Ask HTM - Diversifying to FI, Upside Down on an RV, & Extreme Lengths to Buy a Home #937

Summary

Podcast Summary: How to Money - Episode #937: Ask HTM - Diversifying to FI, Upside Down on an RV, & Extreme Lengths to Buy a Home

Release Date: January 27, 2025
Host/Author: iHeartPodcasts
Title: Ask HTM - Diversifying to FI, Upside Down on an RV, & Extreme Lengths to Buy a Home #937

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Introduction

In Episode #937 of "How to Money," co-hosts Joel and Matt tackle a trio of listener questions centered around financial independence, managing vehicle debt, and strategies for saving for a home. The episode delves deep into practical advice, personal anecdotes, and expert insights to guide listeners through these common financial challenges.

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1. Diversifying to Financial Independence (FI)

Listener: Mike
Timestamp: [07:07]

Mike, a long-time listener in his mid-30s without children, reaches out with concerns about his investment strategy. He and his wife have diligently maximized their 401(k), IRAs, and HSAs, contributing approximately $4,000 monthly to a brokerage account. However, he's hesitant about diversifying into real estate, citing high risks and minimal cash flow in their medium cost-of-living area. Mike questions whether solely investing in low-cost index funds is sufficient for achieving financial independence.

Key Discussions:

• Diversification Necessity:
  Joel: "If you're all in with 100 bucks, that's one thing. If you're all in with a million bucks, that's another thing."
  Matt: "Low cost index funds, man, it's the way to go."

• Real Estate Considerations:
  Joel and Matt explore the pros and cons of real estate investment. They acknowledge that while real estate can potentially "supercharge" finances, it often requires significant effort and may not be suitable for everyone, especially if the primary goal (financial independence) doesn't align with the investment's demands.

• Alternative Diversification Methods:
  Matt suggests Real Estate Investment Trusts (REITs) as a less hands-on alternative to direct property investment. Matt: "You can invest in REITs, VNQ specifically, that couldn't hurt."

• Conclusion for Mike:
  Given Mike's current strategy and risk aversion towards real estate, Joel and Matt advise that his focus on low-cost index funds is adequate. They emphasize that diversification is personal and should align with one's financial goals and lifestyle.

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2. Managing an Upside-Down RV Purchase

Listener: Tony
Timestamp: [24:06]

Tony from San Diego shares her dilemma of being "upside down" on an RV purchased in May 2024. After her circumstances changed, she bought a home and no longer needs the RV. She faces a $30,000 gap between the RV's value and her remaining loan balance. Tony is torn between selling the RV privately or returning it to the dealership, risking a significant financial loss.

Key Discussions:

• Selling Privately vs. Dealership Return:
  Matt: "If you let the dealership sell it for you, it's going to end up costing you a lot more money."
  Joel: "Put in a little bit of sweat equity and look to sell it yourself might be more the path that we would recommend."

• Depreciation Risks:
  The hosts highlight the rapid depreciation of RVs, noting that even minimal usage can lead to substantial financial losses. They advise Tony to seek the highest possible sale price to minimize the gap.

• Creative Solutions:
  Matt suggests renting out the RV through platforms like Outdoorsy to potentially turn it into a side income, which could help offset the loan balance.

• Final Recommendations:
  Joel and Matt encourage Tony to attempt a private sale to recover as much value as possible and consider additional income streams to manage the remaining debt. They caution against returning the RV to the dealership due to the financial repercussions.

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3. Strategies for Saving for a Home Purchase

Listener: Ophelia
Timestamp: [34:53]

Ophelia from Los Angeles plans to sell her condo in two years, rent temporarily, and save up for a new home. Currently, she holds her savings in a high-yield savings account and seeks advice on better short-term investment options to maximize growth.

Key Discussions:

• Optimal Savings Vehicles:
  Joel: "It's all about timeline and risk tolerance."
  Matt: "Saving in a high yield savings account like CIT is one of the best options."

• Investment Options:
  Matt discusses the merits of Certificates of Deposit (CDs) as a way to safeguard funds against fluctuating interest rates. However, he notes that current CD rates may be lower than high-yield savings accounts.
  Matt: "Maybe you split your money. Maybe you put half of what you currently have in a CD, the rest keep it in a high-yield savings account."

• Risk Management:
  They caution Ophelia about the potential volatility of the stock market and the emotional impact of market downturns on her savings intended for a home purchase.

• Timeline Considerations:
  Joel emphasizes the importance of aligning investment choices with Ophelia's home-buying timeline to avoid unnecessary risks. If the timeline is flexible, Ophelia might consider allocating a portion of her savings to higher-yield investments while keeping the rest in safer accounts.

• Final Recommendations:
  The hosts recommend maintaining most of her savings in a high-yield savings account to ensure liquidity and minimize risk, advising against venturing into more volatile investments given her short-term goal.

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4. Understanding Credit Utilization and Its Impact on Credit Scores

Listener: Bonnie
Timestamp: [48:54]

Bonnie asks whether credit utilization rates are calculated on an aggregate basis or per individual credit card. After several large expenses pushed one card to a 45% utilization rate while keeping overall utilization below 10%, Bonnie experienced a significant drop in her credit score by over 30 points. She seeks clarification on why this happened despite paying off the card before interest accrues.

Key Discussions:

• Credit Utilization Metrics:
  Matt: "The credit scoring models out there, they rate this statistic pretty highly."
  Joel: "If you have $100,000 in total credit available and you're using $10,000 of it, that's great, you have a low credit utilization rate. But if all $10,000 is on a single credit card that has a $12,000 limit, your credit score is going to take a hit."

• Scoring Methodology:
  Joel explains that credit scoring models assess both individual card utilization and overall utilization. High usage on a single card can negatively impact the score even if the overall rate remains low.

• Best Practices:
  Joel: "Best practices are to keep your utilization rate under 30% of your overall credit limit and under 10% on individual cards."
  Matt: "Focus on the individual cards because by keeping each individual card under the 30% limit, it is impossible to go over your 30% overall aggregate credit limit."

• Mitigation Strategies:
  The hosts suggest paying down balances before statement closure to prevent high utilization from being reported. Additionally, requesting a credit limit increase can help lower utilization ratios.

• Conclusion for Bonnie:
  They reassure that once balances are lowered, the credit score will rebound. Understanding both aggregate and individual credit utilization is crucial for maintaining a healthy credit score.

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5. Beer Review: Humble Forager's Barrel-Aged Stout

Timestamp: [56:02]

Joel and Matt take a brief detour to review a specialty beer they enjoyed during the episode—Humble Forager's barrel-aged American double stout.

Key Points:

• Tasting Notes:
  Joel: "This was huge in every essence of the word huge... a sweet, burly beast with maple syrup infused into it."
  Matt: "A little too much for Joel's dainty palate... felt like drinking straight molasses."

• Overall Impressions:
  Despite the intense flavor profile, the hosts appreciate the craftsmanship but acknowledge it might be overwhelming for some. They liken it to enjoying a rich, winter beverage.

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Conclusion

Episode #937 of "How to Money" offers invaluable insights into managing investments for financial independence, handling debt from high-value purchases like RVs, optimizing savings strategies for home buying, and understanding the nuances of credit utilization. Joel and Matt provide practical, no-nonsense advice tailored to diverse financial situations, empowering listeners to make informed decisions on their financial journeys.

