Ask HTM – ADU vs iBonds, Timing a Silver Sale, and HELOC Unlocking Landlord Status #1099

Summary

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Podcast Summary: "Ask HTM – ADU vs iBonds, Timing a Silver Sale, and HELOC Unlocking Landlord Status"

Podcast: How to Money by iHeartPodcasts
Hosts: Joel & Matt
Episode: #1099
Date: February 9, 2026

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Overview

In this Ask HTM episode, Matt and Joel answer listener questions on personal finance topics ranging from I Bonds versus ADUs, timing the sale of silver investments, establishing trusts, Roth IRA conversions, and using HELOCs to unlock real estate opportunities. Their conversational, down-to-earth style blends practical money wisdom with relatable personal anecdotes and a dash of pop culture humor, delivering advice focused on simplicity, smart decision-making, and real-life applicability.

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Key Discussion Points & Insights

1. Grocery Savings & Listener Feedback (04:08–08:31)

• Discussion opens with a tip from a listener advocating for Amazon Grocery as a source of cheap staples, such as 18 eggs for $1.
• Matt and Joel reflect on changing grocery prices, the importance of price sensitivity, and their own humorously failed attempts at backyard chicken ownership.
• Quote:

  “You just have to have your eyes open to [deals]...” – Matt (06:54)

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2. Listener Question 1: I Bonds vs. Funding an ADU (09:37–20:17)

Question Summary:
Amy from the Bay Area asks about the actual return from her I Bonds bought in 2021–2023 (originally at ~9%, now at ~3%), and whether to cash them out to help pay for an ADU (accessory dwelling unit/remodel), or leave the money growing.

Key Takeaways & Analysis

• I Bonds Recap:

  • Rates adjust every 6 months with inflation (tied to CPI).
  • Early 2020s offered high rates; now substantially lower.
  • Later I Bonds have a small fixed rate, but most of the big returns are in the past.

• Return Math:

  • Amy confused by her actual earnings versus currently-posted rate.
  • Matt explains she should annualize the gains (smooth over 4 years) to get a real annualized return, likely >5% due to hot early rates (16:01–16:24).

• Decision Factors:

  • Current I Bond rates are now less than many high-yield savings accounts.
  • Withdrawing I Bonds vs. selling other investments: best to cash out I Bonds (especially those that are near or at 5-year maturity), accept losing 3 months’ interest for the less-aged ones, and avoid touching retirement/taxable investment accounts and the associated taxes/penalties.

  "It's awesome that this money from the I Bonds could help facilitate your ability to earn additional income via this ADU on your property." – Joel (19:08)

  • Rental real estate/ADU likely to be a better long-term investment if managed properly.

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3. Listener Question 2: Do I Need a Trust? (24:09–33:19)

Question Summary:
Michael from Chicago asks if he needs a revocable/irrevocable trust for asset protection, as a family member suggested, even though he isn't extremely wealthy and has no heirs.

Key Takeaways & Analysis

• When Trusts Make Sense:

  • Necessary for complex estate planning, passing money to heirs, or special situations (mental incapacity, complicated wishes).
  • Not needed for those without heirs or significant complexity.

• Creditor Protection:

  • Workplace retirement accounts and rollovers into IRAs are already protected (up to ~$1.5 million).
  • Taxable brokerage accounts are exposed, but umbrella insurance is cheap and effective protection for most cases.

• The Real Costs of Trusts:

  • Trusts can be expensive to set up and maintain.
  • Often sold unnecessarily by advisors; simpler, affordable online options may suffice if ever needed.

  “We are also fans of simplicity…your life just isn't complicated enough to merit [a trust].” – Joel (26:30)

• Low-Hanging Fruit:

  • Update will, life insurance, and beneficiary designations; these are crucial and often overlooked.

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4. Listener Question 3: Roth IRA Conversion Rules (33:52–42:01)

Question Summary:
Mike from SoCal, age 61, wants to convert a traditional IRA to a Roth and is confused about the 5-year rules for withdrawals.

Key Takeaways & Analysis

• Five-Year Rule Clarified:

  • At age 59½+, the principal of Roth conversions can be accessed penalty-free.
  • Growth on converted dollars requires a Roth to have been open for at least 5 years for tax-free withdrawals (applies to first-ever Roth account; not for each conversion).

  “59 and a half is the magical age where you can access the converted principal without having to watch the clock.” – Matt (35:21)

• Lump Sum vs. Laddering Conversions:

  • Strategic, annual "laddered" conversions (filling up lower tax brackets over multiple years) almost always beat lump sum conversions tax-wise.
  • Lump sums risk bumping you into high tax brackets; laddering keeps taxes lower.
  • Plan for future income (RMDs, Social Security, pension) and consider consulting a financial advisor for personalized planning.

• Other Nuances:

  • Qualified charitable distributions (QCDs) from traditional IRAs can reduce taxes and fulfill RMDs – don’t rush to convert everything to Roth.
  • Always have cash on hand to pay the taxes due from conversions.

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5. Facebook QOTW: Should I Sell My Silver Now? (44:39–50:30)

Question Summary:
Nicole bought silver at ~$16/oz, now it’s up a lot. Should she sell or hold?

Key Takeaways & Analysis

• Market timing questions have no certain answer; no one knows when peaks happen.

• Decision hinges more on original investing goals than current price.

• If investment philosophy or personal needs have changed (pay off high-interest debt, new goals), then selling may make sense.

• For diversification, maintain a small percentage in precious metals; for speculation, realize gains if you’ve hit your target.

  "You did it because you read a tip somewhere...maybe it worked out for you this time, but it may not work out for you next time." – Matt (47:33)

• Physical silver vs. ETF has different transaction costs and liquidity implications.

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6. Listener Email: Using a HELOC for a Down Payment/Becoming a Landlord (50:30–56:26)

Question Summary:
Tripp wants to keep his current home as a rental, take out a HELOC for the down payment on a new house, but found warnings online that this is "basically fraud." Is it legal? Are there better alternatives?

Key Takeaways & Analysis

• Not fraud; a common and legal strategy if rules are followed.

• HELOC contract may stipulate you reside for 12 months, but this is usually about intent at time of signing; lenders care more about provenance and seasoning of funds for new mortgage approval (typically 60 days’ history).

• The bigger concern is whether you can pay off the HELOC quickly; otherwise, you might be stretching too far.

• Lender underwriting may look at debt-to-income ratio and require documentation of all liabilities.

• Summary: It’s fine to use the HELOC for the down payment in most cases—just don't set yourself up for long-term payment stress, and follow bank seasoning rules.

  “I just would not be worried about ending up in the slammer...if you fail to live up to the letter of the law regarding all the fine print details of this HELOC.” – Joel (56:24)

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Notable Quotes & Moments

• On keeping personal finance simple:
  "We're all about reducing complexity whenever humanly possible." – Joel (26:15)

• On tough market timing decisions:
  "Nobody knows what the top is...If this is the beginning of a massive five-year silver run, or if this is the top." – Matt (45:54)

• Pop Culture Crossover:
  Joking about Marvel’s “Vibranium” and Harry Potter’s Fluffy/Cerberus as relatable metaphors for investing and life decisions (03:10–03:49; 56:34–57:09).

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Timestamps of Key Segments

• Grocery/Amazon Grocery tips & intro chatter: 04:08–08:31
• I Bonds vs. ADU/real-life example: 09:37–20:17
• Trusts & asset protection: 24:09–33:19
• Roth IRA conversions & rules: 33:52–42:01
• Precious metals – when to sell: 44:39–50:30
• HELOC, down payment, and landlord status: 50:30–56:26

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Final Thoughts

Matt and Joel ultimately reinforce timeless, core advice:

• Focus on your personal financial goals and simplicity.
• Avoid unnecessary investment moves or legal structures unless complexity demands it.
• Don’t try to outguess the markets—focus on fundamentals.
• Use tax and investment “tools” (like Roth conversions and HELOCs) in a smart, measured way that fits your exact circumstances.
• When in doubt, seek unbiased, flat-fee advice—don’t get upsold.

