Latest / The Personal Finance Club Show / Elon Musk Cash Poor, Health Insurance in Early Retirement, and How Bonds Work | Ep 6

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Elon Musk Cash Poor, Health Insurance in Early Retirement, and How Bonds Work | Ep 6 · The Personal Finance Club Show

0:13
Welcome to the personal finance club show.
0:15
Hey, Jen. Hey, Jeremy, what's up?
0:18
We're back, all right. I need to start today with
0:20
clearing the air. I posted a thread.
0:25
It's like a tweet. If you're on threads, it's like
0:27
a meta slash Instagrams, Twitter.
0:30
It's one of those things I like was like half asleep.
0:33
I was like, this is kind of funny.
0:34
I'm I'm going to post it. And then I woke up and like
0:36
everyone was mad at me. And so this is I got to clear
0:39
the air. I'm going to explain myself,
0:40
maybe. I mean, it'll make it much worse
0:43
and just this will be our final episode and. 6 and done. 6 and
0:50
done. Hey, they say most people don't
0:51
get past five podcast episodes. So we're we're already doing
0:54
great. All right.
0:56
So I tweeted like kind of a light hearted, dry sense of
1:01
humor take about a conversation my wife and I had one night and
1:05
it said it's 4 lines. It said my wife can we get a
1:08
$1600 stroller? Me.
1:11
No, my wife, you've never told me no before Me.
1:15
Well I guess we found the line and like that wasn't the real
1:18
conversation but she did bring up the idea of a $1600 stroller.
1:23
And I think what I actually responded was my last car didn't
1:26
cost that much, which is kind of true.
1:28
It was 2 cars ago and I sold it for $1500.
1:31
But still it had like an engine and four wheel drive and, you
1:35
know, moon roof and you know. I don't know, strollers nowadays
1:39
might have some of those things. Yeah, I guess maybe that's true,
1:42
but yeah, people are just telling me.
1:43
One person told me that she should divorce me over this
1:46
because I am a. What?
1:49
I'm an authoritarian who doesn't let her, you know, control her
1:53
money or something like that. And, you know, like me saying no
1:55
was like me saying no was like a twinkle in my eye, which is
1:57
like, you know, you of course are going to do whatever you
2:00
want because you're an adult human who does whatever they
2:02
want. But like, come out a $1600
2:06
stroller. And so I, I do need to tell the
2:07
story of the last time we bought a stroller, which is we wanted a
2:10
Bob stroller. And you don't have kids.
2:12
Do you know what a Bob stroller? Is never heard of it.
2:14
OK. It's like, it's like a jogging
2:16
stroller. So if you think of like one of
2:17
those really big jogging strollers with like bicycle
2:19
wheels on both sides with really big wheels.
2:22
And you know, these days if you buy like the nice new one, it's
2:24
about $600.00, which I thought was like the most you could
2:27
spend on a stroller. How wrong I was.
2:29
And then I was like, OK, $600.00, come on.
2:31
There's got to be a zillion of these on like Marketplace or
2:34
OfferUp. And so a lot of them are really
2:36
used, you know, that, you know, after three or four years of
2:38
kids, they're just kind of destroyed.
2:40
But I found one that was looked basically brand new and they
2:43
turned, turned out they'd never use it and they're selling it
2:45
for 75 bucks. And so it took me like a couple
2:47
days of, of watching all the listings, I found it picked up
2:50
for 75 bucks. We used it ever since.
2:53
And so the fact that you can, you know, you can get a with
2:55
through a little bit of effort instead of just, you know, going
2:58
on Amazon and going on Target and doing the easy thing, paying
3:00
$600.00 plus tax and having a very nice stroller.
3:04
I have a $75 stroller and when I'm walking down the street with
3:07
my Bob and someone walked down the street with their Bob, no
3:11
one knows who paid what for it. It's the same.
3:14
It's like, you know, it, you know, it was a little bit dusty
3:17
because it's been storages. I cleaned it up, pumped up the
3:19
tires. The thing looks brand new.
3:21
And so, you know, my conversation with my wife was
3:25
not about what she's allowed to do or if this thing has value or
3:28
not. I think for sure having a good
3:30
store is important, but there's ways to like save tons of money
3:34
without that much work. And you know, I'm a multi
3:36
millionaire and still I'm like the I thought of just shelling
3:39
out 600 bucks without, you know, looking at your other options
3:42
is, is wasteful. So it's not like you don't need
3:45
a stroller. It's more like let's, you know,
3:47
see what we need and see if there's other ways to like save
3:49
some money. And that 500 plus bucks I saved
3:52
on the stroller that just goes right into our investments and
3:55
keeps growing. So we are financially
3:57
independent and now we have both things, financial independence
3:59
and a nice stroller. So yeah, my wife, I don't think
4:04
is planning on divorcing me. And if she is probably not over
4:06
this conversation, there's much more worse things that she has
4:10
issues with, I'm sure. Oh, I honestly am guilty of
4:13
wanting to buy things new, but I think there's places where I
4:17
should probably be buying things nicer.
4:19
Like I'm I've been like the past probably 10 years.
4:22
I've been so into fast fashion and like a couple washes in
4:25
something from H&M or Forever 21 and it's like ruined.
4:29
So I think I could probably spend more on clothes but less
4:31
on like brand new appliances. Like maybe I could like search
4:35
on my Facebook marketplace for like a Nutribullet instead of
4:37
buying it brand new from the manufacturer.
4:40
I didn't do that. I bought it brand new.
4:42
I. Think that's a good point.
4:43
And, and yeah, and you know, there's, you know, you'd rather
4:45
like buy nice than there's, what's what's that saying Like
4:48
buy nice instead of buy it twice or something like that?
4:51
Never heard it. Maybe I was made-up or maybe I'm
4:54
butchering some other saying, but for sure I'd rather like,
4:57
I'd rather have fewer things and nicer things like one shirt you
5:00
can wear a bunch rather than like you said, shirts that fall
5:02
apart. But I think with any time you
5:04
spend money, I think we're all probably I'm very guilty of this
5:07
of of wasting money. I'm actually right now creating
5:10
a list of all the money I've just burned lately.
5:12
And you know, I'm like the personal finance club guy.
5:15
This is like what I think about all day.
5:16
And I've like burned a lot of my just total wasted my just like
5:20
flushing it down the toilet. And I'm going to make a post
5:23
about we can talk about a future episode when I add it all up.