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Notable Quotes:

• Joel [07:07]: "Low cost index funds, man, it's the way to go."
• Matt [09:06]: "I was glad Mike is asking this question. He's asking how much diversity is necessary to be a successful investor."
• Joel [24:06]: "Tony can't twist my arm. I still won't budge."
• Matt [34:53]: "If you're keen on raising your score, focus on the individual cards."
• Joel [56:02]: "This was huge in every essence of the word huge."

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For more detailed discussions and personal finance tips, visit howtomoney.com.

Transcript

[Joel]

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[Matt]

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[Capital One]

This podcast is sponsored by Capital One in households. We subscribe to everything, music, tv, even dog food. And it rocks until you have to manage it all, which is where Capital One comes in. Capital One credit card holders can easily track, block or cancel recurring charges right from the Capital One mobile app at no additional cost. With one sign in, you can manage all your subscriptions all in one place. Learn more at Capital1.comsubscriptions Terms and Conditions apply.

[Matt]

Hey there, this is Matt and Joel.

[Joel]

From the how to Money podcast.

[Matt]

That's right. Joel and I both love traveling with our families. Actually this past fall break from school we took a trip to Cape San Blas down there in Florida with some of the families from the kids school. We all got our own Airbnbs. We had a great time.

[Joel]

I love staying in an Airbnb, Matt. Plus, while you're traveling, you could be hosting guests in your own home. Now with the Airbnb Co host feature, hosting is easier than ever. You can access a network of high quality local co hosts in your area who can help you get your home ready for guests. Find a co [e-mail] host welcome to how To Money. I'm Joel. I'm Matt and today we're answering your listener questions.

[Matt]

That's right buddy. We've got a number of voice memos to get to during our Ask how to Money episode today, we're going to hear from a listener who is looking to diversify his way to financial independence. Another listener is wondering what she should do specifically when she is upside down on a vehicle. An rv. We'll get to that. And we're gonna hear from another listener who is looking for the best accounts to park a down payment in for a home that she's looking to purchase. So looking forward to that plus more during our episode here today. Buddy, no doubt you wanna talk about finding lost money. You've got a note here about.

[Joel]

I'm not talking about Couch cushion money.

[Matt]

Matt, about the old standby.

[Joel]

So I got a text from a buddy the other day, and he said, hey, found money for you. I was like, what are you talking about?

[Matt]

For you? Yeah, for me personally.

[Joel]

He literally just started. So there are these online databases. Missingmoney.com and unclaimed.org. so let's say it's an insurance payout that was trying to get to you. There's like, a million reasons. You might have some sort of outstanding money that's in your name that, I don't know, you missed the correspondence, and it never came to you. And so there are these state databases that keep track of these funds.

[Matt]

Or maybe it was when you had to flee the state, Joel, and you changed your name in order to evade all of the. We don't talk about the loan sharks.

[Joel]

We don't talk about my time on the lam map. Okay. That we're after you. And so apparently, I did have money my buddy randomly searched in my name. You can do this for people that you care about, I guess, if you want. And he was like, I got a bit extra time on my hands. Let me put Joel's name into the database. And so, yeah, he was able to find two little sums of money I was owed. What by?

[Matt]

How did you not look this up?

[Joel]

I was shocked. Well, I guess it must be fairly recent based on an insurance claim. A homeowner's insurance claim. Where the tree fell through my roof.

[Matt]

I remember that.

[Joel]

Yeah, but they were sub$50 each, so it's not like we're talking about big.

[Matt]

Big bucks, like, thousands of dollars.

[Joel]

No, I mean, how cool would that have been, right? I would have owed him a finder. See, if that was the case.

[Matt]

That's crazy, man. Okay, so, well, you specifically mentioned the two, like, national sites. I think there's a lot of folks who are listening, and they're thinking, this is too good to be true, man. Like, there's no way that this exists. No, this is completely legit. Yeah. And the two sites that Joel mentioned are like national sort of databases.

[Joel]

We'll link to them in the show.

[Matt]

Notes, by the way, but go a step beyond that as well, because some of those or some states aren't included in those national registries as well. So states have their own registry that you can search as well. And so if you really want to get into the. The weeds a little bit, I would recommend for you to do that. So sub $50.

[Joel]

Yeah.

[Matt]

Still, you look 100 bucks. Perhaps. You got any plans?

[Joel]

Not quite. Not quite. But but hey, it's something.

[Matt]

No big plans for the money.

[Joel]

Not really, but we'll see. But it's really nice of my friend to look out for me. And you can do this for your friends, for your loved ones, but you can do it for yourself. And so this is just one of those things that takes literally 30 seconds of your time. Type that information in, figure. Figure out whether or not there is some money out there for you and go out there and get it. But yeah, just know that these websites are legitimate. And Matt, every time we talk about this, we have probably half a dozen listeners reach out who hear it for the first time. Yeah. And they've heard it and they take action and they go check it out and there's money waiting there for them. So it's one of those things where it does seem too good to be true, but in this case it's not. It's really just record keeping of your money that wasn't able to get to you somehow.

[Matt]

In a lot of cases. I mean, it can be thousands of dollars. It's way more than just like the equivalent of some, like a $20 bill lost or left in the winter coat or in a purse that you're no longer using stuff away in your closet.

[Joel]

How nice is it to find 20 bucks in your coat pocket? Yeah, it brings a smile to me.

[Matt]

Although I've literally never had that happen. And it's even less likely to happen given how little we use physical cash these days. But hey, hey, I'm happy for you, buddy.

[Joel]

Yeah, thanks, man. And thanks to my friend Tim for looking out for me.

[Matt]

Did Tim search my name as well?

[Joel]

He didn't say.

[Matt]

I'm going to assume he did. There's no money out there.

[Joel]

He probably did.

[Matt]

It's been a couple years, though, since I've searched as well. But before we move on, let's share the beer that you and I are going to enjoy during this episode. This is an Ash, which is a beer by Humble Forger. And specifically it's a barrel aged American double stout. And I'm not surprised to see that it looks like it's a collaboration with the brewing project because I have literally never had a stout buy the Humble Forager before. They normally do those. I've had an IPA by them before and some sours. A lot of sours is typically what I'm used to seeing on their label. So looking forward to enjoying this one and sharing our thoughts at the end of the episode.

[Joel]

Same here. All right, let's move on to listener questions. So Matt. And by the way, if you're listening and you say I've got a money question, I want Matt and Joel to tackle it next week on the podcast. Well, we'd love to hear your question. You can just go to howtomoney.com ask for the directions, but really it's just recording a voice memo, sending it over to us via email, and hopefully we'll take it next week. Matt, let's get to a question about diversification and is stock market investing enough to get the job done?

[Mike]

Hey, Matt and Joel, my name is Mike and I've been listening to your podcast for a few years now. Great content, love the fact that it's tailored to a wide audience. Keep up the awesome work. The question today is about diversity. The wife and I have focused on our careers and our income, which has paid off in the long run. We're also interested in financial independence and over the last few years we've become really focused on our savings rate. And I'll also add that we are currently in our mid-30s and do not have any kids as of yet. Right now we max out both the 401, the Iraq, the HSAs, and after that we average $4,000 per month to a brokerage account. And my question is, everyone keeps saying that real estate is a way to supercharge your finances, but honestly I see nothing but hard work and high risks. We live in a medium cost of living area, but there are no houses around here that are actually cash flowing. I've talked to a couple of real estate agents and the general advice is that they're going for appreciation, which I think is a bad bet. Is investing everything in a low cost index fund enough? It's pure stocks. So if the market slows down, obviously that's all we're banking on. What else can we do to diversify this money? We save so much and have so much in cash. I just don't see the benefit in making life more complex with real estate and rentals. But is it ultimately a bad move to only do low cost index funds and nothing else? Thanks, guys.

