Ask HTM - Is a 25% Savings Rate Overkill, Avoiding State Minimum Insurance Requirements, & Eliminating 401k Loans #1030

Summary

Podcast Summary: How to Money – Ask HTM - Is a 25% Savings Rate Overkill, Avoiding State Minimum Insurance Requirements, & Eliminating 401k Loans (#1030)

Podcast: How to Money
Hosts: Joel & Matt
Episode Date: September 1, 2025
Episode Theme: Listener Money Questions on 401k Loans, Saving Rates, Insurance, and Smart Budgeting

Episode Overview

In this Ask HTM (How to Money) episode, best friends and cohosts Joel and Matt field a variety of listener questions covering the practical challenges of personal finance. They dive into the pros and cons of 401k loans when changing jobs, strategies for ambitious saving rates (like 25%), the risks of meeting only state minimums for auto liability insurance, and smart systems for controlling household spending. The duo is relatable, jargon-free, and pepper their conversation with friendly banter and real-life anecdotes to help listeners "thrive" in managing their money more purposefully.

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Key Discussion Points & Insights

1. 401k Loans & Job Changes

Listener: Nathan from Idaho ([09:46])

• Situation: Nathan has a $5,300 401k loan with his employer but is considering a new job with a $30,000 pay bump—however, the new job has no 401k.
• Main Concerns: What happens to the loan if he can’t pay it back? Is taking a job without a 401k a dealbreaker?

Key Insights:

• 401k Loans Can Trap You: Matt explains they caution against 401k loans because if you change or lose your job, you’re forced to pay the loan back quickly (often immediately), or it becomes a taxable distribution with a 10% early withdrawal penalty ([11:01]).
• What to Do:
  • Review your employer’s specific loan repayment policy—some allow 60-90 days; most require immediate repayment ([13:33]).
  • Explore all means to pay the loan: delay job transition, use emergency savings, borrow from a HELOC, even ask family (but not payday loans!) ([15:13]).
  • "I wouldn't let this 401k loan keep you tethered to that significantly lower paying job." – Matt ([15:35])
• No 401k at New Job?
  • Max out Roth IRA or Traditional IRA. "You can still get really wealthy, Nathan, with just an IRA." – Matt ([17:47])
  • Consider an HSA if available, and a taxable brokerage for additional savings.
  • Automated monthly contributions help maintain discipline. "It just takes more intentionality and it falls more directly on your shoulders." – Joel ([19:28])
• Bottom Line: Don’t let a 401k loan trap you; a better salary and intentional savings outside a workplace plan can still lead to significant wealth.

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2. Ambitious Savings Rates & Where to Invest Extra

Listener: Bryant from Montana ([23:19])

• Situation: Bryant and his wife (age 25) are living frugally, debt-free, and saving 20%—aiming to raise that to 24-25%. Wife’s new job offers 401k with 5% match and an HSA. Where should extra go: her 401k or open a Roth IRA?

Key Insights:

• Congrats—You’re Way Ahead: Both hosts praise Bryant for starting young and debt-free—ideal for building wealth ([25:04]).
• Should You Save More than 20%?
  • Yes, especially without student loans and early in your career: "Delaying some of those lifestyle upgrades intentionally... for a missional purpose of having greater levels of financial freedom earlier in your life." – Joel ([27:04])
• Lifestyle Creep: Keep it in check; avoid "upgrading" your lifestyle just because income rises ([29:18]).
  • "Keeping that lifestyle creep in check... it doesn't really matter that your old friends from high school or college are going on this trip." – Matt ([29:18])
• Where Should Extra Savings Go?
  • After getting full 401k match: Max out her Roth IRA.
  • Why Roth IRA? Tax flexibility ("at some point you might lose access to that bucket"), more control, and post-tax contributions benefit you as incomes rise ([30:59]).
  • Additional contributions could go to the 401k or taxable brokerage, especially for early retirement goals.
  • "That flexibility comes in quite handy." – Joel ([31:37])
• Don’t Overdo It: Saving 60% of income can be overkill; "life has to be lived." Make sure both partners are on board with aggressive savings ([33:36]).