5:26
And I think just being more conscious of the wasted money,
5:30
it's a really good way to build a lot of wealth rather than just
5:33
always doing the most convenient thing, always just going to
5:35
Amazon, going to DoorDash. Like I definitely do that
5:37
sometimes. But if you could just do it a
5:39
little bit less, that's like maybe hundreds of dollars a
5:41
month that you're saving that can turn into millions over
5:44
time. So.
5:45
This is coming from a millionaire.
5:46
You'll listen up. We love it.
5:48
All right, so should we get into some segments?
5:50
Let's let's do it. What are we doing today?
5:52
Do it. OK, first segment, explain it
5:58
like I'm 5, or as we've discovered, maybe explain it
6:02
like I'm 1516. By the time we get to the end of
6:04
the topic. Today's question is something
6:09
that maybe a lot of people who are interested in personal
6:11
finance may have asked. What are bonds?
6:15
Bonds are that is so unpopular right now, but you hear about
6:20
the word, you hear the word stocks and bonds.
6:23
And I think we, we'll, we'll do another episode.
6:25
We're talking about stocks. We talk about stocks every
6:27
episode. But what is a stock?
6:28
But some people, I think don't even know what a bond is very
6:31
reasonably because why would you like, do we have the bond class
6:34
in high school? No, that's why you're listening
6:35
to the personal finance clip show And and the the world of
6:40
investing, I think is often the headlines are about very
6:42
speculative things. What's the price of gold going
6:46
to do crypto, meme stocks, oil. This is speculating what's going
6:51
to happen in the future. Bonds are not very speculative
6:55
because of this is what a bond is.
6:57
A bond is a loan. It's like giving someone a
7:00
certain amount of money, a loan for a certain amount of time, a
7:04
term, and they promise to pay you back, pay you back.
7:07
So like, let's say Jen, you want to go buy a new Bob stroller
7:14
because. For my non existent kids.
7:17
Just in case you have kids one of these days and you want a
7:20
$500 Bob stroller. And so you say, hey, I'm going
7:23
to sell a $500 bond. And that basically is like a
7:26
little little piece of paper that says, I, I promise you I'll
7:29
pay you back $500.00. So I give you 500 bucks.
7:32
You give me back this piece of paper.
7:33
That's the bond. And then you say, I'll give it.
7:35
I'll give you the money in five years from now, like after I've
7:37
had kids or something. And so the term is five years.
7:41
And So what happens? That's the transaction.
7:42
You give me the piece of paper, which is the bond.
7:45
I give you the 500 bucks. You go buy your stroller, do
7:47
whatever you want. And then five years later, I can
7:50
take this bond that says not good for five years until a
7:53
certain date and give it back to you and say, hey, give me 5 my
7:55
$500 back. And you do that is like the
7:58
transaction of a bond. That's part of it.
8:01
And you might be asking, OK, why would anyone do that?
8:04
Why would someone just loan their money away for free for
8:07
five years to get it back? And the answer is they wouldn't.
8:09
Because during that five years, there's also a rate on this bond
8:14
that says, hey, every month I'm going to pay you a certain
8:17
amount of interest. The rate might be 3 and it might
8:19
not. It might not be monthly, might
8:21
be quarterly or yearly or whatever it is.
8:22
I'm going to pay you a certain amount of interest per year.
8:24
Maybe it's 3%. So that means 3% on 500 bucks is
8:29
what, 15 bucks, right? Yeah, I did that math right in
8:34
my head. No calculator.
8:35
Come on, SO. That means, so that means every
8:38
year you're going to give me 15 bucks.
8:40
So I give you the 500 bucks, you give me the bond, and then every
8:44
year you give me 15 bucks and then at the end of the term you
8:48
give me my 500 bucks back. And so bonds are a way to
8:52
basically put your money to work, to be making money for
8:56
you. If you're so just just so it's
8:58
not sitting there in your checking account doing nothing.
9:00
You know, these days bonds are paying sometimes more like 4 or
9:02
5-6 or seven percent. 3% would be pretty low.
9:05
Historically. Like a few years back it was
9:07
more like 3%. And that's what it is.
9:09
They usually come in $1000 increments, not $500 increments.
9:12
And they're usually not sold by people.
9:14
They're usually not sold by Jen trying to buy a stroller.
9:17
They're usually sold by governments or companies.
9:20
So the federal government, for example, sells lots of bonds.
9:23
That's one of the ways they fund the government.
9:25
That's the way they, you know, pay back previous interest and
9:28
do all these things that the government needs to do.
9:30
And so they'll sell these $1000 bonds.
9:33
So a rich person could go to treasurydirect.gov, look through
9:37
the list of bonds for sale and buy them, and they would own
9:40
them and they'd give the money and they'd get the get the
9:42
payments. Over time, they'd get all their
9:43
money back. And that's a very instead of
9:47
speculative way to make money. Instead of hoping gold goes up,
9:51
instead of hoping Bitcoin goes up, instead of hoping oil goes
9:53
up, that's a very responsible conservative Safeway to make
9:59
money. And basically all investors
10:01
believe that the US government is about as safe of an
10:04
investment as exists because the US government has the power to
10:09
make money and the power of the US military, yadda, yadda,
10:13
yadda. And so you pretty confident, you
10:15
know, these days with the headlines you read in the news
10:17
and the government being shut down and things like that.
10:19
Maybe not. And, and the reason the
10:21
government shut down is because, you know, the Congress has
10:24
refused to agree upon a way to keep paying back all these
10:27
bonds, paying all our bills, right?
10:29
But that's what the bond is. It's just a loan.
10:31
You buy the bond, you get the piece of paper and it's not a
10:34
piece of paper anymore. It used to be.
10:35
Now it's all done digitally. Of course, you get your, you get
10:38
your entire amount back at the end of the term and you get paid
10:41
along the way. And you can also trade these
10:42
like let's say you buy a bond with a 10 year term, two years
10:46
in, you're like, OK, I want my $1000 back.
10:48
Now you can sell it to someone else for about 1000 bucks.
10:51
It might be a little bit more, a little bit less based on what
10:53
rates are doing along the way. But these things trade all the
10:56
time. And you know, we're beyond five
10:59
year old explanation territory. But what normal investors do
11:03
like individuals like you and me, is we're not really going to
11:05
treasurydirect.gov to buy individual bonds.