[Matt]

Oh, Joel, is it a bad move? I'm not sure if I would go that far, but I am glad that Mike is asking this question. He's asking how much diversity is necessary to be a successful investor. And this becomes even more pertinent the further along you get in your progress towards financial independence just because, you know, we're talking about a bigger sum of money as opposed to someone who's like just getting started. That's right.

[Joel]

If you're all in with 100 bucks, that's one thing. If you're all in with a million bucks, that's another thing.

[Matt]

Exactly, exactly. And in Mike's case, it's not like he's all in on Nvidia or anything like that. He's well diversified in the stock market. But does he need to go beyond that? That is his question.

[Joel]

Yeah. I definitely think there are ways in which if Mike called in with this question and his portfolio were not as diverse as it is, it were kind of allocated towards just a handful of stocks or something like that, the answer is different. But you know, you're right. Like they are decently well diversified, at least on the stock front.

[Matt]

Yeah. And so low cost index funds, man, it's the way to go.

[Joel]

Yeah. And so Mike and his partner, they've been smart to focus on their careers. I was like one of the first things he talked about. You know, some people who are incredibly frugal can focus so hard on saving and pinching pennies that they forget to invest in themselves. I think it's really important to highlight that, Matt, because, you know, growing the pie is so much smarter than just trying to eat a little bit less of that pie. And that that is something that doesn't get focused on enough. I don't think finance space. What Mike and his spouse have been able to do with that bigger pie is admirable. You guys have made a lot of progress towards financial independence at an incredibly young age. But now the question arises, do you need to expand your efforts to other asset classes, to investing more widely? I think Matt, at least simple, quick answer to that question is not really that those low cost index funds really are enough for the vast majority of people.

[Matt]

Totally. I would give him a big old negative because if you, let's say you are a savvy real estate investor, you are inclined in that direction. I think it can be a way, in his words, to supercharge your finances. But whether or not it will be for you as an individual there, Mike, that depends on a ton of factors including the purchase price, it depends on what you can get in rent and the fact that it takes a lot of time to save up for that down payment as well. I think it's hardest for a lot of folks out there to stomach the idea of buying a rental property when you know that you're going to be losing money on it every single month.

[Joel]

Can I raise my hand to that, Matt? It would be hard for me to stom a rental property right now, especially Given I wouldn't do it. Some of the dynamics and the fact like, no, don't sign me up for buying a rental property when I'm gonna lose money.

[Matt]

And so basically, like, it feels like Mike is trying to get us to talk him into getting into real estate and I'm not gonna do it.

[Joel]

Mike can't twist my arm. I still won't budge.

[Matt]

No, I'm seriously. Because like, he even highlighted the sort of aspects that are going to make it more of. More of a negative experience for him. And instead what I want to do is like, one of the things Mike pointed out is the fact that he has. Him and his wife are interested in financial independence, which is when your investments are large enough that you can live off of your investments as opposed to work. I think for a lot of folks, when they first find out about financial independence, it can kind of become this all consuming project.

[Joel]

It's like the tractor beam on the.

[Matt]

Death Star and you can't. It's hard to escape it. Like, you've taken the red pill in the Matrix and you know the truth. And so now you're thinking, oh, everything else is just an illusion. It's the, it's the warm, cozy security blanket that you get with a blue pill. No Mike saying no to the blue pill. He's like, okay, I know what I'm capable of, or I know what is capable once you've invested enough money. But instead. And so, Mike, if this doesn't apply to you, then just dismiss everything that I'm saying here. But this was me, like, I am confessing here that when I first learned about this, I was consumed and pretty infatuated with the idea of becoming financially independent.

[Joel]

But it's kind of hard not to because it does alter the way you view the world to a degree.

[Matt]

It's really helpful. But what I would challenge you to do, Mike, is to think through some other aspects of life that make life more robust and enriching. Like, and that could be something as small as just thinking through some hobbies that you enjoy. Like, okay, how, like, how can I incorporate those into my. Into my life a little bit more? But I also noticed that Mike said that they aren't. Or that they don't have any kids, at least not yet. Which tells me that maybe this is a goal of theirs. And so I would say, hey, I want to hear you talking more about making that a priority if that's something that you want to do. Because personally, I found that growing my family and having kids, man, like, that is like one of the biggest, most rewarding things in my entire life, man. The joys of parenthood. And oftentimes when you're like, or we could get that next promotion and then we could sock away this much more at work, which leads to being able to attain that magic number of being financially independent even more. So I just want you to not necessarily optimize from a financial standpoint and to expand your scope a little bit and to look at some of the other things in life. And the way I'm hearing you talk about real estate, you're not thinking at all about what it is that you want to spend your time doing. It's about the financial or the return on your investment. And you might see like, we're like, I was just saying you might see an outsized return on your investment, but certainly if it's A, not something you want to do anyway, and B, if investors in your area are only counting on appreciation, well, man, personally, I don't think it would be worth it. Yeah.

[Joel]

And so, so much of how we answer this question depends on the person asking it and how they're asking it. Because, Matt, there are some people who are more inclined to invest in real estate. They're more just naturally interested and maybe their skill set leads to them being better real estate investors.

[Matt]

True.

[Joel]

What Mike said was, all I see is the hard work and the high risks.

[Matt]

Yes.

[Joel]

Like, and, and when you see that, then I think taking on a part time job to hope on some appreciation, at the end of the day, that's a bad idea. And when we talk about real estate, you and I try to talk about it with open eyes because there are a lot of people who talk about it as this passive investment, passive income. And the truth is it is more like a part time job than investing in the stock market, which you can do essentially blindfolded, with two hands tied behind your back. It's, it's something that doesn't really require all that much dedication. And so if you have other interests, like growing your family or just, I don't know, not spending a lot of time managing real estate, then you can do those things. Whereas real estate does change your life to a certain degree. And I just think really at the end of the day for Mike, when it comes down to it, if your heart isn't into investing in real estate, I wouldn't encourage you to buy a house in an effort to eke out higher returns when you just don't have that innate desire. Like if you, if you kind of have been following this space. You've read a few books and you're like, man, this is super exciting to me. Yes, there are ways in which you can make real estate make sense, but if you're trying to put the square peg in the round hole, don't do it.

[Matt]

Yeah, man, that's right. Like you are speaking to the activity of investing in real estate. But then even beyond that, I still want to just touch on the like, did he say that they, aside from 401ks and Roth IRAs and even HSAs that he's also throwing, I think he said, another $4,000 into a brokerage, a taxable brokerage account, they are like really, really getting after it. And he's saying that they're not in a high cost of living area either. It's not, it's one thing if they're living in like the Bay Area or they live in New York or something like that, but it makes it sound like that they are just banking all this money in a relatively, at least average cost of living area. So that's why I guess I want Mike to think through some of the other aspects, some of the other facets of life perhaps. But then on top of that, specifically addressing real estate here to diversify, there are other ways to diversify your investments as well. For instance, if you want that real estate exposure, but without all that effort, you can invest in REITs, real estate investment trusts. I think having a small amount of REIT exposure. So I'll specifically name Vanguards, which is vnq. That couldn't hurt. But we also don't think it's totally crucial to you being able to stay diversified. I mean, you could also invest in alternative investments. And maybe I shouldn't even, even mention that because we're not fans of those due to the high fees. But like even excluding the fees, the returns are often worse on those alternatives as well.

