Latest / The Personal Finance Club Show / Looming Recession, High Fee 401ks, and Estate Planning for Migos | Ep 29

Transcript

Looming Recession, High Fee 401ks, and Estate Planning for Migos | Ep 29 · The Personal Finance Club Show

0:16
Welcome back to the Personal Finance Club show.
0:18
Hey, Jen. Hey, Jeremy, we live.
0:21
So we're actually live right now, kind of.
0:24
I decided just on a whim to go live on Instagram.
0:28
And so I set my phone kind of off to the side, catching a more
0:31
wide angle view of, like, the lights and the computer and the
0:34
set behind me. It's not that fancy, just like
0:37
in a bedroom of my home that I kind of made into a podcasting
0:40
set. And I realized that, you know,
0:41
I'm like a, you know, polo shirt with a collar, but then I'm the
0:46
bottom swing. Right, the comments are thoughts
0:49
on the S&P 500. And also wow, those legs.
0:52
Haha OK love the bare feet. I hope that you can see my feet
0:57
too. I I've never like, I set up like
0:59
a tripod, you know, halfway across the because I actually
1:02
don't even know what it. Looks like I'll take a
1:03
screenshot so you can see the. Oh yeah, take a screenshot, OK.
1:06
Good. Oh my God, it's so funny so.
1:08
If you're one of those live watchers, what'd you say this
1:11
is? A scam.
1:11
The tiles only go halfway across the wall.
1:14
Oh, that's true. It's all everything's,
1:16
everything's fake. Everything's fake.
1:18
I mean, it is actually real. It's real.
1:19
Like kind of move this stuff back here.
1:22
It's not a green screen. Not a green screen, OK.
1:27
Amazing. All right, this is exciting.
1:30
I think the tiles help with the sound a little bit.
1:33
Sure. All right, so we're live.
1:35
You are listening to this as a podcast.
1:37
Maybe you can watch it live. And if you're listening live,
1:39
you can only hear my voice. You can't hear James because
1:42
we're we're not that tech savvy yet.
1:44
Maybe we'll figure it out in the future if this is a hit.
1:47
But anyway, should we like do the podcast?
1:50
Yeah, let's get into it. What's our first segment?
1:56
Hot Topics. What is today's hot topic?
2:01
OK, I have a Forbes post that says economists warn rising oil
2:05
prices may push US into a recession.
2:08
We talk a lot on this podcast for the past six months, but I
2:10
don't know if we've directly addressed recession threats.
2:13
What are recession indicators, as they say, and what does it
2:16
mean to be in a recession? Yeah.
2:19
So a recession is one of those things that it's just like
2:22
thrown around a lot like, oh, we're in a session, we're in a
2:24
recession, we're going to be in a recession.
2:26
And it's just like this bad economic thing.
2:33
And what it is is basically when there was a recession means the
2:37
economy is in like a noticeable decline, meaning we're selling
2:41
less stuff, fewer jobs, less money.
2:44
And normally in a normal American economy, we want things
2:48
to be growing. And so, and there's a bunch of
2:51
indicators and, you know, the economy is a very complicated
2:55
thing. It's made-up of companies and
2:58
consumers and lenders and money and stocks.
3:01
And, you know, there's a million different like little things
3:03
that make up this thing we call the economy.
3:06
And so to say yes or no, we are a recession, we are not a
3:09
recession is kind of a tricky distinction to make.
3:13
And so some of those indicators you mentioned are first a big
3:17
one is the GDP, the gross domestic product.
3:20
That's basically our best guess at adding up all the money for
3:25
all the stuff, the goods and services that's sold in the
3:28
country in a year. That's the gross domestic
3:31
product. So everything Amazon sells,
3:33
everything Walmart sells everything, you know, Boeing and
3:39
flights and transportation and medicine and all the stuff
3:44
everyone sells added up together.
3:46
That's the gross domestic product.
3:48
Normally that's growing, but if it's shrinking, that's a signal
3:52
that we might be in a recession. But it's not the only signal.
3:55
There's also things like rising unemployment, you know, if the
3:58
gross domestic product is shrinking, but then there's more
4:00
and more people have jobs. Those are kind of conflicting.
4:03
You're like, OK, well, what's going on here?
4:05
Is that a recession? And I'll tell you who decides in
4:07
a SEC. Lower consumer spending.
4:09
If you look at all the money consumers are spending, if they
4:11
spend less quarter to quarter, and these things are measured
4:14
quarterly, every three months, they look at these things and
4:17
decide. And I'll tell you they are in a
4:19
SEC falling business activity, for example, if there's less
4:23
manufacturing, if, if retail sales are down, that could be an
4:26
indicator of a recession. And finally, financial strain,
4:30
things like companies having reduced earnings, the stock
4:33
market dropping, lending being tighter, you know, lenders, but
4:37
banks do not want to lend as much money.
4:39
All these things are kind of indicators of a recession.
4:42
So you can imagine a scenario where it's very extreme.
4:45
We have four quarters in a row of declining gross amounts of
4:48
product. Unemployment is skyrocketing,
4:50
consumer spending is plummeting. You know, manufacturing and
4:54
retail are dropping. All the companies are
4:57
experiencing reduced earnings. The market is dropping, lending
5:01
is tighter. If everything, every one of
5:03
those is true, I think everyone would agree, OK, that's a
5:06
recession. We're officially in recession.
5:08
And so then the question is, OK, well, what Like when do we cross
5:11
that line? And there's actually an
5:13
organization called the National Bureau of Economic Research and
5:17
BER and they decide when we're in a recession.
5:21
And so some interesting points about this.
