Ask HTM - Cashback vs Travel Points, Letting a Brokerage Cook, and the Right Way to buy a First Home #952

Summary

Podcast Summary: How to Money

Episode: Ask HTM - Cashback vs Travel Points, Letting a Brokerage Cook, and the Right Way to Buy a First Home #952
Release Date: March 3, 2025
Host: Joel and Matt
Produced by: iHeartPodcasts

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1. Choosing Between Cashback and Travel Points Credit Cards

Discussion Overview: In this segment, Joel and Matt address a listener question from Austin in Alabama, who is deliberating whether to stick with his 2% cashback credit card or switch to a travel rewards card that offers 2x miles per dollar spent. Austin is considering the long-term benefits, especially as his family’s travel frequency might increase.

Key Points:

• Foundation of a 2% Cashback Card: Both hosts emphasize the importance of maintaining a basic cashback card. Joel states, “[...] everyone should basically have one of those in their wallet” ([10:00]).

• Value Comparison: Matt explains that 2x travel points and 2% cashback are roughly equivalent in value, typically around 1 cent per point. However, he notes that when travel points are used strategically—like transferring to hotel partners—their value can exceed cashback ([12:22]).

• Complexity vs Simplicity: Travel rewards often come with complex redemption processes and higher annual fees. In contrast, cashback rewards are straightforward and easy to manage, aligning well with listeners who prefer a "set it and forget it" approach ([15:46]).

• Sign-Up Bonuses and Flexibility: Travel cards usually offer substantial sign-up bonuses, appealing to frequent travelers. Joel adds, “The cashback cards, the sign up bonus, typically non-existent” ([13:27]).

Notable Quotes:

• Joel: “2% I think of as like the floor.” ([10:24])
• Matt: “Miles can be more rewarding, especially for folks who like to travel who have the ability to be super flexible as well in how it is that they travel when they book.” ([13:27])
• Joel: “Cashback is easy to redeem, and typically you can set up automatic redemptions so the benefits aren’t sitting there not being used.” ([15:46])

Conclusion: For Austin and similar listeners, Joel and Matt recommend maintaining a robust cashback card while considering a travel card if the additional complexity and potential rewards align with their travel habits and financial goals.

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2. Letting a Brokerage Account Cook

Discussion Overview: David from California poses a question about whether to continue letting his invested lump sum grow in a joint brokerage account or to prioritize contributions to their Roth IRA accounts. David is weighing the implications of capital gains taxes and long-term growth.

Key Points:

• Initial Investment Strategy: Joel commends David for investing the lump sum, highlighting that “a 3% mortgage [...] should be a very low priority for all listeners who want to build wealth” ([28:03]).

• Capital Gains Tax Considerations: Matt breaks down the capital gains tax rates, emphasizing that under certain income thresholds, David could potentially withdraw funds tax-free: “...if you are married filing jointly, then others who can keep their total taxable income below $94,000 again married filing jointly. Well, you can pay a long term capital gains tax rate of 0%.” ([29:32])

• Roth IRA vs Brokerage Account: While prioritizing Roth IRA contributions is generally advisable due to their tax-advantaged nature, David’s strategic positioning to stay within the 0% capital gains tax bracket makes maintaining the brokerage account a viable option. Joel notes, “we prioritize the Roth IRA. We, we love Roth IRAs” ([30:00]).

Notable Quotes:

• Matt: “Going from 15 to 20% [...] going above that threshold.” ([29:32])
• Joel: “At least for you and I, right now, with a bunch of young kids, we're not traveling quite as much [...]” ([20:38])
• Matt: “This is a vote in the favor of frugality, because if you can get your low income.” ([30:24])

Conclusion: Joel and Matt advise David to continue prioritizing his Roth IRA contributions while strategically utilizing his brokerage account to maximize tax benefits. They highlight the importance of understanding income thresholds to minimize capital gains taxes, thereby enhancing long-term investment growth.

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3. The Right Way to Buy a First Home

Discussion Overview: Sarah from Brooklyn seeks advice on investing her savings into real estate. She and her husband are contemplating whether to purchase a smaller condo now as a stepping stone towards a larger property in the future or to wait until they can afford their dream home directly.

Key Points:

• Analytical vs Emotional Decision-Making: Joel stresses the importance of an analytical approach over an emotional one: “The person who gets emotionally attached [...] is often going to lose financial perspective” ([36:08]).

• Stepping Stone Strategy: Matt suggests purchasing a smaller, more affordable property that can serve as a rental or a foundation for purchasing a larger condo later. This approach allows building equity and financial flexibility: “It's sort of like a stepping stone approach to getting the home that you ultimately want” ([38:06]).

• Neighborhood Selection and Long-Term Planning: The hosts advise Sarah to consider neighborhoods with growth potential and to ensure that any first home purchase aligns with long-term real estate goals. Joel adds, “I've got this amazing place, but then also it's. You're getting a less than market rent [...]” ([38:06]).

• Tax Implications and Primary Residence Requirements: They mention the importance of fulfilling primary residence requirements to benefit from capital gains tax exclusions when selling the property in the future: “...make sure that you have lived in that thing for at least two of the past five years” ([41:25]).

Notable Quotes:

• Joel: “Settling for less can be the best financial move that we could possibly make.” ([36:08])
• Matt: “Our long-term benefit of taking the, you know, it's sort of like a stepping stone approach to getting the home that you ultimately want.” ([37:07])
• Joel: “I think if you're not interested in becoming a landlord [...]” ([42:02])

Conclusion: Joel and Matt encourage Sarah to consider purchasing a smaller, more affordable condo initially. This strategy not only provides immediate housing benefits but also sets the stage for future real estate investments. They emphasize the importance of staying financially flexible and avoiding overextension, ensuring that the first property serves as a solid foundation for her and her husband’s long-term real estate ambitions.

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Additional Insights

While the main focus of this episode revolves around credit cards, brokerage accounts, and first-time home buying, Joel and Matt also touch upon broader financial strategies and listener interactions. They offer practical advice tailored to various life stages and financial goals, reinforcing their commitment to providing unbiased, jargon-free personal finance guidance.

Notable Areas Skipped:

• Advertisements and sponsored segments.
• Credit score navigation and Instacart hack discussions, as they do not align directly with the main episode topics.

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Final Thoughts

Joel and Matt effectively address diverse financial queries, offering actionable insights and emphasizing tailored strategies based on individual circumstances. Their conversational style makes complex financial topics accessible, providing listeners with the tools and knowledge necessary to make informed decisions on their financial journeys.

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

Transcript

[Joel]

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[Matt]

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[Joel]

From the how to Money podcast.

[Matt]

Indeed. And this spring is a great time to start thinking about travel plans for the summer, figuring out how you're going to pay for that travel as well. And one great way to financially support your travel is is to host your home on Airbnb. It's simple and a great way to make some extra cash.

[Joel]

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[Joel]

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[Matt]

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[Joel]

See if your company qualifies for this special [e-mail] strategic. That's oracle.com strategic. Welcome to how To Money. I'm Joel. I'm Matt and today we're answering your listener questions.

[Matt]

That's right, buddy. Happy Monday to everyone. We're excited to get to some listener questions today, including A listener who's trying to figure out whether he should be going with a cash back credit card as opposed to a credit card that offers points. He's going to figure out what's best for him. Another listener is asking what they should be doing about a brokerage account. Turns out it might be sticking around for a little bit longer than they were expecting. And we're going to discuss the best way to buy your first piece of real estate, your first home. Turns out there's a good way of doing it, Joel, but there's also a better way of doing it that we're.

[Joel]

Going to get to today. Are you going to suggest buying real estate in the. In the metaverse? Right.

[Matt]

I'm going to suggest to buy a portion of the moon, which do they still sell different stars. And I think there's some sort of register out there that where you can literally lay claim to stars that might be true. Portions of the moon. Yeah, I would not recommend that.