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3. Avoiding State Minimum Auto Insurance Liability

Listener Feedback: Angela from Georgia—Accredited Financial Counselor ([34:41])

Feedback Points:

• Warns listeners not to drop liability coverage to state minimums for cost savings—this can expose you to major financial risk, especially if you cause a serious accident, e.g., damaging a Lamborghini in a big city ([42:05]).
• Discusses the difference between property (comprehensive & collision) and liability insurance.
• Hosts agree: "State minimums are not indicative of what your coverage should be." – Matt ([41:53])
• Tip: As your net worth grows, increase liability coverage.
• Find Independent Agents: Trustedchoice.com can help assess personal coverage needs ([44:41]).

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4. Maxing Out Retirement Contributions Too Early

Feedback Addendum: Angela also pointed out the risk of losing employer match by front-loading 401k/TSP contributions ([37:58]).

Hosts’ Tips:

• Don’t Max Out By June: Might lose future employer matching dollars if you stop contributing later in the year ([39:09]).
• Plan for 26 Equal Pay Periods: Spread contributions through the year unless your plan offers a "true-up" match ([40:25]).
• Commandment: "Know your plan documents!" ([40:25])

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5. Tools & Methods to Limit Grocery/Restaurant Spending

Listener: Grace ([53:27])

• Problem: Wants to limit family food spending. Tried Visa gift cards but found high fees.
• Hosts’ Tips:
  • Cash Envelope System: Effective for limiting—but can’t use for online orders (DoorDash, etc.).
  • Spending Accounts: Only load your budgeted amount into checking/spending account; use a debit card. Adds friction and limits auto-transfer temptations ([55:17]).
  • Prepaid Gift Cards: Worth considering if the $3–$5 fee saves $50–$100 otherwise wasted ([57:35]).
  • Batch Shopping/Meal Prep: Planning in advance (e.g., smoking chickens in bulk at Costco) can cut costs and temptations ([57:27]).
  • Limit Doordash/Apps: Consider inability to use cash on these platforms a feature, not a bug ([54:17]).
  • Pick-up Grocery Orders: Ordering online for pickup can curb impulse buys ([58:08]).

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6. Homeowners Insurance—Should You File a Claim?

Listener: Steven ([48:05])

• Question: Homeowner’s insurance claims (after lightning strike)—will premiums go up if I file? Deductible is $5,000.
• Insights:
  • Filing a claim usually increases premiums (20–40% not uncommon), varies by state/insurer ([51:04]).
  • Claims are logged on your 'CLUE' report—affects quotes from other insurers too ([51:04]).
  • If damages are close to the deductible, pay out-of-pocket and don’t make a claim ([53:27]).
  • Insurance is for catastrophe, not minor expenses: "If it's kind of close to that deductible amount, yeah, that's something you cover. You don't involve insurance at all." – Joel ([53:27])

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Notable Quotes & Memorable Moments

• "I wouldn't let this 401k loan keep you tethered to that significantly lower paying job." – Matt ([15:35])
• "You can still get really wealthy, Nathan, with just an IRA." – Matt ([17:47])
• "Keeping that lifestyle creep in check... it doesn't really matter that your old friends from high school or college are going on this trip." – Matt ([29:18])
• "That flexibility comes in quite handy." – Joel, on mixing 401k and Roth IRA accounts ([31:37])
• "State minimums are not indicative of what your coverage should be." – Matt ([41:53])
• "Insurance is for catastrophes, not for minor expenses." – Joel ([53:27])

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Important Timestamps

• [09:46] – Nathan's 401k loan/job switch dilemma
• [23:19] – Bryant’s savings rate & account prioritization question
• [34:41] – Angela’s insurance and TSP/401k contribution feedback
• [53:27] – Grace’s question on limiting grocery/restaurant spend
• [48:05] – Steven’s homeowners insurance premium query

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Tone & Approach

Cheerful, conversational, and empathetic—Joel and Matt blend personal anecdotes, humor, and actionable advice. They balance financial rigor with real-life practicality, encouraging intentionality without deprivation.

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Summary

This episode of How to Money delivers practical, nuanced advice for anyone facing real-world money questions—from the pitfalls of 401k loans to leveling up your savings rate, buying enough insurance as your wealth grows, maximizing employer matches, and budgeting for groceries. Listeners are empowered to make thoughtful, proactive decisions that align with their values and goals, all delivered with the easy relatability of two best friends who genuinely want you to thrive financially.