5:23
I think as much as there is any sort of pop culture concept of a
5:27
recession, I think the pop culture concept of a reception a
5:32
recession is two quarters of negative GDP growth.
5:37
So it's saying OK. And quarter 2, if we as a
5:40
country sold less stuff than we did in country and quarter one
5:44
that's negative growth. If that happens again in quarter
5:46
32 consecutive quarters of negative GDP growth, a lot of
5:51
people say that's a recession. And technically that's not true
5:54
because if again, that's only one of the indicators of the
5:57
other indicators are all really positive.
5:59
And maybe that, you know, reduced GDP growth is like a
6:02
lagging metric for some reason from previous years or whatever
6:05
the NBER might say, no, we don't think this is actually a
6:08
recession. We think that things are
6:09
actually still growing. This isn't negative growth
6:12
overall. It's just one indicator.
6:14
And this actually became a little bit of a political issue
6:17
back in early 2022. Do you remember this chat at all
6:19
where Trump was losing his mind for like a week over the over it
6:23
not being called a recession? No, I can't keep up with what
6:27
goes on with that man. In the list of Trump losing his
6:30
mind is like wait on the list, but in quarter one of 2022, we
6:35
had negative GDP growth and then quarter 2 came around and early
6:39
indications were were saying OK, this might be a negative quarter
6:43
again. And so then Trump's like this is
6:45
a recession, this is by nomics, blah, blah, blah.
6:47
You know, like it turns out by the way, when the GDP numbers
6:51
came in, GDP growth was positive in quarter 2 of 2022 is +.6%.
6:57
In fact, in Biden's 15 quarters, he was president, you know, four
7:01
years times four quarters of 60, sorry.
7:04
And it's 16 quarters as presidents, 15 of those had
7:07
positive growth. And so it wasn't like there was
7:09
like this huge negative growth on their Biden.
7:11
There's one quarter where it was negative in 2022.
7:16
And so, you know, it was this I remember maybe just because I
7:19
like follow stuff, work like in my news feed or whatever, but
7:24
all the right wing people are saying that this is officially a
7:26
recession. And then the NBER had to say,
7:28
excuse me, technically we define recessions and it has there's no
7:32
strict rule about two quarters of GDP decline.
7:35
And in fact, we don't even decide if it's a recession.
7:38
This is like not my nerdy voice until months later because, you
7:43
know, they don't know all that. You know, it's very hard to like
7:45
collect all these numbers because the economy is a big
7:48
complex place and the numbers take a while to to filter into
7:51
the people who need them or whatever.
7:53
And so recessions are often declared after they already
7:57
started. So it might be maybe quarter 3
8:00
of 2026 when the NBER says, hey, we're in recession starting in
8:05
quarter one, by the way, because that's when all these metrics
8:08
started that we're now all able to process.
8:11
And so the last actual recession that happened was back in 2020,
8:16
when you know what? Happened in 2020.
8:20
I know every time, every time I hear the, the number 2020, I
8:24
like everyone like shudders like ho ho.
8:26
But yeah, as you realize, as of course, remember COVID came like
8:30
everything shut down. GP just plummeted, you know,
8:35
employment skyrocketed, consumer spending plummeted business, you
8:38
know, every single things pointed to it.
8:40
And it was actually relatively short because, you know, one or
8:42
two quarters later, it kind of like mostly came back.
8:45
And we've all been dealing with the, you know, the echo effects
8:48
ever since. But in 2020, that was our last
8:51
recession. And then there's been none
8:52
declared since then. And so, you know, you send me a
8:55
headline about economists warn of recession fears.
9:00
I feel like they could post that every single week for all of
9:03
eternity just because there's always some reason to think that
9:07
in the future this might happen. And, you know, this, this
9:11
headline says rising oil prices may push us into a recession
9:14
because rising oil prices mean it's more expensive to ship.
9:18
Things mean consumer spending might go down, which means
9:20
unemployment might might drop, which means GDP went, you know,
9:23
like all these things are kind of linked to each, to each other
9:25
to some degree. And so it, it makes for a really
9:29
snappy headline to say, hey, oil prices are going up.
9:31
That's going to grind the economy to a halt.
9:33
We're going to be in a recession.
9:35
Is that true? You know, possibly, I don't know
9:39
the future. I certainly don't think it's
9:41
like true yet, or certainly the NBER hasn't declared it to be
9:44
true yet. But I think, you know, this is
9:47
personal finance club show, not macroeconomic show.
9:50
And personally, this has like very little to do with our
9:53
lives. You know, I remember I was an
9:58
adult during the Great Recession, the 2008 financial
10:01
crisis, which was, you know, after the Great Depression in
10:06
the 1930s. Mostly, I think a lot of people
10:10
consider the Great Recession to be like the next biggest
10:12
financial crisis. And I was starting a company at
10:15
that point. It was like a little Internet
10:16
company and I was trying to sell things.
10:18
And I remember probably less than.
10:22
But people ask, they say, hi, hey, how's the recession
10:25
impacting your business? And my answer was like, I don't
10:28
know, you know, I'm trying to sell more than I did last year.
10:31
You know, our growth trajectory has way more to do with how good
10:36
our product is and how good we're selling and how, you know,
10:39
how good the referrals are and, you know, the million little
10:43
things that are going to growing a business.
10:44
And the macroeconomic picture of, you know, inflation or
10:49
unemployment being slightly higher had very little effect as
10:52
far as I could tell, on the growth trajectory of my own
10:55
business. And if it did have an effect, it
10:57
wasn't really visible to me. It was kind of like an invisible
11:00
headwind. I was like, oh, we're not
11:01
selling as much. I don't, you know, I don't
11:03
really know why people aren't saying, Jeremy, we're in a
11:05
recession, so I'm not going to buy a product.
