Jen speechless.
32:56
You thought that your cute little question was going to
32:59
have a short and sweet answer, but guess what, Jeremy?
33:03
Not to skip ahead, but Jeremy had time today.
33:05
I think I broke down like you know, 6000 pages of tax code in
33:11
like 5 minutes of ranting. That's.
33:12
Not a lot for basically, you don't need to do nothing.
33:14
You're going to get AW2, basically the same thing you
33:17
would get at the end of the year from any other job.
33:19
W 210991089 Division 10809-B Don't do anything except what
33:24
you normally would do. You're just going to get the
33:25
forms you're going to give them to your tax person or H&R Block.
33:28
100% my show would be 5 minutes long.
33:31
It was just me. 100% But I will say, like the caveat is it's
33:34
good to understand when you're taxed because sometimes you'll
33:37
like sell something at a huge gain and be like, Oh, I didn't
33:40
realize that I was going to show up on that tax form right where
33:42
like W2 income, you kind of know what you're signing for.
33:44
You're like, oh, they're going to tax me on my my payroll.
33:47
I got this year. But if you sell something in a
33:49
gain or sell something at a loss.
33:51
In fact on my 1099 B you can see here, when I was selling all
33:55
these things at a gain, I decided to purposely sell my
33:58
lift stock. I randomly bought lift stock one
34:00
day on a win that went way down. I was like, I think I'll realize
34:03
that loss to offset some of my gains.
34:06
I'll save myself a couple 1000 grand on taxes by lowering my
34:10
total gain for the year by, you know, selling one of my losers
34:14
basically harvesting those losses, right?
34:17
That's what you what that's what they mean when you hear tax loss
34:19
harvesting, you sell something at a loss to basically have it
34:22
show up on this 1099 B to lower your taxes.
34:25
And so you know for sure, depending on where you are in
34:28
your journey, the take away, Jen's takeaways fully valid.
34:33
Nothing crazier. Just type in the tax form like
34:35
you do with everything else. If you're like, OK, numbers are
34:38
getting bigger, I'm making some moves.
34:40
It's, you know, probably time to start looking at, you know, when
34:43
you get taxed on these things. So you're not, you know, signing
34:45
yourself up for an unexpected tax bill.
34:48
I mess with you. We, they were here for the nitty
34:51
gritty. We're here to know why, you
34:52
know. I agree I.
34:55
Agree, but we form personal finance club.
34:57
Listener is better. OK, Can we move on?
35:02
Is that OK? Yeah, we can move on more.
35:04
To say to Monica. We better.
35:06
I think it's time when you get one of those long hooks from
35:08
like the 1920s, you know, theater and you just.
35:14
Yeah, like. Showtime at the Apollo and
35:16
you're getting booed off right now.
35:17
He got into non qualified dividends.
35:20
He better get the hook. Get the hook.
35:22
Boo. OK, let's move on too scroll
35:31
patrol. Scroll Patrol.
35:34
All right, you guys know the deal.
35:35
I've I found a video from the Internet.
35:38
Jeremy has not seen it. He's going to react in real time
35:41
and give it a score. Did you give the did you give
35:43
the score last week? I.
35:45
Think you did, You did OK. Oh, you were OK, You're going to
35:48
have to go. I just have that thought.
35:49
Why? Was it nice?
35:51
I wouldn't forget the score. Passing judgement on people from
35:54
a place of absolutely no perspective to do so is like my
35:57
favorite thing. Period.
35:59
OK, so we're both going to click on this video and then Jeremy's
36:03
going to tell us what he thinks. My sister and I spent $60,000 on
36:06
a Disney Vacation Club timeshare and what this gets us is a 2
36:10
bedroom villa for just over a week every single year for the
36:12
next 45 years. I'm certainly not saving money
36:15
in the first year or the second year or the third year or the
36:17
4th year, but by the 15th year, the 20th year, we're going to
36:20
end up actually saving a ton of money versus just paying the
36:22
cash price. And we haven't talked about time
36:28
shares yet have. We oh, was my grown audible.