Transcript

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[Joel]

Welcome to how to Money. I'm Joel. I am Matt, and today we're answering your listener questions.

[Matt]

All right, buddy, let's get to it.

[Joel]

Are your.

[Matt]

Is your throat all warmed up?

[Joel]

I was born ready, Matt.

[Matt]

We did just chat for about 15 minutes about local politics before we actually, I had already hit record, and then we got off topic, so we went back over there. Stopped, deleted, started fresh from the beginning.

[Joel]

Sometimes that happens like we're friends, so we just like to catch up about random other stuff that's happening in our lives or around town. And then we're like, oh, wait, we're supposed to be recording a podcast now.

[Matt]

Aren't we gonna talk about personal finance, not local politic yard signs?

[Joel]

Is that a question which are proliferating right now? Who's running for local school board is a thing.

[Matt]

Just stop.

[Joel]

Just stop. All right.

[Matt]

We are.

[Joel]

You don't want me to endorse a candidate right now.

[Matt]

Hey, if you want to go out.

[Joel]

On a limb, no thanks.

[Matt]

Go for it. We're gonna talk when you are younger, when you're 25. We're going to specifically talk about some different accounts that this listener is asking about. We're going to discuss insurance coverage limits specifically. We got some feedback from a listener. We will address that. And plus another point that she raised. Another listener is asking what he should do about a 401k loan that he has. We've got all of that to get to, plus more today. But, buddy, I want to share something really quick. Folks might remember. I guess it was maybe two years ago that there was a small part of me that was thinking we might get a second vehicle. And I was considering a Tesla, and I was just like, I want to. I want to drive it. I want to get to get to see what it feels like and what's great about.

[Joel]

If you're gonna do it, do it quick. Before that.

[Matt]

Oh, I know that that time is no longer something I want to do.

[Joel]

Okay.

[Matt]

But one of the. I don't know if you recall, but one of the things I shared was that it was a ton of fun to drive. To drive a Tesla. So much fun. I really enjoyed it, but it was a pain in the butt. So this was during a trip, and we rented it, which is. Isn't that a great way to try out a car, by the way, while you are traveling somewhere to try to get that particular vehicle before you purchase the dang thing because like a 12.

[Joel]

Minute test drive doesn't tell you enough.

[Matt]

It's like a multi day extended test drive, which is so much fun, especially when it's a Tesla and you're not used to an ev. It was a ton of fun, but it was a pain in the butt to find the Tesla superchargers, the charge points or whatever.

[Joel]

My friends in California say the opposite.

[Matt]

Where I was, we had to go out of our way to get to a charger. That was the downside. As opposed to a gas station on every single corner. Right. And not to mention because you're tapping into the supercharger as opposed to trickle, you know, slow charging at home. If you weren't traveling, it ended up being just as expensive as having filled up traditional gas powered vehicle. Right. Going to the gas station.

[Joel]

Yeah. Loading up on that, that battery at home. That's the way to do it. On the money.

[Matt]

Yes.

[Joel]

Yeah. If you're filling up on the road. Yeah. You're going to pay a lot.

[Matt]

So basically what I learned was that, okay, I don't want a Tesla and also I'm not going to rent another Tesla again because it just didn't really work out for the type of trip that we were taking. So you might be surprised to hear that I just rented another Tesla for a trip that Kate and I were taking.

[Joel]

Change your tune.

[Matt]

Here's the thing.

[Joel]

In the span of three seconds, would.

[Matt]

You rent a Tesla if it was substantially cheaper than, than even the most affordable economy, traditionally gas powered vehicle?

[Joel]

Yes, I would. And that's why I've been renting EVs lately. When I rent a car.

[Matt]

It's so great, dude. So the, I went to one of the site aggregators, you know, where it's got all the different places that you can rent from. And then I hopped to one that I had rented from somewhat recently just to see directly on the site. And they were running specials on electric vehicles specifically. It wasn't just Tesla, it was also like the, the Ford Mach E. I.

[Joel]

Rented a Subaru electric car recently.

[Matt]

Money.

[Joel]

It was great. Enjoyed it. Yeah.

[Matt]

So it's interesting they made one.

[Joel]

Yeah.

[Matt]

So here's the deal. It was $96 total for this rental as opposed to a little over 300.

