Ask HTM - Budgeting for Housing Splurges, ChatGPT for Your Savings, & Churning Free Gym Trials #964

Summary

How to Money Podcast Episode 964 Summary

Title: Ask HTM - Budgeting for Housing Splurges, ChatGPT for Your Savings, & Churning Free Gym Trials
Release Date: March 31, 2025
Hosts: Joel and Matt
Description: Best friends Joel and Matt tackle listener questions on personal finance, offering actionable advice on debt payoff, DIY investing, and essential money tricks to help you thrive financially.

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Introduction

In Episode 964 of How to Money, Joel and Matt dive into listener questions, providing insightful advice on budgeting for home improvements, leveraging artificial intelligence for savings, and the ethics of churning free gym trials. They also celebrate a remarkable financial achievement from one of their long-time listeners.

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Listener Win: Paying Off a Mortgage Early

Timestamp: [04:26] Joel & Matt

Joel and Matt begin the episode by sharing an inspiring success story from a listener named Andy. Andy reportedly paid off his mortgage in just 12 and a half years while maintaining a 30% savings rate.

• Joel: “Andy didn’t just pay off the mortgage; he involved his family by rolling in coins with his kids, making it a fun and educational experience for them.”
• Matt: “Andy is killing it. He’s a money gear number seven and can do whatever he wants with his money, legally speaking.”

This accomplishment underscores the power of disciplined saving and debt management, inspiring listeners to consider both debt payoff and substantial savings simultaneously.

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Listener Question 1: Budgeting for Housing Splurges

Timestamp: [08:41] Eric’s Question

Eric from Columbus, Ohio, asks for advice on budgeting for the first year of homeownership, especially with upcoming home improvements like kitchen changes and a radon reduction system.

Key Points Discussed:

• Anticipate Additional Costs: Beyond the standard 1-2% annual maintenance budget, consider the specific upgrades you plan to make.

• Prioritize Upgrades: Create a list of desired improvements, prioritize them, and allocate a realistic timeline and budget for each.

• DIY vs. Professional Help: Emphasize the benefits of DIY projects to save money and involve the family.

• Emotional Spending: Be cautious of letting emotional appeals drive excessive spending, which can derail other financial goals.

• Matt: “It's easy to find yourself ripping out and replacing countertops, calling contractors, and stacking up costs quickly.”

• Joel: “Creating a timeline helps you understand when you might reasonably be able to address each upgrade within your financial constraints.”

Advice Given:

• Set aside funds specifically for upgrades without compromising your overall financial health.
• Avoid taking on additional debt or reducing retirement contributions to fund home improvements.
• Balance personal priorities with financial prudence to ensure long-term stability.

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Listener Question 2: Using ChatGPT for Savings and Bank Hopping

Timestamp: [24:11] Rob’s Question

Rob inquires about choosing between two high-yield savings accounts offered by neobanks and asks for recommendations. He also questions the reliability of using ChatGPT for financial advice.

Key Points Discussed:

• Neobanks vs. Traditional Banks:

  • Neobanks often offer higher interest rates but come with potential risks, such as ambiguous FDIC protection and unreliable customer service.
  • Traditional online banks like CIT, Ally, Capital One, and Discover provide competitive rates with the assurance of FDIC backing and dependable customer service.

• Using AI for Financial Decisions:

  • While AI tools like ChatGPT can offer general advice, they may provide outdated or inaccurate information.
  • It’s essential to cross-verify AI-generated recommendations with reputable financial institutions or advisors.

• Notable Quotes:

  • Matt ([25:15]): “These neobanks might not last very long either. If you want to avoid bank hopping, pick a traditional online bank that has consistently offered great rates.”
  • Joel ([32:21]): “AI can help with basic budgeting or meal planning, but tread lightly as some information might be inaccurate.”

Advice Given:

• Prefer established online banks with a strong reputation and clear FDIC insurance.
• Use AI as a supplementary tool rather than relying solely on it for critical financial decisions.
• Ensure any financial move does not expose you to unnecessary risks or complicated banking hassles.

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Listener Question 3: Churning Free Gym Trials

Timestamp: [52:07] TJ’s Question

TJ wonders whether churning free gym trials—using trial memberships without the intention of signing up—is considered frugal or cheap, especially given his limited income working for a nonprofit.

Key Points Discussed:

• Ethical Considerations:

  • The hosts compare churning free trials to sampling products at a grocery store. If a service offers a free trial, it's their opportunity to showcase their value and convince you to become a paying member.

• Potential Outcomes:

  • While initially not intending to subscribe, TJ might end up appreciating the service and choosing to continue, aligning with what many free trial services aim for.

• Notable Quotes:

  • Matt ([53:25]): “Free trials are businesses’ way of convincing you to join. It's up to them to sway you with their offerings.”
  • Joel ([54:03]): “Be prepared to either cancel the free trial in time or potentially fall in love with the service and subscribe.”

Advice Given:

• Utilize free trials responsibly by setting clear intentions and deadlines to avoid unintended subscriptions.
• Assess if the gym’s community and offerings genuinely add value to your fitness routine, potentially turning a free trial into a worthwhile investment.
• Balance the benefits of a gym membership with your financial constraints and prioritize cost-effective alternatives like home workouts or community classes if necessary.

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Discussion Segment: The Role of AI in Personal Finance

Timestamp: [30:49] – [33:28]

Joel and Matt engage in a candid discussion about the relevance and reliability of artificial intelligence in managing personal finances.

Key Points Discussed:

• Current Use of AI:

  • While AI is integrated into many consumer tools (like Google’s search summaries), the hosts express skepticism about its effectiveness in providing accurate and personalized financial advice.

• Advantages and Limitations:

  • AI can assist with basic tasks such as meal planning or simple budgeting.
  • However, for more complex financial decisions, AI may lack the context and up-to-date information necessary for sound advice.

• Notable Quotes:

  • Joel ([32:21]): “AI comes back with wrong info sometimes and even the recommendations may not be the best for your specific financial situation.”
  • Matt ([33:21]): “Everything that we use as consumers is going to incrementally get better with AI, but the focus feels overblown.”

Conclusion: While AI tools can offer supplementary assistance in managing finances, Joel and Matt emphasize the continued importance of human expertise and personalized financial planning.

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Listener Question 4: Pension Lump Sum and Net Worth Calculation

Timestamp: [45:37] Zane’s Question

Zane asks whether he should include the option to cash out his pension when listing personal assets for a loan application or when calculating net worth.

Key Points Discussed:

• Pros and Cons of Cashing Out a Pension:

  • Pros: Potential for higher returns by investing the lump sum, increased liquidity, and flexibility in financial planning.
  • Cons: Tax implications, loss of guaranteed pension income, and potential financial headaches if not managed properly.

• Including Pension in Net Worth:

  • Advantages: Reflects the full scope of one's assets, potentially enhancing perceived creditworthiness.
  • Disadvantages: Overestimation of liquid assets and reliance on future market performance, which is uncertain.

• Notable Quotes:

  • Joel ([46:11]): “AI hasn't killed us off yet. You can still seek professional advice and make informed decisions.”
  • Matt ([49:24]): “Net worth has to do with how much money I have now. Future net worth depends on market performance.”

Advice Given:

• Carefully evaluate whether cashing out the pension aligns with long-term financial goals and risk tolerance.
• Consider consulting a financial advisor to understand the tax implications and potential benefits of investing the lump sum.
• When calculating net worth, be cautious about including non-liquid or uncertain assets like pension plans, focusing instead on readily accessible funds.

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Conclusion

In this episode, Joel and Matt provide thoughtful and practical advice on managing significant financial decisions related to homeownership, leveraging technology for savings, and evaluating free trials’ value. By sharing real listener experiences and engaging in in-depth discussions, they empower their audience to make informed and strategic choices to enhance their financial well-being.