11:08
It's just logistically inconvenient and complex.
11:11
You're probably buying and index fund or a mutual fund or an ETF
11:16
that owns a zillion bonds inside of it.
11:19
And it automatically is collecting those payments from
11:21
the issuers and as automatically, you know,
11:23
renewing them over time and buying and selling them as, as
11:26
like the fund needs. And so you can basically get all
11:29
the benefits of bond ownership, that growth of the, you know,
11:32
the, the, the income over time and the, and the return of your
11:35
capital without having to go manage them directly.
11:40
I love it. I, I feel like a couple of
11:42
things that I've learned since working at personal finance
11:44
club, It's, it's actually very educational to work here, by the
11:47
way. Oh good, somebody.
11:48
Was wondering. You want a job?
11:51
We don't have any. So we have one exactly one
11:53
position and I have it. I've learned that bonds are
11:58
going to return a bit more than a high yield savings account
12:01
usually, but less than the stock market.
12:03
And that as you get older you're probably going to want to invest
12:05
more in bonds because they're more stable there.
12:08
As you said, the government, we don't really know what's going
12:10
to happen, but most likely you'll get a guaranteed return
12:13
percentage as opposed to something fluctuating.
12:15
So those are two things that I've learned from you directly.
12:18
A. 100% and young people, you know, this audience is probably
12:21
mostly young people. I think the typical listener is
12:23
a millennial ish, millennial ish, or maybe Gen.
12:26
Z ish. And so the people hate bonds
12:29
right now because rates have dropped or rates have went up a
12:31
lot the last few years. And when rates go up, existing
12:35
bond values go down. If you bought bonds five years
12:38
ago and you paid $1000 your bond, no one today wants to buy
12:43
your crappy bond from five years ago because your bond didn't
12:46
pay. It didn't have a very high rate
12:47
five years ago because rates were lower.
12:49
So if rates go up as they just have over the last five years,
12:52
the existing bond values go down, you can always just wait.
12:55
You can just wait out the, the rest of the term and get all of
12:57
your money back as is guaranteed by your bond.
12:59
But if you're trading bonds and you're watching the value of
13:02
your bonds, like on your investment website, you're going
13:04
to see that they went down temporarily, but they'll come
13:07
back. And, and the opposite is
13:09
probably about to happen as rates have just started
13:11
dropping. And if they continue dropping,
13:13
all the existing bonds will go up in value.
13:16
And so I, I kind of think that as goes pop culture and
13:20
investing, the opposite is generally what is the right
13:23
thing to do. And so right now, you know,
13:26
crypto, NVIDIA, big US tech companies are super hot because
13:30
they have in the last 10 years. But is that what was going to be
13:34
hot the next 10 years? I doubt it.
13:36
I think we could be doing episode, we're doing about 50 of
13:38
these per year times 10 years. We could be doing episode 610
13:43
years from now, Jen, and we could be having the opposite
13:45
conversation about how bonds were the hottest investment for
13:49
the last 10 years, as crazy as it sounds.
13:51
But basically what you said is exactly right, which is people
13:54
in their 20s, thirties and really even 40s are like much
13:57
more aggressive. Like, yeah, yeah, I want to buy
13:59
the hot thing. I want to get really big.
14:01
But when I talk to people in their 60s, seventies and beyond,
14:04
what they really want is to not lose the principal.
14:07
They want to not lose the money they put in, which is what bonds
14:10
are good for. They just generate income.
14:11
This pay those coupon payments. So if you have a big nest egg,
14:14
you know, and our example is 15 bucks, but if you start putting
14:17
zeros behind that, it could be 150 bucks or it could be 1500
14:21
bucks or 15,000 bucks or whatever it is.
14:23
And then you can basically just live on that with a guarantee
14:25
return of your principal at the end of the term.
14:28
Amazing. I feel like we're getting into
14:30
like explain it like I'm 10 territory.
14:32
Like I feel like a 10 year old could probably grasp with that.
14:34
Yeah, some of it you're. Getting better, you're getting.
14:37
About strollers Talked. About strollers, very relatable
14:41
for me, a childless spinster. OK, let's move on to our next
14:47
segment, Money, Money. Can I ask a dumb one are?
14:52
You going to ask a dumb person or are you going to ask a dumb
14:54
question? Maybe both, maybe neither.
14:56
It's kind of a, it's like kind of Russian roulette of personal
15:00
finance question asking. You really got to stop calling
15:03
our audience dumb. This is.
15:05
Getting all in general, Yeah, well, we don't know yet.
15:08
We don't know what the question is, but the questions are never
15:09
dumb. OK.
15:10
This question is from Shannon. Shannon, thank you for writing
15:14
in. You did a really good job at
15:15
making your question nice and succinct.
15:17
We appreciate that people are getting better.
15:19
We didn't have to edit this one, so Shannon asks.
15:22
My question is about early retirement and health insurance.
15:25
Although marketplace exists for now, it seems employer
15:29
associated policies are much more extensive in coverage and
15:32
of course more affordable. Is early retirement realistic in
15:35
a country with such expensive healthcare costs?
15:38
What options do early retirees have?
15:41
Good question. Thank you, Shannon.
15:43
So there could be an entire podcast about navigating the
15:47
healthcare and health insurance system.
15:48
And so I'm going to start with a caveat that we're not, I'm not
15:52
going to solve health insurance for you right now, but I think I
15:55
can at least tell you my perspective on how you could
15:58
potentially retire in this health insurance world we live
16:01
in. First, it is kind of weird in
16:04
America that health insurance is so tied to your employer and
16:07
whether or not they choose to offer health insurance and what
16:10
health insurance they choose to offer.
16:12
You know, other countries aren't like this and it's kind of
16:14
strange if you switch jobs that you won't be able to go to the
16:16
doctor. That seems like a wild thing to
16:18
me. And so I think decoupling your
16:20
health insurance from your employer isn't necessarily the
16:23
worst thing in the world. What I another thing, as you
16:27
mentioned that employer sponsored health insurance
16:32
policies are generally better or more extensive than the
16:35
Affordable Care Act. And I don't think that's
16:37
necessarily true. Employers generally don't get
16:40
some crazy deep discount on some much better policy.
16:43
I think they generally are navigating a very similar market
16:47
to you are if you go and try to buy a policy directly.
16:50
Of course they can like negotiate a deal with the health
16:52
insurance provider if you have a big group, but like that's
16:55
essentially what the Affordable Care Act is.