Listener engagement and personal stories layered throughout bring the financial advice to life and make the show approachable and actionable for listeners at all stages of their money journey.

Transcript

[Matt]

This is an iHeart podcast.

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[Joel]

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[Matt]

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[Joel]

Hire right the first time, post your first job and get $100 off towards your job [e-mail] help. How to money that's LinkedIn.com howtomoney terms and conditions apply. Travel is such a life changing pursuit and my trip to Australia was one of the best investments I've ever made. I got to enjoy the bustling metropolis of Melbourne and some of the best coffee of my life while also driving the great ocean road and taking in spectacular views. I even hopped on a plane to the island of Tasmania. That was my favorite stop. I loved it all. A trip to Australia doesn't just offer a getaway, it's an investment in experiences that stay with you. Explore more destinations in Australia and start planning your Memorable [e-mail] Welcome to how to Money.

[Matt]

I'm Joel and I am Matt.

[Joel]

Today we're answering your listener questions.

[Matt]

Welcome to an Ask how to Monday? I almost said how to Monday, which is not what we're doing here. We're not telling you how you should live your life, although we kind of are. Because money touches everything, right buddy? Yeah, touches everything.

[Joel]

There's a lot of freedom of choice in there and we don't want to dictate anything to you, but we're just offered some advice and opinion.

[Matt]

Yeah, do it. Float Your boat to a certain extent. Like a listener.

[Joel]

For instance, if you sent your question in, you asked us. Okay, so, like, it's on you a little bit.

[Matt]

You want to know what it is that we have to say about I Bonds, for instance? That's a question we're going to get to. Listeners asking if they like switching over to an adu, if that's better than I Bonds. And you might be thinking, man, that's like apples to oranges. Well, we will get to it.

[Joel]

Might even be like apples to spinach or something.

[Matt]

Chicken. Yeah, we're gonna talk about silver. Actually, there's been a whole lot of gold talk recently. I feel like there's been less talk about silver. What about silver, Joel? What about palladium? What about platinum? All the other precious metals you could invest in. What about vibranium?

[Joel]

Is that a real one?

[Matt]

You know, vibranium? Vibranium is. That's the made up metal from Wakanda. Oh. I mean, it's not made up, it's fictional.

[Joel]

I never saw those movies. Mostly because I haven't watched. I think maybe I've watched like one Marvel movie in my whole life and I try to stay away from.

[Matt]

I feel like after that one they all started to go downhill.

[Joel]

They were great there, supposedly. That one was really good.

[Matt]

Yeah, that was around the endgame film, whatever.

[Joel]

Before they started, like forcing all the plot lines. Yes.

[Matt]

Yeah, exactly. As well as Helocs, we're going to talk about home equity lineup. Where else can you hear us talk about Marvel characters and movies? But then also Helox, Joel, Only here at out of Money from the fun.

[Joel]

And the culturally relevant to the mundane money talk. We run the gamut.

[Matt]

That's what we're doing here.

[Joel]

Okay, real quick, listener. Andrea emailed us recently and she said that if you guys haven't checked it out before, you should check out Amazon Grocery. And I was wondering, Matt, if you have given Amazon Grocery a shot. She sent over a screenshot of a recent purchase and she got 18 eggs for a dollar. First off, it shows egg prices are not what they were a year ago. Right. They really have come down. Kind of gone back to normal. But 18 eggs for a dollar? The flocks are back. Is that normal? Is that not normal on Amazon Grocery? If that's normal, then you're right. I probably should check out Amazon Grocery.

[Matt]

Except that I'm sure it was those plain, generic white eggs, though. Let's be honest. Right.

[Joel]

Nothing wrong with some plain generic white eggs.

[Matt]

Oh, man. We've moved on to, like, the faint.

[Joel]

I get the fancy.

[Matt]

Oh, man, we get the fancy brown egg eggs now, Joel.

[Joel]

It depends on the price discrepancy for me.

[Matt]

So we should be more price sensitive.

[Joel]

Obviously. The two dozen eggs at the white eggs at Costco is typically around $4 and the two dozen brown eggs is closer to $8.

[Matt]

And so, yeah, it is closer.

[Joel]

If that gap gets closer sometimes I'll.

[Matt]

Get the brown ones twice as much. Yeah, yeah, I got those Ivy League eggs, Joel. My eggs have, they've got degrees.

[Joel]

Do they. Do they increase your iq? Do they do anything extra special?

[Matt]

Oh, I think they're the chickens, baby, are in better shape when they lay the. But yeah, no, I think by the.

[Joel]

Way, the listener listeners probably know that we have had backyard chickens. They're all dead right now. I blame my son. And so right now we are doing store bought eggs until we get new chickens that we can hopefully keep alive.

[Listener Amy]

Why.

[Matt]

Why did I think that y' all got like some, some chicks. Weren't.

[Joel]

No, we haven't done that.

[Matt]

Supposed to bring y' all. Some, some pullets or some, some chicks.

[Joel]

Yeah, she did.

[Matt]

They're dead.

[Joel]

Yeah. Wait, no, but that was like in February. No, this was like June of last year. So we. It's been a while.

[Matt]

Oh my gosh. Time flies.

[Joel]

Yeah, we had those, had those chickens and they're all gone. We're not the best chicken owners.

[Matt]

Well, I was gonna say it makes me think of Fantastic Mr. Fox, like the opening scene, like. Anyway, I'm thinking about how I should probably pay more attention to that because just the way I think you make a purchase on Amazon, you get ready to check out and it's like, would you like to add something to your order? And it's just like, you know, they show you recent things. I'm like, no, I don't want to buy more trash bags. I just got those trash bag liners that don't need that. And I always just assume that they're. Even though it's an item that I have purchased before that the price right then and there, if I add it is going to be more. And that's just me being skeptical. But like Andrea pointed out, maybe it's worth paying attention a little more to some of the prompts Amazon Grocery, specifically, what the actual prices are as opposed to just being like crystallize my thought and how I approach things, which is I think how I tend to do things. Like, I know you put it in.

[Joel]

The category of it cost too much.

[Listener Amy]

Yeah.

[Matt]

And I don't even consider it at all. As opposed to being a little more open minded and thinking, oh, there's deals to be had. You just have to be. Have your eyes open to them.

[Joel]

Kind of be discerning.

[Matt]

Yeah, exactly. And I think Andrew certainly did a great job. I mean, a dollar for 18 eggs, even though, even if they're the plain old but generic white ones, that's. That's tough to pass.

[Joel]

And what was. Yeah, I don't. She didn't say what the delivery fee was. I think it's free. Was it, Was it free?

[Matt]

Well, or maybe it was if it was part of another order. I just remember her being.

[Joel]

I'm guessing you have to order at least a certain dollar amount or you have to pay a monthly fee. I want to say it's $7.99 or something like that to get Amazon Grocery. So. And then are you tipping on top of that? And how much do you have to.

[Matt]

Get to order tipping? Because I remember her saying that they leave it at her door.

[Joel]

Okay.

[Matt]

But with it, she's in D.C. and.

[Joel]

It'S cold, so she's like, it all.

[Matt]

Stays fresh because it's been so cold outside.

[Joel]

I want more info. Like, so if there's listeners out there who have been using Amazon Grocery and they're like, it's saving me money or it's not costing much more and it's making my life so great, let me know. Because I haven't delved into it personally yet, but seeing this email and I'm like, I feel like trying to do more research.