36:32
I don't think we've ever talked about time shares not in the
36:34
podcast. I've definitely.
36:35
Mentioned them we haven't covered yet.
36:36
It's so. Exciting.
36:37
What are we, we're 31 episodes in when when we get to episode
36:40
1000, you can we can talk about how we've got nothing left to
36:43
talk about. Cool.
36:46
So that was just like an endorsement for a Disney
36:48
timeshare. I mean, the, the mention of the
36:51
word Disney in there, it gives me great pause because I feel
36:55
like there's going to be some Disney adults who have me
36:59
murdered if I. Speak.
37:01
I'll of any sort of spending on Disney and you know, that aside,
37:09
let's put the Disney thing mostly aside.
37:11
Maybe I'll. Well, then you'll have more
37:13
comments for Jeremy had time today because you know, we're
37:15
kind of going dry so at. Least I'm like Disney adults.
37:19
If you had your wedding at Disney then.
37:22
It's going to be just as bad as the Christmas post where you're
37:24
like don't buy a real Christmas tree and the Christmas hive
37:27
comes out strong. Oh my God, literally a
37:30
reasonable topic. Someone like that's the most
37:33
important topic in the world. Then they're like, how dare you,
37:35
man. This is not.
37:37
That's not even touching Disney adults.
37:39
Yeah, exactly. All right, so let's put the
37:42
Disney thing aside for a second. And.
37:43
And she's basically saying I don't know who this creator is.
37:46
By the way, it looks like I was reposted by.
37:48
No, yeah, it's not the whatever's in the bottom is not
37:50
her because somebody reacted to it.
37:52
But I was like, I don't want you to do a reaction to a reaction.
37:55
So I cut his part out. Yeah.
37:57
OK, I know that guy, but I don't know this this other creator.
38:02
But yeah, so it's saying, hey, if I'm going to go, you know,
38:09
since Disney vacations are so much money, I can put all this
38:12
up front and then I'll be saving over time.
38:16
I really hate that perspective. And I'll tell you why because it
38:22
assumes so much about future spending, right.
38:26
And, you know, I think that's kind of like the.
38:29
By the way, I guess maybe I should give some baseline about
38:32
a timeshare as a timeshare back in the day, the idea kind of
38:36
started a little bit altruistically, which is, hey, I
38:39
want to go buy a vacation home. But the nature of vacation homes
38:42
is I only really use them a couple weeks a year.
38:44
And so instead of buying a whole vacation home and having, you
38:48
know, 50 weeks a year that it goes empty, I could maybe go in
38:53
on it with 26 other people. I get, you know, I get it and
38:56
maybe 126 the cost plus maybe some, you know, management fees
39:02
and stuff like that for cleaners between our, our families
39:04
sharing it. And then I get all the benefits
39:07
of being an owner, you know, in terms of maybe I can sell my
39:10
share one day. And you know, that theory kind
39:14
of really makes nice sense because you, you know, you've
39:16
got some ownership in real estate.
39:18
You, you get to use your vacation home like you wanted
39:24
to, you get in for like a dramatically cheaper price than
39:27
buying an entire property. And that idea has kind of
39:31
morphed over time into these like vacation companies where
39:36
you're not buying a specific small property anymore.
39:41
You're like buying points in their system that have
39:43
conversion values and merge over time.
39:45
And all these like legalese around how you can transfer
39:47
them. And they claim you're still a
39:49
deeded property owner, but you're really not.
39:51
And the the bottom bottom line is, you know, owning a timeshare
39:56
is owning a toxic asset. You can't get rid of a
39:58
timeshare. And time shares almost always
40:00
come with huge annual maintenance fees.
40:04
And she didn't mention that at all.
