Ask HTM - Acorns to Jumpstart Investing, Seasoning a Cash Gift, & Social Security Running Out #1027

Summary

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How to Money: Episode #1027

“Ask HTM – Acorns to Jumpstart Investing, Seasoning a Cash Gift, & Social Security Running Out”
Hosts: Joel & Matt
Release Date: August 25, 2025

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Episode Overview

In this engaging Q&A episode, Joel and Matt take on burning listener questions about getting started with investing (is Acorns worth it?), saving up for major purchases (cars, houses, and the role of “seasoned” funds), and concerns about the future of Social Security as its trust fund runs dry. The show blends approachable financial advice, lighthearted banter, and candid anecdotes about negotiating customer service and the best vessel for a craft beer.

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Key Discussion Points & Insights

1. How to Get Started with Investing (Acorns & Alternatives)

Listener Question from Denali, 24, Carpenter near Asheville, NC [09:51]
Denali wants to start investing—should he use Acorns? What about beginner-friendly real estate tips on a $45k salary?

Hosts’ Insights:

• Acorns: Pros & Cons
  • Joel: “Would I personally use Acorns? No, but it’s not because Acorns is bad.” [15:15]
    • Originally innovative, Acorns made investing accessible via roundups and automation.
    • Moved from an assets-under-management (AUM) fee to a flat fee model.
    • Flat fees (e.g., $3/month) are proportionally very high for small balances.
      • “When you do the math...it can be insane.” [15:25]
• When Acorns Can Make Sense:
  • Matt: “If it is a decision between using them and investing, or going another path and not investing at all, I would say go for it with Acorns 100%.” [16:00]
  • The round-up feature can nudge beginners into consistent investing.
  • But aim to "graduate" to more robust, lower-cost platforms after the fundamentals are learned.
• Preferred Brokerages for DIY Investing:
  • Both recommend starting with Fidelity, Vanguard, or Schwab—low-cost, straightforward, and great for beginners.[16:21]
  • Robinhood is improving for long-term investors, but be wary of temptations to day trade or overload on speculative assets.
  • “Where it is that you invest, it matters.” [16:58]
• Best Account for Starters:
  • Matt: “Roth IRAs are clutch... especially for folks in the early wealth-building stages.” [17:45]
  • Pay taxes now (at low rates), avoid them later.
  • Set up automatic, recurring contributions to build the habit.
• Real Estate on a $45k salary:
  • Build savings aggressively—side hustles help.
  • Use your skilled labor (Denali = carpenter) to buy a fixer-upper (“sweat equity”), keep expenses down, and improve value over time.
  • Joel: “Being willing to wait a little bit longer...what can my realistic timeline be?” [23:04]
  • Avoid borrowing from family as “investors”—accept gifts, not complicated arrangements.

Memorable Quote:
Joel: “Don’t say yes to the first thing a company offers...just that extra little pushback...” [07:07]
(More on negotiating as a customer, but emblematic of the importance of advocating for your best financial interests.)

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2. Is Social Security Running Out? What Should Younger Workers Do?

Listener Question from Katie, Ithaca, NY [26:53]
What’s going to happen with Social Security, given declining populations and a shrinking trust fund? Should we be worried by the projections?

Hosts’ Insights:

• The Reality Check:
  • Social Security’s trust fund is projected to be depleted by 2033.
  • After that, benefits would be automatically cut ~23% unless Congress acts.
  • “This game of chicken is starting to get scary…” – Joel [29:59]
  • Declining birth rates and fewer workers per retiree worsen the situation.
• Could Things Get Worse?
  • If unemployment rises or birth rates decline further, the “cliff” could come sooner or be more severe.
  • Matt: “It’s just like smashing the gas pedal on the accelerator toward this Social Security cliff...” [32:41]
• Preparation Advice:
  • Save more in Roth and 401(k) plans; don’t rely on Social Security projections for your financial planning.
  • “It’s more incumbent on us as individuals to save for ourselves.” – Joel [35:48]
  • For older listeners, claiming SS early may actually make sense, given looming uncertainty over benefit cuts.
• Policy & Politics:
  • They doubt Congress will act until the last minute.
  • Don’t base your retirement assumptions on “projected” Social Security payouts.

Memorable Quote:
Joel: “I do think, at some point, someone’s going to have to do something [about Social Security] and that will mean changes to the system.” [35:13]

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3. Financial Advisors: When Do You Need One? Are the Fees Worth It?

Listener Question from Wendy [39:06]
Should I follow my sister’s advisor from Schwab to LPL? Do I need an advisor at all?

Hosts’ Insights:

• Do-It-Yourself First:
  • “A lot of folks…start to wake up in terms of their finances, they start to look for a financial advisor immediately...They’re almost looking for a magician...It’s less a magic trick and more like cultivating a seedling.” – Matt [42:39]
  • Most early and mid-career investors can handle things themselves—read, listen, and learn before hiring ongoing help.
• How to Hire Smart:
  • 1% assets-under-management (AUM) fees sound small but add up to massive sums over time. LPL, compared to Schwab, may charge even more.
  • Prefer hourly or flat-fee models for targeted, objective advice.
  • Recommendation: Seek out fee-only, fiduciary planners via services like Hello Nectarine or Domain Money for one-time planning.
  • Pay for advice/sessions as needed, rather than long-term management.

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4. “Seasoning” a Cash Gift for a Car Purchase (and Credit Score Impact)

Listener Question from Authentic Elk, Facebook group [49:22]
If I’m gifted funds for a car down payment, how long do they need to "season" in my account to boost my credit score? (And does it matter for my car loan?)

Hosts’ Clarification:

• Seasoning applies mainly to buying a house.
  • For home loans, large deposits must be “seasoned” (in your account 60+ days to avoid disclosure hassles).
  • For car loans, requirements are less stringent, and depend on lender policy—usually not an issue.
• Credit Bureaus and Cash Holdings:
  • Having more cash does not affect your credit score.
  • Credit scores reflect payment history, amounts owed, credit mix, etc.—not your bank balance.
  • “They don’t care how much money you actually have. They just want to see consistent behavior.” – Matt [51:36]
• Best Advice:
  • Use cash on hand to buy a car outright, if possible—avoid payments! “Having no car payment is such a gift...I am allergic to car payments.” – Joel [52:58]

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5. Debating Down Payment Size: Save for 20%, or Buy with FHA?

Listener Question from Kaden [53:42]
Should we wait an extra 2-3 years to save a 20% down payment, or buy now with a 3.5% FHA loan and pay private mortgage insurance (PMI)?

Hosts’ Guidance:

• Patience Pays:
  • Joel: “For the first time in something like 15 years, maybe waiting longer will actually mean that you can buy the home you want for less money.” [55:32]
  • Recent cooling in the housing market may help savers catch up.
• Risks of Low Down Payment:
  • Less “skin in the game” = more risk; PMI may last for the full term on FHA loans (not just until 20% equity).
  • “It can create problems…like buy now, pay later. I want the thing before I actually have the money to really afford it.” – Joel [57:36]
  • A conventional loan with 15% down may be a (marginally) better option, as PMI can eventually be removed.
• Best Practice:
  • Save for 20% to ensure lower risk, better terms, and no PMI.