11:08
You know, it just kind of was what it was.
11:10
And so and and that was me starting a business.
11:13
I think as you as an individual, it has even less to do with you.
11:15
It's like, do you still have your job?
11:17
If yes, it's kind of business as usual.
11:19
You know, if is your job more likely to lay off, you know,
11:22
maybe you should be aware of that, but I think that has way
11:24
more to do with how your company's doing than how all
11:28
companies are doing, right? You know, sometimes layoffs
11:30
happen not during a recession that impacts the employees of
11:33
that company. And often times during a
11:35
recession, you don't get laid off and that it doesn't impact
11:38
you, right? So, you know, I wouldn't get
11:42
overly scared about a recession. You know, stay on your lane,
11:46
focus on growing your own income, living below your means,
11:49
investing early and often and so they don't change your
11:52
investment strategy. I think a lot of people think,
11:54
oh, if we're going to be in a recession, shouldn't I sell my
11:56
stocks now and then buy it after the stock market goes down?
11:59
And the answer is no, because you know, that has probably
12:02
already been priced in. If the if the if we're going to
12:05
be in a recession, the stock market already knows that and
12:07
it's too late and he's sort of jumping in and out of the
12:10
market. As I always say, it's much more
12:11
likely to hurt you than help you.
12:13
So doesn't matter. Doesn't matter.
12:16
In conclusion, doesn't matter. Doesn't matter.
12:19
I mean, you know, it might be sad for the country if we're in
12:22
a recession, but recessions are often usually very short.
12:24
They're measured in months, not years.
12:27
And they're, you know, usually less than a year.
12:28
And so if if a recession happens, that would be sad, I
12:32
guess. But yeah, I found myself being
12:35
very conscious of the live thing all of a sudden because I'm
12:38
like, oh, they can't hear John. Maybe this is that's.
12:40
OK, I'm not really saying anything interesting.
12:42
I did see somebody, H Dragon 23 said.
12:44
Sup Germ, if you want to shout him out.
12:46
Age Dragon 23 is commenting on the live now.
12:49
Is this. This is like a hybrid live
12:51
recorded podcast. Well, you know, we got to keep
12:53
the people engaged. So, Age.
12:55
Why don't you shout out Age Dragon 23?
12:58
Didn't I say Age Dragon 23? I said that I thought.
13:00
Say hi. Hi, Age Dragon 23.
13:03
All right, enough with the live people.
13:05
You know, they're not committed. The podcasters, the podcast
13:08
listeners, they're committed. They're here for like the hour
13:10
the the Instagram live people. They're like, what's going on
13:12
here? Swipe, swipe, swipe.
13:14
You podcasters, you got you got an attention span that's longer
13:17
than you know, 5 seconds US Social.
13:20
Media. Well, not.
13:21
You're roasting the people watching you actively.
13:23
That's hilarious. OK, let's move on to money.
13:26
Money. Can I ask a dumb one?
13:30
Are you asking a smart question to a dumb person?
13:33
Maybe what's the question? Maybe.
13:35
OK, we've got a question from Luca.
13:38
My name is Luca, I'm 23. I'm currently living in Miami,
13:40
FL. In August 2025, I started my
13:43
first full time job as an analyst earning $65,000 a year.
13:48
My question is, my employer offers a four O 1K with no match
13:51
and all available investment options have gross expense
13:54
ratios around 1% or higher. Should I contribute to this four
13:58
O 1K or continue investing only in my Roth IRA where I've been
14:01
maxing it out for the past two years and currently invest in
14:05
FSKAX&FZILX, both with very low expense ratios?
14:12
All right. First of all, Luca, that was
14:14
like an excellent question. You said your name, you said you
14:17
age your age, you said where you're from, and then you gave
14:21
like a really? Did you edit this down or did
14:23
you send it like this this? Is how he asked it.
14:25
Oh. My God, Luca, you're you're
14:27
crushing it in terms of like you win like the question of the
14:29
year award for the podcast, like Park is just is is great.
14:32
And it was like a really good question and gave all the
14:36
necessary details in a nice concise manner.
14:38
All right, so so your question is all right.
14:41
I have a 41K but appears to be kind of shitty 41K.
14:44
There's no match and then the expense ratios are high and so
14:48
should I use it still or should I do the Roth IRA this year?
14:52
The Roth IRA Max contribution limit is $7500.
14:56
You said you've been maxing out the past two years, which is
14:59
insanely amazing by the way. You were absolutely crushing it.
15:01
You're 23, you've already maxed out your Roth IRA two years in a
15:04
row and you're and you're listening to the personal
15:06
finance clip show. If I could bet $1,000,000 on
15:09
whether or not Luca was going to be a millionaire, I would like,
15:13
you know, short of him dying in some sort of horrific train
15:15
accident or something. And trains are notoriously safe.
15:18
I don't even know why I mentioned trains.
15:20
But you know, I would like, I would be gladly about $1,000,000
15:24
that Luke is going to be a millionaire because this is the
15:26
kind of mindset that makes a millionaire.
15:28
He's already maxing out his Iras and he's listening to the
15:30
personal finance club show. How amazing.
15:33
So yeah, you're putting 7500 bucks in this year.
15:36
That's 11.5% of your gross, which is for 23.
15:40
Really good. So I mean, you know, 7500 /
15:43
65,000 how much you make, That's 11.5% after taxes.
15:48
You live in Florida. I made a couple assumptions, but
15:51
you're probably taking home around $55,000 per year.
15:54
And that means you're actually investing about 13.6% of your
16:00
take home, which is really good. You know, a really, really rough
16:04
rule of thumb is like 10 to 20 percent, 15%.