[Matt]

Yeah. With those kind of savings, I will.

[Joel]

Say I do buy some groceries, some dry groceries sometimes on Amazon. Soup for some reason, like Campbell's soup or whatever is so much cheaper on Amazon than it is at the grocery store. And so if I'm ordering soup, I get it from Amazon. Okay. I know that's weird.

[Matt]

I was gonna say, I wondered if it's gotta vary too depend on depending on where you live. Like not just from a city versus rural standpoint. But I do wonder. Cause I know eggs, generally speaking, tend to be more affordable, like in the Midwest because of like, they're closer to all the chicken farms versus having to ship it like to the coast.

[Joel]

Yeah.

[Matt]

To the elite podcasters who live on the coast. We're coast ish, aren't we? Yeah, we're not like on, you know, we're not ish on the actual coast anyway.

[Joel]

I think they might even consider us in flyover country too. Even though we're in a, in a state that touches the coast. We're still.

[Matt]

We got water attractions.

[Joel]

We're not coastal elites. All right, let's mention the beer we're having on this episode. This one's called Cerberus Nocturne. It's a vanilla porter by Incendiary Brewing. Another one given to us by Brandon the, the head brewer and owner over there at Incendiary.

[Matt]

So founder of Incendiary Brewing Company.

[Joel]

Founder. I've just got a lot of, you know, titles after.

[Matt]

Oh, my gosh, was it last? When did I say that he was like headmaster or something. Head brewer.

[Joel]

The Dumbledore of Incendiary. Yeah, exactly. By the way, if you have a money question, please do send it our way. Howtomoney.com ask is where the directions are, but really it's just recording the voice memo on the app on your phone, emailing it over to us. It'll take you all of a minute and then hopefully we can take your question next week on the show. Let's get to some questions, though, Matt. This next question in particular is about moving money from one investment to another.

[Listener Amy]

Hi, Matt and Joel. This is Amy from the Bay Area. I have a math question for you. This is regarding interest rates for I bonds. So back in the day, in 2021, I purchased $10,000 in I bonds because I think the interest rate was somewhere around 9%. I bought some more in 2022, also 10,000 and another 10,000 in 2023. Then I stopped buying the I bond because the interest rates fell. So I logged into my account and Right now the 2021 and 22 has an interest rate of 3.12%. 2023 has an interest rate of 3.53%. My total investment for those three years is $30,000. The current value is $35,168. I can't for the life of me figure out what my money is actually earning, like, for real. Because if I take what's earned and divided it by what I put in, the interest rate is super high. It is not the 3% ish interest rate that is currently shown on my account. So I would love to have some help to figure out what exactly am I earning on these ibines. Should I keep them in there? We are getting ready to start a home project, like a large remodeling project where we're actually adding an ADU to our home with hopes of either using it as an income property or maybe moving my parents into it when they get older and need more assistance. So I want to know, should I keep the Money here because the first set of ibaned is maturing soon I can take the money out or I should just leave it in here and let it ride and maybe take money from other investments so that this could keep earning an interest rate. If the interest rate is actually very high and beyond the 3ish percent that is being advertised. Thank you so much for your time and I appreciate your help with this.

[Matt]

Dude, you remember ibonds?

[Joel]

It's been a minute since we've talked about I bonds for.

[Matt]

They came and then they went.

[Joel]

Yeah, 2022 was like the year of the I bond and.

[Matt]

Oh, is that when inflation happened to skyrocket and spike and they adjusted the I bonds? Yeah, that's. So that's what the I stands for is inflation bonds. It's not like. It's not like an iPhone. What does the I stand for? And it's not like an imac or an iPad.

[Joel]

I think it's Internet is what it stands for. With the I in the Apple branding.

[Matt]

Or is it like you as an individual? Anyway, it doesn't matter.

[Joel]

I think it's you as an individual is what it's going on.

[Matt]

As in, like, this is your device. Yeah. In this case is inflation. Inflation bonds. And yeah, they're super hot there for a minute. Oh, my gosh, Amy.

[Joel]

It was like Hansel in Zoolander. So hot right now.

[Matt]

I had multiple I bond purchases that I made at that. At that period in time because it was so great. Yeah, it was fantastic. It's hard to turn down.

[Joel]

I no longer hold any of those I bonds. And that was something. Actually, we did talk about kind of on the comedown from I bonds was like, well, when do you sell them and how long should you hold onto your I bonds? And that's essentially what this question is, is getting at the root of. And we should talk about I bonds. Yeah, they keep pace with inflation. That's the goal of I bonds. But the rate.

[Matt]

How do they work, Joel?

[Joel]

Well, the rate changes every six months based on what's happening with inflation and the CPI report and the. As inflation has cooled, I bonds have become far less attractive because guess what? If you're keeping up with the rate of inflation and inflation is paying less than what you can get in a bunch of other investments or even savings accounts, then I bonds just don't look very good. In addition to that, Matt, something that I bonds can have, depending on when you purchase them, is a fixed rate attached to them as well. Right. And so Amy mentioned, well, the earlier I bonds that she bought those, did not have any fixed rate attached. Like when inflation was 9%, there was no fixed rate attached to it. But for a short period of time you were getting a sick return. Right. That equivalent to inflation. In the I bonds that you purchased, you bought them because the floating rate was fantastic, not because they had a great fixed rate attached to them. More recently though, as inflation has fallen, the fixed rate has ticked up in an attempt to kind of make I bonds a little more enticing. But the overall rate is still far worse than it was right in 2022 in that era. And so the current I bond rate, if you were to buy one today, is about 4% with 0.9% of that being fixed, which, you know, it's not too bad. But if inflation cools back to 2%, which is what the Fed's goal is, your overall rate then would be closer to 2.9%, which is not, not as good as four.

[Matt]

Yeah, exactly. Yeah. So that's how these I bonds are constructed. Let's talk about when you might want to utilize an I bond because they might, you know, they made sense as a short term play back then as a way for folks to earn extra on some of these medium term savings. That being said, they were never a great replacement for money that you wanted to invest more for the long term. So you asked how much your I bonds are ear. Well, each batch is going to earn a different rate. So the I bonds you bought back in 2021, that started off great, well, they're now only earning the rate of inflation today because there is no fixed rate. It's a fraction of what you earned back then. Although the early returns were awesome. You're earning less on that $10,000 than you would now earn in a high yield savings account. So it's likely the same with the other I bonds that you purchased as well. Unless you bought them late in the year because they would have these a low fixed rate then. But either way, not holding on to your I bonds and you know, cashing them out for your ADU project, I think it actually does make the most sense as opposed to tapping maybe some other investments. Also, I wanted to address this. She seemed to be a bit unsure of the actual rate that she's receiving. Right. She's like, I did the math and it seems like it's way, way higher than what it says when I log in.

[Joel]

And I, she's like, why do I have this much money if my annualized return is like 3, like 3%.

[Matt]

Yeah. And so I Think there might be a part of that's. Well, you were earning an actual higher amount, sort of like we just discussed.

[Joel]

But also in those early months and years.

[Matt]

Yeah, yeah. But also I think she might be effectively calculating her total rate of return, her total return on investment as opposed to it being annualized. And so this is overly simple, but if you divide it by like four or five, however long you've had it, you're going to get closer to the annualized return. It's not exactly the same because it's compounding.