16:56
There's negotiate with the healthcare providers for the
16:59
biggest group, like all all of Americans.
17:01
And so it just feels a lot cheaper and maybe more safe as
17:05
an employee because the because your employer is paying a lot
17:09
for it. So for example, you might go and
17:11
pay $1000 a month for a health insurance premium if you go buy
17:16
it directly. But if you if your employer buys
17:19
the exact same policy, they might just decide to pay 80% of
17:25
it for you. So they're writing the check of
17:28
$800 a month or 9600 bucks a year for you, leaving you to
17:33
only pay 200. So 200 bucks a month versus 1000
17:35
bucks a month sounds amazing. And it is.
17:38
But it's really essentially coming out of your salary.
17:40
So you know, if, for example, if you, if the employer had $90,000
17:44
of budget to hire you and they put $10,000 of it towards your
17:48
health insurance, then your salary is going to be $80,000,
17:51
right. And so it, it feels a bit better
17:54
because it just has, it happened behind the scenes and you just
17:56
see what you see, which is your end of the day salary.
17:59
But it's, it's not magic. It's just the employer paying
18:02
it. So that said, you know, what do
18:04
you do if you're faced with this like $1000 a month premium?
18:08
And I'll tell you what I do, which is I just buy it.
18:11
You know, I go to I went to healthcare.gov, thisislike.gov
18:14
shout out day at a personal class.
18:16
Club show We love the government.
18:19
Yeah, I know we're this is a government episode.
18:22
Yeah, but I went to healthcare.gov and you can
18:25
search based, you know, search based on your state.
18:28
For me, I'm in California. So actually I think it
18:30
redirected me to Covered California.
18:32
For your state, it might be different.
18:33
Then you can see all the prices you can put in your details.
18:37
And for all of its failings, the Affordable Care Act did some
18:40
nice things. One, it gave you guaranteed
18:42
coverage so you can't be denied. Before the Affordable Care Act,
18:45
if you had a pre-existing condition, you were just out of
18:47
luck. You would just be left to die or
18:49
go bankrupt or whatever. It's guaranteed to cover
18:52
essential healthcare, things like hospitalization,
18:54
prescription maternity, mental health.
18:57
There's income based subsidies. And so that's one option that
19:00
you might have as an early retiree.
19:02
If you retire and your income goes to 0, then you could
19:06
potentially get the Affordable Care Act health insurance for
19:10
close to 0. I am an early retiree but I just
19:13
have so many investments and money out there doing stuff.
19:16
I didn't even really bother trying to get the subsidy to be
19:19
transparent. And I feel like maybe it's not
19:21
really in the spirit of the the rule to have a wealthy person
19:26
like myself try to not pay the insurance premium.
19:30
So I just I just pay it, you know?
19:31
When I was single paying just for my own, it was around 400
19:36
bucks a month. Now I have a family of four,
19:38
it's around 1500 bucks a month, which is an eye watering amount
19:41
of money. But things cost money.
19:44
You know, you're going to need a certain amount of money to live,
19:46
whether it's 40,050 thousand, 60,070 thousand.
19:49
You might need to dedicate 10,000 bucks a year to covering
19:52
your health insurance premium. And that just needs to go into
19:55
the calculation of when can you retire.
19:58
So if you're trying to, you know, get your investments to
20:02
generate. $50,000 a year and you haven't accounted for health
20:05
insurance yet. Maybe it needs to be $60,000 a
20:08
year. You know it's not good news, but
20:09
it doesn't make it's not impossible, right?
20:11
It's just it's just a different number so and the other nice
20:15
thing I didn't finish this list about the Affordable Care Act is
20:19
that there's an annual out of pocket limit.
20:21
Meaning in the early days when I used to buy health insurance
20:25
myself pre ACA, the insurance would cover you up to $1,000,000
20:30
or something. So if you get cancer or hit by a
20:32
bus or something horrible, you might go to the hospital in the
20:36
ICU and burn through $1,000,000 of coverage in a week or two or
20:40
however fast that happens. And then beyond that, the health
20:44
insurance just stops paying. Like we did our job.
20:46
There's your million bucks now you're on your own.
20:48
Now there's an out of pocket Max, which is once you and for
20:52
us, for, you know, for an individual might be like $8000 a
20:54
year. Or if I think for a family, it's
20:56
like 16,000 a year or something like that, which is obviously
20:59
out of money, but it's not millions of dollars that you're
21:02
on the hook for indefinitely because you got a very serious
21:05
illness. It's just a reasonable amount of
21:08
money. And so again, as an early
21:09
retiree, you might have an HSA or a high yield savings account
21:13
or an emergency fund where you can cover your annual out of
21:17
pocket Max if you need to. And then still be able to kind
21:20
of rest easy knowing that a serious illness or injury or
21:24
whatever isn't going to literally bankrupt you and, and
21:28
drain your retirement. It's just going, you know, your
21:30
insurance covers it now. So as expensive as it is, that's
21:34
what you're getting for. You're getting that insurance
21:36
and that's kind of what insurance is for, is for the big
21:38
bad thing happening. So yeah, apologies on behalf of
21:42
the health insurance world because it is a gigantic mess,
21:46
but it's really not that hard to go to healthcare.gov violent,
21:49
it's just kind of expensive. Yeah, yeah.
21:52
Interesting, interesting takes. I think that we can all agree
21:57
that insurance is just very confusing.
22:00
I actually have insurance through SAG.
22:05
Oh, it's awesome. I write music and sometimes that
22:08
music goes into commercials and sometimes those commercials are
22:10
union. And so I made enough money to
22:12
like qualify for that and it's pretty affordable.
22:15
But my best friend works for one of the big insurance companies.
22:19
I won't say which one, but even when I ask her, she's confused.
22:22
So knowing somebody who's been in this industry for like 5
22:26
years at that company and still has questions and sometimes
22:29
calls me to ask questions about the rule, the laws in California
22:32
because she'll be serving people in California.
22:34
She's a social worker. I'm like the fact that you have
22:37
to call me a layman and ask about what the laws are in
22:40
California, it's not readily available, tells you how
22:42
confusing insurance is. So I think that like you said,
22:46
the research is available for you, just have to kind of do the
22:49
work and try your best to get the plan that's best for you.