40:05
I mean, maybe the subtext was there that, you know, when I'm,
40:09
you know, paying the huge annual maintenance fee, eventually I'll
40:12
come out ahead. But what really happens is
40:15
people buy a timeshare and then they're on the hook for like
40:18
$1500 a year. And like, well, you know, the
40:22
renting this 3 bedroom in Hawaii would have cost 3000.
40:25
So 1500 is a screaming deal. But then one year they don't
40:29
want to go to Hawaii and they don't want to go on a vacation
40:31
at all. Or they used their vacation time
40:34
doing something else that where there was no timeshare, yadda,
40:36
yadda, yadda. And now they're out to 1500
40:38
bucks or they're their kids don't want it and now they, you
40:43
know, they can't get rid of it. And there's literally companies
40:47
dedicated to getting people out of timeshare deals where they'll
40:51
go and try to like sue the. Timeshare company.
40:53
For yeah, there's literally like multiple companies where you pay
40:57
them not to sell your portion and get some money back.
41:01
You pay them just to get out of it for free, just to like throw
41:05
it away, right? Have you ever have you ever been
41:07
through a timeshare presentation?
41:09
Yes, I have to. Get something free.
41:13
When I was, yeah, I guess I was to get something free.
41:16
I think I've been through 2. Have you ever been through a
41:18
timeshare presentation? Let me tell you something right
41:20
now, the first time I went to Disney World, I was 18.
41:24
We didn't go to were older. My mom took me and my younger
41:27
brother. We had to go to a time trip
41:28
presentation in order to get free tickets.
41:31
So I don't know why we took Isaac because at that time he
41:34
was like, OK, he was 11 and he was they were like the I don't
41:39
know why this was a rule, but as a rule, you couldn't be married.
41:42
My dad didn't come with us. It was like me, my aunt, my mom
41:45
and my younger brother. And they were like, we got
41:47
through this whole like 3 hour presentation and they're like,
41:49
we just want to make sure this is true.
41:51
And also you're not married. And my mom's like, Yep.
41:53
And Isaac goes, what about dad, mom?
41:55
And then we had to do the whole thing the next day to get into
42:03
Disney. Oh no, she was so mad.
42:04
But he was so young so she couldn't get mad.
42:06
But he he was like, why would you lie?
42:08
Like, what about Dad? He's at home.
42:12
So she had to go the next day. She's like, I'm just going to go
42:13
alone. We'll go to Disney tomorrow.
42:15
It was so bad. We were like.
42:16
I know exactly why they asked that because they know you're
42:19
not going to make that that financial transaction without
42:22
the spouse there. And they know if you're lying
42:25
about it like your mom was, that you have no intention to
42:27
actually buy it. And so they don't want to give
42:29
you the freebie without. And your brother very, I love
42:32
that from your brother because he's just.
42:34
He he was just an innocent, sweet little baby.
42:37
Yeah, exactly. Oh, Dad.
42:41
We were like, oh Isaac, why? Yeah.
42:46
I'm traumatized now. I'll never do it again, even for
42:49
something free. It was so awful because they
42:50
really are by the end, they're like almost cornering you.
42:54
It's so predatorial. And they're like almost won't
42:57
let you leave without. And my mom was never like,
42:59
listen, one thing about Alice, she's not going to, she's not
43:01
going to get the timeshare. She don't care what you say.
43:03
She's there for the free stuff. But like she was never going to
43:06
get it. But like, they really do start
43:08
applying pressure in like kind of a scary way.
43:11
Yeah, it is crazy that like we live in, you know, 2026 where
43:17
everything's Amazon DoorDash, like no pressure, transparent.
43:20
But still if you sit down at a timeshare, it's like you get a
43:22
table, you get you get a, you know, the numbers in front of
43:26
you can't leave the and it and it feels like, oh, but you know,
43:30
it's a 30 six, $6000 opportunity, but we're going to
43:33
give it today for 12,000. But if you walk out that door,
43:35
you know, I mean, like come and and there's just like there's so
43:39
many crazy high pressure tactics being used.