[Joel]

And we, those alternative investments have to beat their fees and their fees are really high. And guess what? They don't even beat.

[Matt]

They will occasionally, but they can't do it consistently. That's why we love investing in widely diversified low cost index funds. I think when it boils down to it, we think that being all in on these low cost funds is totally the way to go and it does offer enough diversity to be invested in the American economy at large. Not to mention if you're considering some of the different global ETFs out there as well.

[Joel]

Yeah, I'm glad you mentioned B and Q. I do think that is one of the easiest Ways to invest in a myriad of real estate projects at an incredibly low cost and in a way that's incredibly liquid. Right. Whereas like a lot of the alternative investors that you just highlighted, they're typically very illiquid, which means your money might be set aside for years. Not the high fees. Yes. But then, oh, hey, I want to get out of this investment. It's really difficult to get your money back. Last thing, Mike. I'm not sure if you own a primary home or not, but that's also a way to own real estate and to not have to be a landlord, to kind of have at least a foot right in into real estate as a diversifier. And it can, over time, act as a hedge against inflation and a forced method of savings, which is part of the reason that people who own a home typically have a higher net worth in this country. It's because, not because real estate is the best investment, but it's because it's a forced method of savings leading to people's increased net worth. But taking money, I think, away from investing in stocks at the rate you're doing in order to amass a down payment and buy a house that you rent out just doesn't seem like a brilliant move to me. Maybe the primary home you buy could have some sort of rental component to it which would help you dip your toes in the water without buying something that doesn't make sense from a work or from an ROI perspective. But we just truly don't see the need for you to make any changes to your strategy, given your age, your goals and your interests. For people out there who are listening, again, Matt, who say, I really am curious about real estate and I feel like I have some special skills, some fix it skills, some, you know, I'm a real estate agent, whatever it may be, that funnel you kind of further towards the real estate orbit.

[Matt]

Yeah, you got a real estate superpower. Right. Like you have an unfair advantage in one of those ways.

[Joel]

Great. Take advantage of that superpower and lean into real estate and slowly but surely start to acquire properties. It's harder than it was eight, ten years ago, but it doesn't mean it's impossible. But I think for somebody like Mike, who's already not inclined in that direction, it just doesn't make any sense.

[Matt]

Totally. So, Mike, we hope that those are some of the answers that you needed to hear. And speaking of real estate, we're going to hear from a listener who is looking to save up for a down payment. We'll get to that question and more. Right after this.

[Joel]

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[Matt]

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[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.

[Capital One]

This podcast is sponsored by Capital One. In households, we subscribe to everything music, tv, even dog food. And it rocks. Until you have to manage it all. Which is where Capital One comes in. Capital One credit card holders can easily track, block or cancel recurring charges right from the Capital One mobile app at no additional cost. With one sign in, you can manage all your subscriptions all in one place. Learn more at Capital1.comsubscriptions Terms and Conditions apply.

[Matt]

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[Joel]

Matt we were able to get customized Indochino suits and we love them. Getting to customize everything, it kind of endears you to the final product in a different way. Including the best friends out embroidering on the inside of the jacket takes a couple of weeks for your custom suit to arrive. The fit and the fabric though, they're second to none. I feel like a total stud when I hit up a wedding in my Indochino suit. My next one though, it's going to be tweed.

[Matt]

Matt Ooh, I like it, man. Yeah. You can even set up your measurement profile on Indochino's website, and you can choose customizations without even leaving the house. Or sign up for a premium in person experience just by booking an appointment at a showroom near you and let an Indochino style guide walk you through every step. For your 2025 plans. Look your best in Indochino. Visit Indochino.com and use code how2money to get 20% off any purchase of $499 or more. That's 20% off at ind o C-H-I-N o.com promo code howtomoney a new year often feels like it offers a chance to spark real change. But resolutions can feel daunting, especially when they're important. Joel like creating a will or a trust. It may feel overwhelming, but you know it's about time you did it.

[Joel]

Well.

[Matt]

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[Joel]

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[Matt]

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[Joel]

All right, Matt, we're back. Let's get to a question now about man. Sadly, one of the worst purchases you can make. Hello how to money name is Tony in San Diego.

[Matt]

I have an RV.

[Joel]

Bought it in May 2024. But things changed in my life and I was able to buy a home. Don't need the rv. Trying to determine whether I should sell it in public, like on the street, or return it back to the dealership, at which point they will have me pay the remainder of what's left over, which is about 30k.

[Matt]

They'd like that money in about two.

[Joel]

Weeks once it's sold.

[Matt]

And I guess I'd have to get.

[Joel]

A loan to cover that remaining amount. Just not sure what to do.

[Matt]

Thanks, Joel. I feel like a lot of what we're gonna say to Tony is, like, bad news. Right. So before we get to all that.

[Joel]

Don't shoot the messenger.

[Matt]

I wanna highlight the fact that what I like about what Tony has done here is that she's taken a more unconventional approach to solving one of the biggest expenses that we all experience every single month, which is housing.

[Joel]

Yeah.

[Matt]

Because she. The way she said it, it sounded like she considered, or she maybe lived for a period of time in the rv, because then she said, but now I have a house, so I don't need the RV anymore. I like that.

[Joel]

I do, too.

[Matt]

I like that. Kind of outside of the box thinking. It makes me think of a friend I had in college who.

[Joel]

He said it's like the tiny house movement.

[Matt]

Yeah, yeah, yeah. He lived in his truck. He had a pickup truck with a. The bed cover on it, you know, that, like, kind of turns your truck into an suv. And he had all of his stuff in the back of his truck. And he created a little sleeping area. And he literally, for at least one semester, if not an entire year, slept in his truck. He was on the meal plan. So that's how. That's how he ate.

[Joel]

Okay.

[Matt]

All of his friends were living in the dorm, of course, and so he would just get his little shower tote, his shower kit. He would go and shower in the dorms for free.

[Joel]

What about when he got, like, really cold or really hot?

[Matt]

He had an amazing sleeping bag and his. Like, a sleeping pad. So he was insulated up off of the bed, and he was out there, dude. When it was cold, like, cold, cold. So is this frugal or cheap? Well, my buddy James, I don't know.

[Joel]

When you're that age, I think you can endure a lot more than when you're our age.

[Matt]

Here's the thing. He wasn't, like, a total cheapskate where he was, like, mooching off of everybody because, like, if we would go out like to the coffee shop, he would buy coffees for everybody. Like, he knew that, that everyone, like that is how he was able to get clean at least. Well, now you always like hanging out in everyone's living rooms.

[Joel]

You just get a gym membership, right, for 15, 20 bucks a month. And that's a.

[Matt]

You could have done that.

[Joel]

Free shower. Could have done that thing.

[Matt]

But, but all that to say, I think I appreciate Tony and just maybe how she attempted to solve this problem, but I guess getting an rv, you're not taking the absolute cheapest path towards finding a way to solve this problem, is maybe a little bit more of a lifestyle play, right? Like maybe after the pandemic when everybody was on the road, everyone's doing the van life thing, and she thought, oh, I could, maybe I could do that. And then she realizes, actually, this isn't quite for me.