Notable Final Quotes:

• Matt: “You can afford anything, but you can't afford everything. Make your decisions with your eyes wide open.”
• Joel: “Trade-offs are the ultimate reality in personal finance. Prioritize what truly matters to you.”

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Looking Ahead

Stay tuned for the next episode, where Joel and Matt will delve into the complexities of taxes with an expert influencer, providing listeners with essential strategies to optimize their tax planning.

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For more detailed insights and resources mentioned in this episode, visit howtomoney.com.

Transcript

[Matt]

Asking the right questions can greatly impact your future, especially when it comes to your finances.

[Joel]

So if you're looking for a financial advisor you can trust, certified Financial Planner professionals are committed to acting in your best interest. That's why it's got to be a CFP. Find your CFP [e-mail] breaking news t Mobile Network outperforms expectations in all sectors because T Mobile helps keep you connected from big cities to your hometown on America's largest 5G network. Switch now keep your phone and T Mobile will pay it off up to $800 per line via prepaid card. Visit your local T Mobile location or learn more@t mobile.com KeepAndSwitch up to 4 lines via virtual prepaid card. Allow 15 days qualified unlock device, credit service port in 90 days device and eligible carrier and timely redemption required card is no cash access and expires in 6.

[Oracle Representative]

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[Joel]

Oracle can cut your current cloud bill in half if you move to OCI. Minimum financial commitment and other terms apply. Offer ends March 31st. See if your company qualifies for this special [e-mail] strategic. That's oracle.com strategic welcome to how to Money. I'm Joel.

[Matt]

I'm Matt.

[Joel]

Today we're answering your listener questions.

[Matt]

Happy Monday everybody. Hey, Happy April to you Joel. April is tomorrow. Isn't that crazy?

[Joel]

That is crazy.

[Matt]

How quickly did March just zip on by? Yeah, spring is here.

[Joel]

And how quickly did winter zip by?

[Matt]

We're just like the old men on the front porch. Just like yelling at the clouds right now.

[Joel]

I know.

[Matt]

Slow down. It is true time.

[Joel]

The older you get, the more quickly it goes by.

[Matt]

It's unreal.

[Joel]

I don't know why that is the case.

[Matt]

Because we have a larger number of years to draw from. And so each individual year, when you're two months old, every day probably feels like an eternity. I don't know how to remember being that young, but as you get older, it's just a small slice in our overall lifetime. Joel but we are in fact going to talk about personal finance and money. We're going to answer listener questions. We've got a listener who is budgeting or hoping to budget for some housing splurges that they have coming up for a. This is on a new home purchase. Another listener is using ChatGPT to find the best bank if it makes sense for him to do some bank hopping in order to get the best rates. And another listener is asking whether it's cool or acceptable to churn free gym trials. This is going to be a frugal or cheap. We'll get to that one, plus others. During our episode today, buddy, that makes.

[Joel]

Me think for some reason about you Remember when we had an abundance of mattress companies that were shipping mattresses directly to consumers and they just had like all these different brands. It was like, we have a thousand dollar mattress that we'll send to you. There's still other. There's a couple, but there's far less than they're worth.

[Matt]

We're still waiting on you, Lisa. And so got to get us that new queen bed for one of the kids rooms.

[Joel]

Yeah, they had that like free 30 nights SL. Some of them had even longer than that 90, 100 day sleeps. And so I remember reading about people who were like, I'm just going to never pay for a mattress. I'm essentially renting these mattresses for free. That might have been uncouth, but we'll.

[Matt]

Talk about this on a trial basis.

[Joel]

Yeah, but Matt, before we get to the questions, let's share a money win from a listener. Listener Andy sent us an email and he basically said, hey, guess what, guys? Andy L. I'll say we have multiple Andy listeners.

[Matt]

Well, how many Andy L's do we have? We actually probably have multiple. Oh yeah, I'm sure you're out there, guys, but this, this is long ADL's.

[Joel]

Send us an email so we can. It's like a little census.

[Matt]

Yeah, no, this is a longtime listener, Andy, who's been listening to the show from like way back in the day. Literally from the beginning. He has sent us listener money wins. He sent us questions. He even sent us beer out from Utah. He's done that multiple times back in the day.

[Joel]

We appreciate you, Andy. So we got to share this Win. He paid off his mortgage in just 12 and a half years time while maintaining a 30% savings rate simultaneously.

[Matt]

So unreal.

[Joel]

You know, we get the question about paying off the mortgage or not. And you know, we're typically pointing people in the direction of like, well, you know, saving and investing if you got that low mortgage rate. But what if you're doing both? What if you're just hitting all the above and you're like, no, no, I'm going to have a massive savings rate and I'm going to pay down that mortgage quickly. That's Andy. He made it happen.

[Matt]

Then you must be named Andy. And I want to point out the fact that he didn't even mention what his mortgage interest rate was. And I, we didn't even ask because it doesn't, because we know that Andy is killing it. He is. I mean, he's literally money gear number seven. And he can do whatever he wants with his money. Whatever, anything that's, whatever that's legal.

[Joel]

I mean, I guess everyone listening, they don't. You don't have to run your money decisions by us anyway. But yeah, yeah, if you're Andy, you could do.

[Matt]

But for him you could do whatever you want. Absolutely. And so like there are other reasons that you do something like that, other psychological reasons. We have friends, friends of the show, even folks out there who are really smart when it comes to the different things that they pursue. I would say, I would dare say that they're smarter than usual and they have chosen to also pay off their homes because from a psychological standpoint, they want to know that no matter what, we've always got this house. We've got a roof to be a.

[Joel]

Roof over our heads that the bank take back.

[Matt]

That is true, I guess. Does what is this? What is a city or county lien or short sale or foreclosure look like?

[Joel]

That's a good question.

[Matt]

That's not pretty.

[Joel]

Well, one of the things Andy mentioned, by the way, when he reached out to us was that he took in rolled coins with his kids to pay off the mortgage. So he made it not just, he didn't just pay off the mortgage. What he did was he made it a family spectacle, which I think is really cool, kind of getting your kids in on the action. That's just a great. People ask us about teaching kids about money and that's just one of the include them in your money decisions, include them in your money wins. And he did that on top of paying off his mortgage. So.

[Matt]

Well, just think about the kind of impact that's going to have on his kids. Like right now they're probably thinking, yeah, dad, okay, you made a stand for the picture.

[Joel]

Lame.

[Matt]

But like, this kind of thing has an impact on kids. And so like when they are getting older and like their friends are starting to use credit cards or something like that, or let's just say, I don't know, student loans. They might have friends who are taking on ridiculous amounts of student loans. And maybe they're thinking, you know, maybe we should be a little more cautious about this. Or when it comes to, let's say they're full grown adults and they're looking to buy a new car or a used car and they're thinking, well, a lot of times folks will just finance that thing. I guarantee his kids won't. Yeah, I mean, I guess they could rebel and do the financially unsavvy thing, but like these kind of things have an impression on you, I think further down the road. Because right now I think they're probably thinking, okay, this is kind of lame, whatever. But as they get older, they're going to remember this. Like these are identity forming kind of events that are going to allow them to think about debt in particular, I think, in just a completely different lens.

[Joel]

So I agree.

[Matt]

I'm all for it.

[Joel]

What we do as families matters and kind of how we include our kids in the financial decisions we make, it can have a long lasting impact on them. All right, Matt, let's introduce a beer that we're having on this episode. This one's called Little Biggie on Chrome. It's a coffee stout from the brewery that's spitting distance from where we're sitting right now. The name of that brewery is Contrast Brewing.