43:42
By the time your head is like in this tizzy, you're like, like,
43:44
am I crazy not to? It's only 12,000, you know, am I
43:47
crazy not to spend? I'm like, no, no, that's
43:49
$12,000. That's still real money.
43:52
Don't do it. Yeah.
43:54
And so I'm, you know, spoiler, if you haven't picked up on the
43:59
the way this convo is going yet, I'm very anti timeshare.
44:04
I think that, you know, it's just this predatory business
44:08
that ropes people in these deals.
44:10
And, you know, while her math may be technically true, we're
44:17
like, OK, if I do this each and every year and this week and all
44:19
these things end up being true, you know, there's a huge missing
44:22
component there, which is flexibility.
44:25
Like maybe in year #3 Disney's running a huge sale.
44:28
And so you get in for even cheaper than maybe you're #4 you
44:31
don't want to go to Disney and you go somewhere else.
44:33
And maybe, you know, you know, and, you know, maybe you're #5
44:36
you travel to Southeast Asia where lodging is, you know, 10
44:39
bucks a night, and you can't use a timeshare there.
44:41
And, you know, money. And there's also the time value
44:44
of money where maybe that's $60,000 rather than rotting in
44:47
a, you know, timeshare could be spent growing an investment.
44:52
And so I'm, I'm very anti timeshare.
44:54
I mean, I think some people have made an argument that's like a
44:56
much more social argument, which is some people never leave their
45:01
house. If they buy a timeshare, then it
45:03
forces them to at least go on a vacation per year, which I'm
45:06
like, OK, that's true. But I kind of think that's like,
45:10
you know, there's other ways to achieve that without being this
45:14
horrible financial decision. And so yeah, I, I feel kind of
45:22
bad giving a grade to this nice looking person here who just
45:26
wants to go to, just wants to be a Disney adult and, and have her
45:30
boyfriend's proposer in front of the Disney Princess castle or
45:34
whatever. Then they can ask.
45:35
I don't know what goes on there. Can you have a Disney wedding?
45:39
I'm sure you. Can Oh my God, I want to know
45:41
how much that would cost. I'm sure you can do it, but wow
45:44
the. Price I'm looking at this this
45:47
like hotel room there and it's like it looks like a very basic
45:49
hotel room with 2 Queens and a you know, dresser and I'm like
45:54
60,000 bucks That's a that's a lot of money.
45:59
So I give this Adi don't. Brutal.
46:02
Don't don't buy timeshare. It's like my one of my least
46:05
favorite ways to spend money. It's slightly better than
46:07
joining an MLM I think, but I just don't like all these
46:11
predatory businesses. Try to take your money.
46:12
Keep your money for you, invested for you.
46:15
Don't put it in these other companies trying to suck it out
46:18
of you. I agree.
46:20
I agree and I have personal first hand experience on the
46:23
predatory behaviour. I mean they're sales people so
46:25
they're just getting commissioned.
46:26
So it's just like any other sales position.
46:29
But it is spooky. No, I, I, I have gone to two
46:32
timeshare presentations myself. 1 is my dad who owns a few and
46:36
he just. He owns Time shares.
46:38
Yeah, he owns time shares. My dad and I have some
46:41
similarities and some differences.
46:43
I think he's, I think he's offered them to me before at
46:46
least once and I'd like didn't happen again because it's got
46:49
shut down so fast. He's like, no, I'll just give it
46:51
to you. I was like, oh, I understand.
46:53
I do not want it, but he just, I just think he dislikes the
46:58
negotiation. He's like, oh, maybe I can get
46:59
him down from 12,000 to 10,000, whatever.
47:01
I'm like, dad, they would be thrilled to sell this to you for
47:03
10,000 because they make, they make their money in the
47:06
maintenance fees or whatever. And then the other one, I went
47:09
with a bunch of, I was, I think I've been in my 30s, but mostly
47:12
with 20 somethings. And we went on like New Year's
47:15
Eve and they literally, they were like short sales people
47:18
because it was over the holidays and, you know, they had to sit
47:21
down And I was like bracing. And then they're like, oh, we're
47:24
kind of short sales people. Like give us 5 minutes.