[Joel]

And if you're buying an RV to solve your housing situation, I think that could be a really smart decision. And maybe that's what Tony was initially doing. And now she bought this house, which. Congratulations on buying a home, Tony. We hope it's great and that you live there a long time. But I think Most people buy RVs as like an excursion vehicle of sorts, right? To go see the country, just to have fun, which is also cool, I guess, if it's well planned and well considered and you know what you're doing. But RVs are typically incredibly expensive. And it's one of those decisions, Matt, that I see time and time again, people one year, 18 months, two years after the fact saying, yeah, this wasn't what I thought it was going to be. And actually, one I get, I'm scared to drive this thing. It's 40ft long or whatever it is. And I don't like living on the road. And so you, you, you find people who, you know, the depreciation period, it can, the depreciation can be severe in just a, a short year or two. And so even though people have owned their RV for not much time, just like Toni here, and it sounds like she knows this, you could be talking about losing many thousands of dollars or tens of thousands of dollars, even if you haven't. Haven't put many miles on it. And so that's the treacherous downside of RVs, is that people go into it with these high hopes, these ideals of living on the road. Maybe they read some Jack Kerouac or something like that, Matt, and they're like, this is going to be grand and I'm going to go see all the national Parks. And then they realize, oh, wait, man, I miss my community, I miss my family, I miss my friends. And the RV lifestyle, it turns out, is not for me.

[Matt]

It's not quite. Even though it kind of solves the same problem. It's not the same as real estate, where you have one that's pretty much guaranteed to depreciate versus another one, which is pretty much guaranteed to appreciate. But she's asking whether or not she should sell it herself or she should just turn it over to the dealership. And I will say none of these two options are particularly stellar. I would be curious to know how much she owes and how much the RV is worth because, like, it sounds like there's a, like a roughly $30,000 gap, which, again, this is a tough dollar amount to stomach. But I would advise you to look up the value of your particular make and model up on a site like rvtrader.com and there are ways to get, like, professional appraisals as well, but you're just looking for a, a ballpark value here. And the goal, of course, would be to close that $30,000 gap as much as possible by selling it yourself. Because I think if you let the dealership sell it for you, it's going to end up costing you a lot more money at the end of the day. And that's, I think, going to be the more expedient it's the more, let's just get this over with sort of approach to where you're not sort of faced with maybe this decision that you now regret at this point. But I do think putting in a little bit of sweat equity and looking to sell it yourself might be more the path that we would recommend.

[Joel]

100%. I mean, I think you're right. The easy, easy path here is going to cost you more money. And so at the end of the day, which is what you want to avoid. So we would suggest taking great picks, writing a good description, or to sell your RV yourself. You might even want to pay a little bit of money to get it listed on some of the more popular RV selling websites. That's going to net you the biggest sale price, which is ultimately what you're looking to do to minimize the amount of money that you're losing. And just like selling a car, there's a substantial gap in what you make selling it yourself versus what you get trading in. When you [e-mail] for instance, and you're trying to figure out car values, Matt, they give you a car value selling it Used in certain conditions and then trade in value. And there's a reason the trade in value is less.

[Matt]

They're not even trying to hide it.

[Joel]

No, it's just out there.

[Matt]

The fact that you typically are going to sell it for much more. Were you to sell it yourself, you.

[Joel]

Hit the easy button, and guess what? You get a certain amount of money back, you put in a little more legwork, and you're going to get a good bit more back in your hands. And so either way, you're going to have to come up with a way to borrow money to pay for the difference in what you owe and what the RV is worth. If you hand the RV back to the dealer, though, your credit is likely to be negatively impacted. That's going to affect every other realm of your finances for years to come. So I guess that's what we want to avoid, is you coming out even worse on the financial side of the equation and also having your credit smacked around the. In the same time.

[Matt]

That's true. Yeah. But I like what you're saying. Essentially, you're saying to create this beautiful listing, right? And I think another. I think there's an emotional component, too, of just turning it into the dealership to where you don't have to.

[Joel]

You're done with it.

[Matt]

Again, you don't want to see it anymore because you're just sick of it. And I think by, like, making yourself see it a little bit, there's like, there's a chance you would internalize the positive lessons then the takeaways from this a little bit more. Were you to then just say, okay, I'm just going to. I'm just going to pay whatever it takes. Something else I think that's worth considering is renting it out. You've got this rv. I don't know, can you sort of turn it on its head a little bit and see this maybe as an asset as opposed to a liability? Outdoorsy, this is a cool site where folks can rent out their RVs. And I think it might be worth browsing around, look like, peruse a little bit, see how much you could potentially make with an rv, given where you currently live. Because if you're able to, you know, turn your RV from a cash drag into a monthly net positive, well, you might be able to avoid your fate of selling that thing at a substantial loss. Either it becomes a side hustle that makes you a little bit of money every single month, or it at least allows you to hold onto it for longer as you continue to pay off that balance. So that you don't take a $30,000 bath that you can't afford all at once. I think it's at least worth considering. And Joel, this totally reminds me of one of the original how to Money episode, or back in the day, it was poor, not poor. But was it like episode two or three or whatever? But, like, you and Emily were considering getting an Airstream.

[Joel]

That's right.

[Matt]

That you were gonna put in your backyard. And you're gonna list that bad. It's gonna be super cute. Yeah, List that thing on Airbnb.

[Joel]

We have a friend who's done exactly that. And he has crushed with his Airstream, like, I think about how much he spent on that and what he's turned it into. He's turned it into, like, essentially a literal gold mine that sits in his backyard. Super cute. And the value has not really declined much, and yet he has continued to make money on it month after month after month.

[Matt]

And I went with you, took a picture of you sitting in it and everything, like, very seriously considering buying that thing.

[Joel]

And this. You're right.

[Matt]

And she's already got it. Granted, maybe it's not as cute as, like, a vintage Airstream or anything like that. She says rv. So I picture it's got to be brown or it's got to be tan with brown highlights. Well, yeah.

[Joel]

And if you. You might not go back in time and make this decision to buy this RV for this purpose, but now that you have it, can you make lemonade out of lemons? And if you do have to take on additional debt, let's say to cover the gap in what you owe and what it's worth, we would say go to your local credit union to see what they offer. You almost always get better terms than. Than you would at the bank. I'd also make a massive goal, Matt, if I was Tony, to try and pay off that loan in short order, like, as fast as possible. Get a side hustle to bring in some extra income. Stick to a bare bones budget for a few months to accelerate your cash flow. We have a whole episode on creating a bare bones budget, but it's essentially like an all hands on deck, whatever it takes to eradicate this debt sort of scenario. We all make financial mistakes, right? But we want you to recover from this as quickly as possible. And so to look at kind of straight in the face, like Matt was saying, get the best terms possible for selling this so that you minimize your loss and then to attempt to improve your financial situation as quickly as you can via increased income. Reduced spending or both at the same time.

[Matt]

Yeah. But then on top of that, if you think that this is something you want to do from a lifestyle standpoint, consider just renting the dang RV before going all in and certainly before financing it. But even before paying for one in cash, even before buying a used RV in cash, just go out there and rent it for a couple weeks.

[Joel]

Be on the other side of outdoorsy. Yes, yes, exactly.