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Notable Quotes & Moments

• On DIY Investing:
  “Just adding a tiny bit more complexity...getting a bit more comfortable with some of the different platforms is going to allow you to have more of your money working for you...” – Matt [16:00]

• On Fee-Only Advisors:
  “A few hours of their time could cost you far less than what that 1% charge absolutely adds up to over time.” – Joel [44:37]

• Customer Service Wins:
  “Just that extra little pushback and saying...‘this battery is not great’...They made it right.” – Joel (Woot Apple Watch story) [07:07]

• Car Payment Aversion:
  “I would prefer to spread this allergy through this microphone...I want this allergy [to car payments] to be contagious.” – Joel [53:26]

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Fun Banter & Beer Talk

• Best Beer Vessel? [11:25]

  • Both Matt and Joel are firmly in the glass camp, avoiding frosted mugs (“I’d rather drink beer out of a cereal bowl than a frosted mug” – Joel [12:07]) and loving classic “nonic” glasses.
  • Splitting beers = sharing and moderating alcohol intake for health.
  • “Splitting beers is the way to go...You get to drink something awesome with someone that you love.” – Matt [13:57]

• Favorite Asheville spots & road trip dreams [11:09, 29:03]

• Social Security, Banana Peel, and Adam Sandler Tangents [32:41-33:10]

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Timestamps for Major Segments

• Acorns & Beginner Investing: 09:51 – 23:04
• Social Security Sustainability: 26:53 – 38:48
• Hiring Financial Advisors: 39:06 – 46:11
• Cash Gifts & Car Buying: 49:22 – 53:26
• Down Payments & Mortgages: 53:42 – 58:02
• Beer Review: 58:02 – 59:37

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Summary & Takeaways

• Automate saving and start investing ASAP, but choose platforms carefully—don’t let fees eat away your gains.
• Roth IRAs and index funds remain the best starting point for most new investors.
• Social Security’s future is uncertain; don’t rely on it as a chief pillar of your retirement plan.
• Hiring an advisor is rarely necessary for beginners; prioritize learning and seek fee-only, fiduciary help when appropriate.
• Buying a car? Cash is king—avoid payments if at all possible.
• Wait and save for a substantial down payment on a house to minimize risk and unnecessary costs.

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Hosts’ Parting Message:
“Thank you to everyone who sent us a question. And again, reach out to howtomoney.com if you’d like instructions on how to send along your query. The weirder, the better!” [59:55]

How to Money’s mission:
Money doesn’t have to be complicated—start with the basics, beware shiny distractions, and aim for long-term security over quick fixes. And don’t forget to enjoy life’s simple pleasures along the way (like a perfectly poured craft beer in good company).

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Best friends out!

Transcript

[A]

This is an iHeart podcast.

[B]

This episode is brought to you by Navy Federal Credit Union. Navy Federal can help you find and finance the right vehicle with ease. If you don't have the cash on hand. With Navy Federal's car buying service powered by Truecar, you can find the vehicle that's right for you as you search through inventory and compare models. And you could get an amazing rate when you finance with Navy Federal.

[C]

Visit navyfederal.org truecar to learn more. Navy Federal is insured by NCUA Credit and Collateral subject to approval. Hey, it's Matt and Joel from How To Money. Joel, I feel like you've always got a cool trip in the works. What's next on your travel radar?

[B]

All right, well, my dad and I were planning, hoping to hike the Camino de Santiago in Spain next year. I mean, not the full thing. Cause that would be insane. That'd be really long. But at least a portion of it. It's been on our bucket list for a while and I think we're finally gonna make it happen.

[C]

I love it, man. Yeah, it's gonna be such a great memory. It's also a really long hike, so I hope you are building up to it. You getting the miles in good?

[B]

I've already started getting my body ready. And if you're planning a big trip, too, it might be the perfect time to let your home work for you.

[C]

That's true. With Airbnb's co host feature, someone local can help you manage your reservations or message your guests. If you're away, find a co [e-mail] host.

[D]

Hello, divorce. Are you surprised by a divorce ad for hellodivorce.com don't be. We all know someone dealing with divorce right now, maybe even closer to you than you think. Instead of watching them struggle emotionally and financially, let them know about hello, Divorce.com. they provide expert guidance, simple tools, and affordable solutions before, during, or after divorce. Be the friend who helps ease their stress and saves them money. Tell them to visit hellodivorce.com today.

[B]

Welcome to how to Money. I'm Joel.

[C]

I am Matt.

[B]

And today we're answering your listener questions.

[C]

Yeah, buddy. Episode 1027. Did you know that this was episode 1027, Joel?

[B]

I could assume we were in that vicinity.

[C]

We could have, like, done the math. I just wanted to highlight this unorthodox milestone. Episode 1027 does not sound like the number of episodes that we've done, but somehow we've managed to pull it off. Here we are.

[B]

It wasn't too long ago that we did the episode 1000 ask me anything, so it makes sense.

[C]

But the 1000, there's something about just being in, like, the 10 whatevers.

[B]

Yeah.

[C]

You know, it's just kind of like. And we're still plugging along.

[B]

We're still in it. And you know what? It is one of the joys of my life doing this show, hanging out with you.

[C]

I love it, man.

[B]

Also answering listener questions because while we're.

[C]

Drinking a delicious craft beer, as people.

[B]

Know, personal finance can be confusing. We want to demystify. And so we'll hopefully demystify a few things today on the show.

[C]

Like, in particular, there's a listener who's wondering how to get started with investing. Specifically, he's wondering if he should look to acorns. We remember when that app rolled out.

[B]

Blast from the past. Yeah.

[C]

We're going to give our hot takes on Social Security, talk about some of the different factors that we are paying attention to there. And then we're going to take some payment questions. We're going to talk about auto car loan payments. We're going to talk about mortgage payments. That and more during our episode today.

[B]

Buddy, can I reveal a quick story? A battle for customer service with Woot, which is technically Amazon now. Woot is like a discount site.

[C]

I did not know Woot still existed, my friend.

[B]

I think. I think Woot is doing quite well.

[C]

You are the king of shopping at websites and companies that I either A, have not heard of or B, did not think still existed. Like, what is this, like 2010? What is it, 2009? Joel?

[B]

Big Lots after we finish this episode. Matt.

[C]

See, Big Lots I've heard of because you drive past it, you might see it.

[B]

But I haven't been to a Big Lots in forever, though.

[C]

I haven't either. But that sounds. That's more familiar to me than Woot, which I feel like I haven't heard of since, like, Smash Mouth was coming out with hits.

[B]

So Woot still exists, owned by Amazon now. And I didn't know that. I don't actually just like shop on Woot for fun because I think a lot of it is just kind of Amazon trying to clear stuff out and they charge less for it. So it's. It's like a clearance site where you can get stuff on the cheap, but sometimes.

[C]

Okay, sorry, yeah, quick aside. Do they still do wood offs?

[B]

I think so, but I don't know.

[C]

That's what I remember from, like the 0809 era when I first discovered Woot. Yeah. With a countdown Time or the countdown of like how many items they have. And so they were, they would drive that demand and try to get you to spend your money.

[B]

Sure. Yeah. It's like limited time only right on a camping hammock. Get it while it's hot and then it's gone. Well, in this case I was buying a refurbished Apple Watch for my daughter because new Apple watch is crazy expensive, especially the ones with cellular connections. I don't know why, but Apple charges a lot more for those. I don't know if it's a much more expensive component to stick in there.

[C]

A little cellular modem in there, but.

[B]

Once the watch gets a few years old it seems like similar to like a luxury car and a regular car. Like the price disparity becomes almost non existent. And so I was looking for an older model and, and I found Woot had a pretty good deal on, I think it was the series seven is what I was buying. And it's like Beamers, right?

[C]

This is part of the 5 Series. That's right, 7 Series Apple Watch.

[B]

It means it's like four generations old or something. I was like, oh, it'll still be supported for a couple more years. And when I. The other good thing about buying from Woot was that there was a two year warranty on the watch. And I was like, okay, that, that's good. It seemed like the warranty was solid, but that gave me some peace of mind when I was buying a refurb watch. Well, what I didn't factor in. Well, I got the watch, she was super excited. The battery life was terrible. And so go into the backend settings and it turns out the battery life was inferior to the quality they promised. So the battery life says you can go into your Apple Watch. I guess.