22:52
Yeah, it's rough out there and and don't feel dumb because like
22:57
you said, nobody understands the stuff and we're just all trying
22:59
to do our best and it's like just incomprehensibly confusing
23:03
and this is covered. This is an end, you know, I, my
23:06
general strategy is I generally go for the lowest premium.
23:09
I'm trying to pay the least out of pocket I can.
23:11
And the difference in like your out of pocket Max doesn't change
23:14
that much if at all. And so you're still on the hook.
23:17
You know, you have to pay more throughout the year, like for
23:18
appointments or whatever, but I'd rather just keep the money
23:21
in my own account. I use an HSAA health savings
23:23
account to put in the extra money I have to cover those
23:26
medical expenses beneath the out of pocket Max.
23:29
And then beyond that, you know, that's what the, that's when the
23:31
insurance kicks in. So.
23:33
Yeah, like you said, it's for the just in case.
23:35
I feel like I'm a relatively knock wood healthy person and so
23:38
I don't generally use my insurance a lot.
23:40
So it's just making sure that nothing crazy happens because
23:42
medical debt stinks. Yeah, let's never.
23:45
Speak of health insurance again, I hate it.
23:47
OK. I don't know.
23:48
We might get more questions. Shall we move on to our next
23:51
segment, Scroll Patrol? Scroll Patrol.
23:59
Let's go. OK, so to preface, I don't
24:03
there's a lot of financial influencers I'll say out there
24:06
like yourself and I don't know the rules on like who's your
24:10
arch nemesis? Who do you like?
24:12
Who do you enjoy their advice? So hopefully this is cool.
24:17
And to that point, I these are legitimate, genuine reactions.
24:20
I have not seen this before. I genpixie's.
24:23
I watch it and react in real time.
24:24
It's terrifying to me because I don't know either, and so we're
24:28
about to find out. OK, go ahead and click on that.
24:31
My car payment used to be $350.00 a month when I lived in
24:34
San Francisco. Do you know how much I actually
24:36
paid out of pocket? Over $1000 a month.
24:40
Listen closely because almost nobody counts in all the phantom
24:43
costs of the purchases you have. My car payment was $350.00 but
24:47
that does not include gas maintenance.
24:49
I paid I think 200 bucks a month.
24:51
Parking, parking tickets. You should include that too if
24:54
you get any. That's a phantom cost.
24:55
Registration, insurance, all of it.
24:58
And if that is how much my car payment was, imagine how much
25:01
the phantom cost on a house bar. So that is remit seti seti.
25:07
I am not sure if I'm pronouncing his next exact last name exactly
25:11
correctly. He's not my nemesis.
25:13
OK, I'm not afraid. We should do more walking
25:15
videos. I was very engaged.
25:16
You should do some of those that.
25:18
Was such an easy yeah, it was, yeah, if you're just listening
25:23
as remit walking through a city talking about car payments, of
25:26
course. And yeah, not my nemesis.
25:28
I, I would say probably of all the financial people out there,
25:31
he is who I'm most aligned with in terms of philosophy.
25:34
We both, and on this topic, especially things like cars and
25:39
housing, it's just so easy to look at part of a payment.
25:44
You know, this is what my mortgage payment will be.
25:46
This is what my loan payment will be.
25:49
This is my lease payment will be whatever and ignore all that
25:51
other stuff. And what you should really be
25:53
looking at is, like, total cost of ownership, you know, being
25:57
depreciation, like all the stuff he's mentioned.
25:59
And so I love that. I love when we talked about
26:01
stuff. It really ruffles feathers
26:03
because people don't like having, like, the meter held up
26:07
to them and saying, you know, they want to live in this
26:08
fiction where anything over the car payment doesn't exist.
26:13
And if, you know, of course, his rationalization is like, yeah,
26:14
you're going to need gas anyway. But like, maybe not.
26:16
You know, he said, I forgot his exact numbers.
26:18
It was 350 a month, but I went to 600 or whatever it was.
26:21
You know, for 600 bucks a month, you might have options like
26:24
maybe you could bike to work sometimes and take an Uber
26:26
sometimes, or you could take public translator, get a cheaper
26:30
car. And I think what happens a lot
26:32
these days is people get like a $700.00 car payment, which
26:36
sounds outrageous. And then when you include what
26:38
he was talking about, it takes your total cost of ownership up
26:41
to maybe 1000 or $1200 a month. And they could maybe have a
26:46
total cost of driving a car 2 or $300 a month like I have with
26:50
many used cars I bought in my life.
26:52
And that's a massive delta. It's like $1000 a month
26:56
difference right? So I, I, I grade these scroll
26:59
patrols on a, through FF being like, this is absolute nonsense
27:04
and a being like dead on. I just want an A, maybe an A+.
27:08
You know, it's exactly right. There's nothing really
27:09
controversial here. I think absolutely should be
27:11
looking at total cost of ownership and all the other
27:13
phantom costs associated with anything that you buy, not just
27:17
trying to live in this fiction, kind of just barely make this
27:19
payment because that's how you're going to stay broke when
27:21
all these other costs, you know, invariably crop up.
27:25
OK, shout out, Ramit, shout out. And a couple more shout outs
27:29
actually #1 to my brother who loves Ramit, he is a huge fan.
27:34
And I think that you 2 are aligned and that you 2 would
27:37
actually get along in real life. And #2 is to my car, Rhonda, the
27:44
Honda. Actually, the third shout out
27:46
will be to my mom, who gave me that car for a dollar, sold me
27:49
that car for a dollar when I moved to California.
27:51
Tax. Fraud just on the record too.
27:56
And I I had to pay to ship it out here because I was not
27:58
driving across the country in a 2008 Honda Civic.
28:00
But it's been, I've been in California now for five years.
28:05
My mom had that car for probably like 7 or 8 before me because it
28:08
was used when she got it. And I am, I thank God every day
28:12
for this car. Just like rub the little
28:14
dashboard. I'm like, thank you, Rhonda,
28:16
because not having to pay a car payment is so clutch.
28:19
And I hope I never have to pay 1 again.
28:22
Hope that Rhonda just last me for another 50 years.
28:24
Yeah, that'd be nice. Yeah, my, my now it was 2 cars
28:28
ago, but I drove it from 2000, 10 to 2016 was a 1999 Ford
28:35
Explorer. I paid $3000 cash when I kind of
28:39
like, yeah, I moved to California, went to Craigslist.