47:26
And then he like, he kind of like, what's it called when you
47:30
like? When you said short sales people
47:32
I was like why is he on their height like?
47:35
When they had too few sales people who are all of normal
47:38
stature. Yeah, I know I lorded over these
47:42
short sales people and said, do you think I'm going to buy your?
47:45
I AM 64. I don't think I mentioned that
47:47
enough on the podcast. How tall I am so.
47:50
So I'm taking this personally once again.
47:52
I forgot how sure you are we've been together personally.
47:55
I got tall energy. 100% sure. And I have weekly energy, so
48:00
we're off that. But yeah, he he like he profiled
48:04
us and saw we're a bunch of like, you know, New Year's Eve
48:07
20 somethings. He's like, here's your tickets,
48:10
leave. We're like, yes, that's done.
48:14
That's my dream. Oh my.
48:15
God, he's actually, he's actually pretty cool.
48:17
He's like, I know the situation here.
48:19
He's like, I get that, you know, some people are here for the
48:22
freebies and that's like what we're advertising.
48:24
And so that's, you know, and you're not going to actually,
48:27
you know, but if your dad comes here who we can trick into
48:30
getting into a negotiation again then.
48:32
What are the tickets for? Where are you guys trying to go?
48:37
I don't know, like skiing or something.
48:39
They might have been lift. Tickets.
48:39
Oh, so it wasn't something happening right then?
48:41
It was like for a future trip? Yeah, yeah, yeah.
48:45
OK, got you. Is that New Year's?
48:47
Eve. Well, I think we might went
48:49
skiing in early January or something with the lift tickets,
48:52
something like that. I don't know.
48:54
Nice. I remember very little.
48:56
All right, anyway, let's stop talking about time series.
48:58
I'm already getting nauseated. Fair enough.
49:01
Let's go on to our last segment. Jeremy had time today.
49:08
We're in the comments. We are in the comments.
49:10
Starting a good old fashioned flame war.
49:13
And what is this post? I'm back on Instagram.
49:17
I'm back home. At the beginning of the year,
49:20
you posted annual contribution limits for tax advantage
49:23
accounts titled Max Out for 2026.
49:27
Do you want to tell us what you're seeing in this little
49:28
chart here? Yeah, it's just a table that
49:32
says like IRA four O 1 KHSA along the left and along that on
49:36
the top it says annual limit monthly and bi weekly.
49:40
And it's basically just a little table to help you figure out how
49:44
much you need to invest. So for example, if you want to
49:46
Max out your IRA, do the maximum you're allowed to contribute to
49:49
it. That would be $625 per month.
49:52
If you want to Max out your 4-O1K, that would be $2041.00
49:56
per month. And so for people in January who
49:59
are able and willing and interested in trying to take
50:03
full advantage of the government limit of how much they can put
50:05
into these tax advantage accounts, that's what it breaks
50:09
down to either bi month or bi weekly, which is how a lot of
50:12
people get their paychecks. And then this commenter said.
50:16
The average person can't maxese and save to buy a house, period.
50:21
Period. They didn't say.
50:23
Period. Just that.
50:23
That's just the punctuation. They did just Yeah, that's
50:26
right. It just which I.
50:27
Feel makes it very harsh, like a period.
50:30
Oh my gosh, relax. Are we to that level of Internet
50:35
grammar culture where a period of some sort of microaggression?
50:39
Texting like my mom like get out of.
50:41
Here, my God, capitalizing all the words and using it.
50:45
I'm so I'm an elder millennial, so I I capitalize, but I don't
50:48
put periods and then that my sentence is mostly that's too
50:51
much. I don't know if I do.
50:53
I think I think I do because you can just press space twice.