16:07
And you know, you're right in there in terms of investing
16:10
until you're in a healthy retirement.
16:12
But I'll do you one further. I put all of your numbers into
16:14
the calculator, the retirement calculator at
16:17
hellonectarine.com. And it assumes you're spending
16:21
about $4000 a month, which is how much you have leftover after
16:24
you, after your taxes and investing.
16:27
And that means you're saving $7500 per year if you do nothing
16:32
else but exactly that, what you're doing at 23 for the next
16:35
42 years until you're 65, which is not going to happen, by the
16:38
way, things going to change. But assuming you just stand this
16:41
exact trajectory, when you're 65, you have $2.1 million
16:46
invested. And that's accounting for
16:48
inflation that's in today's dollars.
16:50
And you'll have a 99% chance of a successful retirement after
16:53
age 65. In fact, doing nothing but
16:57
exactly what you're currently doing, you're actually on pace
17:00
to retire healthily at about the age of 57.
17:03
And so you know, big strokes, you're absolutely crushing it.
17:09
To your question, I would prioritize the IRA.
17:14
Our investing guidelines is do the four O 1K up to your match.
17:18
If you have an HSA, you can use that.
17:20
And then the next step is your Roth IRA.
17:23
Since you have no match, you skip it.
17:25
You didn't mention HSA. Let's assume you skip it.
17:27
So that means your first priority is maxing out your Roth
17:30
IRA. You're doing it great.
17:32
If you want to invest more, you could then go put, let's say if
17:36
you had $2500 more per year to invest, you could go put $2500
17:40
into your 4-O1K. That would be great, $7500 Roth
17:44
IRA, $2500 for one K, That would be great.
17:48
If you did that, by the way, it would drop your projected
17:51
retirement age from 57 down to 53.
17:54
That's four years. Now, when you're 23, hearing the
17:57
numbers 57 and 50, three, you probably thinking like, put a
18:00
bolt in my brain. What's the difference?
18:02
I'm going to be like the crypt keeper rotting in a grave or
18:05
whatever. But when you're 50, you know,
18:07
I'm 45 and I'm not that old. And when you're 50, you're like,
18:10
oh, I could retire in three years or seven years.
18:14
Like 4 years of your life makes a big difference, right?
18:17
And that's four years, You know, think about a week of paid time
18:19
off. What about a year of paid time
18:21
off or four years of paid time off?
18:24
You know, and that's just getting down to 53.
18:27
You know, what if you retired 50 or 45 or 40 or whatever it is,
18:31
the numbers start to get pretty meaningful.
18:33
So here's the thing, Bond line, you're totally crushing it.
18:38
If I could bet $1,000,000 on you being a millionaire, I would.
18:41
If you want to invest more and you have the means to invest
18:45
more, going to 41K will be totally fine.
18:47
The 1% fee is a little bit annoying, but you know people
18:50
generally switch jobs every two or three years.
18:52
These days. When you switch jobs, you can
18:55
roll over. That means transfer your old 41K
18:58
to either your Roth IRA or an individual Traditional IRA and
19:03
then leave those high expense fees and invest it just like the
19:06
same way you are your Roth IRA. And by the way, your ticker
19:10
symbols are great. But I'll say the one, the flip
19:15
side of this is you have another really amazing asset to your
19:19
name right now, which is your youth.
19:21
You're 23. You said you have your first job
19:25
surmising you just got out of college, you're kind of starting
19:27
adulthood officially here. And you can do things in your
19:32
20s that you can't do in your 30s and you can do things in
19:35
your 30s you can't do in your 40s and and so on and so forth.
19:38
And so I warn you, Luca, don't live your life trying to
19:42
maximize every single penny when you're 65 because you'll get to
19:45
be 65 and you're going to be like, what did I do with my
19:47
life, right? And I hate the word, but it's
19:50
kind of a balance. You don't want to have no
19:52
investments and be broke your whole life and have to work
19:54
until you die and be stressed about money your entire life.
19:57
But you also don't want to be the richest guy in the cemetery,
20:00
right? Die with all this money because
20:02
you, you wasted your 20s. And so if you have an
20:04
opportunity to go on a trip with your friends or backpack around
20:08
your upper. Stay in hostels or, you know, do
20:11
something generous for a friend or whatever it is.
20:14
You know, I would, I would jump on those opportunities because,
20:19
you know, as someone 20 years your senior, you know, your 20s
20:22
go by quick. And those opportunities come
20:24
along less often than you realize.
20:27
You know, if your friends like, oh, that's going on a trip and
20:28
you say I don't want to, I'm saving money.
20:31
So you can realize like when you're in your 30s, all those
20:34
friends who are inviting that trips all have stupid kids and
20:37
stupid wives. And you know, or maybe very
20:39
smart wives and very smart kids, I don't know, or very smart
20:42
husbands, I don't know, or stupid husbands, I don't know
20:44
how smart your friends are or there's or their theoretical
20:46
future spouses. But the point is their
20:49
theoretical future spouses are going to prevent these trips
20:52
from happening. And so, you know, I'm very
20:55
comfortable with doing what you're currently doing, maxing
20:57
out your Roth IRA and then spending the rest.
20:59
But I would say if you go with that plan, think about devoting
21:02
a portion of your future raises to your investments.
21:06
And so maybe you're on pace to retire at 57 now, but someone
21:10
who's just starting off at a $65,000 job as an analyst, it's
21:14
probably going to increase their salary throughout the years.
21:17
Maybe you're going to be making $100,000 as an analyst when
21:20
you're 30. And if you can spend half of
21:23
that raise and invest half that raise, you're going to amass a
21:26
ton of money, millions of dollars, and be extremely
21:29
wealthy and retire early. And I think that's a that would
21:31
be a great thing. Nice.