[Matt]

We will heck yes.

[Joel]

Give our thoughts on this beer theme.

[Matt]

Of the episode, everybody. I can't believe it's taken us this long to actually have one of their beers on the show. We've been there multiple times. We just haven't plunked on the change and purchased a couple bottles, a couple cans of beer.

[Joel]

At first they were like really just doing draft pours and then now they finally have some stuff you can buy on hand. So it took them a minute to stock up. But yeah, looking forward to having this one today.

[Matt]

Thank you.

[Joel]

By the way, if you have a money question we'd love to hear from you. Just go to how to money.com, ask for the directions or just record a voice memo on your phone of the question that you've got, the money question you've got and send it over to us via email. How to. Moneypodmail.com is our email address. Matt, let's take a question specifically about preparing for the incredible costs of owning a home.

[Eric]

Hey, Matt and Joel, this is Eric from Columbus, Ohio. Wanted to ask a quick question as my wife and I are set to close on a house in the next few weeks. I know that the good rule of thumb for home maintenance each year is about 1 to 2% of the purchase price, but wanted to ask you if you had a different tip or trick for budgeting for the first year of home ownership. We know it's going to be pretty different because we're making some changes to the kitchen, installing a radon reduction system, and those are all pretty easy to budget for. But didn't know if you had any tips since you've both been homeowners for a while, about a different percentage budget for the first year of homeownership. Thanks, guys.

[Matt]

Oh, Eric mentioned a radon capture system or whatever. That's one of the things that new home buyers are thinking. Wait, what? This sounds completely made up. There's no way that this thing is something I actually have to install.

[Joel]

Do you know much about that? Because that's something. I don't know a lot about it, actually.

[Matt]

I don't. Okay, well, like, I know if it's a house that's on rock, something like it's. It's a gas.

[Joel]

Yeah.

[Matt]

Right. And sometimes the. If you are near a mountain or on rock, this is a gas that comes up under your house perhaps. And so you have to find a way. I don't know, you have to like vent it or something.

[Joel]

Okay, gotcha. Yeah. That's why I've kind of heard, like.

[Matt]

The basic explanation in different parts of the country. It's more or less prevalent.

[Joel]

Yeah. And I don't know how much it costs to basically. I don't know.

[Matt]

I don't think. Yeah, no, because it's like a whole. Yeah. A whole system. But Eric, bottom line, congrats on the new home. Super stoked for you. And I love that you're asking this question because so many folks, of course, they budget for the down payment, they budget for the closing costs. They've been saving for years towards this goal. But then they neglect to consider how much money they're going to want to pour into that home in order to make it feel like home in order to make it their own. And sometimes it can just be a few pieces of furniture, maybe just a little. A little bit of paint. And some of these modifications can be easy and there's ways to achieve this. Like a reasonably priced version of this. I'm thinking about if you're buying something used on Facebook, Marketplace, for instance, if.

[Joel]

You'Re like me, go to the Habitat Restore.

[Matt]

Oh yeah, man, you get. They even have like the windows and stuff in there. I just, I just unloaded an electric stove. I think I talked about how actually upgrading to gas was saving us money because I meant that we didn't have to get a new service to the house. And you know what I said to myself? I don't want to fool around. I don't want to have a part time job this weekend. Because the worst part about selling something on Facebook is just constantly being on your phone and messaging folks and trying to arrange for a time.

[Joel]

And the question is this still available? Makes me want to punch myself in the face.

[Matt]

And luckily there's also automatic responses. But even still, if it's. I don't know all that to say, I took some good pictures, did the video because they recommend that and I priced it competitively because I just wanted that thing out of there. I didn't want to be constantly inundated. And if you have time on your hand to be able to shop around and to look for a deal like that, you can find some excellent appliances out there at a great price.

[Joel]

You can own Matt's old stove.

[Matt]

Somebody, I forget her name that came by and got it, her and her husband. But literally it was less than one hour after I got back to the first person that replied to me. Nothing was gone.

[Joel]

I believe you called her Karen, which I thought was rude.

[Matt]

Matt, but it actual name Joel. Okay.

[Joel]

Yeah, I think you're right though. Like it doesn't have to cost an arm and a leg to make those updates. But so much depends on what you're trying to achieve. And the truth is those costs can spiral out of control quickly. Large largely because turning a house into a home is very emotionally appealing, right? Yeah. But it can also be financially draining. It can put a strain on your money if you're not careful. And the first year of homeownership, it's often less about maintenance. Although there is going to be some of that. There's like always that when you decide to own a home. And for a lot of people, sounds like this is the case for Eric. Maybe it's more about cosmetic changes that you want to make to the home too. And I guess we just don't want you to spend more than you planned and because that can derail other financial goals that you Have. I think it's really easy, Matt, for people to find themselves in a dideros robe kind of situation. This is something we've talked about on in prior episodes where this French philosopher.

[Matt]

His dressing gown.

[Joel]

Yes. And he got a new one, right. A friend gave him a new gown, and then he kind of lived a life of, like, poverty, and then he gets this new dressing gown, and then he basically says, well, now everything else around me looks shabby. And he ruins himself financially in an attempt to update everything in his life. And the truth is, man, hey, you update some paint, it's fairly inexpensive, then you kind of. The dominoes drop. You find yourself ripping out and replacing countertops, calling contractors, maybe about adding on a screen porch. And I think, like, just the. The next domino to drop because, hey, we updated this. Now this other thing kind of just doesn't. It's not as visually appealing. Now we got to drop more money on that. I think that's ultimately what we want Eric to avoid here and everyone else out there to avoid, which means instituting some guardrails, having some kind of rules in place for how and when you're willing to make updates.

[Matt]

Totally. Of course, don't dismiss the maintenance costs, even though it is a. It sounds like it's a newer home or oftentimes when someone is listing a property, like, they have addressed, I guess, a lot of the issues. And so still, though, that being said, set aside that 1%. If you've got a system like a major system that is older, like, let's say an h vac that's 18 years old, that would be an instance where I would lean towards the 2%.

[Joel]

Can I tell you my. One of my friends, by the way, just had an H vac system go down. Guess how long it lasted? 40 years.

[Matt]

Well, they also don't make them like they used to.

[Joel]

I know.

[Matt]

Is there a way to go back in time and then get that, like that same 40 year.

[Joel]

Right.

[Matt]

That's super impressive.

[Joel]

You're the luckiest human ever.

[Matt]

But what Eric is getting to, though, is what you were addressing, Joel, which is the fact that how do you account for some of these splurges, some of these elective upgrades that you want to make? And so just start socking away money for these improvements that you want to make for fun. And honestly, it's gonna be up to you as to how much you actually spend. Like, there might be a lot of folks who would see you make some upgrades, and they're like, okay, like you mentioned the countertops, Joel. And they're, they're thinking, well, those are perfectly fine, great, like builder. Builder grade granite countertops. But maybe.

[Joel]

Nothing wrong with them.

[Matt]

Nothing wrong with them, but maybe you hate them. And so for you it's gonna be.

[Joel]

Important in order to get them from personal experience.