50:56
I don't know, Maybe I'm. You do I'm.
50:58
Looking at our text right now, Oh my God.
50:59
See, OK, see it's all they're all, they're all
51:01
microaggressions against two Gen. so and.
51:04
I'm always so upset with you, so that makes sense.
51:06
You can talk to our HR department, which I think is
51:08
you. So good luck.
51:13
Awesome. There's two of us.
51:15
I'm the HR assistant. You work for me.
51:19
All right, I know. It's the, it's the, it's the
51:22
snake eating its own tail of org charts.
51:26
Yeah, welcome to Pfc. All right, OK, so this person
51:30
says, hey, the average person can't Max these to say and save
51:34
to buy a house. I mean, you know, to me I'm
51:36
like, OK, first of all, I didn't say no one talking about buying
51:40
a house in this post. I'm just saying what the limits
51:42
are and you know, like, you know, to, to be, what'd you say?
51:46
I said they're coming for your neck.
51:48
Oh, yeah, they come for my neck. I'm like, am I doing something
51:50
weird with my neck? Am I doing a double chin again?
51:54
OK. But yeah, my general, my general
51:56
response is like, yeah, you're right.
51:57
You're you're almost certainly right.
51:58
Let's break it down slow. The the median US household
52:02
income, they said average. I'm saying median average isn't
52:04
really a fair stack because it's skewed by super high income
52:07
people. But the median US household
52:09
income right now is $83,000. You know, if you and your
52:15
spouse, spouse both make $40,000 or so or so, then you're
52:19
$80,000. If you live alone and make
52:23
80,000, then you're 80,000. If you have a teenager who makes
52:26
10,000, you make 70,000, you make 80,000, right?
52:29
That's household income. And then like, let's say you Max
52:32
all that 83,000. Let's say you Max every single
52:36
account, your your IRA, your 4-O1K, and your HSA.
52:41
That would leave you with $42,980 per year.
52:46
That's a lot less. That's like about half right?
52:50
And then like this commenter says, you try to save for house.
52:54
Let's say you save $1000 a month for a down payment for a house.
52:57
You know, that might get you to a down payment in some states in
53:01
a few years. That would leave you with 30,980
53:05
dollars, $30,000 is a little bit less than the poverty line in
53:11
the US for a family, $33,000 for a family, and about $16,000 for
53:15
an individual. And so, you know, in this
53:19
extreme straw man's argument, if you make the median income and
53:24
you Max out every single account and save $1000 for a month,
53:27
you're remaining, you know, and this isn't even talking about
53:31
taxes by the way, but you're remaining.
53:32
And you know, maybe taxes isn't even counted here because IRA
53:36
401 KH to say those could all be tax free accounts, but your
53:39
remaining pre tax income would be around $30,000.
53:43
So I'd say, yeah, that's not in the world of real realism.
53:46
I'm not going to say you should be, you should be doing this and
53:50
Oh yeah, you can gladly save $1000 a month and all that.
53:53
Of course not. So I have two main arguments to
53:59
make here. 1 is this comment he's making is essentially what
54:03
I'd say a straw man's argument. No one is saying a median income
54:07
person should be doing the maximum, that's those are kind
54:09
of different. Like maybe the median person
54:11
should be doing the median or what should they be doing so and
54:14
also it's not all or nothing. While this post is just a
54:16
helpful divide the numbers. If you are someone who can Max
54:19
out your accounts, it doesn't mean you have to, and if you
54:23
don't, doing. Anything.