[Joel]

Oh my gosh.

[Matt]

For even the most economy, whatever gas powered vehicle.

[Joel]

That's worth the hassle, man.

[Matt]

Yes. Well, and here's the other thing. I of course looked to where we were traveling and there were superchargers very close by to where we're planning to travel, but I specifically paid like 10 bucks more and got the long range because I think there's a chance we may not even need to charge at all during that trip. Because, you know, they charge you if you bring it back without over 90% battery life, but it's only 35 bucks. And so, like, I might be able to save 10 bucks or something. I don't know, maybe it's only 15 or 25 bucks to charge it myself. But the worst case scenario is, let's say we're tight on time, we gotta make it back to the airport. What do you do? You just take it back and they just charge you 35 bucks, which is still. There is still a massive savings to be had there, going with the EV as opposed to a more traditional vehicle. Last wanted to share that. I like that because I think there's good savings opportunity out there.

[Joel]

I like that. I've been shocked at the discounts on EVs too, when you're renting a car. And last, I was staying in an Airbnb last time, and so I just messaged with the folks ahead of time and I said, hey, do you have a place I can plug in over there? Just trickle charging is fine. And they were like, yeah, we'll leave an extension cord out through the garage.

[Matt]

There you go.

[Joel]

So I was like fueling up for free. Yes. And so, yeah, just ask the question of your host if for a hotel or wherever you're staying, just, just check and see. Maybe you don't even have to pay for a supercharger. Maybe there's someplace close by you can charge up for free.

[Matt]

In our case, we don't have. It's not a. It's not an Airbnb. So there's not going to be the ability to run that extension cord out otherwise.

[Joel]

I don't know, man.

[Matt]

Did I tell you that?

[Joel]

Go to Lowe's, get a 200 extension cord, just like tap into this house nearby.

[Matt]

Did I tell you that I literally threw an extension cord in the minivan because we rented a plug in hybrid for the road trip.

[Joel]

Oh, okay.

[Matt]

And because I wanted to have the option wherever we stayed, because we stayed at Airbnbs the entire time to be able to use the extension. Dude, we absolutely use that extension cord. It was a smart thing to throw in the trunk. Saved you some money with that Chrysler Pacifica. But yeah, it was just. This is just a piece of advice out there for folks to make sure to shop around instead of going with the default, even when the default tends to be a money saver like Kayak or Priceline or Skyscraper, one of those sites that I did check. Sometimes it pays to go directly to the the business website itself and to find the best deal.

[Joel]

Don't forget Costco's auto rental program as well. It's a good place to look. All right, let's mention the beer we're having on this episode, Matt. This is called Marbit's by Southern Grist. It's a marshmallow ipa. We'll give our thoughts later. Should be interesting.

[Matt]

Yes, we will.

[Joel]

All right, if you have a money question we'd love to hear from you. Just go to howtomoney.com ask, read the instructions or record your question on the voicemail app of your phone. Email it over to [e-mail] we want to hear from you. Hopefully we can take your question next week on the show. Matt, let's get to a question specifically about a 401k loan and a little nervousness about not being able to pay it back in time.

[Nathan Parkinson (Listener)]

Hello, Matt and Joel. My name is Nathan Parkinson from Pocatello, Idaho. I have a 401 through my work right now that I have a 401k loan through and I was thinking about moving jobs and one of the places I was planning on going to doesn't have a 401. The difference in pay might be at least $30,000. So I wasn't sure if I can't pay off that loan. I've read that 60 to 90 days that you have to pay it off or you might get charged on your tax, taxes. I just wanted to be able to find out if I should be looking for a different job that actually offers a 401k loan and how I might be able to find something that can either get a match or if it doesn't have a 401k loan, how I go about getting more into my IRA, 401k. Thanks, Matt and Joel.

[Matt]

Ooh, Nathan's in a tight spot here, Joel. I certainly hate to see him not take this job that pays a whole lot more because of this decision that he's made here in the past.

[Joel]

Sure.

[Matt]

Honestly, these are the sorts of situations, these are the things we want folks to avoid completely. And it's why we tend to be against 401k loans. Because the common refrain that you hear when you talk about a 401k loan is like, hey, you're just going to pay yourself back. No harm, no foul.

[Joel]

Even that interest that you're paying. Yeah, it's going back to you, right to you.