[Joel]

It's interesting. I haven't heard like anything about the metaverse recently or people want to spend time there or snatch up real estate. I'm wondering if the people who so.

[Matt]

Hot in 2021 is that when Facebook changed their name to Meta, because which Facebook has done. They're all in quite nice.

[Joel]

I mean, but I don't know that the metaverse is panned out like they hoped. And I wonder if the early adopters buying real estate in the metaverse have lost their shirt, the proverbial shirt.

[Matt]

How did that ever sound like a good idea? I'm not totally sure. Like looking back now, it seems like it's like, would you like to buy this virtual piece of property in the game called Sims? It just seems like such a fake, made up, pipe dream kind of thing.

[Joel]

I know, like video games, but trying to be real life and the mixture just didn't quite pan out. Maybe it will someday. I don't know. Matt, real quick, before we get to listener questions, my buddy Scott, I ran into him the other day on a walk around the neighborhood and. And he was like, oh man. I listened to your interview with the guys from Car Edge, Ray and Zach, father, son duo, talking about how to buy a car effectively. And one of the pieces of advice that those two awesome dudes gave was to fly elsewhere around the country to scour online to see if you can find a better price than what you have available locally. And I think most people, when they're buying a car, myself included, for so many years, you just kind of, I don't know look on autotrader, look on Craigslist, Facebook, those kinds of places to say, well, what is being sold nearby where I live that I could, that I could grab. That makes sense for my family and my budget. Well, the truth is there's a much bigger marketplace than the one within 30 mile. A 30 mile radius of where you live.

[Matt]

Yeah.

[Joel]

And so my buddy Scott heard that and he was like, you know what, I'm going to take that and I'm actually going to do it. Did he really? And he did. So he, he flew, I want to say he flew down to Houston. I don't remember exactly where he went, but halfway across the country. It's kind of far. Maybe it was a. I forget how far the drive. Maybe it was like a 12, 15 hour drive back to his house from there. But he saved, I want to say he saved like three or four grand buying this car elsewhere. He dropped a couple hundred bucks on a plane ticket, said it was definitely worth his time.

[Matt]

Yeah. Okay, so that's the question, I guess, is you got to kind of weigh the pros and the cons because it's.

[Joel]

A lot of money, though.

[Matt]

It is a lot of money. And it depends on whether or not you're in like the stage of life where you've got more cash on hand or do you have more time on hand. And yeah, there might be a ton of folks who are like, oh, well, I'm the kind of guy that drives across town to get gas that's $0.03 less per gallon. So I'm definitely going to buy a vehicle that cost $3,000 less. But did he get it inspected while he was over there? Because one of the things we always talk about is when you buy a used car you have and whether or not we're talking local or abroad in other states, but make sure that you get that thing looked at right.

[Joel]

For sure.

[Matt]

Because. And that's one of the difficulties that I would foresee is saying, hey, I've got a mechanic here in town that I trust that I go to all the. But the ability to find a mechanic who is going to give you the time of day to be able to say, yeah, I can fit that in in this sort of narrow window of time. Otherwise, like timing belt or like some other really expensive thing or system that needs to be addressed, it could really eat into any of the savings that you.

[Joel]

That's a good point. That's a good point. Because you do. We want people when they're buying a used car to get it inspected so they know what they're buying.

[Matt]

It's like a home inspection.

[Joel]

Yeah.

[Matt]

Like, I mean, literally, I would even, especially if you're looking in a different city, expect to pay somebody. Not just because if it's your local mechanic, maybe they would look it over because you've got a reputation. Not a reputation, a relationship with them. But if you're somewhere else, man, I think you could definitely expect to pay some money to make sure that. That you're not getting something that's going to end up costing you more down the road.

[Joel]

Yeah. You don't want to save three grand and then get a lemon and pay that out in repair bills over the next.

[Matt]

And then I had to drive across the Southeast. So boring. Yeah.

[Joel]

But I think for some people, I.

[Matt]

Love the idea, though.

[Joel]

It's an excuse for a road trip and especially if it's not too, too far away. I had another friend who did that maybe a few years back before. That was before this episode came about. So she was just even smarter, but she flew down to Florida to buy a minivan and. Yeah. So just a word of the wise reminder to people.

[Matt]

Rachel.

[Joel]

Yeah.

[Matt]

Yeah, that's right. That ended up working out great for her. Right?

[Joel]

Worked out great.

[Matt]

Yeah.

[Joel]

So. And the amount of money you can save, if you're willing to jump through a couple hoops and maybe cash your net a little bit wider, totally can be significant.

[Matt]

Totally. It's definitely worth considering because I think for a lot of folks buying a car, it's not something that you do often event. And so because of that, you're not as familiar with the process and it's even rarer or it's even weirder to say, oh, I want to fly somewhere to then do this thing that I also never do. And so I guess I'm pointing out the fact that there's this mental roadblock, this mental hurdle to get past. But once you get past that and if you can solve some of the small, well, not small, but I guess very solvable problems, then, yeah, like you said, could be a great way to save for.

[Joel]

Sure.

[Matt]

I like it.

[Joel]

All right, let's mention the beer we're having on this episode. This is.

[Matt]

Which I also like.

[Joel]

This is a Bigfoot, a barley wine style ale. It's not a barley wine. They say barley wine style ale.

[Matt]

Barley wine. Ish.

[Joel]

Yeah. So this is by Sierra Nevada, one of the OG craft breweries in the US we'll give our thoughts on this one at the end of the episode.

[Matt]

What if they're like, mm, this didn't quite Turn out like we thought it would. It sort of tastes like a barley wine, though. Barley wine is barley wine style.

[Joel]

Completely accidental, but it's been one of their best sellers for like three decades now.

[Matt]

Let's just keep it, keep it going, man. Why not?

[Joel]

All right, let's. And Matt, for folks out there who are listening and they're like, I've got a question for Matt and Joel. We'd love to hear from you. Just go to howtomoney.com ask for the simple directions on how to record a voice memo and send it over to us. But it's pretty simple. Basically I just outlined what you do. Record a voice memo, send it over.

[Matt]

To us, blast it on over.

[Joel]

Yep. Hopefully we'll take it next week on the show. Matt, let's take a question now about credit cards and how to know which one might be most appropriate for you.

[Austin]

Hey guys, it's Austin from Alabama. I have a question that I've been trying to figure out on my own but have been unable to come to a clear and succinct answer on. I have a 2% cash back credit card with no annual fee. We use it and like it with no problems. Many Travel cards offer 2x miles for every dollar spent. What is the difference between these two kinds of rewards? The 2% cash back and 2x miles? Or is there one? I know some of the travel cars with more rewards like airport lounge access and free checked bags will come with an annual fee. My family doesn't travel a ton, which is why I haven't pursued a travel card up to this point. But if we were to travel more as our kids get older, I may want to venture, pun intended, into travel cards. I should add that we pay our balances off in full and on time every month and have never carried a balance on credit cards. Thanks.

[Joel]

Oh, Matt, we got a venture pun thrown in there. Nicely done, Austin. It's great dad joke. That's of the ilk that I would tell.

[Matt]

So I want to address something that Austin mentioned. The 2% cash back cards. I think everyone should basically have one of those in their wallet in their credit card arsenal. Even if you implement a travel credit card as well, I think there are times when you're just not going to get as much of a return using those cards. Just in your day to day spending where by default you should always be getting 2%. Like 1%. No, no, no. That was so 1998 or something.

[Joel]

2% I think of as like the floor.

[Matt]

It's the basement. Yeah, it's the minimum.

[Joel]

Don't ever get less than that on rewards for when stuff with a credit card. Like, there's no need to.

[Matt]

And if you are getting into travel, Absolutely. Consider some of these travel cards that, like, we're going to get into, but at a minimum, by default have a 2% card. And specifically the. So I've never actually had this card. But don't you have the Fidelity. I have the Fidelity 2% card. And it deposited deposits it into your Fidelity account.

[Joel]

That's right. And I've had that account, that credit card for. I think that's the first credit card I ever got. So I've had that card for a long time.