21:34
Thank you Luca for the question. So succinctly put.
21:38
We love it. Do you think Luca's Do you think
21:41
Luca's destined for failure? No, Luca's on a great path.
21:47
Luca, If I could buy stock in Luca, I would buy stock in Luca.
21:51
I'm I'm 90% VTSAX, 10% Luca. Luca if you're.
21:57
At UCA. That's how you spell Luca.
22:01
That's his picker symbol. If you ever make an ETF that's
22:04
just you, the you ETF I'm investing.
22:08
I wonder, was that a wasn't that a Pixar film too?
22:11
Luca, you're just really firing on all cylinders.
22:14
OK, let's go on to scroll Patrol.
22:21
Scroll Patrol. We've got a video from the
22:24
Internet. Jeremy has not seen it.
22:26
He's going to review it live. Go ahead and click on that link
22:29
and we'll watch this together. All right, I have not seen this.
22:34
Think is in the news that people might remember is take off dying
22:38
and he didn't have a relationship with his father.
22:41
So he's not married. He doesn't have any kids.
22:45
His mother would get it. His mother and father would get
22:47
it. His father didn't raise him,
22:50
according to reports. So now this person is getting
22:52
half of a $26 million estate and is probably going to continue to
22:57
get money because there are royalties that would be going
22:59
from what all the songs that they had.
23:01
So now this person who didn't raise you private and paid child
23:03
support didn't do whatever gets half of your stuff instead of
23:06
your mother. But of course, he was 20
23:08
something years old. He didn't think he was going to
23:10
die, right? So there's no plan.
23:12
Not to mention the amount that the estate is going to have to
23:15
pay in taxes. Aretha Franklin had a a special
23:19
needs son. They they're looking for stuff
23:22
on napkins and things like that. Or it can be as simple as
23:26
siblings arguing because whatever beef they had growing
23:30
up is going to show up when someone passes away.
23:35
Were they talking about, do you know, were they talking about a
23:36
specific person or was she talking?
23:38
About yeah. Do you know who take off is?
23:40
Oh, no, I didn't. I didn't clock that as a name.
23:43
I I heard takeoff. I'm like, what is like, I was
23:46
very confused. What is?
23:47
What is takeoff? Do you know who the Migos are?
23:50
The Migos never even heard these words.
23:53
Is that even a word? They're a rap trio.
23:57
Well, they were until Takeoff died.
24:00
Cardi B, her one of her baby daddies is one of the Migos.
24:05
OK. Do you know what Cardi B is?
24:07
I know that name. By the way, if you're new to the
24:10
Personal Appliance Club show, Jeremy does not know music but.
24:13
Cardi. BI Still I knew the name.
24:16
That's pretty good. OK, well anyway, Take Off is one
24:19
of the Migos. He's a rapper.
24:21
He passed away like a few years ago and I guess they're talking
24:24
about his estate. OK, well, yeah, you know
24:30
everything she said. I think so, yeah.
24:33
What she's saying is saying, hey, if you die when you're 20
24:37
and you don't have a will, who gets your stuff and you probably
24:42
don't have kids? And the answer is it goes to
24:47
probate court, goes to court, and then people basically fight
24:51
over it. And then the law of the land
24:54
decides. And you know, this is I'm not an
24:57
estate planning attorney. And and I don't know what state
25:00
this is in and you know the the amount, I don't know about this
25:04
situation could fill a barn, I'm sure.
25:07
Well, they're very rich rappers. So I guess that's why this
25:09
matters because they're like, you know, I feel like there's
25:11
other cases where it wouldn't necessarily matter as much.
25:13
But this piece, they're his parents, I guess, are getting
25:15
huge lumps of money and royalties and houses and things
25:19
like that, that of course they didn't think he was going to
25:21
pass away. You know, I don't know if she's
25:23
right. You know, I think she what she's
25:24
saying. And also, if you're listening,
25:26
there's like some words plastered over the video that
25:28
says nobody talks about this, but an absent parent can legally
25:31
get half your estate if you die without a will.
25:34
And is that true? And the answer is, I don't know.
25:36
It really comes down to your jurisdiction, the probate court.
25:40
I imagine if this went to probate court and you know, the
25:46
mom could produce the evidence that the dad never paid child
25:51
support, was behind, was a deadbeat, wasn't in on his
25:53
record deals, yadda, yadda, yadda, I'd imagine judges have
25:57
some leeway to say my hands are tied.
25:59
He's 50%. You know, like, I don't think
26:01
that's true. I think that other people can
26:03
make claims. It could simply could make a
26:04
claim. An aunt and uncle can make a
26:06
claim. I think that's what probate
26:07
court sorts out. Of course the overarching
26:10
message she's saying is true, which is, you know, a will would
26:13
solve this. A will doesn't avoid probate
26:16
court, but a will makes it very clear what should happen in
26:19
probate court. So for example, if Takeoff was
26:22
his name, yes. So if Takeoff had a will, like
26:25
20 would be. 20. This is the whitest review of
26:29
rapper Violence. The other ones name is offset.
26:34
Takeoff an offset. What's the thirds name?
26:37
I can't remember. Oh, Cuevo.
26:41
Yeah, Cuevo. Cuevo.
26:42
But his name is actually Cuevas Kiante Marshall, so that that
26:45
actually came from his name. The other ones are just like
26:48
Cuevo. Yeah, anyway, yeah.
26:50
So if Takeoff had a will, then his mom could bring the will to
26:53
Probecore and be like, yo, Takeoff had this will.