[Matt]

This is something, something we did. And I think a lot of folks would have been like, I can't believe you're doing that. But I'm like, you know what? This is a priority for us. We do a ton of cooking at home and somebody else is going to think that that's a ridiculous move for us. It was, it was kind of almost like a craft beer equivalent. Of course, you can't have too many craft beer equivalents, but as long as you're not going into debt, and I think this is one of the most important factors, as long as you are not paying interest in order to afford these upgrades, and as long as you are not neglecting your retirement account contributions in order to pull this off. I think Eric might be looking for like a percentage. Like, give me a rule of thumb, guys. Like, how much should we be? You know, like, we need a guide, like some sort of bumpers on the side of the bowling alley that. To help keep us in check. And I'm not quite comfortable doing that because it depends on how much you value making the place your own. If you love to travel and you're just like, well, we just got a house because it kind of made sense and we found a good deal and my uncle's a realtor, it all kind of came together that we're going to buy a house, but you don't really care about it and instead you want to continue to travel and prioritize other things. Well, I would say you probably don't want to spend a ton on some of these upgrades, but if you are a homebody and in fact you work out of your home, you've got a little home office. Oh, maybe both of you work out of your home. You also love hosting friends over. Okay, I could see there's definitely a case to be made here that this is going to be a little bit more important if that's the case.

[Joel]

Yeah. And you just said, oh, I'm a little hesitant to give guardrails, but I feel like you did just give a couple good guardrails, which are like not going into debt and not neglecting your financial future if you're.

[Matt]

There's the left and the right bumper on the board.

[Joel]

Exactly. I think beyond that, like, I don't have other bumps Cap it at no more than 500 bucks a month. Like, no.

[Matt]

Like, yeah, we're not going to do a dollar amount or even a percentage amount. Yeah.

[Joel]

On your income and your other financial goals. And as long as you're able to not do those two things that would actively harm your finances now and later, then I think you could. You've got a lot of free reign.

[Matt]

Right.

[Joel]

You got. There's a lot of wiggle room here. And that's. That's what we're kind of getting here to, is trade offs, which are the ultimate reality in personal finance. They're really the ultimate reality in life. And, you know, new homeowners, they often dial back on other spending kind of naturally as they enter this nesting phase, but they do it with their eyes wide open. And so it probably will mean saying no to the next big concert when Beyonce brings her, what is it, Cowboy Carter tour, Matt. Through the country and say, I'm not going to drop 900 bucks on those tickets because I instead want to prioritize doing some house stuff or taking one less vacation. Right. Is it worth it to get those house projects done in less time to say no to other things? Maybe, maybe not. That depends on you. That's a personal decision. I would start making a list of, like, the most important items I want to address the updates I want to make at the house, and then I'd come up with a ballpark figure of what each one of those would cost after that. Matt, I'd probably like, I don't know, make a priority list from 1 to 1.

[Matt]

Can't do them all.

[Joel]

Yeah.

[Matt]

Can't do them all at the same time. Unless you're a total baller. If so, Eric, congratulations.

[Joel]

Yeah. If you've got that much money saved up after buying the home, that's amazing. But then, you know, list them in priority and then create a timeline of when based on your current income and your current current expenses and keeping everything else essentially the same, at least from a, you know, a retirement standpoint. Maybe dial back on other spending so you can ramp up the timeline of getting those things done. But, you know, creating that timeline can help you understand when you might reasonably be able to address each one of those upgrades, you know, within the financial constraints that you have. And so I think this. This could span a few years. Right. So maybe. Maybe that's a good thing to realize ahead of time.

[Matt]

Man.

[Joel]

We want to do all these things, but if we do one one of these things, a quarter maybe, then we're going to get there over the course of three years. Get comfortable with the timeline. I think it'll help mentally, and it'll also ensure that you're going to be able to pay cash as you save up for each one of those upgrades.

[Matt]

Yeah, you want to cash flow that thing. And of course, the more you DIY it, the less you're going to be forking out. So get in there, man. Like, use some of that elbow grease. Get excited to do some of these weekend projects together. It's a good way to get to know your neighbors as well. Be like, hey, we come over and we got some beers and pizza. Maybe you want to. Are you good with a roller? Or maybe you're good at trim? No. Okay, maybe just taping. Okay, you can pay, but we ultimately want you to avoid either taking on additional debt to make these improvements or slashing your savings rate, specifically how much you're able to invest for your retirement. If you avoid both of those routes, how much you opt to spend. It really does come down to your personal priorities and saying no to other fun ways that you could be spending your money. But to you, it's going to be worth it. Just make these decisions with your eyes wide open.

[Joel]

Yeah, man. As one of our friends says, you can afford anything, but you can't afford everything.

[Matt]

It's true.

[Joel]

You got to got to make those decisions with your eyes wide open. But Eric sounds like you're on the right path. You're asking the right questions, and we hope you're able to. To make those upgrades that you want, make that house exactly into what you want it to be. And hopefully, yeah, you do it smartly so that those renovations pay off in terms of increased value of that home as well. Matt, we've got more to get to on this episode, including, let's take a question about using artificial intelligence to make smart money decisions. We'll get to that and more right after this. Are you 100% sure you're doing all the smartest things for your money? To be completely honest, I wasn't. And that's coming from someone who has committed their life to personal finance for nearly two decades.

[Matt]

That's right. So you looked into a company called Domain Money. Their team of expert certified financial planners get to know what matters the most to you. They analyze every aspect of your financial life. They build you a personalized plan with clear steps to reach each one of your goals. They make it incredibly easy to make money. It's like having your own personal cfo, therapist, and money coach all in one.

[Joel]

Yeah, I personally worked with Katie Song. She's an absolute gem and the best part is that you can work with Katie or one of the expert certified financial planners on her team. I'm always looking out for great resources to recommend to the How To Money community and I can confidently tell you that Domain Money exceeded my expectations. And for a limited time they're doing free 30 minute strategy sessions. So start today by booking a free strategy session with one of their experts by going to domainmoney.com howtomoney I am a current client of Domain Money. I received a financial plan as part of the compensation for Domain Money's advertising on the podcast and therefore I have an incentive to promote Domain Money.

[Matt]

Hi, this is Joel and Matt from the how to Money podcast.

[Joel]

We're almost out of the cold winter months and the way I plan to help myself make it through is to think of the great travel I have planned this summer. Like the road trip I want to take with my kids out west. Going to take the whole month off, head towards Seattle for my cousin's wedding by car. I'm already plotting all the different Airbnbs we can stay on along the way.

[Matt]

Nice. I think that's a great idea. There's nothing like a cross country road trip during the summer months, and staying at Airbnbs is a great way to experience all the different towns and cities on the route. Plus, while you're gone for this long stretch of time, you could also be hosting guests in your home on Airbnb, making some extra money in the process. I was an Airbnb host myself for a while and I loved it. It was easy and it gave me the chance to make some extra cash.

[Joel]

And now hosting your home is easier than ever on Airbnb with the co host feature. Access a network of high quality local co hosts who can help you handle everything from getting your home ready to helping your guests once they arrive with whatever they may need. Find a co [e-mail] host.

[Matt]

You probably think it's too soon to join AARP, right? Well, let's take a minute to talk about it. Where do you see yourself in 15 years? More specifically, your career, your health, your social life? What are you doing now to help you to get there? Well, there are tons of ways for you to start preparing today for your future with aarp.

[Joel]

What about that dream job you've dreamt about? Sign up for AARP reskilling courses to help make it a reality. How about that active lifestyle you've only spoken about from the couch? AARP has health tips and wellness tools to keep you moving for years to come. But none of these experiences are without making friends along the way. Connect with your community through AARP volunteer events.

[Matt]

So it's safe to say it's never too soon to join aarp. They're here to help your money, your health and happiness live as long as you do. That's why the younger you are, the more you need AARP. Learn more at aarp.org wisefriend.

[Joel]

All right.

[Matt]

Buddy, we are back from the break. Let's now hear from a listener who is looking to use ChatGPT in order to find the best rates on his savings. Hi Joel, I'd love to get your thoughts on these two high yield saving options. Open bank at 4.7% or Genius at 4.5%. Any recommendations? I just received 40K and I want to make the best choice. Also, do you ever use AI to find answers to your questions and your research? If so, which one? ChatGPT doesn't seem to really provide the most up to date or actually truthful info. Enjoy the show. Thanks. Okay, so technically, Rob didn't say he was using AI to find the best savings account, but basically that's what he's asking.