28:42
You know, it was like the I kind of wanted Toyota just for
28:45
reliability, but the Toyota's are like twice as much money.
28:48
Same make mile years kind of equivalents.
28:51
And so I bought a Ford Explorer for 3000 bucks once a year or
28:54
so. It had a mechanical problem when
28:56
I took it to this guy named Dave and he charged me 500 bucks and
29:00
he fixed the the Serpentine belt or the fuel pump or whatever
29:05
stupid thing went wrong in these cars.
29:07
And you know, it was a little bit inconvenient, but my total
29:09
cost of ownership on that car over the six years I drove it
29:12
was probably about a couple 100 bucks a month, you know, 500
29:15
bucks a year for those repairs. That is less than 50 bucks a
29:18
month in repairs. There was no car payment.
29:20
The depreciation was only 1500 bucks because I bought it for
29:23
3000. I sold it for 15106 years later
29:27
and it was a great car. You know, people are so
29:30
emotional about cars. You know, they're like, oh, I
29:32
need to like project success or girls aren't going to like me or
29:36
yadda yadda yadda. Like I I took girls on dates in
29:39
that car. They thought I was cool.
29:40
You know, like if a girl literally was going to look at
29:42
my car and say this guy's not cool.
29:44
He drives a very clean, well maintained like SUV like now.
29:50
What Car did you have? Did you have that car when you
29:53
met Andrea? I might have actually because we
30:00
met and then we started dating many years later.
30:03
When we when we started dating, I was driving a Mazda, a Mazda
30:08
CX5. It was much more new.
30:10
It was like what I bought after I sold the the Explorer.
30:15
So all right. Is she just the Is she just the
30:17
Mazda chaser? We'll never know.
30:19
You know, she might just be. One of those, Yeah.
30:21
You're a lawyer wife. Right, Yeah, my private practice
30:24
owns her own own practice attorney wife.
30:27
She's just, she's just trying to, she sees a Mazda mini SUV
30:31
driving by and she's like, how do I get in that, that passenger
30:34
seat, right? OK, amazing.
30:36
Cool. Well shout out to Ramit.
30:38
Good job A plus I I believe. Let's get into our final segment
30:43
of the episode. Money, money.
30:46
Jeremy had time today. Oh man, and did I need time
30:50
today because I posted a post on Instagram that was titled How
30:56
Rich is Elon? Went viral.
30:58
And and it went viral. I think this counts as viral as
31:03
80. 1000 or something? 82,000 likes 3600 comments.
31:08
It's I think I think it's getting It has about 5 million
31:11
views. That counts as a viral.
31:13
I feel like, yeah, you know, in the personal finance world.
31:16
Relatively exactly relative to our average post, it's
31:18
definitely viral, which is maybe speaks poorly by average post.
31:21
And so so yeah, just to describe this if if you're watching,
31:25
you'll see it scrolling by. But if you were listing, it's a
31:29
bar chart says Howard is Elon and that and these bars go
31:33
horizontally to the right and the top line is median family.
31:38
And it basically compares Elon Musk's net worth to all these
31:42
different net worths. And the median family net worth
31:45
in the US right now is 193,000, which isn't even a pixel on
31:49
this. It's like so small it isn't even
31:50
a pixel. And a lot of the comments, this
31:53
isn't even the common I had time today for, but a lot of comments
31:55
were like, how is the median income 193,000?
31:59
And the answer is it's not. This is an income, it's net
32:02
worth. Net worth is all the stuff you
32:04
own minus all the stuff you owe. And so the median American maybe
32:08
has some equity in their home, owns some cars, has some
32:11
retirement accounts. You Add all that stuff up as
32:13
about 200 grand, not they're not making 200 grand a year.
32:17
Median, median incomes, I think closer to like 70 grand or
32:20
something like that. And that says millionaire.
32:23
Then it says, this one's also interesting.
32:25
That says the top zero, 1% American.
32:28
So if you're in the top .1%, you have $62 million.
32:33
Again, you're not making $62 million, you have $62 million.
32:36
And that also is not even a pixel.
32:39
So imagine a bar chart where you can't even see it because it's
32:42
not even a pixel, $62 million. But then you start scrolling.
32:46
Scroll, scroll, scroll, scroll, scroll, scroll, scroll, scroll.
32:49
You used to scroll 10 times before you get to Elon Musk's
32:52
net worth. That just crossed recently $500
32:54
billion. And so it, I think this is done
32:58
well because big numbers like this are so hard to wrap your
33:02
head around. A billion is 1000 millions, 500
33:07
billion is 500,000 millions. So when you multiply those
33:12
numbers 500,000 * 1,000,000, that's how you get to 5 billion
33:15
or 500 billion. And so you can't even wrap your
33:18
head around that until you start scrolling, scrolling and you're
33:21
like, OK, I can have $62 million, be able to buy any
33:25
house, any car, like, you know, be in a top .1%, like the rich
33:29
of the rich of the rich and not even be a pixel compared to 10
33:33
pages of scrolling for Elon Musk.
33:36
And so people see it and it's like, I think it starts to put
33:38
into perspective, but what did I have time for today?
33:43
And actually we have two of these.
33:44
Do you want to read them? These these two comments kind of
33:46
encapsulate what was a really common theme in I want to say, I
33:52
want to like, you know, over stereotype these commenters, but
33:54
I'm going to say like, kind of like bro Y dudes.
33:58
They might have been in a frat. They probably make 40 grand a
34:01
year and and fancy themselves financial.
34:08
I don't know aficionados and and so they pointed out what Jen?
34:12
OK so let me read this first comment.
34:14
It says you can't eat equity. Great visualization.
34:19
Love these. But he doesn't have that sitting
34:21
in cash and if he liquidates #1 the valuable tank and #2 he will
34:26
get the ever loving beep taxed out of whatever he gets out at.
34:30
Do you want me to read the second comment too?
34:34
They say guys, he doesn't actually have $500 billion in a
34:38
shipping container. It's all in the value of the
34:41
things he owns. He borrows money using his Tesla
34:44
stock as collateral to live on. He is asset rich, cash poor.
34:48
I don't think Elon is cash poor but OK.
34:51
Well, that's what I want to talk about because both of them are
34:54
basically saying the same thing. And, and to be fair, I think
34:57
there's a hint of truth. So if you Google Tesla stock
35:00
today, the share price is $433 a share for Tesla stock.