[Matt]

Oh, look at you.

[Joel]

Yeah. Very loyal to that.

[Matt]

Seems like a very like goody Two.

[Joel]

Shoes sort of answer.

[Matt]

It's like my first credit card was the Fidelity investment, but then the other one is the Citi Double Cash, where you earn 2% no matter what. Right.

[Joel]

And I think it's also important to mention here, Matthew, that not everyone or listeners don't need to have dozens of cards. Right. They don't need just a slew of credit cards in their arsenal, especially if they're not into optimizing their credit card game all the way, which a lot of people aren't. Some people don't want to play the game to that degree. They're not like our buddy Chris Hutchins, who goes so hard with credit cards. And I think it's awesome and I love hearing how he does it and I love kind of divulging that information to our listeners who are interested in going crazy with credit cards because it's amazing how much you can accomplish. I was literally texting with him the other day and we should talk about this on the show at some point, but he bought tons of gift cards at a discount to resell, and the whole goal for him was to do just a mass. Ridiculous amounts of points. So he's playing the game and he's playing harder than almost anybody I know.

[Matt]

Frugal or cheap, Joel, to go to those lengths.

[Joel]

It depends what you're into, man. But like, especially when, if you love.

[Matt]

It, if you find satisfaction and like life fulfillment, I guess from doing that, then more power to you, man.

[Joel]

For him, it's going to mean a lot of free travel, but it's also going to mean content for his podcast. So, yeah, he's.

[Matt]

He's doing it for the pod.

[Joel]

That's right.

[Matt]

That's right.

[Joel]

So how valuable are travel rewards? Let's get to the heart of Austin's question and does to 2x points, let's say, which you're going to hear on the commercials for some of those travel cards, does that equal 2% cash back? It's kind of a squirrely thing, but the quick answer is not necessarily. Points are typically worth $0.01. So 2x points and 2% cash back are roughly equivalent in value. But how much more or less valuable those travel miles are than the cash back rewards that you're going to get revolves around how well you know and play the system. For instance.

[Matt]

Yeah.

[Joel]

Accumulating points with a 2x travel card and then transferring them to a hotel partner so you can pay less for your stay, that increases the value of those points and it could allow those points to be worth far more than a 2% cash back card can get you essentially more than 2 cents on the dollar. But if you use those points unwisely or you attempt to turn those travel points into cash, you're losing out and you would have been better off using a 2% card. So part of it is just kind of knowing the system and using it in the way to its fullest extent.

[Matt]

Totally. Yeah. Miles can be more rewarding, especially for folks who like to travel who have the ability to be super flexible as well in how it is that they travel when they book. And the sign up bonuses because of that. I guess because like the credit card companies are offering, they're dangling like a fatter, juicier carrot, but it's harder to catch.

[Joel]

Right.

[Matt]

But if you do catch it, the in particular the sign up bonuses for those travel cards are vastly superior.

[Joel]

Yeah. The cashback cards, the sign up bonus, typically non existent.

[Matt]

They're pretty meager or paltry, right? Yeah, yeah. And so they offer an outsized advantage for folks out there who are optimizing. By the way, Chris Hushen's episode, we talked to him, episode 899 where we actually dove into some of that you got to know yourself. But some of the best cashback cards out there come with bigger perks in certain spending categories and that actually it tends to be a little bit easier to optimize. So for instance, you can get 5% cash back eating out if you use the Chase custom cash card like I do. So it's literally a credit card I keep on my person and often in which a lot of times a lot of cards I don't keep on my person. But that's one card because when Kate and I go out for date nights, they bring you the check, they take it off, you know, it's not like I'm standing there at the register like you.

[Joel]

It's not Europe, Matt.

[Matt]

Yeah, exactly. They don't bring you the terminal to the whatever, to the table.

[Joel]

Why don't we do that?

[Matt]

But that's a card. I keep it on my person because when it comes to paying for our date nights, I use that card 100% of the time. 5% cash back or even like a 6% cash back at grocery stores with the Amex Blue Cash preferred card. That's another one that I love. And we take full advantage of. You don't. That's one that you downgrade a little bit.

[Joel]

Yeah, just shop at Costco.

[Matt]

You don't like that annual fee. Well, speaking of Costco, what is it? 5% cash back on gas at Costco and then 4% at other gas stations. And so I mentioned this because there are ways to get a higher percentage of cash back. And you're thinking, whoa, that's like, that's got to be at least 4x5x6x miles. Well, yeah, but there are caps, there are limits, and it's only within, you know, narrow spending windows.

[Joel]

Right. So. And the thing is too, there's typically no annual fees except for on that Amex Blue Cash Preferred. No hoops to jump through premium.

[Matt]

6%.

[Joel]

Yeah, I think you just. There's less due diligence required. Right. So you could cash back, optimize just a few categories. Categories. Used to 2% card for everything else and you do quite well for yourself.

[Matt]

It's sort of like a set it and forget it sort of mentality. And if that's what you're looking for, Austin, if you're looking to kind of figure out the system and then always know that, okay, for going out to eat, I use this card. For groceries, I use this card. And then to the ability to never have to think about it again. That's what's so great about these cash back cards as opposed to the points game. It's like having to keep up with the news. It's always ever evolving and changing. Hopefully not as quickly as the news has been in recent cycles. But it is something that you have to keep up with a little bit more because of the fact that the credit card companies are looking to keep you on your toes and they're trying to like out maneuver you essentially. Because if they're changing the rules a little bit, it's tougher to know what it is that you should be doing with this.

[Joel]

Yeah, I think that's, that's one of the Pros of cashback. Right. It's easy to redeem travel rewards less so. Right. So you might have to go through the credit card company's booking portal, or if you want the best deal, you might have to transfer them to one of the partners. And it can obviously be done, but there are just steps involved and some people just don't want to figure out the proprietary system of Chase or Capital One or something like that. Right. And the other potential problem with travel rewards is that they can diminish in value over time if you don't use them. This is inflation, particularly, it's pointsflation. And so, hey, you get these points and you're like, all right, 80,000 points. Well, if you don't use them for a year or two, those 80,000 points, instead of buying you like two plane tickets, might get you a plane ticket and a half or something like that. And so you just have to be wary of that as well. On the cash back front, you can typically sign into the back end of your account and choose automatic redemptions. Right. So that you're quickly getting the benefit you signed up for. That money isn't necessarily sitting there for a long period of time getting eaten away by inflation. And so, I don't know. I think there are a lot of folks, Matt, who let their eyes get as big as saucers when accruing rewards, but they fail to use them in a timely manner. And then when they do use them, they're not great at optimizing that spend of points and it just devalues your purchase. And so maybe for a lot of people, not for everyone, that's for sure. Some people optimize this quite well. But for a lot of people who go into the travel points game, I think maybe they're not doing it as well as they thought they were going to. And so they're not quite getting the benefit that they thought they were.

[Matt]

Exactly. They thought they had that big juicy carrot within their grasp, but then they boing, yes. Gets yanked up. And I also like the sort of picture that you painted about the points getting devalued and how the flights don't get you quite as far.

[Joel]

And I like the idea that carrot out further.

[Matt]

Yeah, I like the idea of an airline saying, or I kind of don't like it, obviously, but it's kind of funny to think, hey, you're wanting to go to California. Sorry your points didn't quite get you there.

[Joel]

Looks like you're in South Dakota.

[Matt]

You got to get out in Nevada. No, no, shade throwing at Nevada or anything like that. But Austin also mentioned some of the secondary benefits of travel cards, which is pretty cool because if you are keen to travel more, you know, there's a nice sign up bonus and you're also interested in deal hunting to use those points then those secondary benefits, it really might push you over the edge to get and to start regularly using a travel card like Capital One's Venture Card, which is a great one. The Chase Sapphire Preferred card is also a great travel card. And do both of those have primary. The primary?