[Matt]

But the assumption is that because of that, I guess it's just not that bad. But when you take the money out, it's also not in the market, it's not growing on your behalf. And then you might end up in a situation like Nathan where you are looking for a new job or maybe even worse, maybe you are in a situation where you get laid off. And oh, you know what, that 401k loan, it can present a real issue if you don't have the ability to pay it back pretty quickly.

[Joel]

That's right, yeah. So the 401k loan, it sounds like the easiest way to get money. Hey, it's better than a lot of other options and it might be depending on your ability to pay back how long it's going to take. But there are a lot of potential downsides too. And think about the run up we've seen in the market, Matt, what Nathan took out. Not to point into this sore spot, Nathan, sorry, but it hasn't been growing as the market's been up like what, 35% essentially over the past five or six months. Nathan's right. If he doesn't pay this loan back in a timely fashion, he's going to owe money. Right. Because it's going to be treated as a disbursement. So I think he said in his email he owes about $5,300 toward this 401k loan. And so what does that look like? Well, it means he's going to pay ordinary income tax on that money as well as a 10% early withdrawal penalty on top. So I don't think Nathan's 59 and a half. Because of that, he is going to owe that extra 10% and that's, I don't know, to somebody like me, that feels like a Harry Houdini gut punch. Matt, you remember that's, that's how he ended up dying, right? Was like somebody punched him when he wasn't ready. And was it.

[Matt]

I thought it was like a cannonball.

[Joel]

Oh, I thought it was somebody. I think, I think it was like some young fella because he would let people come punch him as hard as. Yeah, as hard as he could during his acts. And they were like, oh, I'm going to punch her. And he wasn't, he wasn't ready, he wasn't doing his act. It was like I sucker punched him. Exactly, exactly.

[Matt]

I don't like that.

[Joel]

Of course he wasn't ready. Internal bleeding, all that kind of stuff, that's what this feels like to me.

[Matt]

You probably got to feel pretty bad about yourself if you're the guy that, like, initially you're like, yeah, I got you. But then you're like, oh, I'm sorry.

[Joel]

Dude, I killed the greatest musician magician of all time. You know?

[Matt]

Kill the guy.

[Joel]

Yeah, well, in the specifics matter here, by the way, because the IRS says that you need to pay back this 401k loan before you file taxes. And you could even wait until October with an extension next year. That'd be fine with the irs. They're okay with that. But your employer likely has more stringent requirements in their plan documents, and that's what you're really gonna wanna pay attention to. Most plans require that you pay back that loan in full right when you leave your job with no grace period. Your employer, I don't know, Nathan, mentioned like, 60 or 90 days. Yeah. There's a chance that your employer has that written into those plan documents. But don't count your chickens before they hatch. Don't assume this. Make sure that that's the case, that that's exactly how your employer treats this disbursement. You want to just make sure you're following the letter of, like we just said, the adverse consequences could be significant.

[Matt]

And this is one of those really important things where, man, I would be willing to make a lot of sacrifices in order to pay this 401k loan back in the required time period. Like, for instance, I might even be willing to delay taking that new job, if that's something you have any control over, in order to pay this, the sucker off, maybe even take out, like, I would. I think I would certainly be willing to drain my emergency fund, maybe even borrow from a HELOC in order to avoid that negative outcome. And then, of course, make a plan to replenish that E fund. Make a plan to pay back that HELOC 8, like, as soon as possible. I certainly. I don't think I would go as far as, like, taking out a payday loan, Joel. That feels a little. A little too far.

[Joel]

But, like, the only way I'm doing that, Matt, is if there's some mob boss who's threatening to break my kneecaps. And in that case, I'd probably take out a payday loan, but that's it.

[Matt]

You might want to consider it.

[Joel]

And I'm not in that kind of trouble right now.

[Matt]

I don't think I would do this, but depending on your situation, you might even want to, like, maybe borrow from a relative with the assurances and this is obviously assuming that you are taking this very seriously and you plan to not borrow from yourself like this ever again. But just make assurances to them that they, that you will be paying them back regularly over the coming year or so. But man, just that difference in your salary right there, that $30,000 is significant and I wouldn't let this 401k loan keep you tethered to that significantly lower paying job. You know, I think where there's a will, there's a way, but certainly make it a high priority to completely eliminate this.