35:05
And that price is basically the price at which the last share
35:09
traded. So for example, John, you and I
35:12
went to the New York Stock Exchange and we wrote down a
35:15
little deal between US and said, hey, I'll sell you my share of
35:17
Tesla and you buy it. We, you know, agree on $435 a
35:20
share, then then the share price becomes 435.
35:24
And so when you, when we say he's worth 500 billion, we take
35:29
the number of shares he owns in Tesla, which is a ton,
35:32
multiplying it by the most recent share price that the most
35:37
recent transaction happened at. And that's how we get the 500
35:40
billion. And so both these commenters
35:41
kind of have a point, which is he doesn't have the cash.
35:46
We're just assuming that that share price is good for every
35:49
single one of his shares. And that can't be true because
35:52
like the first commenter said, if he liquidates, if he's tries
35:55
to, if he goes to the New York Stock Exchange and sells all of
35:58
his millions of shares, the price will tank and he'll get
36:02
the Everly living bleep tax on them.
36:04
But is that true? And my answer is no, that's not
36:08
true. And I'll tell you why, because
36:12
Elon Musk can sell his stock and he might say, no, Jeremy, that's
36:16
what I said. They can't.
36:17
It was, it's all this like vapor money.
36:19
It's just this multiplying of money.
36:21
But here's what happened in 2022 on April.
36:24
And, and I know this because this is since he's an insider,
36:27
since he's a, you know, executive level C guy, whatever
36:30
at Tesla, he has to report all of his trades.
36:34
He can't trade in secret. When he buys or sells stocks or
36:37
gets equity grants or exercises options or whatever you do with
36:42
stock, he has to post it publicly to the government,
36:46
which is very readily accessible if you just Google it.
36:48
And I'm going to show you that here.
36:50
So on April 26th, 2022, Elon Musk sold some stock.
36:54
How many shares did he sell? 109,000 shares.
36:59
The share price $904. Oh my God.
37:03
And you multiply it together. On that day he sold $98 million
37:10
worth of stock. So he gets so this cash poor guy
37:15
in one instant, basically on this one day he sold $998
37:20
million he and then that money was a cent.
37:22
Like literally could have gone to a bank and taken the cash out
37:25
and put into a shipping crater. More likely just held it into a
37:28
his checking account or whatever, right?
37:29
But he wasn't done on that day. He sold again.
37:33
He sold 84,000 and 51 shares, The average price $905.
37:38
And look what happened between his first sale that day and the
37:41
second sale that day. The the share price went up.
37:44
And so even though he sold $98 million worth of stock, it
37:49
didn't crater the share price. In fact, the share price went up
37:52
for a second sale and that the value of that sale was over
37:56
$76,000,000. That's two in one day.
37:59
You may say, OK, now we're at 98,000,000 + 76,000,000.
38:01
We're at we're at $175,000,000 in that one day in Cash, Cash
38:06
mind you. Not cash poor.
38:08
Not cash poor, but wait, that's two.
38:10
Over the next three days, April 26th, 27th and 28th of 2022, he
38:16
did 214 such transactions. He sold, sold, sold 214 times,
38:22
all sales. The starting share price
38:24
$904.00. The ending share price $853.
38:29
So OK, it went down. It was about a 5 percent, 5%
38:32
drop, but that's over the course of three days.
38:35
If you look at the range over those three days, this 214
38:39
sales, the share price range was 822 to $999.
38:47
His average sale was at $902.00. So in these three days he took
38:54
out of the stock market $8.5 billion in cash and the average
39:04
price at which he sold his stock was .4% lower than the first
39:10
price of which he sold the stock.
39:12
So this these commenters who said this is vapor money, this
39:17
isn't real. He's cash Lily said cash poor
39:20
Gen. This man has $8.5 billion in
39:23
three days in cash that he monetize and the price dropped
39:29
nine point O 4%. Do you think that a .4% price
39:34
drop to get $8.4 billion in cash represents the value tanking?
39:42
No, absolutely not. I don't think so either.
39:44
That seems incredibly stable for this very speculative stock like
39:48
Tesla, right? And wait, he wasn't done, you
39:53
know. And that was, that was just in
39:55
April. In August, a few months later,
39:57
he sold $6.9 billion of stock. In November, he sold $3.9
40:02
billion of stock. In December, he sold $3.6
40:04
billion of stock. With hundreds and hundreds and
40:06
hundreds of these transactions also sell, sell, sell, sell sell
40:09
sell all Cash Cash in his checking account totaling up
40:13
22.9. Billion dollars worth of stock
40:17
not and, and, and, and, and that's cash, right?
40:20
And so this idea that he is just, you can't eat equity, he
40:23
says you period can't period eat period equity.
40:26
This man in the course of a few months and A and a few days in
40:29
the case had $22 billion of cash.
40:33
You can literally buy the most expensive everything on earth
40:37
and still have about $15 billion left in cash, right?
40:42
So no, it's just, it's just simply not true because Tesla is
40:45
a massive company and has lots of liquidity.
40:47
And so, and so when you are comparing, you know, and, and a
40:50
lot of these comments have things like this, like, oh, it
40:52
doesn't count because he doesn't have in cash.
40:53
He can have it in cash if he wants, as I've just
40:55
demonstrated. And rich people generally don't
40:59
keep their money in cash. Even people as you know me on
41:02
that bar chart, I'm like, I'm right in between the average
41:06
American. And stuff.
41:07
Right, that's a less than the pixels.
41:08
Poor Jeremy can't even see it. You see mine?
41:12
But we're all the same compared to Elon Musk.
41:15
I'm not. I'm in the pixel, right?
41:16
But you know, I don't keep my money in cash either.
41:17
I keep it in stocks and bonds so that it goes up in in value.
41:22
I have. A question about that.
41:24
Yeah. I mean, I know Elon is very
41:26
volatile, so maybe you don't have an answer for this, but is
41:28
there a reason specifically those first three days, he just
41:31
want to become richer And like, look on paper, is there a reason
41:34
he took out that much? He sold that many shares over
41:36
the three days and then did it again a few months later?
41:38
Is there? Do you know why?
41:40
Do you know why? Is this a rhetorical question?
41:41
Are you not sure? I don't know why I'm, I mean,
41:43
I'm thinking he's not, he's not very reasonable.
41:45
So I'm wondering if that like he just was like, I want to be
41:48
richer. I want to like, I know he just
41:50
became the richest man and it's been between him and another
41:52
person for like a few months or whatever weeks.