[C]

Yeah, percentage of battery life left or something.

[B]

Exactly. And it was like, hey, this ain't great. It's basically the message that the Apple Watch told me.

[C]

Did it give a percentage?

[B]

It gives a percentage. I think it was like 73%. And then it also. Did it guarantee like 80 or. Yeah, yeah, okay, yep. And so because it was below that I reached out and they're like, hey, well we'll give you 25 bucks and that'll help you out.

[C]

How much was the watch?

[B]

The watch was like 130, something like that.

[C]

Okay, that's not 25. I'm picture. I'm thinking $225 sounds like, I mean a pittance like that sounds like nothing.

[B]

It does, but. But if you have to replace the battery, which the battery Was super not satisfactory.

[C]

A lot more.

[B]

Yeah, it's like a hundred bucks, right? So I was like, yeah, that's. That's not going to cut it. Actually, I'd rather send this back and get another watch with a higher battery life. And they said, actually we source these watches through a different vendor. They don't have any more of these right now, so we can't do that. What they ended up doing was saying, actually, we're just going to give you a full refund and you can keep the watch. Yeah.

[C]

I was like, oh, dude, how about $125 off?

[B]

Right? But this, this.

[C]

Just how much. How long did it take before the initial contact of you reaching out to Woot versus them finally caving?

[B]

And not too bad. It was like four or five days total. Like a few back and forth. It didn't take too long. So I was impressed with the customer service. I like it and with the resolution. And I just gotta say, like, you know, you and I, we've talked in the past about asking for a discount. We've talked about standing up for yourself. And these are the. Don't say yes to the first thing that a company offers when you're trying to get your problem resolved often. Just that extra little pushback and saying, well, batteries are 100 bucks and you're offering me 25 and this battery, it's not great. Like, she was pretty disappointed as the battery died quickly when she just used it a little bit.

[C]

How often do you have to. Yeah, if it's a 73% battery life left or whatever. Battery expectancy. What does that mean from a daily use standpoint? Because we don't have any Apple watch.

[B]

She doesn't use it very often. And so she would just use it for a few minutes, put it down, pick it back up later, use it for a few minutes. And she'd be like, now it's at like 42%. What in the world?

[C]

In one day?

[B]

Oh, yeah. In like hours, so. Oh, dude, that's very frustrating. Yeah. Yeah. And again, it's not like she was addicted to it. Using it a bunch.

[C]

That's my bueno.

[B]

Stick up for yourself.

[C]

Yeah, man.

[B]

And recognize that you can get better customer service. You just have to push for it and, and check in. Know your rights. Like, no. Hey, what's the standard, actually, that you're. That I'm supposed to get when I buy this product from you? This was substandard and they made it right.

[C]

Yeah. Well, I am glad that they were able to make it right for you. Glad that you held out. And I think like you said, looking specifically for metrics, that's why I asked. Okay, what was the actual percentage? Because if they are saying, oh yeah, it's a pretty good battery.

[B]

Right? All right.

[C]

Well that's incredibly subjective as opposed to. Oh no, it will be at least 80% or higher.

[B]

Yeah.

[C]

Nice, man. Glad you were able to make that happen. And also I would recommend for folks to not just go on there shopping because if they're still doing that wood off, it can be addicting as opposed to looking for a specific item. Right. Like don't go shopping for stuff. Go looking for an actual piece of equipment that you might need an actual specific item. But I'll go ahead and introduce the beer that you and I are going to enjoy during this episode, buddy, which is a Dawn Patroller by Hanakoa. This is the, Is it the last one that you brought back from Hawaii? It is that we're going to enjoy. But don't you worry, folks. We've got more that we're going to.

[B]

Be able to get to. Some beers from your trip?

[C]

Yeah, yeah, exactly.

[B]

All right, well, if you have a money question, we'd love to take it on the show. Hopefully we can take it next week. Just go to howtomoney.com ask for the simple instructions. It's basically recording a voice memo on your phone. Emailing it to us takes no time at all. And we would love to take your question. Holler at us, Matt. Let's get to one from a young listener specifically about investing and whether some of those apps are going to be best for getting started.

[E]

Hey, Joel.

[B]

Hey, Matt.

[E]

My name is Denali. I'm 24 years old and I'm a full time carpenter for a custom home builder worker owned co op just outside of Asheville, North Carolina. Great beer, Great mountains. Come hang out. It's pretty cool over here. I have a couple questions for you guys. My first question is, is an app or a platform like Acorns something that you would personally use? Is it, would you advise people use it and if you do recommend using it, is it worth paying their ridiculous subscription fees for? I'd like to start investing my own money. I just don't know how. I don't know where to start. So if you guys could please point me in the right direction, that would be super awesome. My second question would be how do I start investing in real estate off of a $45,000 salary? I have family that is willing to put down some money with a legal contract, but I Don't want to, you know, get in a sticky situation and let my family down. So, yeah, where do I start? How do I start? And that's it. All right, cheers, guys. Wait, wait, wait, wait. Do you guys prefer to drink a beer in a can, a bottle, or a nice, cold glass? Super curious how you guys are drinking beer over there. All right, Denali out.

[B]

Matt, we're obviously familiar with Asheville. Come on. Oh, yeah, I was there in the spring.

[C]

It was lovely. I. Oh, I don't know if I've been up there yet this year. Normally, Kate and I at least get up there for, like, a couple's trip, but I might have to make sure that happens before long.

[B]

Make a pilgrimage on the reg. Yes.

[C]

But y. We actually. We've been doing other. Other travels. I wanted to get to Denali's, which is if that's his real name. That's an awesome, awesome name. Let's get to his. His beer glass or drinking beverage question, which. I mean, I'm pretty sure I know what you're gonna answer. You're a fan of tulip glasses. Perhaps that's what we. We drink out of here on the show. Honestly, I don't even necessarily love the fact that it's got a stem. It's just because early on, when we first started the show, we just wanted to make it clear that we weren't like, your dad's frosted mug full of, like, beer from Cheers, you know?

[B]

Yeah, I'd rather drink beer out of, like, a cereal bowl than a frosted mug. What? Yeah.

[C]

I'm not gonna take it.

[B]

I eat frosted mugs with a passion.

[C]

I'm not gonna take it that far.

[B]

I will. Why? Because.

[C]

Why does it feel like a frosted mug?

[B]

Well, one. I think a lot of great beers taste better at a slightly elevated temperature.

[C]

Yeah, sure, sure.

[B]

You don't need the Rockies to be blue. You know what I'm saying?

[C]

It doesn't need to be ice cold, but I don't mind the little boosts in or actually slight decline in temperature in order, because it's gonna. It always warms up.

[B]

Those mugs. They're old, but they're also incredibly heavy, which makes it ridiculous.

[C]

You just need to get stronger.

[B]

I'm not a Viking, you know, I come from a lineage of Vikings, but I'm not one. So I would rather drink out of, like, a gentler, more gentlemanly glass. Yeah. Or a can. I'm down with a can. Bottles. I don't really.

[C]

I'm pretty much. Yeah, yeah. I Feel like craft beer. Initially it was all about the bottle. But all the great.

[B]

I feel like all the great breweries.

[C]

Are caning these days. Specifically I, I'm not really drinking out of the can, but at home I would say 99% of the time I'm drinking out of our little glasses. And I've, I know I've shared a beer with you, but they are these 8 ounce and they're called nonic glasses and they're called that because I'm pretty sure they were originated or invented in the UK in like a bar or like a pub kind of setting. And it's like a normal glass. But imagine towards the top, it bubbles out a little bit before it tapers back in to where the rim of the glass is. And they're called no nicks because were the glass to fall over, what hits the bar first?