[Joel]

Yeah, I mean it'd be, it'd be kind of like a self inflicted wound. To say I'm going to stay at this job if I really want to move on. I'm going to get paid a lot more just because of this 401k loan. There's, there's got to be a way. And you mentioned some good methods, Matt, of finding the money to get rid of this 401k loan so that you're not, you know, keeping that money out of your 401k forever and that you're also not paying the tax and penalty, which is a big deal. You also mentioned, Nathan, that you're holding out for another job or for an employer that offers a 401k, which I.

[Matt]

Will say, by the way, to reiterate, we're talking about 401k loan. Not because at one point he said what if the new one doesn't have a 401k loan? I think maybe he misspoke and I think he's specifically talking about a 401 plan. Yeah, specifically. Especially one with a match.

[Joel]

And you do have to consider that you and I talk regularly, Matt, about the secondary benefits that employers offer and those benefits add up incredibly. Some, you know, some employers offering health insurance with a significant discount where they'll pay like 80 or 90% of the premiums for you. Yeah, and straight up free.

[Matt]

I got friends that are having babies and everything is just like completely covered at super fancy employers has me just weeping those Cadillac healthcare plans knowing how much money I've spent on labor and delivery over my lifetime.

[Joel]

I know as self employed individuals the healthcare stuff, I've had the privilege of.

[Matt]

Being able to do that.

[Joel]

Yes, yes. So those things really matter. And a 401k plan is incredibly helpful. I think not having access to a workplace retirement account would be a bummer. No match, no ability to shovel chunks of money into a tax advantaged account. That's a downer. It's a downer for Anyone who wants to be smart with their money, you're looking for that in an employer and you're hoping that they're competitive in that way.

[Matt]

But it's not a deal breaker, though. No. Especially given the difference in income. And here's the other thing too that I want to address. You can still get really wealthy, Nathan, with just an IRA.

[Joel]

Yeah. So I can be a Roth IRA millionaire in what, 36 years?

[Matt]

35. At seven and a half percent. It's 35 years.

[Joel]

I was way off. It's a year year right there.

[Matt]

That's pretty incredible in my opinion. And that's just the. I mean, I know for a lot of folks it might be. It's difficult for them to max out an IRA every single year, as opposed to a 401k. You can become a 401k millionaire in as little as 20 years. But at the same time, who's maxing out their 401k? I know some folks are, but there's a lot of folks who are saying $23,500 dudes, I'm sorry, but I ain't got that kind of money sitting around.

[Joel]

Right. That'd be a third of my income or that'd be half of my income. And that seems impossible, but it's still.

[Matt]

Possible, even just with the boring old IRA at your disposal.

[Joel]

And well, there's that, but let's just say this. Let's say Nathan plans to invest at least half of just a raise, that he's getting a $30,000 raise.

[Matt]

Boom.

[Joel]

That's, hey, maxing out right there. A Roth IRA every year just became super easy. If he's got a high deductible health care plan through the employer, an hsa, he can max that out too. And then he's got more money left over to toss into a taxable brokerage account as well. So he's just got a whole bunch of accounts at his disposal. It does not have to be the workplace retirement account, the 401k or the TSP at other employers, or a 457B like it can. It can be some of these other accounts that are widely accessible to almost everyone. It doesn't have to be a tax advantaged account through your employer. I think that makes it easy because it's deducted from your paycheck. It's automatic. Right. And you don't really have to think about it. That's one of the perks.

[Matt]

You don't really feel it.

[Joel]

That's right. So you're going to have to make a proactive plan to save for yourself in some of these accounts, including probably in all likelihood, but automatic contributions monthly from your bank account towards some of these accounts. I think you can just, you can still do an incredible job saving for your future without an employer plan. It just takes more intentionality and it falls more directly on your shoulders. But I wouldn't let that especially, especially with a massive pay increase like this. I would not let that be a deal breaker by any stretch of the imagination. Sure.

[Matt]

And again, we're talking about investing in your ability to grow wealth here. But let's make sure that that, Nathan, that your first order of business is 100% to be able to pay off that, that 401k loan. And, and honestly, just to be able to, man, let's just stay away from that altogether in the future as well.