[Joel]

Her overall rate of return on those I bonds is not going to be the number that she's seen. That's the number that's being paid on this current six month batch. Exactly. And so if she looks at the annualized rate of return over like four years, let's say since she initially bought those I bonds, her like smoothed out rate of return could look, it's probably north of 5% would be my guess, maybe even a touch higher. And you mentioned that you think that she should cash these out for the ADU project and yeah, I tend to agree. I mean, it sounds like she wants to pay cash for this project. And so her question really now hinges less on whether she should keep those I bonds around long term, but whether she should tap I bond dollars or investment dollars. And we lean heavily towards liquidating your I bonds when it comes down to the crux of this question, because your overall rate of return has been better than savings, but current returns aren't great. And so yes, it's true that if you sell too early, you'll forfeit some of the interest you would have earned the last three months of interest. But I think you're going to be better off just liquidating your I bonds and putting those towards this ADU instead of tapping other investments to do so.

[Matt]

Yeah, and she mentioned getting to the point to where she could tap that without penalty in some ways. Like I bound I bonds function sort of like a cd, right. So you have to keep them for a certain stretch of time, 12 months. But if you sell your I bonds too soon, under five years, you're going to forfeit three months worth of interest. And so since you bought your first batch back in 2021, it sounds like you are, you're almost there. So try to hit that mark. And once you do, go ahead and grab that money. As far as your other I bonds, I think I would still cash them out instantly because yes, you are forfeiting a bit of interest, but it is keeping your other investments Intact and it allows you to just avoid taking on certainly higher interest debt. But it allows, I don't know, maybe there's a way you could tap the ones that are fully, not fully matured, but 5 years matured, find ways to maybe cash flow, some of the other stuff. But if not, I would not be worried about cashing out those, those other I bonds as well because it's just such a small price to pay, especially as these I bond returns are just far less attractive these days.

[Joel]

Yeah, I mean if you're keeping it in there just to keep three months of, I mean you can, you can legit calculate what is three months at the current rate of 3.15% or whatever it is and you can say, oh, I'm going to give up a few hundred dollars in returns or less than that. In all likelihood, am I willing to give that up so I don't have to tap other investments. That's probably the best case because with most other investments you have, you're talking about either tapping money that's protected in a retirement account, taking money out of a Roth and then you're talking about those dollars not compounding for your future, or if it's in a taxable brokerage account paying capital gains taxes. I think there's just a lot of reasons to say, great, let's tap the I bonds. Let those ones that are close to hitting the five year mark wait, wait till they hit that timeline. The rest, let's just get rid of them and, and move ahead with the ADU project. I mean, the I bond money, Amy, that you diligently socked away is going to be super helpful in this next investment. And yeah, we're talking about apples to spinach here. Right. But these are both still the I bonds were a great place to have your money then. Sounds like the ADU is a better place to be putting your money now. It's awesome that this, this money from the I bonds could help facilitate your ability to earn additional income via this ADU on your property. And in all likelihood it's going to surpass earning what you were able to get with those I bonds. The truth is, you know, rental real estate on your property is, is often a fantastic investment if you can self manage and make the numbers work. And it also gives you flexibility for, for the future when it comes to your in laws.

[Matt]

That's right. Sometimes you don't make decisions purely based on the finances. You think about lifestyle a little bit, you family. So Amy, we hope that gets you pointed in the right direction. Joel, We've got more questions to get to. We're going to talk about Roth conversions, precious metals and more right after this. Joel Single function tools out there, they just don't cut it. In today's fast paced work environment, it's time consuming to context switch between sites, apps and tools just for one project. Well, luckily for our listeners, Grammarly has features that are tailor made for working professionals so you can get all your writing done from start to finish all in one place. Bring more polish and impact to your emails, your presentations and proposals without switching between tabs and windows. All while amplifying your voice and moving your ideas forward.

[Joel]

Yeah, Grammarly is designed to help professionals with real time writing support on any project, email and more. And 90% of professionals say Grammarly has saved them time writing and editing their work. Grammarly leads to less hassle and more focused no matter what you're writing.

[Matt]

So sign up for Grammarly Free and get your professional writing from draft to done. Visit Grammarly.com that's Grammarly.com I love to.

[Joel]

Travel and one of the most rewarding experiences of my life was traveling all around Australia. I hit up the great city of Melbourne. The coffee scene was incredible, had my first flat white there and now it's my morning drink of choice. I took a lovely road trip down to the 12 apostles, which is a beautiful collection of limestone rocks jutting out of the ocean and catching some breathtaking views on the Great Ocean Road. And of course I found a great local brewery, the Great Ocean Road Brew House, snagged a couple of delicious beers and I've still got that T shirt. I even hopped on a plane to visit the delightful island of Tasmania. Hobart is one of my all time favorite towns and visiting the Mona while there was one of my highlights. My trip to Australia was one of the best investments I've ever made. I loved every minute. The wildlife, the culture, the people and those memory dividends of our epic excursion. They keep paying off every time I see a picture of that trip or I reminisce with my travel companions. Australia is a destination that proves joy and financial wisdom can go hand in hand. Explore more destinations in Australia and start planning your memorable [e-mail] I love all.

[Matt]

Of the extra time that I was able to spend around friends and family over the holidays. In particular, I love the extra points of connection with my kids. They are they're getting older and so it's enriching to introduce them to like new ideas. That's a ton of fun. It's like play some challenging games together. That's. That's awesome too. But honestly, just to have a silly fun time. And as much as it's my duty to provide for them with the time spent together, it's also a parent's responsibility to provide for them financially as well. Which is why more folks need to check out policygenius. They help to ease the gravity a bit by protecting what matters most. Policygenius is an online insurance marketplace that allows for you to compare quotes from some of America's top insurers side by side for free.

[Joel]

Start the new year with clarity and security Lock in your life insurance Today, policygenius helps you find your most affordable policy that meets your needs. You can easily find coverage, amounts, prices, terms with no guesswork, just clarity.

[Matt]

That's right, plan the year knowing that you've protected what you've built. With Policygenius, you can see if you can find 20 year life insurance policies starting at just $276 a year for $1 million in coverage. Head to Policygenius.com to compare life insurance quotes from top companies and see how much you could save. That's policygenius.com.

[Joel]

All right, Matt, we're back. We're going to get to a question about Roth conversions. When those make sense here in just a second, but first let's get to a question about a trust. When does that make sense?

[Listener Michael]

Hey Joel and Matt, this is Michael from Chicago. I have a follow up to your answer to the first question in episode 1090. Matt mentioned that such a high net worth would make the couple who asked that question something of a financial target. I don't have nearly the amount of money that couple has, but it did make me curious whether you think either a revocable or irrevocable trust makes sense for certain folks. A family member has recently started badgering me about setting up a trust for my invested assets so that someone can't sue me and drain my brokerage account and everything else. But this has always struck me as the kind of unnecessary complication that only fancy financial advisors ever mention. And I can't really imagine a realistic scenario in which someone not only sues me, but actually wins and is awarded a chunk of my money in the process. I'm very DIY with my money and don't want to put an extra complication or layer between myself and my assets if I don't need to. For context, I'm recently married, but we plan to stay child free, so I'm thinking more about die with zero than I am about heirs. Curious for your thoughts. Thanks, guys.

[Joel]

Ooh.

[Matt]

So a couple things he mentioned. Die with zero. And you're actually going to be speaking with Bill Perkins so listeners can keep an eye out for that interview episode coming up here in the coming weeks. But also, I wanted to mention this is like a little bit of housekeeping. Before we get to your question, Michael, you mentioned that the couple that sold the business and had a ton of money and something about them being a target. Yes, I know exactly who you're talking about. And this is.

[Joel]

How can we forget the listener with.