[Joel]

I think so, yeah. Which is one of the biggest perks for that. My Fidelity card actually comes with that too.

[Matt]

Oh yeah. Little throwback to the. The old two percenters.

[Joel]

I know.

[Matt]

If you do offer a travel card though, Austin, the best ones in our opinion are typically not brand specific. You know, it's not like airline, American Airlines or a Delta card specifically, except for Southwest. Because with Southwest you get that companion pass and you get those unlimited flights within that the rest of that year and then the entire following year as well.

[Joel]

A listener.

[Matt]

It's hard to beat that.

[Joel]

We had a listener email us at the end of last year. I want to say, Matt.

[Matt]

Oh, how many flights did he take?

[Joel]

Something like 22 flights.

[Matt]

And they flew to Hawaii like two, three times. Yeah, multiple times. They were 100% working the system. I don't think that Austin is in that situation because it sounds like he's got young kids, but he's looking ahead and it comes down, I think, to what you said this earlier. What game you're willing to pay because it is a game. Even the credit card cashback system, like that's still a game. But are you willing to take it to the next level and play the points game, the travel rewards game? That's a whole nother game. That's a more complicated game. It makes me think about, like back in the day when we had more bandwidth and more time. Joel, when we sat down to play a game, what would we play? We'd play like Settlers of Catan, Puerto Rico, Wingspan. Like these games that have. It takes like 10 minutes to set these games up.

[Joel]

Like now it's like King Domino takes like 15 minutes. Now what do we do?

[Matt]

It's like, hey, Adult Swim, time for Mario Kart. Get out of here, kids. And we'll, you know, we'll play like one Grand Prix just to show the kids who's boss. Like that's all we have capacity for. And so that's where we are these days when it comes to gaming and in A similar way with credit cards, you have to recognize what you have capacity for when it comes to the. How you're going to optimize your credit card.

[Joel]

I think that's a really good point. The agent stage, where you're at in life. Because at least for you and I, right now, with a bunch of young kids, we're not traveling quite as much, Although that's starting to change. So maybe we're going to start getting back into the. The travel points game with a little more fervor as we kind of start to expand our travel horizons. But for a bunch of years there, it was like, no way we're gonna take the show on the road.

[Matt]

I literally did not have a single travel card because we weren't. I didn't go out. I didn't leave the country for over a decade. Yeah, man. Like, when we. Because we're having kids and I'm just like, all right. I'm just gonna kind of resign myself to the fact that I don't travel anymore.

[Joel]

So I think there's a certain amount of know yourself. My. My dink little sister can. You know who I'm texting her. And she's always in a place that I didn't realize. Yo, you're on another trip. Okay. I just assume she's not home ever.

[Matt]

Literally. Her and her husband, like, once a quarter, they're abroad somewhere.

[Joel]

Oh, no. It's like once a month. Is it really not abroad? But they're somewhere that's not here.

[Matt]

Okay.

[Joel]

Yeah.

[Matt]

Even still, that's pretty fun.

[Joel]

It's a lot. It's a lot. And that's great. Cool for them. So it makes a lot more sense for a couple like that to prioritize points and less for our family. But think about where you're at and how hard you want to go after getting those superior, potentially superior rewards. I think that all plays into which is going to make the most sense for you, Austin, and for everyone else out there. All right, Matt, we got more to get to including. We're going to talk about the credit bureaus and how you go about getting your credit score. One listener got a little confused about where to go. Got. Let us straight. We'll talk about that and more right after this. I love what I do. I also love the idea of not doing it one day, but it's getting harder to know the best way to move into the future towards retirement. Right. We hear about inflation, rate hikes, the changing market. Got to get the kids through college, build an emergency fund. Then there's retirement.

[Matt]

And here is where Fidelity comes in. Fidelity can help you find clarity in saving for the future, even as your path and priorities evolve. How? Well, they'll help you to create a free, personalized plan that adapts as your priorities change. They'll also show you what's called Timely Insights, which are small tips on ways to save and invest to help meet your goals. And you can monitor your plan so you can stay on target.

[Joel]

The future is coming, and so is retirement. Fidelity can help you take it on your way. Learn [e-mail] future expenses charged by your investments and other costs and fees associated with trading or transacting in your account. Apply Fidelity Brokerage Services member NYSE SIPC Living in the present is an important practice, but we simultaneously need to plan well for the future, too, and ensuring that your family is taken care of is paramount. You can protect your family by securing their future with life insurance from policygenius policygenius makes finding and buying life insurance simple and ensures your loved ones have a financial safety net they can use to cover debts and routine expenses, or even invest that money to earn interest over time. With policygenius, you can find life insurance policies that start at just $292 per year for $1 million of coverage. Some options are 100% online and let you avoid unnecessary medical exams.

[Matt]

That's right. And Joel, I will say as I get older, I think attempting to minimize regret, that has been a helpful lens in order for me to view the world. It helps me at least to make good decisions. And if that resonates with you, we'll get this 40% of people wish that they had gotten life insurance at a younger age. So we're trying to help you out here by getting policygenius on your radar. Let's get rid of that could've, should've, would've, regret. And I love that you can compare quotes from America's top insurers side by side for free with no hidden fees. It's the best online insurance marketplace out there.

[Joel]

Yeah, secure your families tomorrow so you have peace of mind today. Head to policygenius.com to get your free life insurance quotes and see how much you could save. That's policygenius.com what does the future hold for business? Ask nine experts and you'll get 10 answers. Will we have another bull market in 2025 or we're going to get a bear market? What about inflation? Will it continue to calm or will higher prices remain sticky? Wouldn't it be cool if someone could invent A crystal ball that would give us some foresight.

[Matt]

Well, until then, Joel, over 41,000 businesses have future proofed their business with NetSuite by Oracle, the number one cloud ERP bringing accounting, financial management, inventory, HR into one fluid with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. When you're closing the books out in days, not weeks, you are spending less time looking backwards and more time on what is next. Our business is really small, but if we needed netsuite, we would be pumped about the time the cost savings that it provides. Whether your company is earning millions or even hundreds of millions of dollars, NetSuite helps you to respond to immediate challenges and seize your biggest opportunities.

[Joel]

Speaking of opportunity, download the CFO's Guide to AI and Machine Learning at netsuite.com howtomoney the guide is free to you at netsuite.com howTomoney that's netsuite.com howtomone all.

[Matt]

Right, Joel, we are back from the break. Let's now hear from a listener who took a lump sum and invested it, but he's trying to figure out what to do next.

[David]

Hello, this is David in California, longtime listener. Thank you Joel and Matt for all the episodes. A few years back, my wife and I were fortunate to receive a lump sum of money that we put into a joint brokerage account investing in an S&P 500 EFT. We were planning on letting it grow a few years and then taking some out each year to help pay our mortgage. I'm wondering now if it would be better to stick with that Plan and pay 15% capital gains on the growth each year. When we take money out, the alternative is to contribute less money into our Roth IRA accounts each year and let the money in the joint brokerage account grow. Two things seem to make this a tough choice. The money in the joint brokerage account is already post tax dollars. Number two, if we retire early as we are planning before we claim Social Security, we should be able to deduct most, possibly all of the money out of our joint brokerage account while in the zero percent bracket for capital gains. With California taxing a growth roughly 2 or 3% at the state level, I would like to prioritize the Roth until I am comfortable that we will have enough money combined with Social Security and a couple of other sources to fund our lives age 70 and on. But once we reach that Target. I am thinking of prioritizing maintaining the joint brokerage account over continuing to fund the Roth. Is this a crazy idea?

[Joel]

Thank you, Matt. I like this question. First things first, I think we have to just say that David made a really good move investing the lump sum. That's another question we get sometime. It's like do I dollar cost average.

[Matt]

Or do I ease into the shallow end like one step at a time? Kind of got to get past that one part where it's extra cold. Or do I just dive in head first?