[Joel]

Yeah.

[Matt]

Yeah, we kind of combine his two questions.

[Joel]

I'm also. I'm also curious, by the way, Robert said he had $40,000 dropped in his lap. I wonder how that came about. Did he like Jesse James? Rob a bank? It's harder to do these days, so I doubt it.

[Matt]

Honestly, if you ask me, sounds like he's in sales. He's kind of like a guy on the move. Okay, maybe I wouldn't be surprised if he got himself a nice little bonus after last year.

[Joel]

You're probably right.

[Matt]

That's my thought.

[Joel]

I'm not trying to cast aspersions on you, Rob. I'm sorry about that. And before we get to your specific bank account question, we should at least mention, I think, Matt, that Rob, he might want to invest a portion of this lump sum that's fallen into his lap. That depends on his goals, how much money he currently has in liquid savings. If he doesn't have much in liquid savings, might need cash soon.

[Matt]

Money gear he's in. Yeah, exactly.

[Joel]

Or if he's buying a home soon or something like that, needs it for the down payment. Opting for the high yield savings account is a fantastic choice, but just know we would say it so much depends whether 40,000 bucks is a lot to put in liquid savings, especially if you already have a decent cash pile. So just make sure you're not being too risk averse with this money.

[Matt]

Totally. And he also mentioned, so he mentioned two accounts specifically, both of which are offers from neo banks. These aren't full fledged online banks. And man, our bias is to steer folks towards legit banks because of the issues that have popped up with neobanks over the years, including folks having a hard time transferring their money out of them. You put a transfer in a transfer request and it's supposed to show up on, you're like, okay, it's Monday, that money is going to show up in my traditional bank on Thursday. And then literally there have been complaints where folks are like on Thursday they get a notification that the transfer was declined. You have to actually reach out to the non customer service in order to get an explanation. And then all of a sudden you're kind of in this never ending cycle of trying to reach out to somebody who is actually not going to be.

[Joel]

Able to support you and then you end up pulling all your hair out and then you've got other problems to deal with because it's just so darn frustrating.

[Matt]

Yeah, so neobanks, like that is the term that has come to describe some of these newer tech like fintech sort of startups that are backed by bank. There are a dime a dozen now, many who are offering a twist on traditional banking services in order to appeal to younger folks, which is cool. But despite the higher rates there are real trade offs including I will say to the ambiguity of the FDIC protection. So they claim that they have it, but it's not quite like what you would see with a traditional bank.

[Joel]

You're right. And like the fdic, they actually issued a neobank warning this past summer right after we saw what happened with Yotta and some other similar fintech banks last year. We kind of liked Yotta because of what they were trying to do. Create like a lottery like environment for their, for people who saved, essentially incentivizing people to save more money for the potential to win really cool prizes. And I just remember when YADA came online I was like that's a great idea. Like you're, you're getting people hopefully incentivized to do the right thing, the best thing for their future. But it turns out the neo banks and, and the banks that back them, they don't always play well together and they don't always play well with the fdic. So we've just been reluctant to recommend that folks go in that direction even if like you said, the rates on savings are Higher. And that's also because it's not like there's this massive disparity, right, that with the additional risk you take, you're getting some sort of insanely superior reward. Legit online banks like cit, they pay upper echelon rates. They're paying rates that are just as good, if not better than the vast majority of these neo banks. So in my mind, having savings with a bank like CIT doesn't come with any ambiguity. They are, that is the bank that is backed by the FDIC and the banks that Rob mentioned are paying what, 4.7% and 4.5%, I believe, on savings. But CIT is paying 4.3% on its platinum savings account.

[Matt]

Pretty solid.

[Joel]

We're just talking about a difference of, especially with his sum of money, 80 bucks or 160 bucks, depending not very.

[Matt]

Much in a year.

[Joel]

By taking on that additional risk, I would just stick with a fully fledged online bank like cit. I don't think it's worth the added risk of going with the neobank to try to eke out that little bit extra.

[Matt]

Totally. And then on top of that, these neobanks might not last very long either. And so if you want to avoid bank hopping, which is a total pain, you know, if there's a way that you could use AI to handle all of the actual bank transfer, like that sounds like a good use case, that would be awesome because like, that's like the, the worst part is the legwork involved with setting up a new bank. But instead pick an online bank that's been around for a while, a bank who has consistently offered really good rates. So Joe, you mentioned cit, but some other great options are Ally Capital One, Discover. These are banks literally that we all are patrons of cit. They certainly have the best rates out there out of the four that we mentioned. But you might appreciate some of the other perks from some of these other big guys, like free checks, free ATM access, things like that. And then on top of that, customer service dependability. These factor into the where we save equation as well. Not just the ease of use, but just what kind of service am I getting at the end of the day?

[Joel]

Can I get a helpful human when I need them?

[Matt]

Yeah, I was mentioning too, Neil, before.

[Joel]

Humans get replaced by AI, yeah, these.

[Matt]

Makes possible folding, but as the CFPB dissolves, I think it's even more important to do business with banks who have a good reputation on that front, their ability to serve their customers. And I'm not typically someone who likes to Change their behavior based on politics and what policy is going through the current administration. But I think there, I think this is a real concern. The fact that there might be some uncouth, some bad behavior, some sketchy behavior with some different fintech pop ups. This is, this is not guaranteed. But I could see it being a potential of there being more of those in the next four years versus the last four years, which means that we need to be even more on guard. We need to be even more careful ourselves, especially when we see an offer that looks like it's potentially too good to be true.

[Joel]

Yeah. If there's not a cop on the beat, you're saying, yes, there are fewer.

[Matt]

Cops on the beat.

[Joel]

When the cat's away, the mice will play. And so that might be the case in the banking sector. So sticking with banks that have a good reputation for customer service makes sense. It's not negligible, it's not completely unimportant. I think it's probably more important, like you're saying, Matt, and the banks that we list out, the banks that we talk about consistently, that factors into the reason we recommend those banks. And so that's, that's why the same four that we mentioned and have been mentioning for years continue to remain the same four we recommend and highlight today. And on the topic of AI that Rob broached, I don't know about you, Matt, I don't know if you're using artificial intelligence on the reg. I'm not using artificial intelligence.

[Matt]

We all kind of are, like, because it's so ubiquitous, like it's in Google, like you get the little summary. And so, I mean, personally I just, I think it's overblown.

[Joel]

Yeah.

[Matt]

Like at least on a consumer end user point of view, I will say.

[Joel]

Talking to a friend who runs a business, like the way he uses it and infuses it into everything he does, it's impressive to see how big of a help it's become for his business. And he's just like. I was like, dude, you need to be like an AI influencer because you know how all this stuff works. I'm an idiot. Yeah, I'm an idiot on this stuff. Actually in a recent how to Money newsletter that we did document how people can use AI to come up with certain specific financial questions. Right. And how maybe AI might be able to help in some ways, but you have to be careful because Rob even mentioned, hey, some of the information is inaccurate. And yes, if you ask AI for investing advice, it could be shoddy because where's it getting the information from what sources is it culling? You might find that the advice is great for someone else that's not you. It might be better for someone in a different financial situation. But like, let's say you need help planning a meal with the food you have on hand. AI can help, right? Can help you save money on that front. Do you need help with your resume or asking for a raise? Try asking AI those questions. Same with like the basic budgeting or debt payoff questions. Those can be helpful too. But I would just say tread lightly because yeah, AI comes back with Aaron info sometimes and even the recommendations that it's making on savings accounts, sure, those might be the, the highest paying accounts out there, but does that mean that they're the absolute best places for you to stash your cash? I don't think so.