54:24
It's literally the maximum that. You the minimum would be 0 and
54:29
the second minimum would be 1 cent and the third lease would
54:32
be two cents. And so, you know, just to put
54:36
some numbers to it, let's say you do the maximum, you do the
54:40
maximum is about $3400 a month. If you add up all those numbers,
54:44
it's $3400 a month. If you invest that and get a 7%
54:47
rate of return, which is about the after inflation real return
54:51
of the stock market over the last 100 years, that would give
54:54
you in 40 years $8.1 million. So if you Max out these
54:59
accounts, you wouldn't just be OK, you would be like Uber
55:02
wealthy, you know, not like billionaire wealthy, but you'd
55:04
be, you know, around the 1%. The, you know, top 1% of all
55:08
people are all all Americans. And so, you know, implying that,
55:13
hey, a median income earner of $80,000 should end up with $8.1
55:16
million. That's not, that's not very
55:20
realistic. A little bit less crazy.
55:22
Let's say instead of, you know, like I said, you don't have to
55:24
Max it out. Instead of doing $3400 a month,
55:28
you just, you just do $1000 a month.
55:30
That's more realistic. That's like a reasonable
55:32
percentage of your, of your income that would leave you with
55:36
$2.4 million at retirement in 40 years.
55:41
And so, and that even that puts you in the 93rd percentile of
55:44
wealth in the US. So if you can put away 1000
55:47
bucks a month at 7% rate of return for 40 years, that'll get
55:51
you a $2.4 million. A lot of people are saying,
55:53
well, I don't have 40 years or this and that.
55:56
These are just numbers, you know, maybe if you don't have 40
55:58
years, you're not starting at 0. Maybe you already have some.
56:01
And this is also across all accounts.
56:03
Maybe you've been doing a four O 1K already for a while.
56:05
Maybe you've already paid off your student loans and you can
56:06
invest more after that. You know these are just numbers.
56:10
It's not your specific situation, right?
56:13
So it just goes to show even if you're not doing the maximum,
56:16
even doing a reasonable amount of money can take off median
56:19
income, 50th percentile income, and get you into the 93rd
56:22
percentile of wealth. Because most of medium income
56:25
people aren't putting away the 1000 bucks a month across all
56:28
their counts. They're doing, they're doing
56:30
less. So that's .1 is it's not all or
56:33
nothing. And even a reasonable amount can
56:35
make you very, very wealthy if done over time.
56:39
And then point #2 I'll make is, you know, I'd say the goal is
56:44
not to be medium. You know, you're, you're sitting
56:47
here driving on the highway listening to the Personal
56:49
Finance club show. I don't think your goal is to be
56:51
medium. I think the goal is to do
56:53
better, right? And you know, if you were making
56:55
83,730 right now, like, how about a raise?
56:59
You know, and I think a lot of people tend to do better
57:01
throughout the course of their career.
57:02
And so maybe as you get raises and you get in that 100,000
57:06
range or or above, you don't spend the entire amount of your
57:10
raise. You spend part of your raise now
57:12
and save part of your raise later.
57:14
And so if you feel a little bit behind now because you haven't
57:17
been doing $1000 a month for 40 years, that's OK because as your
57:21
career progresses and as you go beyond the median income, you
57:24
can start doing more. You know, that's kind of the
57:27
nature of our capitalist society, which is, you know,
57:30
everyone doesn't get the same. You know, if you make more and
57:33
spend less and direct more of your money towards investments,
57:35
you can have more. And it's all really choose your
57:37
own adventure. And all that to say, maybe I
57:41
should have said this at the top, but not to mitigate the
57:45
reality of, you know, the vast, you know, the vast number of
57:49
people situation, which is, yeah, it's really hard to buy a
57:52
house today and save a lot of money today.
57:54
Like it's hard out there. You know, homes relative to
57:58
income are more expensive than they used to be.
58:00
A lot more expensive income is, you know, kind of keeping up
58:03
with inflation but not keeping up with the cost of housing.
58:06
And so, you know, it, it's it's definitely tough out there, but
58:13
you can say this isn't fair. The boomers had it great.
58:17
They could buy a Silicon Valley, you know, duplex in the 60s for
58:23
5 bucks and a, you know, goat. And now that same duplex is, you
58:28
know, $30 million, you know, yeah, that's now it's crazy, you
58:33
know, but still we live in today.
58:35
And so you do what you can today.