[Joel]

Yeah. Or do I instead of investing it, do I pay off the debt immediately? And it seems like David made the right decision because think about how much better he's done by investing that money versus paying off the debt. And it's not like we want debt to linger forever, that we're big fans of debt or anything like that. And we know that some folks are incredibly debt averse and I think everyone kind of has to decide based on their own individual constitution what they should do in a situation like that. But the Truth is a 3% mortgage in our estimation should be a very low priority for all listeners who want to build wealth. There just isn't a great argument for rushing to pay that off ahead of some of those other financial goals.

[Matt]

Yeah, and that's true even if you end up having to pay capital gains tax. But it sounds like you are planning on reducing your income to such an extent that you can tap your brokerage account and not owe any federal tax.

[Joel]

At all, which most people don't even realize that's a possibility.

[Matt]

No. Yeah. So we typically refer to the long term capital gains tax rate as being 15% and that is true for the vast majority of folks. But on one end I will say folks who sell a ton of appreciated securities is actually going to pay more than 15%. They're going to pay 20% if you have an adjusted gross income of over $583,000. If you are married filing jointly, then others who can keep their total taxable income below 94,000 again married filing jointly. Well, you can pay a long term capital gains tax rate of 0%.

[Joel]

The 15% number gets thrown around so frequently that's typical. Most people don't realize that there are two other potential rates for capital gains.

[Matt]

Yeah, going from 15 to 20%. Not the end of the world, not ideal. But going from 20% to zero. That's pretty huge for smart folks in the fire camp. Financial independence Retire early. This is a way to maintain access to funds where you have added Flexibility without paying extra tax for that perk.

[Joel]

Yeah. Typically when we're talking about avoiding tax, we're talking about the accounts that you're, that you're choosing, and the taxable brokerage account, it offers that additional flexibility. But, hey, you're going to pay the tax man. That extra pound of flesh is garnered, Matt, from the taxable brokerage account. Unless. Unless you are incredibly super duper strategic like David is trying to be here. And he mentioned.

[Matt]

I don't even know if you have to be that strategic.

[Joel]

You just have.

[Matt]

This is a vote in the favor of frugality, because if you can get your low income.

[Joel]

Yeah. Or lower income, because you're gonna need.

[Matt]

Both, which can be natural as you enter into your more, you know, more chill retirement years.

[Joel]

Yeah. And what makes it difficult to pull this off, typically, is if you are earning a meaningful salary and then you also sell some of your appreciated securities, some of your, the stocks or ETFs that you've purchased, you're going to push yourself above that threshold. You're going to pay the 15%. So you have to be careful about when you make that sale and what your income is likely going to be in that given year to kind of get yourself below and into that 0% capital gains tax rate threshold. And so normally, what we would tell you, David, is we prioritize the Roth IRA. We, we love Roth IRAs. We'd hate to see you abandon that account, given how good it is, how flexible it can be for early retirees, too, because of the fact that you can take those contributions back out at any point in time in the future. It's just not as flexible as a brokerage account. And if you really can jump through those taxable income hoops, it's actually going to be treated pretty similarly from a tax perspective, which is kind of crazy. So. So in a very rare admission, this is not widely dispensed advice. I think, I think I'm willing to concede on this one, Matt, that a brokerage account might slightly edge out the Roth for, for them. So I think reducing Roth contributions in favor of keeping that money in the taxable brokerage account makes sense to me.

[Matt]

Yeah. Yeah. And. Well, and you said something about totally like, abandoning his Roth. It's not like, as hardcore as that either, because he's, he's still got the Roth. It's still hanging out. He's just not necessarily going to be funding it to the absolute max, which, again, I think is totally fine. Because what that means, though, is that if he feels comfortable enough with the money that he set aside in his retirement accounts. That's what we call coast fire. You can take your foot off the gas a little bit. You can coast because you can tell that you've kind of, oh, I'm getting really close to the crest of this hill. At which point I can let the momentum, in this case, that's your investments do the vast majority of the work for you. And it sounds like that that's close to where David is getting ready to arrive at. But I think the question really boils down to is whether or not to diminish Roth contributions in order to accelerate your mortgage debt payoff. On one hand, it sounded like he was talking about taking some money out of the brokerage account, like maybe month to month or year to year in order to whether or not he was talking about paying off the mortgage early or even to support his cost of living. Because it almost sounded like he was saying, well, if we take some of those investments out, then we can continue to fund our Roth ira. I'm not totally sure if that's what he was saying, but going back to the beginning, it's not something that we're big fans of specifically eliminating, eliminating that mortgage. The dynamics of early mortgage payoff, it's changed significantly. Given the zero risk ability for many folks out there for virtually everyone to earn more in their savings accounts than they can by paying off a 3ish percent mortgage loan. In the calculations, they look different if rates on savings drop significantly or for folks who have a mortgage rate that's, let's say, over 5%. But if you've got a great mortgage rate, then I think I would suggest continuing to prioritize those investments. First your Roth get to the point to where you feel like you have enough in there. But then let that money within that brokerage account, man, let that continue to ride. Because if you are looking to do a little bit of early retirement or you are looking to draw some of those funds, the ability to see your earned income reduced to where you're not taxed at all on that, that's fantastic.

[Joel]

Yeah. So pay off your mortgage as agreed unless you have just a burning desire to see it eradicated more quickly. But Matt and I just don't feel the need to spur anyone in that direction if you've got a really low rate. And I think our advice, again, Matt, is subject to change if, let's say, the Fed cut rates significantly and savers are now experiencing 1.5% to 2% rates again like they did Many years ago. Just crummy rates on savings then.

[Matt]

Yeah.

[Joel]

Why would you keep money locked up in savings that you could pay down debt that has a higher interest rate? The calculations change, but given the facts on the ground and the reality that rates are not likely to come down significantly anytime soon, I think of a 3% mortgage as less of a liability than I think some folks who are getting closer to that retirement age. Think of it. It's not like the debt is great, but it's also not bad debt.

[Matt]

All right, let's hear from a listener who is thinking about purchasing her first home in all the right ways.

[Sarah]

Hi Matt and Jill, this is Sarah from Brooklyn, New York. My husband and I are exploring the best way to invest our savings into real estate. While we know we might not find exactly what we want right now, we're approaching this potential purchase as both a future rental property and a stepping stone to buying a larger condo. Condo in three to five years we currently rent a two bedroom, two bath apartment with a private garden. At 14% below market rate, we have enough savings to cover a 20% down payment, closing cost and three months of expenses for either a one bedroom, one bath unit in a more desirable location closer to Manhattan or a two bedroom, one bath condo in a developing neighborhood further out. Our ultimate goal is to own a two bedroom, two bath condo in a gray area. We're open to making sacrifices, whether that means buying in a developing location, downsizing to a smaller unit, or waiting altogether for context. We have no debt. Our combined income is 308,000. We invest in our 401ks, we both have credit scores above 800 and our savings is currently in a high yield account. We truly love your show and appreciate all the advice you've shared over the years. Thank you.

[Joel]

Oh man, I love, love the analytical approach to buying real estate. Right. It can be such an emotional purchase. But that's like one of the first suggestions. Typically when you're going out to buy or to look at a property is to not get emotionally attached. Because the person who gets emotionally attached to a piece of real estate, to a particular house is often going to lose financial perspective. They might get out over their skis. You know, we don't always get what we want with our first real estate purchase either, or at least not all that we want. And I do think this is going to sound weird, but I think settling for less can be the best financial move that we could possibly make. Thinking about the first purchase, like even if you're going to live in the home like an investor that can help people from a long term ownership perspective. So I think sometimes people, Matt, they've watched a little too much hgtv and so maybe their desires for what that first home is going to look like actually outstrips their budget. So I think some realism is important when we're talking about buying real estate.