[Matt]

Yeah, I think it's sort of like the way we use Internet now, like back in the day, or let's just say today. Like, do you say, hey, did you use the Internet in order to find, in order to book the cheapest, most affordable travel? No, like, you don't say that. You say like, what site did you use or what app did you use? In a similar way? I think that's how AI is going to be infused into everything that we use. I think everything that we use as consumers is going to incrementally get better or even not so incrementally, like maybe by leaps and bounds. But I think just the, like, the focus on AI just feels completely overblown in my opinion, as opposed to, and I'm not like a, you know, I'm not an expert on this, but it seems like there's more groundbreaking innovations that might be able to be made in like the medical field. I've heard folks talk about that, where they're able to like run these simulated trials and like when typically this would take years and years. Like they're able to do this and even decades, they're able to do it like in minutes. Like that seems incredibly promising and exciting, but from like a, just from a consumer and I don't know, maybe like, like you said, maybe we haven't used it enough personally.

[Joel]

So what you're saying is, Matt, that you and I, we're, we're still highly necessary, right? AI hasn't killed us off yet.

[Matt]

You all need to stick around with how to money for sure.

[Joel]

All right, Matt, let's get to another question. This one is about paying off a mortgage.

[Jose]

Hey, Joel and Matt, this is Jose Gonzalez from Wilmington, California, small neighborhood in Southern California. I had a question regarding a mortgage loan on a rental property. My question is should I pay it off or should I continue to collect the rent and let itself pay off? I currently have savings of 337,000 in low cost ETFs and have been saving for quite some time now, hoping to buy a home here in Southern California one day. However, I don't like the idea of the debt hanging over my head during this process. I currently have about 193 left over in the mortgage so I'd have enough to pay for it and get rid of that debt. As you know, homes in SoCal are expensive so that's why I have such big chunk of change. I just signed a 12 month lease and I am being very patient. So I guess the idea of renting has had me thinking of buying soon. Anyways, I love the show. Thanks for everything guys.

[Matt]

Okay, so when he said he's got savings of $337,000, I was like what Jose? But then he quickly followed that up with that they're in low cost ETFs. He's got that money invested. He's calling it his savings but he has invested those dollars. That looks a lot different. But there is a lot to discuss with your question, Jose. So let's start off by discussing mortgage payoff because we've been pretty consistent advocates for not paying off your mortgage if you have a locked in low rate. I think he mentioned that he purchased this home back in 2019. So yeah, he's locked in hopefully at 30 years for a really nice low rate. And inflation and higher savings rates are only making that low cost debt look better by the day. And there's also lots of value to be had by, by having more liquidity as well. Well, I think we'll address all these things I just touched on here.

[Joel]

Yeah, no, I agree. And yeah, the only exception to that answer of not paying off the mortgage is typically if that money was going to blow a hole in your pocket otherwise. But that doesn't sound like it's the case for Jose. And I guess like there are certain other reasons you might want to pay off your mortgage. Really if it's, it's a personal preference though as well. It's just not our personal preference. And so we highlight that because it's our show. But it also sounds like you're in the wealth building phase of your life, Jose. If you were in your 60s, right. And you wanted more financial certainty as you entered your retirement years, the discussion would also Be different. We might, you know, push you a little more towards mortgage payoff just because of where you're at in the grand scheme of things. But you've likely got so many years ahead of you to make savvy financial moves to grow your net worth, including buying that primary home. And so if you pay off this mortgage, you might find your ability to grow your net worth is actually hurt by prioritizing debt payoff.

[Matt]

Yeah, that's right. And if you decide to pay off that debt, it would increase your cash flow. That's certainly a nice perk. But if, let's say, another investment deal came along, something that you were made privy to, well, you might not have the capital to jump on it. Imagine. Sounds like his first property ever purchased was an investment property he's been renting. Imagine if you come across like the perfect house hack. Let's say you came across just this sweet duplex or triplex or a quadplex. And the dollar signs are in your eyes not only because you see the potential, but also because it costs you a whole lot of money. Oh, but too bad you used all the money that you had in order to pay down that previous mortgage, and now you don't have enough on hand for a competitive down payment.

[Joel]

That's right.

[Matt]

Or even something above and beyond in order to make you look like a more attractive buyer to the potential seller. These are all things that you want to want to keep in mind. That's the liquidity aspect that I touched on earlier. But another downside of paying off this debt would be paying tax. And it sounds like the money that you'd be using is in a taxable brokerage account. And it's highly likely that you would have to pay capital gains tax in order to access that money to pay more to the mortgage company. This is a situation we're trying to diminish your debt, where it could lead to an unnecessary tax bill and likely just, I mean, a fairly substantial tax bill, as well as he's trying to get his hands on those funds in an attempt to alleviate this debt that isn't all that terrible.

[Joel]

Yeah. And again, we don't know the exact mortgage interest rate. We're assuming that you have a mortgage rate that starts with a three. If that's the case, then that's our advice for people, Matt, who took out a mortgage within the last year and their mortgage rate's upper sixes, low sevens. There's different advice.

[Matt]

It's a different story. That's not what I'm hearing, though.

[Joel]

No. I think Part of what makes real estate also a compelling investment is the ability to use leverage wisely. If you had to save up and fork over 100% cash to buy a rental property, the investment just wouldn't be nearly as attractive and almost nobody would partake. It would take forever to save up and your profit potential would be greatly diminished. And on the flip side, many real estate investors have taken on too much leverage and they've hurt their finances because of it. Right. They got out over their skis and their debt loads is just, it's too heavy of a burden for them. So there is, it's important to highlight both risk and reward when using leverage. But Jose, that's not you. Right. Like, paying off the mortgage would mean you're going the deleveraging route. And I just don't think you need to do that given where things stand with your finances and how smart you've been in building up wealth. It's not like you're asset poor. It's not like you're light on cash and the only way to have some liquidity is to sell this place. You've made a bunch of other smart moves. So, yeah, deleveraging. There are pros and cons to going that route. I just don't think you're maybe at the place in your financial journey where it makes sense to deleverage. I want to hold on to that low cost debt for now.

[Matt]

Yeah. Especially because I didn't hear him say anything about retirement accounts. It would be different if he also came in and said, hey guys, I've got this. My net worth is at this level. I've been maxing out my 401, my Roth IRA for this many years, for a couple decades even. That would be a different story. I would have a different answer, but I didn't hear him say anything about that. He sounds financially savvy. Like I've got a feeling that he's, he sounds debt averse, like he doesn't want to have debt on him. But I don't hear him saying he's risk averse. So I don't hear him not investing those dollars. I mean, well, he is investing those dollars. He mentioned the low cost etf. So I think he has plenty of money socked aside. I assume he's, he's maxing out his retirement accounts. But Jose, if you're not absolutely do that first. Those are table stakes. And instead of having to jump through these hoops of buying a property that may or may not go up in value, that where you can or can't find a tenant who's willing to sign for 12 months for. Shoot a tenant who might be a nightmare tenant. Like, these are all prerequisites to get you to the point to where you might see an average or slightly higher than average return on your money. But you don't have to do any of those things. Zero prerequisites in order to experience that kind of return by just simply investing in the market.

[Joel]

Yeah, I think when it comes down to it, don't pay off the debt is what we would suggest. But also don't spend that money. Leave it invested for the time being. You might want to even slow down your investing for now in order to enlarge your cash cushion if that home purchase is a high priority. I'm not sure how much you have in liquid savings that's not invested, but that's the bucket I think you want to prioritize for the next house purchase so that, I don't know, maybe you could avoid selling some of those positions.