[B]

Oh, the bubble part.

[C]

The bubble part, which is stronger than the fragile lip or the fragile edge. And so it was a way to create a more robust glass that's not gonna have little nicks along the edge of the glass where you would drink out of. And specifically we have eight ouncers which are perfect for splitting a 16 ounce beer, just like you and I are doing today, my friend. And splitting beers, that's what Kate and I do. Like 90 again, 99% of the time.

[B]

Splitting beers is the way to go. One, because you're drinking less, you get to enjoy it. You kind of sip and savor the flavor more and you get to drink something awesome with someone that you love and care about. So.

[C]

And if you're paying a little more attention to your health, I mean, a little less alcohol consumption for dudes like us who are getting to be a bit older, we're paying a little more attention to that kind of thing.

[B]

We're not as young as Denali. So no, let's get, get to Denali's question specifically about investing as kind of starting out. And you know, he's asking about Acorns. Would I personally use Acorns? No, I would not use Acorns. But it's not because Acorns is bad, right? Why are you such a hater, John? Well, Acorns was one of like the first fintech companies in existence. I remember when they launched and I was like, this is pretty cool novel. Yeah, this is awesome. And I will say they have changed their business model a bit since then, which has made me less supportive. But still, I think it can be helpful to some folks. But it's just really for people who want to get set up investing and they have no idea what to do. They've created this technological solution to help them do the thing that they otherwise really wouldn't do. To be honest, the flat fees that Acorn charges now for small accounts, they might seem reasonable. As you look at it, you're like three bucks a month. That's not terrible. But when you do the math and when you think of it as a percentage of assets, it can be insane. And so that's, I think my major beef is it used to be a percentage of assets, but then when they changed to a flat fee model for some accounts, that was kind of a killer for me and it made Acorns and similar apps just less attractive overall.

[C]

Totally. Yeah. So in part, I think it's personal preference because you could get started with Acorns and if it is a decision between using them and investing or going another path and not investing at all, I would say go for it with acorns 100%. But it sounds like, you know, despite you just getting started on the investing front, it sounds like you're keen to figure it out that you're looking to do the right thing from the get go. You send a voice memo into a personal finance show. So just adding, let's say, a tiny bit more complexity, getting a bit more comfortable with some of the different platforms out there and some of the different account names I think is going to allow you to have more of your money working for you, which is going to be Clash. And our favorites haven't changed since we basically started the show. Fidelity, Vanguard, Schwab, they are all fantastic.

[B]

Been kind of singing the same song for all these years.

[C]

Yeah. I will say I feel like Robinhood is a newer. I know we've got mixed feelings there, but initially it's just like, oh no, they're really encouraging single stock investing. But then they added IRAs, then they started offering the match.

[B]

Yeah, Robin Hood is up there.

[C]

Have both like in my mind come.

[B]

Into our good graces. But the, the OGs are still great.

[C]

Totally.

[B]

Yeah.

[C]

For you, Denali, know yourself because if you are tempted to get in there, mess with it, perhaps do some single stock investing, maybe allocate more of your portfolio to crypto than you otherwise should.

[B]

Day trading trash coins.

[C]

You know, you don't want to do that and instead go with the boring low cost brokerage suggestions of Fidelity, Vanguard or Schwab. Where it is that you invest, it matters. And I think starting where you just start off like on the right foot, you're Starting with a top notch brokerage as opposed to one that's just okay, that's going to literally pay dividends over time.

[B]

I think there's something about, I feel like we've had people on in the past, Matt, and guests on the show, and they're like, well, it's okay if people make a lot of mistakes early on because the goal is eventually to get it right and they see kind of what they're trying to say. But there's also validity to starting off doing the best thing or a much better thing, because inertia bias leads us to kind of continuing going down the path that we started on.

[C]

Just a couple of degrees off, you end up in the wrong state.

[B]

Yeah. So maybe you're like, all right, I'm going to do acorns to get started. And then six years later you're still doing it when you could have done better, experienced lower fees. Maybe you would have been more incentivized to invest more by going with a different brokerage account. I think making a better decision from the get go is a good thing, not a bad thing. Speaking of accounts, Matt, I think the Roth IRA is going to be the best account for Denali. You can read more about it on our site. But especially for folks in the early wealth building stages, Roths are clutch. It's really all about avoiding future taxes. You mentioned what you're making. You know, when you don't have a massive income, the Roth IRA is particularly attractive because you're paying the tax now at a really low tax rate and then you don't pay money ever again. Right. On the Roth money that you accrue, which is brilliant and beautiful. We're also fans of low cost index funds. We say it a lot, but check that out, Check those out. We have articles on the site about that as well. But yeah, go ahead, get that recurring contribution set up so it comes out of your bank account automatically every single month. Not having to think about it, making it seamless, that's crucial because it's really easy to fall off the horse. Otherwise you totally might start with the best of intentions, might fund it with a hundred bucks, 200 bucks or something like that, and you're like, yeah, I'm going to keep going. But if it's not kind of automatically paying yourself first coming out of your account every single month, you're likely to forget and then stop making it a habit.

[C]

Yeah, that's. Honestly, I think that's a part of why Denali's asking specifically about acorns. I'M assuming he's drawn to that one because of the Roundup feature. And that's what I mean. That's how acorns kind of made their name known initially. It's all about rounding up, essentially automating your investing. And so, like. Like, to that extent, Denali, if you are not going to. And I already said this, but I'm gonna just put a pin in it if you're not going to invest otherwise. And for you, if this is how you're gonna be able to jumpstart your investing, I think it's worth it. Maybe you want to do the right thing, but you just haven't found a way. If this is the tool that allows you to practically, literally, to start investing your dollars. And then I think this could be money well spent. It makes me think about, like, when I first started working out, the. Working out at the gym, doing CrossFit. Like, I could have tried to figure it out on my own at home, like I am doing now, but it would have taken a really long time, and I probably would have made a lot of mistakes. But I was like, you know what? I want to pay too much money for a period of time. But over the course of a couple years, I was able to learn. They had coaches there, they had trainers making sure my form was right. I was learning the ropes. And then finally I was like, okay, I can. This is actually not all that difficult. Now I do it myself.

[B]

Now you're ready to fly solo.

[C]

Exactly. And so I think I would love to see deny, like, if he's saying that, no, I need this to get started. I would love for him to find a way to not be signed up with acorns essentially, for the rest of his life. Because that's the part where I'm just, you know, because eventually they're gonna up the prices, up the percentage.

[B]

Which just means that the percentage, if you have a really small amount in there, can be really high under the flat fee model, significant. And it really does eat into your ability to build wealth. So, yeah, again, three bucks seems like nothing. And then you're like, but I've only got 100 bucks in there. So that three bucks a month actually was significant.

[C]

Massive.

[B]

Yeah. Yeah. Let's talk about real estate for a second. Because I like the goal of owning real estate, and I think it's amazing, Denali, that you've got others who are willing to support you in that endeavor. Your question was really about how to build up a down payment on a smaller salary. I would say it's kind of personal finance basics here to pay close attention to your spending, work hard to increase your income.

[C]

Yep.

[B]

Think it sounds simplistic, but every extra dollar matters when you're trying to scrape together a nest egg to buy a place. Yeah. And so, yeah, we often don't sing the praises of side hustles, but in those early years, trading your time for money can make a big difference. Right. It allows you to accomplish some of those primary financial goals that you have earlier. And, you know, start with a cheaper place that's going to. That's going to meet your needs, preferably one that allows you to either make money like a multifamily or something that you can increase the equity of through your own sweat. So, yes, I would lean into that. Maybe you move into something that's like, I don't know, kind of sort of a dump. Ish. Yes. But you can, over time make those repairs. And because he's a home builder.