41:55
So I didn't know if that was part of him just trying to
41:56
become the richest man in the world or whatever it may be.
42:00
So there's a there's a very specific reason, and the reason
42:03
was he bought Twitter. Oh, that was when he bought
42:07
Twitter. Yeah, he, he made, you know,
42:10
this is kind of the. Cost him.
42:12
So I think, you know, now I actually didn't research this
42:14
out of time, but I think the Twitter purchase was around 40
42:17
billion and 20, you know, 20 billion of that or so.
42:21
He just paid in cash with a wire transfer out of his checking
42:25
account, right? And the rest of it, casual loans
42:27
and investors and yadda, yadda, yadda.
42:28
He like did some other stuff too.
42:30
And so, you know, this idea that OK, this, you know, he's not
42:33
really doesn't really have that much money that like, no, he
42:35
does. And like, if he wants to do
42:36
something, you know, if he wants to buy the biggest yacht ever
42:40
created, it's I think 3 or $4 billion, he can sell that in a
42:43
day, the biggest shot. So the man's not cash poor.
42:47
If he wants to do something even crazier than buying the biggest
42:49
shot, he wants to buy entire publicly traded companies like
42:53
Twitter was at the time and control media and decide how
42:57
people are allowed to share their thoughts on this former
43:01
formerly publicly traded company.
43:03
He can buy that. You know, it took a little bit
43:04
longer the day because there's, you know, moving pieces to, you
43:08
know, taking a company private like he did, but people.
43:10
Thought he wasn't going to be able to do it and then he did.
43:13
Yeah, it's crazy. So I saw so many comments like
43:16
that and these drove me nuts because like, no, this, this man
43:19
has $500 billion and like that's real, you know, obviously isn't
43:22
being held in cash as today because that would be crazy.
43:24
No one would do it. But when he needs it, he has the
43:27
power, control, cash, whatever he needs.
43:30
Yeah, I think you can call Elon a lot of things, but you cannot
43:33
call him cash board. Cash board was was, yeah.
43:37
And also I don't think 500 billion would fit in a shipping
43:40
container. 500 billion is bottom like even if there's hundreds, I
43:43
think you would need like a shipping freight an entire
43:47
freighter. You know, I don't we could do
43:49
that. Visualization.
43:50
I'm sure someone can tell us, like how much space would $500
43:53
billion in one hundreds take up? Someone that's my job.
43:56
I'm going to do that. That's that's my next post.
43:58
OK, great. All right, so that was my rant,
44:01
but it is really mind boggling that this you can just literally
44:05
press sell on 109,000 shares 200 times in a over the course of
44:11
three days and walk away with $8.5 billion in cash.
44:15
And that was even half of what you did that year, right?
44:17
So you can, you can convert stock to cash.
44:20
Pretty crazy. There's liquidity in the market.
44:22
So wild. OK, you definitely had time
44:24
today. What's we are actually going to
44:27
read some reviews before we get out of here today.
44:30
We've been getting reviews. We have 5 stars on Apple
44:33
Podcasts, only five stars Hallelu.
44:37
And so we're going to read a review and or two.
44:41
And if you are listening and you're enjoying the podcast,
44:44
leave us a review on pretty much anywhere you listen.
44:46
You can leave a review and reading Spotify and Apple
44:48
podcast. So I'll read this first one from
44:50
Apple podcast from JoJo Trick 7 with an X Jeremy and personal
44:56
finance club are the reason I felt confident enough to start
44:59
investing in November of 2021 at 35 years old.
45:03
I took the original course, notes and all, and immediately
45:06
opened up a Roth IRA and signed up for the four O 3B at my job.
45:10
I have maxed out my Roth IRA yearly since and contribute to
45:14
my 4 O 3B on a biweekly basis. I also learned how to
45:17
essentially create my own portfolio to mimic a target date
45:20
index fund since they were not offered as options in the 403 B
45:24
plan. And he's pretty funny too.
45:27
What? My gosh, JoJo, I love you.
45:29
I literally when I'm sad, I go and read reviews and I filter
45:32
for the ones that have the word funny or hilarious and then I
45:34
make myself feel better. That's.
45:36
Guys, you want to boost Jeremy's ego?
45:37
Call him funny. He loves that.
45:39
Thank you. OK, And I want to do another
45:41
really quick one. It's from Bob One on Spotify,
45:45
and it says Jeremy and Jen. Nice job in parentheses.
45:50
Jeremy's dad. Thanks, Bob.
45:53
One. I have beef with your dad
45:55
though, because you only put 1 N in my name.
45:58
I'm going to leave it alone because you know, he left us a
46:00
good review. But Bob, next time 2 ends.
46:04
I mean, I think that might be the least of his typographic
46:08
errors. At least he doesn't sign all his
46:09
text messages from dad. Thanks, Dad for the nice review
46:14
and thanks, JoJo. Yeah.
46:16
So if you want to leave us a review and help throw the word
46:19
in. Yeah, JoJo, it's like there's so
46:20
many reviews like that. People who literally went from
46:23
not understanding this stuff at all to literally being on the
46:26
path to multi $1,000,000 status. And it literally just.
46:29
I've said literally way too many times in this paragraph, but it
46:34
makes me very happy. We'd love to see it.
46:36
OK, well that's all that we have time today for on the Personal
46:39
Finance Club show. Thank you for listening and
46:41
we'll see you next week. And don't forget the 2 rules of
46:44
Personal Finance Club. Rule #1 Live below your means
46:47
and rule #2 invest early and often.
46:50
See you next time. The personal finance club show
46:52
is produced by Jeremy Schneider and Jed Mundia, music by Essa
46:56
Balu and Homie. Send your questions to
46:58
podcast@personalfinanceclub.com. The Personal Finance Club show
47:02
is Co hosted by Jeremy Schneider who is a co-owner of Nectarine
47:05
and SEC Registered Investment Advisor.
47:08
The views expressed on this show are those of the hosts and
47:10
guests and do not necessarily reflect the views of Nectarine.
47:14
Please refer to hellonectarine.com for all
47:16
relevant disclosures. This podcast is for
47:19
informational and educational purposes only and should not be
47:22
construed as personalized investment advice or a
47:24
solicitation to buy or sell any security.
47:28
Listeners should consult their own financial, legal or tax
47:30
professionals for advice specific