26:56
And you know, she even mentioned like Aretha Franklin, who, by
26:59
the way, grew up on the street I used to run track practice on
27:02
because I she's a, she's a Detroit area.
27:05
I would like run by Aretha's house.
27:07
That's so cool. Yeah, there's a dirt Rd. too.
27:10
There's like, I lived in like the the nice area of southeast
27:14
Michigan outside Detroit. Nice.
27:18
I can't fully guarantee that's true, by the way.
27:22
That's just what we all said was true back then.
27:24
And now, you know, in this age of misinformation, was it true
27:27
that maybe Aretha never lived there?
27:29
Yeah, that's fully true. But it definitely tracks.
27:32
Like, it definitely tracks because like they were like big
27:34
houses set way back and and if you like, lived in Detroit, you
27:38
would live around this area probably.
27:40
That's so cool. Yeah, I hope it's true.
27:42
Yeah, could probably look it up anyway.
27:46
But they're saying even for Aretha, they're like looking at
27:48
for like napkins and stuff because that's the kind of thing
27:51
you take to probate court and say, yo, are we throwing on this
27:54
napkin? Give everything to my disabled
27:56
kid. George is going to weigh that.
28:00
And you know, of course that's, you know, this is kind of what
28:03
estate planning is, which is to have a will and a trust along
28:06
with a bunch of other stuff that says a will says who you want
28:10
your stuff to go to, who you want your kids to go to, things
28:12
like that. And a trust is basically a way
28:14
to avoid probate court all together and say OK, instead of
28:17
even going to. So for example, if Takeoff had a
28:19
trust and all his money was going into a trust, and there's
28:22
a will that backed up the trust, and the trust said if I die my
28:25
mom gets everything, then you don't even need to go to probate
28:28
court. Yeah, can I, can I interrupt you
28:31
real quick? Yeah.
28:32
I'm on AI overview about Aretha Franklin.
28:34
And it said that Aretha Franklin's estate, estimated
28:37
nearly 80 million, is being divided among her four sons,
28:39
including her eldest son Claire, into a special needs and lives
28:41
in assisted living. Following a lengthy legal
28:44
battle, a Michigan jury validated a 2014 handwritten
28:47
will found in a couch over a 2010 version.
28:51
Ensuring all our sons share the assets and royalties.
28:53
Isn't that crazy? Handwritten Will found a couch.
28:56
That's crazy. And like, who could somebody
28:58
could have just like scribbled, you know what I mean?
29:01
This is crazy. I didn't even know.
29:03
I didn't even know this. I should have done more.
29:05
Research, that's crazy, that's crazy.
29:08
I was just, I was on jury duty. You know how I love talking
29:10
about jury duty and there was like facts of the case, threat
29:13
question. And on one side they had these
29:16
like ironclad caliph. There's a real estate thing,
29:19
these ironclad California realtor, you know, legal
29:23
documents. They're like pages and pages of
29:25
legalese. And on the other side, they had
29:27
text messages basically saying the opposite, promising the
29:30
opposite. And our job as a jury was to get
29:34
at the heart of the truth of the matter.
29:35
What was the real deal between these two people?
29:38
And we had to weigh both those things.
29:39
And I think some people have this idea on their mind like,
29:41
oh, if it's not a legal document, it's not legal.
29:43
It's like, that is not true. Like, you know, a judge or a
29:46
jury is going to look at this. And just like that judge did,
29:48
the jury was like, we think the truth was these text messages
29:52
were at the heart of the matter. This is the real deal.
29:55
They signed the legal paperwork, blah, blah, blah.
29:57
We're just going to go through with this.
29:58
And but the real deal is like, you know, I'm not going to get
30:00
into the facts of the case, but the real deal is you pay me back
30:02
later or whatever it was. And that's how we found as a
30:06
jury. And that's how this judge found.
30:07
We're like, OK, I think the real deal was this handwritten one.
30:10
You're right. Like it's pretty sketchy.
30:12
Like, did she write it? I mean, you assume the judge
30:15
that occurred to the judge, someone could have faked it.
30:18
And so there was maybe a handwriting analysis with an
30:20
expert done who knows what it is.
30:23
But also the fact that's the Michigan court at least starts
30:25
to back up my theory that, you know, that she lived where I
30:28
used to run by for truck practice because I was in
30:32
Michigan. Yeah.
30:36
So I don't know, You know, I think some of the stuff was a
30:39
little bit alarmist, you know, kind of like, oh, you're the
30:44
deadbeat. Dad's going to automatically get
30:45
half. I don't think that's necessarily
30:46
true, but I'd say the heart of the message is true, which is,
30:51
you know, if you want to decide what happens, don't leave it up
30:54
to a judge deciphering, you know, a couch.
31:00
Well, you know, like, like get a, you know, get something in
31:03
writing. And you know, I think, you know,
31:06
if you, if you're broke right now and you've got 20 bucks to
31:08
your name and you have a dog or something like write up a thing
31:11
and say, Hey, if I die with my dog to do this and I want my
31:13
deadbeat dad to not get my 20 bucks or whatever it is and
31:17
share with your mom, Put it in your dead box and share with
31:19
your mom, you know, if you're starting.
31:21
To have that $20, that's how bad he was.
31:23
Well, exactly, I'm saying, you know, the point is like, you
31:26
know, your level of estate planning can, can grow with the,
31:30
you know, the size of your estate.
31:32
So if you and I hate the terms of state planning, by the way,
31:35
estate just means all your stuff.
31:36
If you have very little stuff, you should have something.
31:38
So your, you know, your family knows what you want, knows what
31:41
your wishes are, but there's not going to be a huge legal battle
31:44
over your finances. Whereas if you start to have
31:46
like 6-7 figures of, of money, suddenly lawyers can get
31:50
involved in fight over this stuff because it's worth it now.