[C]

Yeah, he works for a home builder. Right. So I'm assuming that means he's got some skills. And so, like, that's like the golden path I see for. For Denali here is the fact that he can potentially find. He's young, so he doesn't care necessarily. Maybe if it's a dump, he's got the skills, maybe he's even got the tools. And so to be able to kind of combine all of these superpowers like that. Denali, I think, is essentially your golden ticket. And I don't know, maybe you don't have the tools. This gets me thinking. I don't love the idea of your family, quote unquote, investing with you, because I hear you, you don't want to let them down. Things start getting kind of weird, and maybe if they could, like, gift you some tools or even some money, I think that's a much better path to take. As opposed to there being sort of this ongoing investor, client sort of relationship where it's like, well, I feel like I have a fiduciary responsibility to make sure that I'm giving them a return on their money.

[B]

You muddy the waters of that relationship.

[C]

Yeah, I would personally avoid that. Instead, just practice some of the basics. Like, Joel, like you just mentioned, finding ways to raise your own money, even if that means it takes a little bit longer to get started in real estate. I think that that that's just the better path forward for you. It's what I would do were I in Denali's shoes.

[B]

I think it's important, what you just said, being willing to wait a little bit longer. Like, hey, this is a goal. But what can my realistic timeline be? Run the numbers. Well, what if I make this change to my budget? What if I cut back here or increase my earnings a little? How does that change the timeline that I should be able to buy the place that I want? And wait a second, can that place actually provide a little bit of an income at the same time negating some of my housing costs once I do reach that point? Like, those are good questions to ask, but I would just say yeah, don't rush it, especially if it means potentially harming relationships because you're. You're borrowing money, which can, which can be awkward, especially with family.

[C]

That's right, dude, we've got more to get to. We're going to take a question about an FHA loan. We're going to get to car payments as well, and more right after the break.

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[B]

All right, Matt, let's get to our next question. This one comes from a listener who is worried about Social Security not being there in her future.

[G]

Hey Matt and Joel, this is Katie calling from Ithaca, New York. Beautiful area. If you guys ever wanted to come visit. There's a lot of beer tasting and wine tasting opportunities here and some beautiful hiking and waterfalls. I am a newer listener to the podcast. I've really enjoyed it. I've learned so much from you guys and I'm really appreciative of that. I just listened to episode number 872 with Jesse Kramer, and I thought that was a great conversation overall. I have a question specifically about Social Security. So you guys were talking about Social Security, you know, and the trust running out in the mid-2030s. But then after that they're still being funds available because, you know, workers continue to pay into that system. I'm wondering if you folks could talk a little bit about fluctuations in population and numbers of folks in the workforce and how that will change the way Social Security works. Or if you could talk about what your your Thoughts about that are okay. Thanks a lot. I love the podcast and appreciate everything that you do for us.

[B]

Matt, you ever been to Ithaca?

[C]

No.

[B]

I was gonna say Katie's a part.

[C]

Of the how to Money Nation now. She's a newer listener. Okay, so she called it that before the HTM Nation.

[B]

Yeah.

[C]

Should we do that?

[B]

I don't know.

[C]

Does it feel too bro y?

[B]

I don't feel good about it.

[C]

Really?

[B]

Yeah.

[C]

You're like, I feel a little icky.

[B]

When I say tell them our besties. You know, that's true. Yeah.

[C]

That's better. There are buds. No, I. You know, I love looking up where people live. Not like there are specific. Katie didn't send her actual address.

[B]

Matt's like, nice house. But she did mention the living room at the front.

[C]

She did mention Ithaca. And, like, when you search a town or a city, Google puts, like, this rotating banner of pictures and, like, three or four of the top 10 or the first 10 or 12 photos that popped up were, in fact, waterfalls. This is, like, a very beautiful place to go hiking, so I'm all for it. I actually might build that into. I'm already thinking about Road trip 2.0, Joel.

[B]

Nice.

[C]

Next summer, we're not going to go all the way up the east coast or go out west, necessarily, but maybe extending it off of our Michigan trip. Maybe, like, doing a little bit of Upper Peninsula action, which we've never done. But the New York Ithaca isn't all that far, I guess, really. I'm just sad we never made it over to Vermont, which is where all.

[B]

The good, good beer is. I still never been either, so I'm.

[C]

Trying to find a way to make that happen.

[B]

Yeah, but let's. Let's talk about Social Security because, yeah, this is a problem. The Social Security trust fund talked about it in that episode. Actually, if you look at the numbers, it's gotten worse. The Social Security trust fund is set to run out in roughly eight years. 2033, I think, is the last estimate I saw.

[C]

Used to be. Not that I'm pretty sure. Maybe the first time we talked about it on the show, they're like, it's totally fine until 2035. The fuse, it's gotten shorter.

[B]

That's right. That's right. And it sounds like a ways away, but it's not really right.

[C]

No.

[B]

This game of chicken is kind of starting to get scary in my book. And it's hard to fathom how no adult in power has been willing to veer the car away from impending disaster. They're Just like nothing to see here. And they get their hands locked on the wheel, keeping it straight ahead. What's going to happen is kind of, as you noted, Katie, benefits are automatically going to get cut by 23% roughly at that time if nothing is done to change the system. Also, more retirees have been claiming at an earlier age because of the troubled Social Security system they keep reading about, which compounds the problem. And still, still there seems to be zero political will to address this elephant in the room or to even acknowledge it exists. It's like, nothing to see here. Everything's fine. Social Security rocks.

[C]

These aren't the funds that you're looking for. This does make sense, though, because honestly, I feel like as a country, like voters, we have lost our stomach to hear the hard news, Right? To deal with the hard stuff. But still, it is shocking.

[B]

Just tell me what I want to hear, please.

[C]

Yeah, that's basically how it works in politics now. But what Katie is asking, though, is could things get worse? So we're going to go full doomsday on Katie here.

[B]

Let's go, HTM Nation.

[C]

We got to stop saying that. The projections now are based on a bunch of assumptions about how much payroll tax will likely be collected. And so, yeah, birth rates are factoring into this analysis as well. So, yes, the drop dead date, it has reflected these negative trends in the past few years, and it gets reassessed by the trustees of Social Security annually. And it, yes, most definitely could get worse. Because if unemployment numbers, let's say, they meaningfully increase, or let's say the birth rate decline, let's say, doesn't taper, let's say, what if it just even speeds up at a faster pace?

[B]

Let's say Elon Musk stops having babies, man.

[C]

I mean, compared to most the typical American, you and I are both outliers as well. We have too many kids.

[B]

I don't know if I'm an outlier at 3 because, what, 2.1 is the birth?

[C]

No, it's like 1.7.

[B]

Is it 1.7 now?

[C]

No. Yeah, it's below. It's below replacement rate. Like 2.1 is replacement rate.

[B]

Yeah, that's right.

[C]

Because to account for death, unfortunately, you're right.

[B]

I'm prolific. You are.

[C]

And four is just like, man, we've got friends who have, like, seven kids. They are like, what cult do they belong to?

[B]

I have friends who had, like, 10 siblings growing up. But I'm like, what was that like? I'm curious.

[C]

It's a different time, man. But all that to say yes. If there's fewer folks paying in. Well, payroll tax collections would decline, meaning that it would essentially speed up the. Yeah, it's just like smashing the gas pedal on the accelerator towards this Social Security cliff. Even more so. It could, in fact, get worse.