[Matt]

There's a lot. It's like almost like timeshares where there's, like, so many people are interested in unloading theirs. But I think trying it out, trying out the RV lifestyle makes a ton of sense before going all in and dropping a whole lot of your money on one of these things.

[Joel]

All right, Matt, let's get to another question. This one is specifically about buying a home and kind of what to do in advance of that.

[Matt]

Hi, Joel and Matt. My name is Ophelia and I'm from Los Angeles. I love your podcast and I listen to it every day on my commute. I'm planning to sell my condo in two years, rent for a while, and save up to buy a new home. Right now I'm holding all of my savings in a high yield savings account, but I'm wondering if there's a better place to park my cash in the short term to maximize growth. What would you say is the best strategy for this situation? And is there anything else you think I should keep in mind? Thank you. Oh, Ophelia said la. I hope she and her family and friends and her neighborhood are safe. Have been safe from all the fires out there. I can't imagine living out there on the West Coast.

[Joel]

Oh, we've been keeping in touch with our friends who live out there, and it's just precarious. And then also just. Man, the images are harrowing.

[Matt]

Yeah. Unreal.

[Joel]

Tough to stomach. Hope you're doing. Doing well, Ophelia. It's also fascinating, Matt, that Ophelia is going to sell her condo and then rent and then buy a home.

[Matt]

I'm cool with that. I like it.

[Joel]

Yeah, it's not a bad strategy. It's actually not something many people are willing to do to kind of go back to renting for a time, to kind of get their stuff together to be able to, you know, have that cash on hand to make a really strong offer when the time does come and they're ready to buy. But I think of that as a solid strategy that maybe more people should consider.

[Matt]

Sure. Okay. So before we get to the heart of a question, let's just touch on renting versus buying because like the economic trade offs of one versus the other are in constant trade off mode. Because in some times in places and markets, like, buying is going to be a slam dunk decision. Like, despite the fear of buying 2010-2013 that provided enormous buying opportunities across essentially all of America.

[Joel]

And everybody who wants to own a home now says, can I please just take a time portal back to 2011 prices?

[Matt]

Yeah, if only we could. But then at other times at other locations, it's almost impossible to come out ahead as a buyer. And that's obviously not the only thing that you're taking into consideration when buying a home. It's not a purely economic decision, but it is important to weigh your desires of homeownership with the economic reality of what it's going to cost you. And that is especially true living out there in Southern California where the rent versus buy gap is massive. But yeah, I like what you said too about her, just her willingness to rent a place as she's saving up. It tells me that this is a serious goal of hers, which I am 100% behind. But one of the things that she didn't mention were other investments that she might have or that she might not have. And I, even though I want this to be a goal that you achieve, like, I love the fact that you are scaling back, let's hope you're scaling back at least, like rent a place that's kind of run down, certainly that you feel safe in.

[Joel]

Live in a tent, Ophelia, is what.

[Matt]

Matt's saying, but like get after that goal of homeownership. I am one for that. That being said, don't let that keep you from investing, at least a bare minimum. So if that means if you have a 401k, which you commute and that's when you listen to the show. So you're employed. That's great. Hopefully you have a match that your employer offers with your 401k. If so, at least get that employer match. If you don't have a 401k, at least invest within a Roth IRA because I don't want future. I don't want tomorrow Ophelia to be cursing yesterday, Ophelia, because all that you were focused on in this portion of your life was getting this property. And unfortunately it's limited some of the options that you now have there. Far off into the future.

[Joel]

Yeah, it feels nice to buy the property of your dreams or at least, you know, get a. Get into a single family Home, especially in Southern California, that is a really expensive prospect. Man. I remember visiting there, hanging out with a friend. Though the price discrepancy between renting and buying on his block was astounding to me. I mean, what you would pay in every month for rent was. It paled in comparison to buying the same property. And so you just have to take that into consideration. And maybe Ophelia starts renting again and she says, wait a second, this is cheap. And I have so much money on hand that I can invest a ton and, you know, ramp up my. My trip to financial independence. I can be there in a decade versus 30 years. I miss out on that dream of home home ownership. But I think it particularly in high cost of living areas, you have to count the cost before you jump in and say homeownership is for me. Maybe it is, maybe it isn't. But I guess it's just you have to take a lot of things into account before you jump all in on that. And that's coming from guys that own their own homes. So it's not like you and I, we're not against homeownership, and we're not actively trying to dissuade people from buying a home. We just want people to go in with eyes wide open. And there's a lot of personal joy that we've derived from homeownership. I am thankful to have to own my own home. I guess I have a mortgage on it, so maybe the bank and I co own the home at this point in time. But just know that it might not be the most financially optimized choice, especially right now. But where to put all that money in the meantime, that's your main question. It's all about timeline and risk tolerance. I think those are the two main things you have to kind of keep in mind. The truth is, eking out a slightly higher rate of return is more worthwhile given the likely amount of cash that you have on hand. Sometimes we get a question or I see people in the how to Money Facebook group and they're saying, I've got 5,000 bucks in savings. Should I open this new account to earn an extra half a percent on my savings interest rate Hopping, right? And that's just kind of a small potatoes question. It's often just not worth the time to jump down the road in order to get paid a little bit more on such a small sum of money. I mean, 5,000 bucks is a lot. I'm not trying to like say it's not worth anything, but the Truth is, when you're talking about half a percent on five grand a year, most people.

[Matt]

Can out earn that difference in interest.

[Joel]

Rate in no time. So some personal finance nerds, Matt, they geek out, they spend too much time majoring on these minor issues. But if we're talking about 100,000 bucks or more, which this just might be given, kind of where Ophelia's at with, you know, the proceeds from the condo, the harvesting those gains tax free, essentially. Well, we, I think we are talking about bigger potatoes, at least about where she puts that money.

[Matt]

And I'm glad that she's already got her money in a High yield savings account and she's not with one of the bigs. But can you do even better? Well, maybe. It's really hard to predict the future of interest rates because all signs were pointing to lower rates for savers coming soon. But those haven't materialized the way that many predicted given the hot jobs market over the past couple weeks.

[Joel]

Oh man, you remember all the headlines about how many times the Fed's gonna cut rates and it just seems to be a lot slower than a lot of people predicted.

[Matt]

Yeah, it's been a little bit stickier than folk than the economists were expecting. Rates have gone down a little bit, but savers are still outpacing inflation if they pick the right accounts. Doctor of Credit is one of our favorite sites because they keep tabs on the top paying accounts to date. And specifically though, for you, I think a CD might even be the best option. But that being said, those rates are a bit lower than a high yield savings account these days and it's hard to know how much lower savings rates are likely going to go given how. Yeah, most recently how hot the jobs market is.

[Joel]

It's almost like a CD is like a hedge, right? A downward hedge, like, oh, if rates go down significantly, I'm still able to get that higher rate.

[Matt]

So maybe you split your money. Maybe you put half of what you currently have in a cd, the rest, keep it in a high yield savings account. If it was me personally, I think I would just keep all of my money earning that high rate currently that I'm currently receiving at a high yield.

[Joel]

Savings account and just know that the rate will likely go somewhat right.

[Matt]

Yeah, but at least my money is not tied up and it gives me the options.