31:52
And that's where you want to keep, you know.
31:54
So if you're like in the six plus figure range, it's probably
31:56
time to to at least do an online version of a will and trust and
32:00
and do it well. OK.
32:03
So I have to give her a grade. I give it an A minus, you know.
32:05
OK. Yeah, yeah.
32:06
Minus I agree. With you, I think the heart of
32:07
the matter is, is that, you know, just do some do some, some
32:10
planning, especially if you have a huge estate like that, like
32:12
Aretha's $80 million, although I'm surprised that it was only
32:14
80 million because she did so much, but.
32:18
That was a while ago though, right?
32:19
Like, it was a while. Well, she died like less than 10
32:22
years ago, but OK. I wonder if that's just like
32:24
what they divided, not her total net worth.
32:28
OK, amazing a minus. Good job.
32:31
Let's move on to money. Money.
32:35
Jeremy had time today. I had time you.
32:38
Have. Time the archives again.
32:41
I'm back, I'm in TikTok. Jeremy had a video about buying
32:45
a car in cash. Let's take a look here.
32:48
Never borrow money for a car. Period.
32:51
Here's why. The average US new car payment
32:53
is $554 per month. Let's say you spend $300 per
32:57
month on a car. The difference between those two
32:59
numbers can make you a millionaire over a career if you
33:01
invest it instead of spend it on a car.
33:03
So how do you do this if you don't have any money?
33:06
Well, first, in months one through 4, you bust, spike,
33:08
borrow, beg your way to wherever you need to go.
33:11
Not very fun and romantic, but it's worth it to be a
33:13
millionaire. Later in month five, you take
33:15
those $300 a month you've saved for four months, you've got 1200
33:19
bucks and you buy yourself a clunker that gets you where you
33:21
need to go. Then in year 1, you sell your
33:23
clunker for about what you paid for it and then take the rest of
33:26
those saved payments and buy yourself a solid $3600 car.
33:30
Then in year 3, you can sell your car worth a little less
33:33
now, plus all those payments you've been saving and you can
33:36
buy a car for 10,200. That's a very solid car.
33:39
Then in Year 5 and every five years after that, you can buy a
33:42
car for $25,000. I feel like the end of that got
33:46
cut off. I think this was bad when TikTok
33:48
cut you off at 60 seconds and there's probably like 64
33:51
seconds. I was like whatever just posted.
33:53
Hilarious. Like the cut of this guy's jib.
33:59
Man this old tick tock. Very mean.
34:02
And so, yeah, naive Jeremy. Never borrow money for a car.
34:05
And then what does the. And by the way, Tik Tok's a good
34:07
place to find angry comments because people are really mean
34:09
there because they don't know me.
34:10
They're seeing random stuff scroll by.
34:12
But. Yeah, have fun in there.
34:13
It's great. What did the commenters like
34:16
the? Comment said this is dumb.
34:19
It's not accounting for taxes and insurance and registration
34:21
fees. Three cars in three years would
34:23
cost as much as the first car. OK, so first of all, before I
34:27
get to that, I should, I do have to announce or whatever,
34:31
whatever, that times have changed and the average car
34:34
payment isn't like $500 a month anymore.
34:36
It's $750. Our work is going unheard, Jen,
34:41
because I posted this back in 2020 or whatever it was and I
34:46
said don't borrow money for a car.
34:48
And since then people borrow more money.
34:50
The average car payment has gone from $500 to 750.
34:53
It's wild. And so that means if you can
34:55
live on a $300 a month car, total cost of ownership, you,
34:59
you now instead of having $250 to invest, you have $450 to
35:04
invest. That'll make you a multi
35:05
millionaire. And so this is more true than
35:07
ever. That said commenter, I think
35:11
your comment might be dumb because you're saying he's
35:16
basically saying the transactional costs are so high
35:20
you lose any value to kind of incrementally increasing in cars
35:25
rather than just buying the big car 1st.
35:28
And that's not true first of all, and you're kind of
35:31
reaching. I'll go from worst argument of
35:34
yours to best argument. The worst argument is insurance.
35:38
Insurance you can stop and start to the day.
35:41
Like I literally texted my insurance company a couple days
35:43
ago and said, cancel my car insurance like effective March
35:46
23rd and they're like done. You know, that's just, they're
35:50
in the business of insuring up to a day.
35:51
And then as of that, you know, anything I paid beyond that, I
35:54
get refunded and anything, you know, then I go to the other
35:56
insurance company and or the new car and say, OK, start it on
35:59
that day. So you don't there's no
36:01
transactional cost to switching insurance.
36:03
I think it's even like legally true that they can't do that.
36:06
They just insure you by the day. That's number one.
36:09
So that is new. In fact, he, he's even like it
36:12
cost as much as the, the, the nicer car, I think is what he's
36:15
saying. That's not true because nicer
36:17
cars cost more to insure. And so if you're insuring
36:20
cheaper cars, you're going to be paying less than insurance.
36:22
So if you're paying the higher insurance rate all the time,
36:24
you're going to be paying way more.
36:25
And so doing this incremental thing actually saves you
36:28
significant money insurance because you're insuring cheaper
36:30
cars until you get up to the car you want.
36:32
Second thing you said registration fees, that's not
36:35
really true either because you're, you're registering both
36:38
cars and just like insurance, registration fees often scale
36:42
with the value of the car. And so if you register one new
36:44
car in year 1 and then you would stop registering that for year
36:48
one in the start registering for year 2.