[B]

Is it an Adam Sandler movie where that family is heading towards the cliff and they. The car hits a banana rules.

[C]

Yeah, I'm trying to. Billy Madison.

[B]

Was it okay? Yeah. Well, so that's what it makes you think. It's like it's the banana peel. It could just accelerate everything. And the. Yeah, it's. What a relief to know that things could get worse. You are such.

[C]

You're a big Adam Sandler fan back in the day.

[B]

Yeah, but.

[C]

Oh, wait, no, I'm getting him confused.

[B]

Jim Carrey.

[C]

Jim Carrey, that's who.

[B]

You're a big fan. But I like Adam Sandler.

[C]

Adam Sandler's respectable.

[B]

I haven't watched Happy Gilmore too, but.

[C]

That'S what I was asking.

[B]

I'm curious to know.

[C]

It did really well opening weekend and was all online too, wasn't it?

[B]

I think it was just on Netflix.

[C]

Netflix only.

[B]

Yeah.

[C]

Pretty amazing.

[B]

Yeah. Okay, so what do you do with this information, this slightly depressing information that if people don't start having more babies.

[C]

And we're trying to put a positive spin on it, but at the end of the day, this is sad news. Katie's like, guys, why are y' all laughing so much and making jokes? I know, we gotta do something, Katie.

[B]

That's true. Yeah. Get y' all through this. In the face of impending disaster, if you don't retain your sense of humor, what kind of person are you? Right. But for younger listeners, I think it should be a wake up call to elect folks who actually tell us the truth. So maybe on a political side, nonpartisan political side, that's something to take into consideration. Don't just tell me what I want to hear. Ask the hard questions. What are you going to do about the impending disaster that Social Security is? Even if it's not fun, I want politicians who are going to tell me what's up. That authenticity, I think, builds trust. Also another thing you can do practically on the personal finance side of things, increase your Roth and 401k contributions, more money in your Roth IRA, more in your 401k, 100%. Because I think a lot of people assume that they're going to get more Social Security than they are. And guess what? If you're making assumptions based on what it says on Social Security, dot Gov when you log in. Well, that assumption could be improper and it could lead you to underinvesting and not having as much as you hoped or as much as you need in retirement. And I do think, Matt, you and I believe that Congress will do something one of these days.

[C]

Speak for yourself, man.

[B]

You don't think anything will be done?

[C]

I honestly, like, at this point, I really don't like because of the fact that the America as a nation, we've lost again. We don't want to be told no. We all want our cake and to be able to eat it too. We all want our candy, Joel. And also to be super fit and strong and to build muscle because, well, think about it. The default action by Congress and legislators, were they to not take any action, is that things are gonna have to change. So who is gonna, like, in their right mind go out there and put their neck on the chopping block or who's gonna put their neck out on the line to say and be the bearer of bad news when by default, it's going to happen anyway?

[B]

When the Social Security checks get cut, seniors are going to be riled up. And those are seniors vote. So I do think at some point someone's going to have to do something and that will mean changes to the system. I think that could mean payouts decrease slightly, maybe not 23%. If there's a change made, I think it can mean that dates for being able to claim Social Security go up, which should have happened already. Payroll taxes could rise. There are all sorts of changes that can be made to the system to give it some longevity, maybe some legs. But, yeah, where the political will is to make that happen. That's a good question. Yeah, we have to take it.

[C]

Yeah. Political will is not there.

[B]

So it's more incumbent on us as individuals to save for ourselves. Yes, the government isn't going to shore up the Social Security system.

[C]

That's the thing. I think as legislators are looking at it, they're like, why are we looking to prolong what is the inevitable death of this terrible program? Like, if you look at Social Security as like, what's the ROI on that? It's terrible. Like, if you, if someone came to me and said, hey, I'm thinking about investing in this etf. It's called ss. It's Social Security, folks. But I'm also contrasting it and comparing it to this other1 that's Voo, I would say, why are you even considering SS? It is terrible. But the fact is we all have to. Essentially, we are forced to pay into payroll taxes. Fica. This is why I think that legislate like nobody is excited because the outcomes have been so dismal that as I try to put myself in the shoes of a legislator, I'm thinking, yeah, like nobody wants to touch this because it's just a sorry. Unfortunately it's a sorry product. And as more folks, like you said, are investing more for themselves, there is a shift that's taking place of where it is that retirees are turning for their money. Yes, you've got folks who are most definitely in retirement who are going to be negatively impacted, but you also have, I mean, how much has retirement wealth in this country on an individual level grown over the past 10, 20, 30 years? It's skyrocketed. And so there are more and more folks who are looking to rely less on Social Social Security for the vast majority of their retirement.

[B]

And younger generations have gotten the message and yes, and they're saving at higher percentage rates than their parents were because they realize that it is more incumbent upon them. And I think that's a message that just has to get hammered home from shows like ours.

[C]

That's why we talk about it.

[B]

Yeah.

[C]

Yep.

[B]

You got to do it because this thing ain't guaranteed. I think for older listeners, Matt, this really could mean that claiming early is a better idea, which does exacerbate the situation. Right. That Social Security finds itself in. But I guess it makes me think, you know, we took a question recently about the break even age of Social Security and when you take it. Well, if you're in your early 60s and you're thinking about holding off to get a better check for decades to come, this should probably factor into your decision making.

[C]

Sure.

[B]

Because there is literally a drop dead date, a ticking time bomb. And so with all this uncertainty, it's really hard to know what's best definitively. We're looking at a moving target here. But I do think that taking the check earlier, even if you don't need it, and then investing conservatively if you can, holds more water because of this looming Social Security cliff. It's goes kind of counterintuitive.

[C]

You can't ignore the fact that something is going to happen. Like what exactly? We're not totally sure. It's not likely going to be good. It's not like they're going to be like, you know what, we're actually going to increase the payout. That's not going to happen. Right. You're not holding out for something. Well, obviously you as an individual get a fatter check as you wait to full retirement age. But I doubt that they're going to say, and we're also going to across the board increase payments. That's not what we're looking at here.

[B]

But if you wait six more years for the higher check and then right when you get the higher check, they cut it by 20 something percent, I.

[C]

Would have been better off having claimed it three years ago and not even waiting.

[B]

That's right. So it should factor in to your analysis. Katie, great question. Hope that helps. And I hope it wasn't too depressing. All right, Matt, let's get to the question from a listener who wants to know if she needs to hire a financial pro to help her out.

[C]

Hello, my name is Wendy.

[B]

I'm thinking of going with a financial advisor whom I spoke with. My sister goes through him. Yet they're moving from Charles Schwab over to lpl, which kind of scares me. I've read some things that are not that great.

[C]

What is your opinion?

[B]

Thank you, Wendy.

[C]

Thank you so much for your question. And we will specifically get to LPL here in a minute. But whether or not you need a financial advisor is a pretty complicated question. Some questions that I would be asking myself is like, how much wealth do I have? What have I been doing up until this point? Because here on the show, and we said this many times, but a lot of folks who start to wake up in terms of their finances, they start to look for a financial advisor immediately they're thinking that, I don't know, there's like a sense of magic that's gonna take place when they reach out to the quote unquote professional like you mentioned.

[B]

Joel, I have seen the light. I should hire a pro.

[C]

Feels like going to the doctor, it's like, oh no, I should. It's the right thing to do.

[B]

But really it'd be like going on a first date and being like, that's pretty good. I should marry this person. And it's like, no, no, no.