[Matt]

A $300 million wealthiest, wealthiest how to money listener of all time. And it turns out they are very wealthy, but not 300 million wealthy. Because fake news. She, she wrote back. It was just like mortified slash kind of beside herself and she's like, oh my gosh. So sleep deprived, new baby at home, it's 3 million. I don't know why I said 300 million. 3 million. But a lot of what we said, honestly, I mean, it truly doesn't change all that much. Although with three, there is much less need for sort of like the, the financial structural architecture that you need to work on creating as opposed to like there's more diying I think that you can do.

[Joel]

Exactly. You might not need as much help.

[Matt]

Yeah, yeah, but, but either way, still that big of an influx because you don't need to still want to hire all the professionals to make sure that is still life changing money.

[Joel]

But you probably don't need to hire someone a philanthropic arm for you.

[Matt]

Exactly. Yeah, yeah, exactly. You don't, you don't need to immediately.

[Joel]

Set up a trust, find the best nonprofits, all your donation dollars. Yeah. Probably not going to hire a butler. Like, that's $300 million money. $3 million money. Not the case. So yeah, that was really funny to get that email after the fact. But let's get to Michael's question. We are also fans of simplicity. We're all about like reducing complexity whenever humanly possible. And so given your circumstance, Michael, you don't want kids and you want to spend that money down. We agree that a trust is an unnecessary step to take. So I'm curious who this is in your family who's like badgering you to get this trust done? Do they know what your goals are? Because it doesn't sound like it's the right fit for you at this point. Maybe it came in handy for them based on their circumstances and they just think that it's a trust is a hammer and that Everyone, everyone should. Should needs one in their life. Well, your life just isn't complicated enough to merit one. If, let's say you wanted to pass money on to multiple heirs and you wanted to decide when they would receive the money, then a trust would probably make more sense. If you were worried about your mental faculties, I think same thing, right? That's something else where you're like, oh, I'm kind of losing it or don't trust myself.

[Matt]

Yeah, not what I used to be.

[Joel]

Or if there was a literal medical diagnosis that made you worry about mental decline, then that's something you would want to consider. But, you know, none of the normal reasons where someone might consider a trust seem to apply to you. Totally.

[Matt]

Yeah. I'm going to mention some of the built in legal protections, though, that you'll come across in other accounts. Your workplace retirement accounts are typically 100% protected from creditors and from lawsuits, thanks to federal law. Personal retirement accounts. So IRAs, they've got a bunch of protection as well, but there is a cap. It's one and a half million dollars. Unless that money was rolled over from.

[Joel]

A 401k in which it's still. Still protected then. So if you roll your 401k into an IRA, that money, even though it's technically in an IRA now, it's still protected because it was 401k money.

[Matt]

Exactly. And that's still plenty, I think, for a lot of folks. So basically, you don't need to worry about any of those dollars because they are legally shielded. That's not what he's asking about, though. Your taxable brokerage account is at more risk if you were to get sued, which is why you are considering a trust. An irrevocable trust specifically does protect your brokerage account. That being said, it is still not a maneuver that I think either one of us would encourage.

[Joel]

Joel? Yeah, Again, like, how much money do you have in there? How at risk are you? You didn't make it sound like you were. That you're doing. You made it sound like you're doing well, but that you're not in the elite rich circles. Right. So it's because, let's say, you have some fear of getting sued. Your best bet is likely an umbrella policy in the amount roughly of that taxable brokerage account. It's not very expensive. It's a few hundred dollars a year and it will offer you a lot of protection. Right. In the. In the unlikely event of a big lawsuit. So yeah, and I say unlikely event because you really do. It's it's not that it's not possible, but certainly possible. Think about what does your life look like? Highly unlikely, though typically the question. This is the question we get, Matt, from. From landlords because they do have a higher potential, a higher likelihood of being sued and of that lawsuit being a substantial amount and being a little more likely to be effective. So that's just not the case for Michael here. We would say ramping up your insurance protection, that's the best route to go. And even that is probably unlikely to be necessary. But given how low the cost is and the protection it provides, the peace of mind that it will offer you, I think it's like a success tax, essentially. That's. That's worth paying a few hundred bucks just to say, I've gotten this taken care of. I don't have to. I don't have to worry about being that. That portion of my wealth being wiped out. In the unlikely event, then if that helps you breathe easy, it's probably a good way to go.

[Matt]

Yeah, we're big fans of umbrella policies, personal liability policy plans, and specifically, Joel, like one of the things. And you mentioned this multiple times, but the low cost of the umbrella policy is a part of. So that's the counterfactual to why the trusts that were not fans of those as well, because of the fact that they can be so stinking expensive to set up. But then on top of that, we're talking about the ongoing annual cost to maintain that. Like, this is like, they're like an irrevocable trust is a completely separate legal entity that the IRS recognizes. And you were saying earlier, I wonder who it is that's mentioning this. I think it's a family member who has been convinced that this is the ticket because that family member has gotten sold a trust themselves. This is typically something a lot of times that is pitched. And if you are a financial advisor and you've got this recurring revenue coming in where you're like, oh, yeah, it costs this much for me to do the paperwork to file your tax return for that trust, that's something that they can make thousands on. I mean, depending on the complexity of it, it can be tens of thousands to set up, but then year to year, it can be thousands of dollars to. In order to maintain. So it's this sort of. It's this source of revenue for whoever might be mentioning that the trust is something that you should consider.

[Joel]

And it's worth mentioning that if you need a trust, there are online avenues to get that for less complicated trusts. That would significantly reduce the cost. It's at least worth considering. Right. Depending on what are your needs and what's your budget. But. But I think you're right. The simplest, most cost effective path to thread the needle of additional protection without overdoing it is this. An umbrella insurance policy. And I think last but not least, last thing I want to mention, you want to make sure that you have a will, that you have life insurance and that your beneficiary designation is updated. That's the low hanging fruit that so many people miss out on. The cost is very little. The cost is exactly nothing. On some of those things, like the beneficiary designation doesn't cost you a dime. Go in there, make sure that the person you want to have your money in the case of your death is properly attributed in each one of your accounts. That's just one of those, man, it's so sad, Matt, when somebody passes away and they just didn't update it. The beneficiary designation in 10, 15, 20 years is a person that inherits the bulk of their money is not the person they wanted to inherit, not the person they were married to potentially. And I just, I shudder to think about that stuff. It's one of those really easy things to do. Takes all of 32 seconds and literally.

[Matt]

It takes that long. Yeah. So this doesn't keep you from getting sued updating all this, but for everyone else out there, you should absolutely be doing this because like you said, like 30 seconds. I'm sure we talked about this when I did this at some point last year.

[Joel]

Do it while the ad is playing before your TV show actually comes on.

[Matt]

It is so easy to do. And I was actually shocked that I hadn't updated. There was nobody. It's not like I had somebody else down.

[Joel]

I wasn't like your old girlfriend or something.

[Matt]

No, I wasn't investing back when I was dating girls. But I'm sure in some crazy future scenario where this was necessary, Kate would be thankful that I had taken care of that for her. Joel, let's get to another question. Let's now hear from a listener who is entering into his retirement years and he wants to consider some of these financial maneuvers that's going to set him up for even more financial success.

[Listener Mike]

Hey, Matt and Joel, this is Mike from Southern California. I'm calling in today to find out some information about the rules of a Roth conversion. I currently am 61, so I'm eligible to pull money out either way. I'm looking at converting my traditional Iraq to a Roth ira. And I'm a little confused on the length of time I need to keep that money in there. Do I need to keep the initial amount in there for the full five years, or is it just the interest earned on that initial deposit that has to remain in that account for five years? Any help on this matter would be great. Thanks, guys.

[Joel]

Well, I love that Mike's thinking about this. This can be one of those confusing things people might have heard about the five year rule, which we need to talk about. Yeah, we talked about actually an earlier five year rule, Matt, in regards to.