[Matt]

Totally. And even though you might be quote unquote settling, that doesn't mean you don't have a home. Right. Like it will provide that initial purchase is going to give you a roof over your head, but it'll also give you some options because as you live in it and you pay down that mortgage, the equity that you're building up, well, it can be used to aid your down payment for that next house. But that being said, we'd rather you buy a place that would make sense as a rental when you're ready for the bigger fancier condo. And that means doing the hard work of saving up another 20% down, ideally for, for the next place and not rolling that equity over into the, to the new house. But the long term benefit of taking the, you know, it's sort of like a stepping stone approach to getting the home that you ultimately want. I think it's going to pay off in a significant way when we're talking about wealth building. But we do want to challenge you because it did sound like she had a couple options laid out before her where it's like, well, we could kind of go from this house and then we'll get rid of that one and then we can get the dream place. Or maybe we'll hang onto it and we would absolutely challenge you to hang onto it if at all possible.

[Joel]

There's something so powerful about buying something that you can easily afford, maintaining a much larger savings rate than most of your peers would likely be able to have so that you can afford the thing you really want later on down the line when some of your peers are like maybe stuck in that first place that they bought and they don't have the financial freedom makes me think even about like a car purchase, Matt, like holding on to my 05 Acura means when I want to. At some point when the new Rivian R2 comes out, I'm going to be able to afford it because for so.

[Matt]

Many years you're going to plunk down cash for that bad boy.

[Joel]

I've had this like non existent car payment. I've paid almost nothing for automobiles and so then I'll be able to pay a lot and guess what? I'll own it free and clear. And I won't have any sort of car payment attached to me. Whereas most people, if they go for it too early, they got a car payment that's no fun.

[Matt]

Would you be embarrassed if we had matching Rivians, matching R2s?

[Joel]

Are you doing it too?

[Matt]

No, probably not.

[Joel]

Okay, well, I don't know if I'm going to either. I might be too cheap and I might have just other financial priorities, so we'll see if I actually do it or not. But I think the good news for Sarah here is she's already got so much money saved, right. And her rent is below market level, which is a meaningful thing in New York City. That's 14% below in New York City.

[Matt]

That's like a unique advantage that they.

[Joel]

Have many hundreds of dollars, which tells.

[Matt]

Me that they don't need to be in any sort of rush, you know, exactly. Like they can just chill, I think, just keep hanging out.

[Joel]

I think if, if, if they're not interested in becoming a landlord and, and they're wary of the substantial transaction costs that come with buying and selling real estate, which everyone knows. Right. That, that, that, that can be prohibitive. Keeping the bird in the hand of the cheap apartment rent and continuing to save, that might be the even more beneficial move here. There's just, I don't think there's any rush to get into something if you aren't planning on holding onto it for more than five years.

[Matt]

Yeah, she said that they've got a. Are they currently in a two one that's got like a private garden And I kind of could imagine what that looked like, but I wasn't totally sure. So I googled it. I mean, it's not like she's living in whatever picture I pulled up that happened to populate Google Images, but.

[Joel]

Did you find Sarah's apartment?

[Matt]

A private garden apartment in New York City looks like the coolest thing ever. Like there's all these pictures of these awesome. These natural spaces in the back of an apartment. It's in the middle of a city, but you kind of got like your own tiny green space, green oasis with like, you know, Japanese maple trees and lush bushes and spot for your dog to go to the bathroom, I guess as well, if that's something that you're into. But yeah, like that coupled with the fact that, so you've got this amazing place, but then also it's. You're getting a less than market rent. Man, I'd be hanging out there for as long as I could.

[Joel]

I think that's another option that should be considered. And I think it's just important to note that it's a gamble. Right. The shorter your ownership timeline is likely to be. But I think it's also, Sarah sounds like she's keen to get on the property ladder and she's willing to stay put a bit longer than she's planned to if need be. And if that's the case, you're probably in a position to buy. So this is a choose your own adventure book, Matt, from the 1990s.

[Matt]

Totally. Yeah. And I think not counting on appreciation is important too, like making sure that you are going to hang onto it for the long because it's just a safer bet from. Okay, are we. I can't imagine that they would be underwater in that property. But as we're talking about timing, it's worth thinking through not just owning that property for, like, at least five years, but also living in it for two out of the past five years. Because let's say they're like, okay, we'll do what Matt and Joel will say. We will buy that thing. We'll hang on to it, we'll live in it. But let's say they try out the whole landlording thing and they're like, man, this really isn't for us. You do want to make sure that you have lived in that thing for at least two of the past five years. Because if you do want to unload the property, you don't want to be a landlord. Well, it needs to have been a primary residence for you to avoid any capital gains tax on that property as a couple. Well up to $500,000 as a married, filing jointly. So that's something else to keep in mind, too, that this is a great way to learn whether or not you want to be a landlord without paying through the nose in taxes for the privilege of learning that lesson.

[Joel]

And one last thought here, Matt. It makes me think, for some reason of our buddy Carl, who does live in Flips, and maybe this is a chance for Sarah to be able to get exactly what she wants by buying one of the ugliest apartments on the block and then forcing some appreciation, saying, actually, I can get that 22 kind of closer to the neighborhood I want as long as I buy literally the ugliest one. And then over time, I'm making improvements to that place.

[Matt]

Sarah and her husband are handy.

[Joel]

Yeah.

[Matt]

That's what you're saying.

[Joel]

Yeah. I mean, just a thought, because in real estate, that's typically how you score a deal. If you buy the one that's all Joanna Gaines and all that stuff. You're paying somebody else for having a premium. Having done that work, you're going to pay the premium. So at least consider maybe doing some DIY renovations. And Sarah, the truth is you're hitting all the metrics. Like, you have a great income. Your credit scores are fantastic. You're still funneling money into retirement accounts. You've already sacrificed a lot to build up that down payment, and you're willing to do more. You're also, like, flexible on exactly where you end up. Although that is something I think more about too. Right. I would personally rather have a smaller house than to live in a less walkable location or someplace that was going to mean a much longer commute. Not everybody feels that way. But just make sure you've thought through that as well before you start making offers.

[Matt]

Although I will say we're talking New York City or we're talking Manhattan. And a small place versus a decent sized place up there is a lot different. Right.

[Joel]

Because like, if you're talking about extra hundred square feet.

[Matt]

Yeah.

[Joel]

Yes.

[Matt]

Because like a one one that you're sharing with your husband, like, that's tight. Like, that is not a whole lot of space. So I get the desire to have a tutu. It's not like we're telling you to find like a 2:2 McMansion, which sounds like an oxymoron. I don't. I don't think that actually exists. But if Sarah had said, hey, we're minimalists, we're not planning to ever have kids, I think I might say, all right, well, if you find the place of your dreams and it's a one one and it's small, but hey, it's in Manhattan, I might say to go for it, but what I heard her say was that it's our dream to own a tutu. It sounds like she's maybe more of a homebody and wants to have the additional space. And. And especially given the fact that she's looking to. She's like, looking far off down the road. It sounded like she was considering getting a nicer place in the here now, versus something that's got. That's up and coming, but that is a little bit bigger, I actually might do the opposite of what you said. I think I would be willing, Joel, to go for the place that's a little more up and coming. You got the space because you, I don't know, you can't ever add more space when you're looking at apartments like you are confined to the square footage that you have, like, you can make it nicer, but you can't gain more square footage. And to count on, you know, this is the dangerous part. To count on some appreciation in the.

[Joel]

Neighborhood, to hope for, some to hope for.

[Matt]

Yeah. And just. And that's something that you can also sort of force into the neighborhood by just, like, community events. How involved are you in your neighbor's lives? Like, like inviting them over for drinks on the porch? Like, just different things like that that add to the overall vibe of a building. I think that's something that you can participate in. But I think about the first house that Kate and I purchased, and it was, like, right on the edge of what we felt was safe, slash, something that it's like, okay, we see some potential here, but let's go for it. And for us, we ended up lucking out. Like, anything worse than that. I don't think we would have felt comfortable from day one. But we said, hey, from day one, it's probably only going to get better. And it totally did. And that's. It's somewhat speculative, like, we're hoping and counting it. But that's, again, something that we participated in. We had friends over. We met folks. You put roots down.