[Joel]

That's right. And I think, you know, I mentioned the importance of timeline in this decision as well. How flexible is your home buying timeline, Ophelia? If you're keen on this home purchase, but also willing to push it further down the road in an attempt to grow your nest egg. If you're saying, listen, this is a goal of mine, but like if it happens three years from now, if it happens seven years from now, I totally care. I just, I know I want to do this, but it doesn't, it's, I'm not necessarily married to the idea of it happening in a specified period of time. If you're willing to push it further down the road, then you could take on some risk by investing a portion of your down payment fund. But here's the other thing you have to keep in mind. Because if you can't stomach seeing a 20% plus drop in the value of your nest egg in this fund that you've worked years and years and years and years to accrue, at some point in the next couple of years, you're likely to experience some sort of a bear market or a stock market downturn and you will see the value of that capital decline precipitously. If it's going to be too emotionally difficult for you to bear that, don't do it. So if the stock market acted more like 2022 than 2023 and 2024 and the perfect house came along, you're going to be between a rock and a hard place. Because the down payment fund that you had accrued, well, it's worth a whole lot less than it was just because of the fact that you were hoping for more upside. So I do agree with Matt. I think saving one of the better high yield savings accounts, CIT typically has top notch rates that are better than almost all the rest of the market.

[Matt]

Upwards of 4% last time I checked.

[Joel]

Yeah. And saving savers are outpacing inflation, thankfully. I think that's the most straightforward option. It's, it's probably the right thing for anybody with a short to medium term need for that money. That's probably the right move for Ophelia.

[Matt]

Here too, especially given the fact that it sounds like she wants that house so badly. Right. Like if she was much more open ended to it, I would say sure, go ahead, invest that money. But given the fact that she's going, she's jumping through some pretty small hoops. Is that the right term? Like the hoops that you gotta jump through? If they're small, they're harder to jump through.

[Joel]

Yeah.

[Matt]

But by selling her place, man, that tells me that she really, that she really wants to own her own home.

[Joel]

Yeah, yeah. She's setting herself up for that ability. Reducing expenses so she can, I think it sounds like increase savings. So she's got that bigger down payment, so she's ready to go.

[Matt]

Yeah. And we'll make sure to link to because you have opened your own CIT account, Joel. And so we'll link to the article up on the site that points out how easy that actually is. But Joel, we've got more to get to. We're going to talk about a listener who may have been handling her credit cards all wrong. We'll get to that more right after this.

[Joel]

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[Matt]

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[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.

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[Matt]

So here on the podcast I know listeners have heard me talk about how I like to always have a big annual finance meeting with Kate, right? As we've wrapped up a great year, as we are kicking off a new one. We are nerdy like that and each year is an opportunity to reflect and to plan for the future, like setting career goals or making financial moves. And most importantly, ensuring your family is always taken care of no matter what happens. Make this the year that you check life insurance off your list and protect your family's future. 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.

[Joel]

Matt, I just double checked our life insurance policies to make sure we're adequately covered. We are thankful for that. It's a good idea for everyone out there to do that, particularly if your family needs have changed recently.

[Matt]

Right?

[Joel]

You want to ensure that you have life insurance to cover loved ones expenses if something happens to you. And policygenius makes a potentially onerous task. Easy as pie.

[Matt]

Secure your families tomorrow so you can have peace of mind today. Head to policygenius.com to get your free life insurance quotes. See how much you could save. That's policygenius.com what's up everybody? Adnan Burke here to tell you about a new podcast from iHeart podcast in the National Hockey League.

[Joel]

It's NHL Unscripted with Vir and Demers.

[Mike]

Hey, I'm Jason Demers, former 700 game NHL defenseman turned NHL Network analyst and.

[Matt]

Boy oh boy does daddy have a lot to say. I love you by the way on NHL Network we're looking forward to getting together each week to chat and chirp.

[Joel]

About the sport and all the other.

[Matt]

Things things surrounding it that we love.

[Joel]

Right?

[Mike]

Yeah, I just met you today but we're going to have a ton of.

[Matt]

Guests from the colliding worlds of hockey, entertainment and pop culture. And you know what, tons of back.

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And forth on all things NHL.

[Matt]

Yeah, you're going to soon going to.

[Joel]

Find out we're not just hockey talk.

[Matt]

We had all kinds of random stuff on this podcast. Movies, television, food, wrestling, even the stuff that you wear on NHL. Now you wish you could pull off my short shorts Ferkie.

[Joel]

That shirt of Kazarakas. Listen to NHL Unscripted with Burke and.

[Matt]

Demers, the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.

[Joel]

All right Matt, we're back. Got more listener question action to get to. This is the Facebook question of the week. It comes from listener Bonnie. She says for credit score calculations, is the credit utilization rate based on each card or an aggregate? I always thought it was aggregate. We recently put several large expenses on a card which put our utilization for that card to 45% all cards combined. Our utilization is less than 10%. However, our credit score plummeted by over 30 points. The card is going to be paid in full before interest accrues. I know my score will rebound once that payment is reported, but I had a bit of sticker shock when I saw that our score was impacted so significantly.

[Matt]

Yep, yep. I think Bonnie's learning the hard way. Let's discuss credit utilization, which is basically how much of your available credit that you use. And the credit scoring models out there, they rate this statistic pretty highly. It makes up 30% of your score after your payment history.

[Joel]

Yeah, basically on time payments, hey, that's the most crucial, but this is the second most important.

[Matt]

But then how much of it you're actually using, they pay close attention to that. Like, they want you to have tons of credit at your disposal, but to use very little of it. That to them at least reveals the ability to control yourself. And they're gonna reward you by showing substantial love to your credit score.

[Joel]

Almost like if you went to an all you can eat buffet. But they saw that you were so disciplined. You only got one well apportioned plate. You didn't keep going back like you did Matt. I know when you were growing up to the soft serve machine for all that ice cream. Come on. I know you handled that.

[Matt]

There's only one way that I learned how to be an expert cone filler upper. You know, like, I do it like they do at Chick Fil A. You know how they got. You don't do it. It like flops around and you know. No, you hold it up in there and then it fills it and then you drop it a little bit and it has those beautiful little ribbons.

[Joel]

You probably got a soft serve. At least seven or eight of those every time you went.

[Matt]

I will say there's a slew of other factors that do impact your credit score, Bonnie, including paying your bills on time. Of course, that's 35% of your overall credit score. But your credit utilization rate is often underrated and misunderstood. But it sounds like you are. You're kind of wisened up to how it's actually calculated.

[Joel]

Most people don't even know what their credit score is. Like, they know that it exists. And they might not even know what their score is. They have a vague notion that it impacts their finances in some way, form or fashion. If you're one of those people and you're not quite sure how the credit score that you have impacts your life, well, we've got a lot of content. Up on howtomoney.com we have some previous episodes that you should go back and listen to. When it comes to repairing a broken credit score or you know, how to understand the credit scoring system so that you can take advantage of it, maximize your score because it does impact almost every aspect of your financial life. And whether or not your utilization rate is per card or overall, that's always been, I'll say, at least a little murky. Like the, the credit bureaus don't always share every single way in which the credit score. Some, some of these credit bureaus, Matt, have potentially several scores, maybe a dozen or more scores for every individual. So it's not even like there's one score for everybody, which is part of what makes this confusing as well. And they don't necessarily tell us exactly how the sausage is made. Even though we have like a high end understanding all the details, they don't come out and spell it out for us. But if one card experiences a higher than normal balance, even though your overall utilization rate remains low, you will see a credit score hit because of it, typically. So if you have, let's say $100,000 in total credit available and you're using $10,000 of it, that's great, you have a low credit utilization rate. But if all $10,000 is on a single credit card that has a $12,000 limit, your credit score is going to take a hit. Because of the fact that, yes, it seems like all credit scoring models, or at least most are taking into account how you're handling specific credit cards into in addition to your overall credit. Right. So they're, they're looking at both your individual credit card utilization ratio and the overall ratio factor. They're both are kind of making their way into your credit score. Best practices are to keep your utilization rate under 30% of your overall credit limit and under 10%. If you're keen on raising your score, if you want to kind of be in that upper echelon closer towards credit score perfection, credit score nirvana, whatever you might call it. But under 30% is, is going to on your specific credit cards on each individual one and then on your overall amount of credit utilization as well. Keeping it under 30% is pretty much going to get you directly where you want to go.