[Matt]

At some point at a potentially inopportune time. Right.

[Joel]

The more cash you have on hand, the more likely you will be able to keep those investments in place. Obviously, Matt, everybody knows this. Home prices in Southern California can be incredibly expensive. Buying instead of renting there is going to cost you quite a bit more on a monthly basis, especially these days. So factor that in. You know, you'll also get to participate, yes, in the upside of appreciation in that market, but buying it's ultimately a personal choice. I just want Jose to know it's not a necessity for wealth building. He said he just signed a new lease. And if. If owning that home is not a massive priority, he might be able to build more wealth overall by continuing to rent if he's so inclined and just investing more in the market and in other potential endeavors.

[Matt]

That's right, man. All right, we're got more to get to. Actually, we're going to hear from a listener who is considering a pension lump sum, something he didn't realize was even possible up until recently. We'll get to that and more right after this.

[Joel]

Are you 100% sure you're doing all the smartest things for your money? To be completely honest, I wasn't. And that's coming from someone who has committed their life to personal finance for nearly two decades.

[Matt]

That's right. So you looked into a company called Domain Money. Their team of expert certified financial planners get to know what matters the most to you. They analyze every aspect of your financial life. They build you a personalized plan with clear steps to reach each one of your goals. They make it incredibly easy to make money. It's like having your own personal cfo, therapist and money coach all in one.

[Joel]

Yeah, I personally worked with Katie Song. She's an absolute gem. And the best part is that you can work with Katie or one of the expert certified financial planners on her team. I'm always looking out for great resources to recommend to the How To Money community and I can confidently tell you that Domain Money exceeded my expectations. And for a limited time they're doing free 30 minute strategy sessions. So start today by booking a free strategy session with one of their experts by going to domainmoney.com howtomoney I am a current client of Domain Money. I received a financial plan as part of the compensation for Domain Money's advertising on the podcast and therefore I have an incentive to promote Domain Money.

[Matt]

Hi, this is Joel and Matt from the how to Money podcast.

[Joel]

We're almost out of the cold winter months and the way I plan to help myself make it through is to think of the great travel I have planned this summer. Like the road trip I want to take with my kids out west. I'm going to take the whole month off, head towards Seattle for my cousin's wedding by car. I'm already plotting all the different Airbnbs we can stay at along the way.

[Matt]

Nice. I think that's a great idea. There's nothing like a cross country road trip during the summer months and staying at Airbnbs is a great way to experience all the different towns and cities on route. Plus, while you're gone for this long stretch of time, you could also be hosting guests in your home on Airbnb, making some extra money in the process. I was an Airbnb host myself for a while and I loved it. It was easy and it gave me the chance to make some extra cash.

[Joel]

And now hosting your home is easier than ever on Airbnb with the Co Host feature. Access a network of high quality local co hosts who can help you handle everything from getting your home ready to helping your guests once they arrive with whatever they may need. Find a co [e-mail] host.

[Matt]

You probably think it's too soon to join AARP, right? Well, let's take a minute to talk about it. Where do you see yourself in 15 years? More specifically, your career, your health, your social life? What are you doing now to help you to get there? Well, there are tons of ways for you to start preparing today for your future with aarp.

[Joel]

What about that dream job you've dreamt about. Sign up for AARP reskilling courses to help make it a reality. How about that active lifestyle you've only spoken about from the couch? AARP has health tips and wellness tools to keep you moving for years to come. But none of these experiences are without making friends along the way. Connect with your community through AARP volunteer events.

[Matt]

So it's safe to say it's never too soon to join aarp. They're here to help your money, your health and happiness live as long as you do. That's why the younger you are, the more you need AARP. Learn more at aarp.org wisefriend.

[Joel]

Alright Matt, we're back. Let's keep taking list for questions. Now we get to the Facebook Question of the Week. This one comes from Zane. He said, I almost wish I didn't learn this, but I found out recently that there is an option to cash out my pension. Not an attractive option, but it does bring up a question. Is there any reason to include that value when I'm listing personal assets, such as for a loan application or when calculating net worth?

[Matt]

Oh, time to cash out. Well, this is something I feel like you can speak to this a little bit when it comes to you've got some personal experience when it comes to.

[Joel]

Some very recent personal experience.

[Matt]

Pension.

[Joel]

Yeah, yeah, yeah. So I mean, I think it's interesting Zane basically said it's not an attractive option, but it might be an attractive option. It's worth at least thinking through the pros and the cons and running the numbers. And so I did that recently because I got sent a letter from my former employer about my pension and they basically said, hey, you can take this lump sum or here's what you would get paid when you turn 65 on a monthly, ongoing, monthly basis. And because I had the option of rolling that into a traditional IRA or into a Roth IRA and then paying a little bit of that, paying the tax, I decided the best thing for me was to roll it into a Roth, get more money into the Roth, pay the tax now and then hopefully watch that money grow to become substantially more than what it otherwise would have become had I just waited for that pension payment to start 25 years down the line. But I think, Matt, a lot of people who opt for a pension lump sum maybe there's a lot of hoops you have to jump through and you have to do it the right way and you have to make sure you get it into the right account and you have to know what is possible from a tax perspective, when you take that lump sum, if you don't do it properly, you could be creating more of a financial headache for yourself.

[Matt]

More of a liability.

[Joel]

Yeah. Than a. Than a benefit.

[Matt]

Yeah, yeah. I think. I mean, one of the reasons you do this is because, yes, it could perform better in your capable hands. And so actually run the numbers, see what it could do. A reasonable goal would be that your lump sum, if you, let's say, invested in a total stock market or an S&P 500 fund, earning average returns, whether or not it would lead to more income in retirement, I think that's a good goal for that, for you to have for that money. Granted, this is a return that's not guaranteed, which is unlike your pension. And so I would want to think through the pros and cons there. Like these are the two schools of thought that I'd be bouncing back and forth between Schwab. They actually have a pretty awesome calculator that we'll link to in the show notes for this episode that will help you to get an idea of the rate of return that you would need to get investing on your own in order to make cashing out worth it.

[Joel]

Yeah. And then you asked the question, should you use your pension in your net worth calculations? I think you can. I never did. But mine was also small, like. Right. It wasn't some epic amount. Others might want to, depending on how much their pension is worth. I think the best way to do that is to figure out what your likely annual pension amount will be and then to multiply it by 25. I think that's roughly what it's going to be from a net worth perspective for you down the road. You should certainly factor it in for retirement planning. But there are also downsides, I think, to including your pension in your net worth. Right. Because you might overestimate your assets. You might under prepare in other ways.

[Matt]

That's what worries me is thinking banking.

[Joel]

On this thing and maybe it doesn't pan out the way you want.

[Matt]

Well, and just how I think about net worth, it has to do with how much money I have now. I'm less interested in my future net worth because that may or may not happen, depending on what the market's going to do.

[Joel]

Count them chickens for the hash.

[Matt]

Yes, exactly. And so if I were going personally, if I was going to consider a pension, I would consider the lump sum cash out for my net worth calculations in the here and now. But even then, I would only assume the most conservative of projections when it Comes to, you know what that number might be?

[Joel]

Well, because the truth is, unlike money you've saved up in retirement accounts now, the pension is not liquid. Right. It's going to pay out monthly as stated once you reach retirement age. And if your employer has financial issues, your pension amount could be reduced. So you might be counting a chicken that doesn't hatch. And so, yeah, that's also something to keep in mind. If your employer is struggling, know that that's a possibility. And that's just, I think, another reason that to at least consider taking the lump sum pension amount if it's offered to you. Matt, you use the term capable hands. I like that. Like, if you, if you feel like you are capable of using that money effectively and investing it for your own future, you'll likely perform better and do better than the pension would on your behalf.