[Matt]

The bonds, the buy bonds.

[Joel]

But it's a little different when you're talking about Roth conversions. But in the truth is, for a lot of folks in your stage of life, Mike, regular Roth conversions typically make a lot of sense. This is the time to make those happen, to pull it off. So much depends on whether you're still working what your upper tax bracket is. But prioritizing Roth conversions in the coming years, it could reduce the overall amount of tax you pay, could reduce required minimum distributions later on down the line, and it can make it easier to give that money away to your heirs if you so desire as well. A lot of potentially good perks from that.

[Matt]

That's right. Yeah. And the truth is you can convert traditional IRA dollars to Roth dollars at any point. There's no time limit before you can make that conversion. If you're talking about tapping your Roth IRA once you've done the conversion, it's going to depend. So for younger how to Money listeners out there, they're going to need to wait five years. But, Mike, in your case, you would not. And that's because you are old enough. 59 and a half is the magical age where you can access the converted principal without having to watch the clock. So, like, all those contributions that you put in over the years can be tapped then whenever you like.

[Joel]

That's right. But the growth, which is likely the more substantial portion for you at this point, Mike, it might not be accessible. It ultimately depends on, on whether you've had a Roth IRA open for at least five years. Even if it's a small one with, like not much money in it, that's okay, just as long as the clock started ticking in your mid-50s. So if so you can tap not just the contributions, but the growth as well. If the converted money will be like your first Roth IRA dollars, the first.

[Matt]

Roth IRA money that you've ever put into, like, we're talking about the actual, like, container, like the actual actual account that we're, is what we're discussing here.

[Joel]

All about how long that container has been opened. Like, when did you open that puppy? And so yeah, if, if these are going to be your first dollars ever put into a Roth ira, know that only the contributions will be available to you until you hit that five year mark. So, you know, make sure you have the cash on hand to pay tax on the conversion. By the way, that's always a really important thing to keep in mind. Some people are like, yeah, let me do this conversion. So I save on tax down the road. But, but know that you're gonna have to pay tax now in order to do that and you have to have the cash on hand to do so.

[Matt]

Yeah, yeah, you need to take into account some of these additional sources of income.

[Joel]

Right.

[Matt]

Cause if we're talking about RMDs. So Joel, that's the required minimum distributions you mentioned earlier. If we're talking about that, maybe we're talking about a pension, we're talking about Social Security income. Like all that is going to increase your income down the line. And so it might be worth considering a more strategic approach to your conversion. Like the way Mike talked about it, he called it a conversion, like singular, a lump sum. Yes, exactly. Which makes me think that, oh my gosh, he's got all of this pre tax money, all of this traditional IRA money. And if Mike, if you do that all at once, like all of this protect, you know, tax protected money is all of a sudden exposed. It's like out on the taxation battlefield and you could get destroyed from a tax standpoint. And so that's when just more of a strategy makes sense, like a laddering approach where you do a certain amount every single year. Essentially what you want to do is. And you said this too, Joel, you said like your upper end tax bracket. A lot of financial planners call this filling up the tax bracket. And what you want to do is utilize the space that you have before you get bumped up to the next tax bracket to be able to essentially utilize that space. It's sort of like, I don't know, it's like, say you're mailing something to a friend and you're like, well, I got all this extra space. And maybe let's assume you're not having to pay based on weight. And so you're like mailing a partially empty box. It's like, no, let's go ahead and send them another little gift. Turns out the person you're sending that gift to is future you. So just keep that in Mind as well. You want to utilize those tax brackets, fill them up.

[Joel]

Interesting, because there was an article I saw the other day in the Wall Street Journal and there was a study that was done, an analysis about one time lump sum Roth conversions. And the author of the study basically said, well, they could be superior to doing conversions in equal annual installments. We'll maybe link that article in the show notes. But I'll tell you this, the data was not convincing. Like the way that they, the methodology behind the study, like I read the headline and I was like, wait, huh. That kind of flies in the face of the way I thought about growth conversions.

[Matt]

Is it based on getting money into the market and seeing the tax free growth?

[Joel]

No, no, because that doesn't have any impact. It was just based on kind of false assumptions of numbers and of tax brackets and of state income taxes and stuff like that too.

[Matt]

Certainly goes against typical financial advisor advice to pull the trigger, go all in like Leroy Jenkins. It's just like, no, no, you want to be a little more measured because.

[Joel]

If you do a lump sum and you're talking about than a big chunk of that money being taxed in 35, 37% tax rate versus being able to keep all your money taxed at 12, 22, 24% tax rates by just spreading it out over a few years, that's a big chunk of money that you save that you keep on hand to grow for your own future. I was shocked seeing the headline. I was like, what? Is there something I don't know? Then I read it and I was like, this is, this is bogus.

[Matt]

Yeah, unless. Yeah, unless, I don't know, maybe there's more research. We'll see if our opinions change, we will talk about it. But also this neglects the fact that you may not even want to convert all of your dollars at the same time. Like basically you might want to hang on to some of your traditional IRA funds, let's say for charitable contributions, as a way to reduce your tax burden. Those qualified charitable distributions count towards required minimum distributions and they're excluded from your, your taxable income. Trying to turn some of those traditional dollars into Roth strategically in the coming years, I think that can be wise. I think that would be a good reason why you should do it in those smaller chunks and certainly know the benefits of keeping some in the traditional IRA as well. Not going all in on the Roth because so many people talk about how great the Roth is and in so many ways it is. But you got to look at the whole picture.

[Joel]

You might think a little of a good thing is great, then why not a lot of a good thing? Well, if you overdo it and you turn everything into Roth dollars, you are potentially missing out on other ways of saving on taxes in the future too, like you just highlighted, Matt. So yeah, take that balanced approach. This can be depending on how much money we're talking about, there can be substantial consequences like a lot at stake here. And so you might find some online calculators to help you out, but you also might want to consult a financial planner to kind of help you think through this. Well, based on your specific circumstances, what you have coming down the pike, what your next six, seven years of life are going to look like from an income perspective in particular. So if that's the case, we would go, say go to poundomoney.com advisor and find someone there who can help you think through this a little bit better. The fee is likely going to be worth the taxes you can save.

[Matt]

That's right. And if you think even more of a good thing is a great thing, I would refer you to Gertrude McFuzz. But Joe, we've got more to get to. We're going to talk about silver, that and more right after this.

[Joel]

I love to travel and one of the most rewarding experiences of my life was traveling all around Australia. I hit up the great city of Melbourne. The coffee scene was incredible, had my first flat white there and now it's my morning drink of choice. I took a lovely road trip down to the 12 apostles, which is a beautiful collection of limestone rocks jutting out of the ocean, catching some breathtaking views on the Great Ocean Road. And of course I found a great local brewery, the Great Ocean Road Brew House. Snagged a couple of delicious beers and I've still got that T shirt. I even hopped on a plane to visit the delightful island of Tasmania. Hobart is one of my all time favorite towns and visiting the Mona while there was one of my highlights. My trip to Australia was one of the best investments I've ever made. I loved every minute. The wildlife, the culture, the people and those memory dividends of our epic excursion. They keep paying off every time I see a picture of that trip or I reminisce with my travel companions. Australia is a destination that proves joy and financial wisdom can go hand in hand. Explore more destinations in Australia and start planning your memorable [e-mail].

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[Joel]

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[Matt]

Yeah, posting a job, that's not always the hard part. It's the finding, connecting with and screening the right candidates. Hiring Pro streamlines the entire process from drafting your job to shortlisting candidates and conducting AI powered interviews for initial screenings, all through a conversational interface that lets you describe what you need in plain language. Nearly 60% of hires find a candidate to interview within a week. With Hiring Pro, you spend less time searching and more time connecting with the right talent.