[Joel]

You can see which dominoes are dropping in the real estate market. And you can say, oh, this is. Here's the hot neighborhood. Here's the neighborhood that's two neighborhoods over from the hot neighborhood. And you can kind of say, well.

[Matt]

It'S got good bones.

[Joel]

People starting to move over there. People are starting to do some stuff.

[Matt]

The neighborhood's got good bones, not the house. But, like, you see the possible future and what life could look like in some of those neighborhoods or in some of those buildings. And if you're hanging onto it for the long haul, there's more upside potential as well, because you are looking at that property appreciating more over time versus maybe purchasing it closer to the top of what the market would support were you to either sell or rent that property.

[Joel]

Yeah. You get to experience the renaissance. You get to be a part of it, which is kind of cool.

[Matt]

Ride the wave a little bit. That's. I don't know. That sounds like a lot of fun, too.

[Joel]

Yeah. Yeah, for sure. All right. But, Sarah, we hope that's helpful. Best of luck to you and your real estate endeavors. Matt, we've got more questions to get to, and we'll actually talk about something I mentioned on the show recently. A listener has a question about my Costco Instacart hack We'll get to that and more right after this.

[Matt]

We've all got some old things laying around, but listen, if one of those things is an old 401k, well, it is time to take care of it. Whether you've recently left a job or you're just making time to get your finances in order, Fidelity can help you explore options for your old 401. A fidelity rollover IRA has no account fees or minimums, plus you can choose from a wide selection of investments.

[Joel]

Learn more about options that may give you flexibility for using your money today and for your future. It's an easy to follow rollover process that makes it simple to get started online in under 15 minutes. And just in case you need any help along the way, you'll have access to one of Fidelity's rollover specialists. So why leave that 401 lying around? It's time to make sure you keep your money working as hard as you do.

[Matt]

That's right. Learn More about a 401k rollover at fidelity.com rollover consider all your options and the applicable fees and features of each before moving your retirement assets Assets Fidelity Brokerage Services, LLC member NYSE SIPC what.

[Joel]

Does the future hold for business? Ask nine experts and you'll get 10 answers. Will we have another bull market in 2025 or we're going to get a bear market? What about inflation? Will it continue to calm or will higher prices remain sticky? Wouldn't it be cool if someone could invent a crystal ball that would give us some foresight?

[Matt]

Well, until then, Joel over 41,000 businesses have future proofed their business with NetSuite by Oracle the one Cloud ERP bringing accounting, financial management, inventory, HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. When you're closing the books out in days, not weeks, you are spending less time looking backwards and more time on what is next. Our business is really small, but if we needed netsuite, we would be pumped about the time the cost savings that it provides. Whether your company is earning millions or even hundreds of millions of dollars, NetSuite helps you to respond to immediate challenges and seize your biggest opportunities.

[Joel]

Speaking of opportunity, download the CFO's guide to AI and machine learning at netsuite.com howtomoney the guide is free to you at netsuite.com howTomoney that's netsuite.com howtomone and now a word from our sponsors at Betterment. When investing your money starts to feel like a second job, Betterment steps in with little work life balance. They're an automated investing and savings app, which means they do the work.

[Matt]

Yeah. While they build and manage your portfolio, you build and manage your weekend plans. While they make it easy to invest for what matters, you just get to enjoy what matters. Their automated tools simplify the complex and they put your money to work, optimizing day after day and again and again. So go ahead, take your time to rest and recharge. Because while your money doesn't need a work life balance, you do make your.

[Joel]

Money hustle with Betterment. Get [e-mail] that's B E T T E R M E N T.com investing involves risk. Performance not guaranteed.

[Matt]

All right, buddy, we're back from the break. It is now time for the Facebook Question of the week, which is from a new she writes, I thought you could check your credit score for free by going directly to the three sites. I am on Equifax's page and it lists prices. I don't see anywhere on the site where it says free. Please show me how to navigate this particular site to obtain my free score. What am I missing? Ooh, what you think, Joel?

[Joel]

I hate to be the bearer of bad news on this one, Matt, but in the credit bureaus, they're not down with offering free scores. I don't know if you remember this. Probably like 15 years ago, maybe there was a free credit report or freecreditscore.com and the credit bureaus were coming up with all these websites to try to entice you to come directly to them to get your credit score.

[Matt]

They were trying to trick you, but.

[Joel]

They were trying to trick you. Maybe it was free for a week or something like that, but then they wanted you to fork over 15, 20 bucks a month or something like that for all these insights into your credit score. This became a profit center for them. And what they'd prefer to do still to this day is to confuse you and to profit off of you as much as possible. And at the same time, when it comes to actually providing you service, if there's an issue, they're not going to do that. So they're never going to, let's say, respond to complaints about errors that you might have found and that you've made them aware of. There's still a lot of reports, would suggest somewhere between 1 in 4 and 1 in 5Americans has an error on their credit report that has not been removed, that has not been made.

[Matt]

Right.

[Joel]

So, Anissa, I just say this to begin with. You're looking in the wrong place. The only reason to go to the website of an individual bureau is to freeze or thaw your credit report. Other than that, stay away. Do not go looking for your credit score from those guys.

[Matt]

Totally.

[Joel]

Yeah.

[Matt]

And you said freeze, which is important because they have, like, all the bureaus have a credit lock feature. Right. We're not talking about freezing. They offer locking abilities as well. And they're going to try to charge you for something that's already available for free. And plus, their product is kind of worse when it comes to the ability to get in there and to monitor your credit.

[Joel]

But their marketing, it's gonna make it sound superior.

[Matt]

Well, and of course, they're gonna prioritize some of the different plans that they offer that have credit monitoring and just some of these other faux services that they offer. But the cool thing is getting your credit score for free is possible. And the place to turn is typically just to your credit card company. Almost everyone listening here, they have a credit card. And the different companies have their own sort of credit score products. I'm thinking of Capital One. Theirs is called Creditwise. Discover has a free credit score that updates monthly as well. Amex, like literally all the credit cards. And it's one of the best ways these days to monitor your actual score for free. Typically, you're logging in there anyway. There's no need then to register your account with Equifax or Experian or whoever, or TransUnion in order to try to get your free score over there. And if you want to look at your detailed report, well, that can actually be had for free at annualcreditreport.com, which is actually still available for free weekly. That's something they started offering during the pandemic when it seems like the world was going to end. That is that they've maintained that is.

[Joel]

The report that's available, not the score. So if you want the score, you got to go elsewhere. And you're right, Matt. The credit card companies do a great job on that front. I still remember. Do you remember the bank Washington Mutual?

[Matt]

That was WaMu.

[Joel]

Yeah, that was one of my first bank accounts.

[Matt]

And they're still around, right? They got the ostrich.

[Joel]

No, they're gone.

[Matt]

The guy with the mustache.

[Joel]

No, that's.

[Matt]

What am I thinking of? That's Liberty something.

[Joel]

Yeah, Liberty Mutual.

[Matt]

That's okay.

[Joel]

That's insurance. So Washington Mutual. No, they went, they went bust in the Great Recession. But when I had, part of the reason I got my bank account with them was because at the time it was, they were essentially the only place where you could get your credit score for free once a month. And I was nerdying into personal finance as a 22 year old or something like that. And so I was like, cool, I'm going to go with that account. But now the cat's kind of out of the bag. The credit score is not nearly as hidden as it used to be. All the credit card companies offer something like that, or most of them. Also, I would say, Anissa, check out Credit Karma. You'll get to see two scores for free. One is from TransUnion and one is from Equifax. You mentioned Equifax in your question. So if you want to see your Equifax score, that's a good place to get it. That gives you a pretty good idea of where your credit score stands. By being able to see both those scores, Credit Karma will try and sell you a bunch of other financial products, including new credit cards or maybe even auto loans. Avoid those if you're not interested, but it's a solid site for digging into what's going on with your credit score. I like their credit health section because it can help you see where you need to improve. So it's not just the score, but then it's like, hey, here's why your score isn't as good as you want it to be and here's where you can make improvements. Like if you're using too much of your available credit or if you're making too many inquiries or something like that, they will make you aware of that. And so then you can maybe correct your course so that you can improve the score.