[Matt]

Yeah, and the other thing he mentioned too was that should he list this out, like, when, like, for instance, with a loan application, I don't see the advantage of doing that either because, like, if anything, what that might do is cause a lender to think that you are more credit worthy because of the fact that maybe you've got additional assets on the books. And I think there might be a slight temptation to borrow more than you should, because bottom line, I think a good rule of thumb is to borrow less than what any lender is say that you're good for. And so by having more debt, you know, more on paper, it's like, oh, actually, you know, let's just say it's for a home or something like that. Actually, you were going to be approved for a $650,000 loan. Let's go and bump that thing up to 800 because we see that you've. No, no, no. See, I don't like. All right, I don't like that. Although I think this is just a. There's a small chance that this would happen because typically they're looking at your income. They don't really look at, like, what you're asked. Like, yeah, they should be looking at your assets, usually.

[Joel]

Debt to income ratio.

[Matt]

Yeah, exactly like you want to. You want a credit limit increase on your credit cards. What are they asking about? They're asking about your income. Actually, they ask about your. If you own a home too, and what your primary mortgage is oftentimes. But they should be considering your assets because I feel like that's more indicative of your capacity to sacrifice, to defer pleasure, to invest and to sock away money. But instead they just care about what you're going to earn that year.

[Joel]

They're using a more basic metric.

[Matt]

They're just looking at the near short term. But even if they do take that into account, I think it can only have the potential to get you in trouble.

[Joel]

Agreed. All right, Matt, let's get to another question. This one comes from TJ in the how to money Facebook group. He said frugal or cheap Churning gym. Free trial memberships with no intention of signing up. I like the community aspect of working out in a class with other people, but I also work for a nonprofit where I don't take home much money. So I'm good with just running, jump roping, and doing workout routines from darebee.com which I not heard of before. I've heard of them in my bedroom. Well, of course you have. So is that frugal or cheap from tj?

[Matt]

It completely comes down to how he goes about doing this, you know, like, you know what it immediately makes me think of? It makes me think of the free samples at Costco, the taste tests. And if you walk up to that nice person there, manning that little booth, that little table, the little card table there with a little air fryer or whatever it is that they're doing, and if you like look them dead in the eyes and you're like, I'm not gonna buy any of this, but let me have a taste, that's like a total jerk thing to do. You might be thinking that, but you can't say it out loud, right? And the reason I think it's okay to think that is because it is up to them to convince you otherwise. Like, if there are free samples, if there's a free taste test or something like that, it means that that manufacturer or that business owner, whoever it is, they believe enough in their product to convince you otherwise. When you have made up your mind that this is not something that you're gonna partake in, but they're willing to give little taste of it for free, knowing that, or in this case, the gym knowing that. Man, our members are so awesome. You're gonna want to come back. Our coaching is so top notch that you're not gonna be able to live without it. Whatever it is that they think they're gonna be able to attract you in with is up to them to sway you. And so you might think that there's no way I'm not gonna join the stupid, it's so expensive, or I do this stuff at home for free, but you can't say that out loud. And it's up to them. To convince you otherwise. See, that's what I think.

[Joel]

That's exactly where I was gonna go with this answer. Cause I think that's the whole reason people offer free trials is because they think you're gonna love the thing enough that you're gonna stick with it. And so you might say, I'm gonna sign up for the Netflix seven day free trial, but I'm not giving them my money. And then you might get hooked on, I don't know, Squid Game or something like that. Whatever, whatever they're showing. I don't have Netflix these days. I haven't had Netflix in a long time, whatever it is. And I think that's true. Like TJ has to be ready to one, either cancel the free trial in time before he gets charged if he's not interested in sticking around. That would be, I think, cheap if he wasn't. But on top of that, be ready to fall in love with the thing that you're checking out.

[Matt]

Because it might happen.

[Joel]

Because it might happen. And it might be worth the money. Even though right now you don't think it is. I remember signing up for a Discover bank account, Matt, because they offer like a $300 bonus and I was like, oh, this is really easy. Like the hoops are not that significant. I just have to like have the account open for 60 days with a certain amount of money in it.

[Matt]

So I was like, all they want is my first name.

[Joel]

That's right. It was so easy. And I was like, 300 bucks. This is great. It's way easier than like some of the, the big physical banks want, like, I don't know, you have to go into the branch. It's so annoying. And then I ended up saying, well, this is a great interface. Yeah, this is a good bank. And I've been with Discover for many years since. So what I thought was playing the.

[Matt]

System, thought it was going to be temporary.

[Joel]

I got played, but not in a bad way because it's a great product.

[Matt]

That'S not costing you anything, right? But it might end up costing tj. And that's the thing. I think I like what you said about being prepared to potentially pay. And you might think, well, guys, because he mentioned that he works for a non profit, he's like, hey, I can't afford that. But you might love it so much, you might get creative with your expenses, you might do some budget rearranging because now all of a sudden this is such a high priority for you. You found your people. It kind of reminds me you remember at some Point we talked about, I think it was on a Friday flight, about a girl who hasn't paid for eating out, hasn't paid a restaurant bill in like two years, and it's because she goes on dates for free. They're not free dates. Well, I mean, I guess technically they are, but she goes on dates and they pay for dinner. And I think it was a frugal cheap then because it kind of feels deceptive, right? But I remember, even at that point in time, I remember thinking the same thing. It's like you might be thinking or saying to yourself that there's no way I'm going to be into this dude. But in fact, after meeting him, oh, he's got a great sense of humor and you get to know him. Then all of a sudden, that's what.

[Joel]

Happened with my wife.

[Matt]

All of a sudden you get tricked, and you've been married for 15 years. See, that's what these. These gyms are banking on, tj. And so I don't think it's. It's cheap at all. I think it's a frugal move. But, yeah, like Joel said, be prepared to start to start paying a monthly fee in order to access those services.

[Joel]

No doubt.

[Matt]

By the way, so you mentioned darebee.com. i've been. I still been using my Push Jerk, which is free programming. Did it this morning. Freaking love it.

[Joel]

Push Jerk. It could be a workout app. It could be, I don't know, a strike back app at people you don't like.

[Matt]

No, it's solid.

[Joel]

Okay.

[Matt]

It was good.

[Joel]

All right. Just the name of it's funny. All right, Matt, let's mention we're done with questions. Now let's get back to the beer that we had on this episode. This one's called Lil Biggie on Chrome. It's a coffee stout. And. Yeah. What were your thoughts on this one?

[Matt]

I feel like we're going along in the episode, so I'm gonna make it short and sweet, dude. Solid roasted coffee flavors. I thought it was gonna be. I thought it was a barrel aged, but there's no way that this is barre, like zero of those woody notes. But really good. It even had, like a creaminess to it. I was picturing it was coffee with a little bit of. A little bit of milk in there.

[Joel]

Yeah, there was definitely some milk vibes going on. Definitely some lactose in the making of this beer. This one is a little thinner, almost, like had more porter vibes than stout vibes going on for me. But yeah, solid beer from the brewery right down the street, which we are trying to support like mad. Wanted to stick around because when you have a good brewery in your neighborhood, it is your pride and joy, as everyone knows.

[Matt]

But that's going to be it for this episode. Find our show notes up on the [e-mail] we will see you back here on Wednesday. We're going to have an awesome conversation about taxes because you know that's on everyone's mind right now.

[Joel]

Joel but with an influencer on taxes.

[Matt]

Matt Indeed.

[Joel]

But she likes an influencer who really knows her stuff.

[Matt]

That's right. So look forward to that and until next time, Best friends out. Best friends out.

[Joel]

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