[Joel]

Hire right the first time, post your first job and get $100 off towards your job. [e-mail] that's LinkedIn.com howtomoney Terms and conditions apply. All right, Matt, we're back. It's time for the Facebook question of the week. This one comes from Nicole. She says, I bought about $500 worth of silver at about $16 an ounce. This was years ago. I see precious metals are way up. Should I wait and hold or should I sell? What do you think?

[Matt]

Oh yeah, precious metals are way up, I've heard. I don't like this question though.

[Joel]

They've been dominating the headlines. You don't think she should be asking this question?

[Matt]

Well, because it's a timing question, right? Like essentially that's what this. Well, shoot, I feel like I'm throwing her under the bus a little bit because she actually I thought this was an anonymous question. I see now that there's a literal name here, so I'll go softer on you, Nicole. But like she's asking folks because she's hoping that someone is going to tell her, yes, this is the top and this is why they're going to provide a convincing argument. But nobody knows what the top is. Nobody knows if there's about to be if this is the beginning of a massive five year silver, gold, palladium, whatever run, or if this is the top and we're not going to see it this high for another seven to eight years.

[Joel]

What's your Prediction, Matt, that's what you want to know.

[Matt]

There is no prediction.

[Joel]

I know.

[Matt]

That's why. Yeah, that's why the premise of the question is something that I question, question the question.

[Joel]

And I think we are start, we're starting to see more commercials back in full force, convince people to buy gold.

[Matt]

The people, they're getting hit with, the.

[Joel]

Marketing, people who love gold and precious metals are like making the podcast rounds trying to sell people on it. And it's interesting too, this question was asked kind of before the dramatic events of. Was like a week and a half ago when silver took a plunge, like 30% on one day. But like, I don't know, like, I.

[Matt]

Should have sold right then. Yeah, probably should have sold.

[Joel]

When I asked, nobody in the Facebook group told me to sell, so I didn't know what to do. But Nicole, I would say, is fortunate in a lot of ways, even with that dramatic drawdown, that a $500 investment is probably worth at least 1500 bucks. Today. She's not up nearly as much as she was last week. But what she does now, I think it largely depends on why she bought silver in the first place. And that's not something she outlined in the question. But why did you buy it when it was $16 an ounce? Was it because you were buying it as a short term play, as a speculative move, or was it because you were like, I want a small amount of my portfolio to be dedicated to commodities like precious metals. And that's something I see as a long term benefit for my portfolio from a diversification perspective. And because maybe you're thinking about geopolitics and you're like you were reading the tea leaves. I don't know. But I think that's ultimately, to answer this question, you have to go back to that fundamental of why you bought it to begin with.

[Matt]

Yeah, no, no, what you're addressing is whether or not her investing philosophy has changed. And if so, and if you feel differently, Nicole, then yeah, that's a good reason to switch. Either maybe to get even more of it in your portfolio, or if you realize you did it because you read a tip somewhere, then, okay, maybe it panned out. Maybe it worked out for you this time, but it may not work out for you next time. But then also I think a lot of it comes down to, I mean, do you. So that's a good reason to potentially sell. And if the market happens to be up, then it's kind of like a little bonus, right? It's a little cherry on top. That being said, if you need the money for something else. Right. Like let's say that you cashing this thing in allows you to eliminate your credit card debt where you are without fail guaranteed to be paying 23%. Okay, well, I'm going to tell you to go ahead and get rid of that thing in order to knock that out. So if you have a need in your life and it just so happens that this amount of silver, if were you to sell it would satisfy that need, I think that's totally a great reason to sell as well. It's less of a, it transforms it less into a. I'm sorry, less from a timing question and more into like, what are the facts of my personal life and does this fit with the overall plan that I've got for my life?

[Joel]

I'd be curious my financial goals to know too if this is like physical gold or silver. Excuse me. Or if this is an exchange traded fund, like where she can sell it immediately or because there's a lot of transaction cost typically in the buying and selling of precious metals when they're in physical form. And so that could just like selling real estate. Like we talked about this recently, it's going to cost you money. And you're also asking long term investors, right? Whether you're asking people in the how to Money Facebook group or you're asking us, we are for the most part people who think on a longer time horizon. So the idea of selling just because the price went up significantly doesn't move the needle for us. Like we, we buy stuff, you know, we buy stocks, we buy index funds because we expect gains over the long run, over decades, even if short term realities don't bear that out and vice versa. Right. Even if the market's up 40% year over year or something like that, it doesn't mean we're more inclined to sell because we've seen a run up. We're, we're really making these investments as a long term play.

[Matt]

That's right. Yeah. And if you are turning to silver because of what's currently going on from a geopolitical standpoint, just remember that when you buy in a crisis, you often buy at the peak. And that's not something that just generally doesn't put you in a strong position, Nicole, as opposed to thinking more nerdy about it. And you're like, okay, I want to be diversified. So like you were saying, like you were using your nerdy voice, I could tell where you're just like, I want a certain portion of my portfolio to include international and small Cap and a little bit of precious metals as well. If that's the case, I'm totally fine with that. But just remember 5% or less of your overall portfolio with these, more of these investments, the stuff that you can invest in that might end up panning out for you or might end up totally bust for sure. Yeah.

[Joel]

All right, let's get to an email from listener Tripp. He said we're looking at selling our house to move, but given our interest rate and relatively small mortgage, we considered renting it out. I thought about taking out a heloc, a home equity line of credit and using that as a down payment for this next house. But some Googling suggested that it's basically fraud. Did you? Would you agree? And if so, is there some similar legal alternative?

[Matt]

Okay, well, I'm just going to say flat out, I don't think it's fraud, but we'll get to that in a second. I want to talk about real estate because I think this is a total clutch move trip, keeping that first home. I think that can be an amazing personal finance decision if you've got great terms. If you're not moving far away and you can manage it yourself, man, I think it just gives you like all those things combined. And if this is something you want to do, first of all, let's address that. It's a lifestyle move as well. You're taking on a very on or off kind of part time job, let's just say that. But it gives you, with all these things considered, it gives you a higher likelihood of being cash flow positive from day one. You know the home, you know what it needs, you know, kind of what's on the horizon from a repair standpoint. And so that's, I know that makes me excited for you because this is an approach that we often recommend, right, like where you are saving up another down payment and then keep that, that first house around, right? Like don't, don't roll the equity from that first home into the next one. If you can essentially trick yourself into imagining that that equity in that first home doesn't even exist, man, that's fantastic. And this whole, this whole operation becomes even more attractive if you've got this incredibly low long term debt via the mortgage to keep that thing around.

[Joel]

And let's, let's kind of tackle the legal portion of the question. We're not lawyers, we're not lawyers, but we will give. And closing papers are different with all sorts of different products. So this is a kind of general answer essentially on this topic. Those Closing papers are usually full of details that most borrowers are not aware of. It's kind of like this terms and conditions, right. That you scroll down as quickly as humanly possible and you just click accept. That's what most people do when they take out a HELOC or a mortgage. Matt, you've been to the closing table. Remember how thick that binder papers was? My guess is you didn't read all of them, did you?

[Matt]

I do think my signing may have taken longer than maybe the attorney's usually.

[Joel]

Giving you the TL doctor.

[Matt]

Right, Exactly. But, like, I tend to be cynical, but no. Did I read every single clause? No, absolutely not.

[Joel]

Me neither. And, you know, a lot of HELOCs, they will state something about living in a residence for 12 months or something like that after taking out the loan. But it's. It's typically about intent, and it's not a legal requirement. And so this is something. It's funny, I did not know even that this could be considered fraud. Like, when. When I did this back in the day, as. As listener Tripp is alluding to, it's something I've done in the past to accelerate being able to buy the new place while holding on to the old property.