[Matt]

But even a lot of the credit card companies are actually offering that now as well. And I think if you dig deep enough, the credit bureaus will, they do the same thing. But we're just going to not steer you towards them because of the fact that they oftentimes just do such a terrible job at the one thing that they're supposed to do a good job at. And so because of that, I don't want to reward them with any other clicks. That one job indeed. Let's get to one more Joel from Courtney. She said, what's the Instacart hack that Joel was talking about for Costco? Literally just less impulse purchases by using Instacart. Or is there something else I'm missing Joel. What's the gonna share your Instacart hack?

[Joel]

I will say this. That's not something I thought about that much. The fewer impulse purchases. But it's totally true.

[Matt]

Oh, do we not talk about that?

[Joel]

Well, because if you go, it's true.

[Matt]

We did.

[Joel]

Well, maybe we did. But it's something I had not thought through a lot. Like.

[Matt]

Like, oh, yeah. When you just were looking for an easy way to get your Aussie bites or whatever it is.

[Joel]

I just like straight up discounts and not having to go grocery shopping or and having someone else do it for me if it's not going to cost me an arm and a leg. And that was my initial aversion to Instacart or to buying groceries online.

[Matt]

You're paying the premium.

[Joel]

You pay the premium, you pay more than what you pay in the store. And then on top of that, you got to pay the tip, the instacart fee, all. All of all that stuff. And so I was like, no, I'm not into it. I would rather get my groceries as cheaply as possible. But Costco sells $100 Instacart gift cards for 80 bucks, which is like a ridiculously sweet discount.

[Matt]

So by my calculations, that's 20% off.

[Joel]

It is. And you can get those gift cards online or in store. If you get them online, you can only buy two every two weeks. If you buy them in store, you can buy two every time you go in. Some people have said you can buy two, walk out, go back in, buy two more. I haven't tried that yet, although I'm sure you can. Especially if you go see a different person at checkout. But I don't even think they would give you.

[Matt]

Put some sunglasses on.

[Joel]

Exactly. Or a mustache. Fake mustache, but. So what's so great about it, too, is that you can use Costco's Same Day service, Costco.com, click the same day, and you can buy your groceries there. The markup, Matt. I haven't done the math exactly, but I'm pretty sure the markup is somewhere between 9 and 11% on most of the groceries. So you're getting that 20% discount. You pay the 9 to 11% markup, then you got to pay the tip to the shopper on top of that. But you still come out, I would say, even if not a little bit ahead. And you avoided the impulse buys.

[Matt]

Show me your math.

[Joel]

And it's true. I'm telling you, man, go look at. Go look. I have. And then I looked on Reddit to see what other people are saying. And they were agreeing with me that it is somewhere in that range. But, yeah, so this is what. But it's saving me multiple hours a week of grocery shopping, which is nice. And even if you just kind of need to make a quick order or something like that, it's not as frustrating because you know the pricing and you know you got a discount on that gift card. So I think for a lot of people out there who are like, I wanted to try Instacart, but I too, am too frugal to go in that direction. If you like Costco, the Instacart hack at Costco makes a lot of sense.

[Matt]

It's a good way to do it. Or you can just avoid all the frustration, including the Costco parking lot, and just go straight to Aldi because you are totally going to save more by going to Aldi. I will say you're right. The Costco, the quality is higher at Costco, but you also pay for it. That's true. You know, that's so all that to be said. We're trying to. I'm telling you, man, we're trying to shop less at Costco because we have seen our grocery budget creep up when we buy more stuff from Costco as well. When you buy in bulk, we are tempted to consume more. You know, when you buy 300 rolls of toilet paper, I'm just like, oh, it doesn't matter how much toilet paper I use. We got so much of it, it's burning a hole in our pocket.

[Joel]

Are you. Are you wiping extra?

[Matt]

I mean, I. If, you know, you've got like 60 rolls in the. In the closet versus six. Like, you treat it a little bit differently, you know, like, there's a psychological component to it, though. I will say, have you seen. I gotta say, these are all the reasons I love Aldi. Have you seen the Aldi commercial?

[Joel]

Oh, they've had some good ones lately. Oh, gosh, dude.

[Matt]

I was gonna say they're terrible.

[Joel]

Oh, really?

[Matt]

I hate them. Where the guy's like, the fake prices. You think that pineapple's on sale and the lady pulls the sticker down and it's the same price underneath and it's all like, sepia toned.

[Joel]

I don't know if I've seen that.

[Matt]

It's like, oh, you think that discount card is actually getting you something, jokes on you, and then it goes to color.

[Joel]

Well, they're making a good point.

[Matt]

Yeah, but it's such a lame. It's a terrible commercial. And so I'm gonna. I will knock Aldi for that.

[Joel]

That's.

[Matt]

Come on, by the way, do better.

[Joel]

Pretty sure I just saw Costco stock price go down 5% with you saying you're shopping at Costco. Less.

[Matt]

There you go.

[Joel]

You move markets, my friend.

[Matt]

All right, let's get back to the beer that you and I enjoyed this episode, which was a Bigfoot barley wine style ale by Sierra Nevada. What'd you think?

[Joel]

I'm glad they said barley wine style because it's not a barley wine.

[Matt]

Like, because it's too hoppy.

[Joel]

Yes. It's incredibly bitterly hoppy.

[Matt]

Yeah.

[Joel]

And so this has got that classic. It's like a West Coast Beast ipa.

[Matt]

It reminds me of Narwhal.

[Joel]

It's just multi year.

[Matt]

It's like a multi or Narwhal. Like is Narwhal. Is that an ipa?

[Joel]

No, that's. What is that? Stout? No, Torpedo, I think is what you're thinking.

[Matt]

I'm thinking of Torpedo. It's got the Torpedo hops going on. I mean, I don't know my hops like somebody who's really, really into craft beer, but the mouthfeel that I got reminded me so much of that Sierra.

[Joel]

Nevada bitterness, or it kind of tastes in some ways like their Christmas IPA a little bit too, that they come out with celebration every single year. Yes.

[Matt]

Yeah. All these beers, classic Sierra Nevada.

[Joel]

So this very much like if you just pour. Blind taste tested this one on me, I would not call it a barley wine. I would call it a hopped up west coast ipa and I would be like, that's totally a Sierra Nevada beer.

[Matt]

Yeah, Sierra Nevada. Make like a dark West Coast IPA or something. It's good. I will say I like.

[Joel]

I mean, it's super tasty, it's unique. And this beer has been around for a super duper long time. And so it's fun to have a Bigfoot. But it's interesting though, if you were expecting barley wine. That's just not what I get from this beer.

[Matt]

No, not nearly as malty, but maybe.

[Joel]

I'm just an idiot and don't know.

[Matt]

What I'm talking about, but just as enjoyable. Yeah, I'm not going to hate on it. I'm not totally sure when the last time I actually had a Bigfoot. And I guess it's one that they do every year seasonal, because it says 2025 Bigfoot.

[Joel]

Well, some people lay these down and seller them, age them, age them, come back to them years down the road.

[Matt]

We're luckily not that nerdy, but, buddy, that's going to be it for this episode. Listeners can find our show notes up on the [e-mail] but we didn't even actually mention the credit card tool when we're addressing Austin's question about travel cards. So head over to howtomoney.com credit card tool and you can sort by the different rewards whether or not you want to do cash back. What a missed opportunity. Oh my gosh. You can sort it by cash back or you're telling them now or travel points. At least we finally got to it for the foot. For the few folks who had their hands tied up, they're doing the dishes or cutting grass or something like that. But anyway, that's gonna be it, buddy, for this episode.

[Joel]

Until next time, Best friends out.

[Matt]

Best friends out.

[Joel]

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