[C]

Maybe it is. We're like, yeah. But it depends on how much Wendy knows as well. Because as you are learning about building your wealth, retiring, I think just doing some of that DIY research, doing, making some personal changes to your savings to what it is that you're spending on that's going to increase your margin, that's going to give you more money to invest. And I would say that if you, if you feel completely lost and you do in fact need some one on one guidance, a money coach is typically more valuable. I think financial advisors, they can be helpful, they can make more sense down the road. I think once you've amassed a good chunk of money, when there's more, when there's more money on the line, they can make a lot more sense, especially on the tax side of things. I think that's where a professional can really step in and help out.

[B]

I think for a lot of folks, Matt, they realize there's a problem and then they think I should hire someone to be the solution. And I think you need to start off being the solution. And so that means like learning the ropes through podcasts, through books, that's going to help you get started. And not only get started doing the right thing yourself, but it'll help you know the right questions to ask a potential advisor if you opt to go in that direction in the future. It's kind of like when we talk about self managing a rental property and it's like you could start, you know, you should buy a rental property and start hiring property managers or interviewing property managers immediately. But because you haven't been doing it yourself for a couple of years, you're just more in the dark about what questions you're even asking them. And I think the same thing is true of financial advisors because you haven't done your own due diligence, which is crucial. And there are just different ways, by the way, that relationships with an advisor can be structured. The most common are advisors who charge an assets under management fee, typically in the 1% range. We don't love. I mean, I think just from hearing that with your two ears, you might say 1% seems reasonable. Right? That's. How big of a deal can that be? Well, it adds up significantly over the time. Over time, in particular over decades. That 1% fee can really be hundreds of thousands of dollars for diligent sabers.

[C]

Yeah, that's a big check mark over in the cons side of the equation. And I don't know what you said, you said something about something in addition to hiring a pro. But essentially, I think a lot of folks when they hire a financial advisor, they're almost like looking for a savior, right? Like they're almost looking to somebody they.

[B]

Want to farm out the hard work.

[C]

Well, and it's not just the hard work, but they're unfortun I think sometimes in a tough position and they're looking for like a magic trick, they're looking for a magician to pull a rabbit out of a hat and building wealth, building your net worth, growing a nice retirement nest egg. It's less a magic trick and it is more like taking, like cultivating a seedling like a tree, right. And early on, the inputs, what it is that you do for that thing matters a lot because it's this tiny little thing and you need to help it along, you need to make it. You gotta water the little seedling that is at some point gonna grow into this big beastly white oak. And guess what? At a certain point, there's almost nothing that you can do that's really gonna impact that tree. Right? Like, for the most part, it's gonna take care of itself. And it can withstand storms and wind and lightning strikes even. That's what it is to build your net worth. That's what it is to build up a nice nest egg. It's not something you can rush or.

[B]

You can toss in six bags of Miracle Gro or whatever, but.

[C]

And you can try to rush it, but then you get mixed results, I think perhaps. But like, there's something about just doing the right thing day by day, like day in, day out over time that is just really difficult to skip that step.

[B]

And because we don't have more information about where Wendy is at, it's really hard to answer this question. But I would say if you really do feel like you're ready to hire a financial advisor, we're fans of some of the newer models that align better with the interests of individuals. So paying for hourly advice can be a smart way to proceed. Instead of the assets under management model, you're paying somebody literally for an hour of their time to talk to you, and you might need many hours of their time, and that's okay. But there's a site, hello, Nectarine, where you can hire an individual advisor and pay them somewhere between 150 and 300 bucks an hour, depending on by a lot of factors, including their level of expertise. But I think a few hours of that time could cost you far less than what that 1% charge absolutely adds up to over time where you're signing.

[C]

This long contract where you're like, yeah, yeah, we're going to be with you for five to ten years as opposed to just a singular appointment.

[B]

Yeah. And there are also models like Domain Money, where you're paying a lot more thousands of dollars, but you're also getting more of a robust financial plan instead of like, hey, let's meet, I got some questions because I feel pretty informed. This is where it's like, hey, start from scratch. Let's look at my overall financial picture and where things are headed. And they're asking you a bunch of questions and they really are getting down to some changes that you can make and ways that you can tweak your investments if need be. But I think of that as more of like an intermediate step that maybe some people could really benefit from after they've gotten to a certain place in their wealth building journey.

[C]

That's right. Let's get specific here because Wendy, you mentioned that your sister's advisor is leaving Schwab and going to lpl. We think very highly of Chuck, of Charles Schwab and specifically their emphasis on low cost. So the fact that they're moving, that doesn't bode well. And we actually looked up what LPL advisors get paid and it depends on how much money you have invested.

[B]

Yeah, they're doing that AUM model, but.

[C]

On top of that it could actually be north of 1%. So it's perhaps even worse. And again, it's not that advisors can't offer you any benefit, but the cost does matter.

[B]

Yeah.

[C]

This is a conversation I continue to have with folks who are more in their retirement years. The opaque nature of assets under management models. It's just something that we dislike. And so we want you to exercise extreme caution.

[B]

Yes. All right. We got more questions to get to get to one about buying a new car and about whether or not it makes sense to save up longer for a down payment or just buy that house. We'll talk about that and more right after this.

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Yeah.

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[C]

All right, buddy, let's keep chugging along. It is now time for the Facebook question of the week. Wish this week is by somebody named Authentic Elk.

[B]

Well, you can post nicknames now, apparently in the Facebook group. I didn't realize this until this week.

[C]

So are they following the anonymous Google user where it's just like Busy Beaver?

[B]

I don't know because I don't know if you get to choose the nickname or if it's assigned to you, but.

[C]

Well, you know, I'm pretty sure on Google, if it's an anonymous user, like on a shared spreadsheet or something, I'm sure a lot of folks know what we're talking about. I think those are just like randomly assigned.

[B]

Yeah, stuff like that. Yep.

[C]

But this person posted buying A new car soon. And we are gifted funds to help with payment. How long do the new funds need to be in our account to see a boost in our credit score? There's a couple different things that I think are being asked here, Joel. So which one do you want to start with?

[B]

Let's clear through this one, Matt. This is not like buying a house where funds need to season. Right. Because typically in that case it's if your parents were super generous, Matt, you were buying a new house and they said, here's $100,000, Mattie, you would have to declare that to the bank unless your parents had the foresight to give it to you more than 60 days in advance. So if that money sits in your account for a while, then you don't need to go through the process of documenting the gift, which can be annoying. So that's seasoning of funds, but that's in buying a house. And with a car purchase. The requirements are not the same. Not typically the same. It's going to vary lender to lender. Some will want you to document a lump sum that recently came into your account. Others won't really care. But yeah, typically that seasoning thing when we're talking about home loans.

[C]

That's right. So you addressed the how long do the new funds need to sit or wait part of the question. I'm going to talk about the credit score side of the question. I guess here he was specifically asking about the impact on his credit score. And, and guess what? It doesn't make a difference. The credit bureaus, they aren't privy to what is in your savings account. They look at how well you pay your debts, your payments. Right. Whether or not you pay your car payment in full and on time every month, whether or not you make your credit card statement payments, that is going to improve your score. Not keeping a lump sum in your account for longer sounds kind of backwards. But lenders, they don't care how much money you actually have. They just want to see consistent behavior. Essentially.

[B]

It's amazing. It doesn't matter. If you had a 10 million dollar net worth, it would not raise your credit score. Like that's just not one of the factors they consider.

[C]

Keep talking, Joel. You're gonna start ending up sounding like Dave Ramsey over here. If I could buy the dealership and I wouldn't be able to get a.

[B]

Car, I mean, that's what he says there, there is, or what he used to say, putting truth to that. But it's true. Yeah.