[Matt]

They're coming after you, dude, and they're gonna be knocking on your door.

[Joel]

Statute of limitations, baby. I think I'm in the clear at this point.

[Matt]

Well, also, like, truly, like, it sounds like he's talking about it from, like, the current loan holder, like, the current HELOC holder's point of view. I don't think they care at all what you do with it. You could literally, you could use that money to go on vacation. You could use it. You could. You could withdraw it and have it in bills and then, like, put it in a big pile and light it on fire like in Dark Knight.

[Joel]

Like, like, you did you get into sports gambling? So your heart's content.

[Matt]

Yeah. Guess what? You still owe them that money.

[Joel]

Yeah.

[Matt]

And guess what? They still have a lien on your home. So, like, I don't think they really care because they got their bases covered. However, I do think, and maybe this is assuming the best here, maybe he's talking about the new lender saying, oh, hey, where did you get that money? Because there are a lot of stipulations and proving where certain money, like, larger deposits where that came from.

[Joel]

And that typically, understand, comes down to seasoning, like, how long that money's been in your account.

[Matt]

100%. So that's certainly something to be aware of. But if you're following the rules, then there's, I don't see any reason that using HELOC funds to use at least a portion of that to fund another down payment, why that would be a problem at all. Yeah, do keep in mind that they're also going to look at your debt to income ratio. And guess what happens when you take money out of a heloc? You owe payments. So is it like a, you win some, you lose some. I don't like, like, oh yeah, you.

[Joel]

Got positive in one way, negative in another.

[Matt]

You got a big old pile of cash. And so that's something to be aware of as well that the current lender, they're going to want to know all the details and they may not approve of you. But it's not because, I don't, I don't think it's because of the current loan holder, the current issuer of the HELOC.

[Joel]

And as far as the seasoning period, typically it's 60 days. And so that's how long, how far the lender will look back into your, your account history. And so if you take out the money and you put it into your savings account from your heloc, that where the money is going to come from for the closing funds that just make sure you do it more than 60 days in advance. Yeah. So, you know, it sounds like we're.

[Matt]

Talking about a way to get around it. But like if they cared about where it came from over the past six months or the past year, well, they would ask that of you. They would make you prove it.

[Joel]

So it's.

[Matt]

But they don't care. It's just, or it's whatever it is that they say they do care about.

[Joel]

Just the rules. Right.

[Matt]

Just the way they do it, them's the rules.

[Joel]

And so you got to jump through the hoops. It's also important, I think, to the part of the question that Tripp didn't ask was it's crucial to have a realistic short term payoff timeframe. And so if the HELOC is going to be with you for the next decade, it likely means you're, you're stretching yourself too far to make this move and that this isn't a good idea for you. But if you can pay it off quickly in two, maybe three years with kind of a combination of income and rental income from this property because, hey, you're going to make a lot more in rent than what you're going to have in expenses on that property. And you really are keen on building wealth as A landlord, then go for it. I just would not be worried about ending up in the slammer or something like that. If you. If you fail to live up to the letter of the law regarding all the fine print details of this heloc.

[Matt]

Totally agree, buddy. Let's get back to the beer that you and I enjoyed during this episode, which was Cerbius. I keep wanting to say Cerebrus.

[Joel]

Cerberus.

[Matt]

Cerberus. Cerberus Nocturne, which is like of the Greek mythology. Cerberus.

[Joel]

It's like the multi headed dog.

[Matt]

No, that's fluffy from speaking of headed dogs.

[Joel]

Isn't Cerberus that too or. No, I guess so.

[Matt]

This is a vanilla porter. It's been conditioned on Madagascar vanilla, which I think is the superior of the vanillas out there. But what'd you think of this beer?

[Joel]

I think it's also where the vast majority of vanilla in our world comes from, is from Madagascar.

[Matt]

There's two types of vanilla. There's vanilla from Madagascar, and I forget where the other stuff comes from somewhere else. And they do have different character profiles.

[Joel]

Okay, well, it wasn't there like that much. There was like a big storm in Madagascar one year and it crushed the vanilla crop. And so vanilla prices went sky high. This was four years, three. Four years ago, something like that. And I just remember, like, you know, a bottle of vanilla went up by 4 or 5x and people were freaking out. Man, baking those cookies at home got more expensive there for a hot minute.

[Matt]

So the reason I know anything at all about vanilla is we're currently making vanilla extract at home.

[Joel]

Oh, your own. You're just like grabbing the vanilla beans and. Okay.

[Matt]

One of our daughter really likes making quote unquote potions and cooking and baking and, you know, messing with stuff. So we got her some vanilla beans, cut it down the middle, scrape out the, you know, the inside like they do on the commercials, you know, and you drop that and the bean like the whole thing in a little.

[Joel]

Can you get whole vanilla beans at Aldi?

[Matt]

Not at Aldi. Now this is like a special order, dog. This is for Christmas that we got that for. And then you evidently agent on bourbon in order to like pull out those flavors.

[Joel]

Sounds right to me. So, yeah, I'm not going to second guess that.

[Matt]

Evidently it's going to take six months, but I'm really excited for awesome vanilla come July perhaps.

[Joel]

Yeah, we'll see. That sounds great. So this beer, to me, it was actually light on the vanilla vibes. Like it didn't have as much as I thought it was. And I was actually fine with that because I think vanilla is great. Speaking of, like, big amounts versus small amounts. And a little bit of vanilla goes a long way for me. And it also had those bitter and roasty notes that a porter, a good porter comes with. And to me, it balanced out really well.

[Matt]

It was very well balanced.

[Joel]

I was worried that this was going to be, like, super sweet and it wasn't. It was. It was really nice.

[Matt]

Totally agree. Yeah, Seal super smooth. It reminded me like, the vanilla maybe. Not surprising. I'm a pedestrian. Like, I'm a peasant. So, like, when I tasted the vanilla made me think of milk. And so my mind immediately went to, like, milk stout territory where it's just kind of creamy. Yeah, it was just really good, man. Really enjoyed it. Vanilla porter with it being a porter wasn't overly heavy as well. So you mentioned light on the vanilla, but it was also light in body as well. It wasn't real thick like the last one we had that was. Oh, yeah, Sticky, sweet, thick.

[Joel]

I love a big stout. I do. And I love the flavor that a stout brings. But sometimes you just want something that's a little more accessible. And that was really good flavors, but.

[Matt]

Also not too heavy. Like, this is one that I can Enjoy a full 16 ounces of 100% very easily, no problem. But yeah, glad you and I got to enjoy this one today. You can find our show notes up on the [e-mail] by the way, if you heard any construction noises in the background, there's some workers nearby hammering and cutting away. So please excuse the construction. Please excuse the mess, the audio mess that I was not able to clean up.

[Joel]

That's all good.

[Matt]

It's all good.

[Joel]

Let's hope they're done with the siding soon. It should be good. All the exterior work.

[Matt]

Yeah.

[Joel]

All right. That's going to do it for this episode. Until next time. Best friends out.

[Matt]

Best friends out.

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[Joel]

Travel is such a life changing pursuit and my trip to Australia was one of the best investments I've ever made. I got to enjoy the bustling metropolis of Melbourne and some of the best coffee of my life while also driving the great ocean road and taking in spectacular views. I even hopped on a plane to the island of Tasmania. That was my favorite stop. I loved it all. A trip to Australia doesn't just offer a getaway, it's an investment in experiences that stay with you. Explore more destinations in Australia and start planning your memorable [e-mail] this is an iHeart podcast. Guaranteed human.