58:36
You live below your means. You invest early and often, grow
58:39
your income, spend less, invest more.
58:41
That's going to come up, result in a better outcome.
58:43
Not saying it's not possible to do the Max.
58:45
So I'll do nothing. That's not going to do it, by
58:48
the way, Like I said, this person is technically correct.
58:51
You can't do those things without like basically putting
58:54
yourself at the poverty line. So I wouldn't, but I would do
58:57
something. Wow, spoiler alert, you already
59:01
gave the rules. Oh man, people don't know the
59:05
rules. Maybe this is?
59:06
The first time listening. If you are this far into episode
59:10
31 of the Personal Appliance Club, show welcome.
59:14
We have rules and we're very strict here.
59:15
It's a cult and everyone must follow the rules or you get
59:21
excommunicated and demerit or what do?
59:24
What do people do in cults? Never been part of 1, can't say.
59:29
But maybe people are part of 1 and they don't know it.
59:31
I can't think of any. This yeah, I guess this is the.
59:34
I'm part of this cult, so. And we have a strict series of
59:38
demerits which essentially result in ACT communication.
59:43
Is that the word excommunication?
59:44
That feels right. That feels good.
59:46
It sounds too much like communication to me.
59:50
I'm looking it up. What?
59:50
Happens when you get kicked out of a call.
59:52
Is that what you're? Is that what you're Googling
59:53
right now? I'm just Googling.
59:55
Yeah, excommunication. That feels right.
59:58
Oh yeah, 'cause I feel like once you leave a call, you can't come
1:00:00
back. Yeah, I think it maybe it's a
1:00:03
little bit more. It's really what's probably
1:00:05
going to happen. Right.
1:00:06
Yeah, what's? More like kill you or like lock
1:00:10
you up. Yeah, pro communication.
1:00:12
That means you're like more in the cult now.
1:00:13
You're just like more indoctrinated.
1:00:15
Yeah, I'm just, I never occurred to me the word communication is
1:00:19
built right in there. Who are we communicating with?
1:00:21
I don't know. I don't know that we're not
1:00:24
going to get into what is it called, the study of language
1:00:26
entomology that is that. Now you're using words I don't
1:00:30
know. I'm in the science.
1:00:31
Oh, I feel like it's the wrong word.
1:00:33
These word, these word science, these word arts to mean nothing
1:00:37
to me. Oh.
1:00:39
You're more of a numbers guy, huh?
1:00:40
Exactly entomology. Is that right The.
1:00:44
Entomology, the branch of zoology concerned with the study
1:00:48
of insects. Pretty close, isn't it?
1:00:51
Like etymology. Yeah, etymology.
1:00:55
There's no one in there. It's the study of origin of.
1:00:58
OK, etymology. Etymology All right now everyone
1:01:02
knows and but if you what you should really know is how to
1:01:04
build wealth and this is how you do it.
1:01:07
You follow the Rule 2 rules of Personal Finance Club rule #1
1:01:10
live below your means and rule #2 invest early enough and see
1:01:13
you next week. The Personal finance Club show
1:01:15
is produced by Jeremy Schneider and Jen Mundia, music by Esabalu
1:01:19
and Homie. Send your questions to podcasts
1:01:21
at personalfinanceclub.com. The Personal Finance Club show
1:01:25
is Co hosted by Jeremy Schneider who is a co-owner of Nectarine,
1:01:28
an SEC registered investment advisor.
1:01:31
The views expressed on this show are those of the hosts and
1:01:34
guests and do not necessarily reflect the views of Nectarine.
1:01:37
Please refer to hellonectarine.com for all
1:01:40
relevant disclosures. This podcast is for
1:01:42
informational and educational purposes only and should not be
1:01:45
construed as personalized investment advice or a
1:01:48
solicitation to buy or sell any security.
1:01:51
Listeners should consult their own financial, legal or tax
1:01:53
professionals for advice specific to their situation.