[Joel]

All right, we've got more money questions to get to Matt, including listener who wants to limit their grocery and restaurant spending. We'll get to that and more. We'll get to that and a whole lot more.

[Matt]

This episode is brought to you by Navy Federal Credit Union. With rising housing prices and steeper mortgage rates, Navy Federal knows homeownership may seem too expensive to be achievable, but that's why they offer a Home Buyer's Choice Loan that can open the door to affordable homeownership. Navy Federal's Homebuyer's Choice Loan has no down payment options available, which means you don't need to wait years to save money. And with their no refi rate drop, you may be able to lower your rate in the future without refinancing.

[Joel]

Plus, while most lenders require borrowers to purchase private mortgage insurance unless they can make a 20% down payment, Navy Federal doesn't require PMI. Finally, they offer fixed payments, so your monthly payment will always be the same. So if you're looking for your first home or your next home, you can open the door with a Navy Federal Home Buyer's Choice loan. Visit navy federal.org to learn how you can achieve home ownership. Navy Federal Credit Union terms and conditions apply. Equal housing lender loans subject to approval and eligibility requirements. Learn more@navy federal.org hey, it's Joel and Matt from how to Money. Matt, it's almost spooky season. And do you remember the Halloween we spent together in Ireland?

[Matt]

How can I forget, Joel? Nothing screams spooky season like driving through the Irish countryside in the dark while it's raining, visiting abandoned castles.

[Joel]

The best part is that we got to experience a couple of amazing Airbnbs along the way, like one in a tiny village right off the coast. And something about walking right out your door into the fresh Irish countryside that just makes a trip spectacular.

[Matt]

It was beautiful. And if I remember correctly, that was the house that also had amazing folk art, but it was Irish folk art, so I feel like it was hitting you like on all cylinders. All the fields, the one we shared with the host and her kids to save some money, I actually remember that one. I still remember sitting around her wood burning stove while she shared some of her favorite local spots for us to check out the next day. That trip was unforgettable and it was super affordable, which as you know, we love.

[Joel]

If you're thinking of traveling this spooky season, you can hire a high quality local co host to handle everything from creating your listing to designing and styling things while you're away. To find a co [e-mail] host hello divorce.

[Matt]

Yes, this is a divorce ad about hello divorce.com and you might be asking why you're hearing it. Even if you're happily married or single, chances are someone close to you might be thinking about or going through divorce. Help them skip expensive lawyers and unnecessary stress. Tell them to visit hellodivorce.com for clarity, savings and peace of mind. Because sometimes being a good friend means sharing the right resources. Hellodivorce.com support your friends can trust. All right, we are back from the break. We've got more listener questions to get to. Joel, this doesn't happen very often, but we're going to hear from a listener who is been listening to the podcast for quite a while longer than my mom's been listening to the podcast. Let's hear from Bryant.

[Bryant (Listener)]

What's up fellas? Bryant here from Montana, longtime listener to the show about six years and I really appreciate what you guys do. I've just got another boring investment question that nobody probably wants to hear about, but I've been pretty curious and I'm gonna shoot anyway. A little context. My wife and I are both 25 years old and we've been together since we were sophomores in high school and she actually just finished up her doctoral degree and started her career. We are very fortunate and we were able to get through school debt free, so we currently do not have any debt. As far as investing goes, I currently max out my Roth IRA and my hsa. On top of that, I have a pretty solid pension and I've been investing for about five years. My wife is kind of in the opposite boat. She hasn't been able to invest at all while she was in school, but is looking to start now. Her employer offers her a 401k with up to a 5% match and an HSA. Of course. We plan to put enough money into her traditional 401k to get the match and max out her HSA. That would put us at about 20% of our income. We're looking to up that to about 24% and we were just curious whether we should put that extra money into her 401k or whether we should open a Roth IRA for her. I'd really appreciate some feedback. Pretty curious on what I should do. I'm currently leaning towards the ira, but would love to get your guys's thoughts. Thanks.

[Matt]

All right, Joel, is this just a yes or no answer to Bryant as to whether or not you should go ahead with the ira? Let's have some color.

[Joel]

Yeah.

[Matt]

Okay.

[Joel]

Well, first off, high school sweethearts. I love. I love that. That's awesome. You guys been together for a long time and they're sophomores.

[Matt]

Yeah.

[Joel]

And he's been listening for a while too.