[Matt]

Totally. And it can be a bit confusing. I would just say focus on the individual cards because by keeping each individual card under the 30% limit, it is impossible to go over your 30% overall aggregate credit limit like you do the one and it'll take care of the other. But there are ways to mitigate the impact of a large expense on your credit. It makes me think about most recently Joel paying for a pretty large plumbing bill and how I should probably take care of that before it hits the statement. Bonnie mentioned that she's gonna be paying the balance on time and in full. That's crucial. But you could pay the balance before the statement actually closes so that that large balance, it never even gets reported.

[Joel]

Which will allow what the credit bureaus don't know, won't hurt them, kind of.

[Matt]

Yeah, exactly. And there's a reason, because, like, there's a benefit I receive by not by waiting until the end of that statement to pay that, because that's, you know, $4,500 that I don't have to pay out of pocket, that that money can then be earning interest in the bank. And by waiting, I'm sticking that to the credit card companies there for a little bit. But by eliminating that to where it doesn't even show up, well, you get to use your card, you get to earn those points, and then you still avoid any sort of negligent credit scoring side effects. Something else that you could do, too, is call the credit card issuer, ask them to raise your credit limit. And that's generally speaking, a good thing to do if you think that your limits might be a little bit low for how it is that you spend on them. But that being said, I wouldn't overthink it because it, like right now, it sucks to see your score take a hit like that. But it sounds like that you're pretty thoughtful about your credit usage. And my guess is that keeping your utilization low on this card for a few months will bring your score, you know, back close to where it was. And I personally wouldn't be too concerned about it unless perhaps maybe you're looking to buy a home in the next year or so.

[Joel]

Yeah, that's when you want to be hyper vigilant. But if it's one of those things where you're like, oh, man, I went from 8, 10 to 792. It doesn't matter.

[Matt]

Not a big deal.

[Joel]

Yeah, and we've, we've talked about that too, where if you're above 760, then you're going to qualify for the best rates, the best terms, there's essentially no downside if you, if your credit score is 760 or above, but there's also no difference between 790 and 820 in the eyes of lenders. So improving your score Once you've gotten to that, that point really does you no extra good. So I get how it can be a little deflating, but I also wouldn't ascribe more meaning to it than it actually deserves.

[Matt]

Cool. All right, man, let's get back to the beer that you and I drank during this. Well, are in the process of drinking, because I think we both tried to slow our roll a little bit because this was one big beer, buddy.

[Joel]

Yes, it was.

[Matt]

I've literally never poured a beer that was so black. I mean, I wish we were already rolling when I was pouring these beers because I exclaimed pouring motor oil. I have literally never poured a beer that was so black and viscous. But let's share your thoughts.

[Joel]

Sure. Yeah. This was huge in every essence of the word huge.

[Matt]

Like, yeah, 10W40.

[Joel]

And on the can, it says that it spent over two and a half years in a barrel, or basically two and a half years in a barrel, which is insane. There were three. Three different kinds of cinnamon. I don't know if you noticed that, Matt, in this beer.

[Matt]

I did not.

[Joel]

From different continents, which is kind of incredible from tasting it. So this is. This is one of those beers that maybe overdid it almost, in my opinion. It was a sweet, burly beast. There was maple syrup infused into this one as well. But Humble Forager makes incredible beers. And so, yeah, while maybe this one was top notch in every essence, and I thoroughly enjoyed it, it was also.

[Matt]

A little too much for Joel's dainty palate.

[Joel]

It was a big one to imbibe on, and so I appreciate it. But I also, man, I don't think I could drink a whole beer like this because it's just too much.

[Matt]

I had already cracked my own and poured it in my glass before we realized the magnitude of this beer. But it was so big, so boozy, it almost felt like I was drinking straight molasses, which I thought was gonna be the biggest problem for you. Just the sweetness.

[Joel]

Yeah.

[Matt]

And I think maybe a lot of it does have to do with the maple syrup that was infused in this. But there is so much flavor, like the initial barrel, like Woody notes. It reminds me of licking the postage stamp. That's just one of the ways I describe some of those Okie notes. But then you got the vanilla as well, of course, the cinnamon, like you mentioned. Kind of. That being said, kind of the perfect beer to enjoy here in the middle of winter when it's nice and, you know, nice and cold outside. But I'm still glad we got to enjoy this. During the episode today, could you pick.

[Joel]

Out the differences between the Mexican, the Chinese and the Sri Lankan cinnamon?

[Matt]

I've never. I've heard of Mexican.

[Joel]

That almost sounds like a craft beer joke. What nerd cares about the fact there's three different kinds of cinnamons from these random exotic locations?

[Matt]

Yeah, it's kind of silly. It's like the craft beer nerds kind of went maybe a little bit too far with this one. Actually, this makes me. Did you read the article about how bourbon.

[Joel]

Oh, yeah.

[Matt]

The bourbon market has imploded essentially because of the demand for it. Years ago was there.

[Joel]

And so bourbon takes years and years to plan and make.

[Matt]

So of course, distillers were doubling down and we saw some of these massive warehouses because they're like, there's only one place that you can make bourbon. Literally. We've got all these buyers.

[Joel]

Was it two years ago?

[Matt]

Two years ago, Old man. Yet again. But I do wonder when it comes to distilleries and even breweries, just given there's more. I mean, we've talked about it on the show, how you and I drink less, but especially given to. With the FDA and how they're talking about slapping. I feel like alcohol is going through what cigarettes went through back in the 80s and 90s. 100%, essentially.

[Joel]

Well, did I tell you our new local craft brewery sent me a coupon and in the email they basically said, hey, thank you for coming in. We've seen all these craft breweries closing. We want to stand the test of time. Thank you for your patronage. And so they're trying to incentivize people to come in because craft breweries are not doing so well right now.

[Matt]

It is a tough time to. Sad, Sad for us, the spirits industry, it's. That's the free market, baby. That's capitalism.

[Joel]

Yeah.

[Matt]

Which is what leads to that creative destruction. But still sad, of course, if there's a beloved local brewery that ends up closing night. Hate to see that.

[Joel]

And just as guys who love craft beer in general.

[Matt]

Indeed. But that's going to be it for this episode. You can find our show notes up on the [e-mail] including the article to where Joel explained how easy it was to open an account with cit, one of the best online high yield savings accounts out there. We'll link to that there in the show notes. But buddy, that's going to be it for this episode. Until next time, best friends out. Best friends out.

[Joel]

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[Matt]

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[Joel]

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[Matt]

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[Joel]

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[Matt]

Wherever you get your podcasts.