[C]

So I've got to say this Though, speaking of having cash on hand to buy whatever it is you want to buy, I'm not sure where you are in this whole car purchase process. Authentic elk, but could that cash gift and what you have on hand just allow you to actually buy this car in cash? It sounds like, I don't know, maybe I should just assume that when they said there were gifted funds to help with the payment, to not think payment like car payment, but in fact to pay for the vehicle. Like, as far as cash down, but that's, I think, a route that we should be looking at here. Hey, use that cash on hand to actually purchase a vehicle. Maybe I'm just going to assume that that was, in fact, what you're thinking, because you're a part of the how to money nation.

[B]

Yeah, I mean, I. I assumed, too, that this.

[C]

Still don't like it?

[B]

Nope. Not doing it for me. I'm assuming as well, that this is. Hey, well, we're going to have payments, and this gift is going to help help us with those payments, but maybe not.

[C]

Yeah, let's pivot.

[B]

Yeah.

[C]

Let's assume the best yes out of authentic elk.

[B]

Because truly having no car payment is such a gift. It's one of the greatest financial gifts you can give to yourself. You and I, Matt, were not. I'm not allergic to gluten. Of course we drink good beer. I am allergic to car payments. And so I. I would prefer to spread this allergy through this microphone into the earbuds of everyone listening. I don't want anybody to be like, car payments. Totally fine. No big deal. Because they are a big deal. And it's surprising how much financial progress you can make if you avoid them altogether.

[C]

Yeah. By the way, allergies don't spread. They're not contagious. Joel.

[B]

I know. But viruses do, though. I want this allergy.

[C]

So we want car payments to feel like a virus for an aversion to car payments to feel like a super. Like. What's the most contagious thing?

[B]

Ebola. Is it?

[C]

I was going to say pink eye.

[B]

Okay.

[C]

You're thinking much darker than. Much more drastic outcomes than, I guess, pink eye, but. All right, let's get to our next one from Kaden, who wrote, my wife and I are currently trying to save for a down payment on our first house. I've been debating this for a while now, but is it worth it to take the extra two to three years to save up a 20% down payment, or would it make more sense to just go with an FHA loan for 3.5% down and end up paying PMI private mortgage insurance. Part of me doesn't want to pay the extra 100 to $200 a month, but then we would have to wait longer to have more money for the down payment. Thanks. What you think, buddy?

[B]

Well, when I first read this question, it made me think about the questions we were getting as housing prices were rising quickly over the past few years and folks were worried that taking longer to save it would mean that they wouldn't be able to afford the house that they wanted, that their needed down payment was a moving target that they never hit. Hey, guess what? The house I wanted two years ago, well, it was $500,000. Now it's $700,000.

[C]

Constantly feels just out of reach.

[B]

Yes, yes. Our advice, and this was hard to say, Matt, at the time because it felt like, it felt like we just like weren't with it and we weren't hip to the fact that housing prices were going to escalate forever in eternity. And so we had to get on the ground floor now or we're idiots. Right. Well, our advice was patience and that real estate prices couldn't continue at that upward clip in perpetuity. That was hard for a lot of people to believe. And I think, I'm sure some people bought a house that maybe they regret because they were trying to time it right. Fortunately, we have seen price increases start to chill out and in many markets we're seeing home prices decline. So for the first time in something like 15 years, maybe waiting longer will actually mean that you can buy the home you want for less money.

[C]

Sure, there's a chance.

[B]

It's not guaranteed. It's hard to know what's going to happen with the housing market, but I'd love to see at least a plateau where people aren't, and especially younger buyers are not worried about just prices continuing to escalate and run away.

[C]

I think it can feel like you can finally try to catch your breath a little bit. So hopefully that's the case that, that you're finding yourself in Caden. And I think the problem with putting less money down and buying sooner is that you're going to have less skin in the game as well. So essentially you're ramping up the level of risk that you're taking on. Your payment's going to be higher. And then, you know, if you lost your job or if you're forced to sell, if you had to move, you would then have to bring money to the closing table, especially when you're looking at something like, with only 3.5% down. This is a part of why we don't feel comfortable with smaller down payments. And then, of course, the debt that you're going to be taking on will be at a higher interest rate these days as well, compared to what you would score with 20% down on a conventional loan.

[B]

Also, on conventional loans, you can typically get rid of private mortgage insurance after you reach the 78% loan to value threshold. On FHA loans, though, where you put down less than 10%, typically you pay that mortgage insurance for the life of the loan. So it doesn't matter. Right. How quickly you pay down on the loan. It's stuck with you. Right. It's like glue. And so nobody wants to wait longer or be told to wait longer, but that's what we do. And so I think maybe in the opposite way, this could actually light a fire under you to increase your savings rate so that you can shorten the timeline to home ownership. Because it sounds like this is a really important goal of yours. But our suggestion would be to not skip over what we see as pretty much a necessity to save up a bigger down payment. Matt, I just couldn't stomach saying, I really want the house now, and so I'm going to sign up for the bigger payment and the potential perils that come along with that alongside mortgage insurance in perpetuity, because I just got to have the thing immediately. It. Yeah, similar to buy now, pay later. It's like, I want the thing before I actually have the money to really afford it. And it can create problems. That's right.

[C]

Kaden is laying out, like, option A or option B. You can go with a conventional loan where you are not putting down a full 20%. Let's say you get a 15% down and then you come. You know, that's how much you've saved up. And then you come across the home of your dreams and you're like, we got a pounce now. Well, yeah, you're gonna get hit with pmi, but then you can still eventually, at some point, drop that, hopefully. So it's not just the FHA or a full 20% down. There are other opt. Granted, you put less down 15%, you're gonna see higher rates.

[B]

That's true.

[C]

Less favorable terms. There's a spectrum. Yeah, exactly. It's a spectrum. All right, buddy, real quick, let's get to the beer that you and I enjoyed during this episode, which was called a Dawn Patroller, which is. I guess that's what they call people who get up early and hit the beach down there in Hawaii. I'm gonna take the Joel route and give three words to describe this beer. Fresh, melony, and crispy. And I say fresh because I recently had a quote unquote, really good beer that was not fresh. And, dude, that just kills it. I drink the first one and thought, man, this wasn't that great. And then like a week later, I cracked open another one. I'm like, wait a minute, this tastes, like, old and stale. And I checked the date on the bottom. It was a year old, which for an ipa is not what you want. You could tell that this was canned just like yesterday, basically.

[B]

It tasted so good. Well, that's a good point. I think we just should tell people, especially with, like, IPAs, the hops that they just, man, they lose their luster. And the taste can change dramatically if it's not. If it's not. If you don't drink it fairly fresh. So there's some beers that are meant to age or at least can taste.

[C]

Awesome aged or can handle the aging.

[B]

Barrel aged stouts or sours. It's like, oh, yeah, drink that two years from now. It's fine.

[C]

Spontaneously fermented beers from Belgium.

[B]

Those best Kenty owned beers. Yeah, they have a shelf life of like 20 years.

[C]

They're fantastic.

[B]

This kind of beer does not. But I thought this was great. I thought it was, like, kind of tropical, hoppy, and which just, you know, reminds me of all the palm trees on that lovely visit.

[C]

Can you hear them swaying in the wind? I bet you can.

[B]

Beautiful trip. All right. And you know what? It's fun to bring beers back. And then while you drink them, reminisce about the awesome time you had.

[C]

It's a souvenir that you can drink. That's the best kind of souvenir, my friend. That's gonna be it for this episode. You can find our show notes up on the website. Thank you to everyone who sent us a question. And again, reach out to howtomoney.com if you'd like instructions on how to send along your query. The weirder, the better.

[B]

Bring it, buddy.

[C]

That's gonna be it. So until next time, best friends out. Best friends out.

[A]

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