36:50
And you know, most states I think do year by year
36:55
registration and you can't get like pro rata refund if you
36:59
don't use up the whole year. So for example, if I register in
37:01
January, I saw the car in October, whoever bought my car
37:04
basically gets a free registration for November and
37:06
December. And so I've I've lost that
37:09
money. So there's a little bit of truth
37:10
to that part, which is OK. There might be some some like
37:13
double registration going on here for the months of overlap,
37:16
depending on, you know, the timeline.
37:17
Although to my, to my credit, I did say do it every single year.
37:22
So you might be able to time it. So there's very little that
37:24
overlap, but that said that that might be true.
37:27
But on the flip side, again, since cheaper cars often for
37:32
less, Jen, do you have a sense of how much your registration is
37:35
for your car because we both. Live in the OR something?
37:38
Oh my God, do you know what mine is?
37:40
I just got it on my desk somewhere.
37:42
Is it higher for expensive cars? My registration is $732.
37:48
I didn't even. I thought it was just a standard
37:50
price. Yeah, it's a very unfun surprise
37:54
when you like I, I like I was, I was, I was driving a 99 Ford
37:57
Explorer. I thought I was like, I was like
37:59
with you. I was like, Oh yeah, 150 bucks,
38:00
whatever it is. Now they bought my first new car
38:02
and I got, you know, my $400.00 registration.
38:05
They bought a Tesla and got my $700.00 registration per year.
38:08
It's crazy. I had no idea.
38:10
I thought it was just like a statewide price.
38:12
No, it's it. It's.
38:14
You're like you're a piece of shit Honda.
38:16
Just give us 100 bucks. All those lives up in Sacramento
38:20
are trying to hook up the hook up the the broke car drivers.
38:24
But you know, that's said it's still 150 bucks.
38:28
Not like it's that cheap, but my point to this comment is you
38:32
would be paying the lower registration fees along the way
38:35
rather than paying that $700.00 every year.
38:37
And so that's also kind of cuts against your argument.
38:40
You'd be better off driving the cheaper car for a while.
38:42
And then the third, the best case you make is taxes, which
38:45
is, yeah, for sure, almost every state is going to get you on.
38:48
No, that's not true Almost every other state, but states that
38:50
have sales tax are going to get you on sales tax when you buy a
38:53
new car. And so when you buy the, and
38:55
that's a transactional thing, that's not an annual thing like
38:58
the insurance and the registration are that you'd be
39:00
paying anyway. And so for taxes for sure, when
39:03
you buy your $1200 car, if you have 5% tax rate in your state,
39:08
you're going to be paying 60 bucks in sales tax.
39:10
When you buy your $3000 car, 5% of that is 150 bucks.
39:15
And you know that kind of sucks, but it's on the scale of things
39:20
that's relatively small and definitely way smaller than the
39:23
cost of the big car, right? Would you rather have a $750 per
39:27
month car payment or one time $150.00 sales tax fee, right?
39:32
The scale is dramatically different.
39:34
And so his exaggerated argument you'd be better off with the
39:38
more expensive car the whole time is like fully, strictly,
39:41
totally false. And there's like a few little
39:43
transactional things. Like some states have a total
39:45
transfer fee, which is like 20 or 50 bucks.
39:47
But really, you know, they all kind of add up to like less than
39:50
like a month's worth of savings. And it again, it depends on the
39:54
scale of your car. If you're selling a car for
39:56
$100,000, you know, sales tax and that would be significant.
39:58
But you know, in my example I gave doing this incrementally
40:01
small cars totally still definitely makes sense.
40:04
And so you know. This commentary, you know,
40:07
there's like a little twinge of truth.
40:08
There's some transactional cost for switching cars which which
40:10
are annoying, but they don't negate the savings from driving
40:14
a cheaper car and saving all that huge monthly payment you're
40:17
trying to avoid. Wow, you told them.
40:22
I told you little anonymous TikTok commenter from many years
40:28
ago, we really, we really danced on his grave.
40:31
He's going to be so sad when he maybe he's APFC super fan all
40:35
these years later. Are they dead?
40:39
Or maybe he's dead. That's a good point.
40:40
Wait a wait a you said. Dance on his grave.
40:42
So I'm like, where did that come?
40:43
From oh, I meant like his little, his little comment grave
40:46
like I guess. But that's, that's fair.
40:49
I am the one who brought death. We always seem to end these
40:52
shows on a very low note. Wasn't ready for that.
40:57
But Speaking of it, in the ending, the show, it's time for
40:59
the end It's. So keep buying those cheap cars.
41:04
Keep. What else do we talk about?
41:06
Oh yeah, keep maxing out your Roth IRA.
41:08
If you have an expensive 4-O1K or do both, that'd be fine too.
41:12
And hopefully we're not in a recession.
41:13
But if we are, that's probably not going to matter much to you
41:16
because you just got to keep doing your things.
41:17
And what are you? What are your things?
41:19
It's following the 2 rules of Personal Finance Club rule #1,
41:23
Live Billion Means and rule #2. Invest early and often.
41:27
See you next week. The Personal Finance Club show
41:29
is produced by Jeremy Schneider and Jed Mundia, music by Essa
41:33
Balu and Homie. Send your questions to podcast
41:35
at personalfinanceclub.com. The Personal Finance Club show
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is Co hosted by Jeremy Schneider who is a co-owner of Nectarine
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and SEC Registered Investment Advisor.
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The views expressed on this show are those of the hosts and
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guests and do not necessarily reflect the view news of
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Nectarine. Please refer to
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hellonectarine.com for all relevant disclosures.
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This podcast is for informational and educational
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purposes only and should not be construed as personalized
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investment advice or a solicitation to buy or sell any
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security. Listeners should consult their
42:06
own financial, legal or tax professionals for advice
42:08
specific to their situation.