[Matt]

Yes.

[Joel]

He's been listening since he was a teenager.

[Matt]

Yes. That's crazy.

[Joel]

Yeah.

[Matt]

He's like, finally, I can enjoy a craft beer just like the boys can, right?

[Joel]

Exactly. And I mean, it's no wonder that he's crushing it already. Right. And his wife has her doctorate at this young age as well. Graduating debt free. That's just an incredible way to get started. Like talking about getting off on the right foot. I mean, that's an understatement for where Bryant and his wife are going in life. I mean, they're just starting off with everything kind of going in their direction, the wind at their backs.

[Matt]

Yeah, they are doing all the right stuff already. The Roth ira, the hsa, a pension as well. So I guess he's got some sort of old school government job perhaps. I don't know. But he's doing basically D all of the above and it's helping him to sock away quite a bit of money and in, let's say, very tax friendly vehicles as well. I'll say. Brian, like, I wasn't necessarily picking up any of this in your voice, but the fact that your wife hasn't started investing yet is nothing to be too worried about, man. Like, she's been working her butt off. She's been getting that debt free degree, which is incredible. And the higher likely income that she is going to be able to earn, that she's going to be able to garner will be well worth it as far as a standard of living, how much you're going to be able to invest, ultimately leading to greater levels of financial freedom, financial independence. So kudos to to you both for crushing it like that.

[Joel]

I love too that, that he said that 20% of his income, it doesn't kind of feel like quite enough. He wants to ramp it up to 20. A lot of folks, Matt, they continue to increase their standard of living as that income goes up. Maybe they kind of bump up their 401 contribution by 1% each year or something like that. But even then, the amount of money you're investing, it might not be keeping pace with the rate of pay increases that you're getting. So actually, as a percentage of your income, you're not doing as well as you were in those early years. The truth is not having any student loans, which is, I think, rare for people, especially with the amount of degrees they've gotten in their household. That's hard to come by.

[Matt]

Oh yeah.

[Joel]

But not having those student loans makes it even more feasible to dedicate more of your resources towards investing for your future. And there's just something incredibly powerful. But delaying some of those lifestyle upgrades intentionally, right when you're doing it on purpose, for a missional purpose of having greater levels of financial freedom earlier in your life. And speaking from the other side of 40, Bryant, like, especially if you plan to have kids, funneling more money away now is going to allow for those greater levels of work and life flexibility when it has the most impact. Matt, you and I talk about this regularly just as friends, but like where the happiness curve, where it hits the bottom is typically right where you and I are in life. And we feel like we're living our best lives now because we're not worried about, we're not trying to build this like nose to the grindstone career. And we're also not worried about finances because we front loaded a lot of that sacrifice. I think that's where a lot of people find themselves, is they're like, I guess I need to start saving for retirement. I haven't done anything yet. And so they just feel like they have to work all the time and they're missing out on a lot of the relational and familial things that really make life worth living in this spot in life in particular.

[Matt]

Yeah, there are just more responsibilities that are thrust upon us as we're trying to achieve oftentimes at this age, career success. But then there's demands being asked of us from as a kid or I'm Sorry, like as a son or a daughter from our parents as they are aging from, from the standpoint of what it is that we're trying to be able to provide for our kids, for them as well. But I think keeping that lifestyle creep in check is basically what you're alluding to. And I think just like I picture the horse, you know, like the horse is pulling the carriages in the cities and they got the blinders on because it doesn't really matter all the craziness that's going around them out there in the city. All they need to be able to do is just to walk exactly straight ahead. And I think if you can kind of keep the blinders on from a lifestyle standpoint, it's like it doesn't really matter that that guy over there or your old friends from high school or college are going on this trip or they're doing that. Man, such a great reason to get off of social media so that you're not keeping up with the lifestyle upgrades that lots of other folks are opting to do, whether intentionally or not intentionally. But what we're saying here is to continue to intentionally limit some of your spending, and it's going to make socking away more money for future. For future you just even more feasible and easy.

[Joel]

My buddy Jim just bought a boat. Maybe, maybe that's what I should do with my, my extra income.

[Matt]

And it's like, oh, I guess it's time that we all get boats, right, huh?

[Joel]

It's like, no, enjoy your buddy Jim's boat. Like, don't get one yourself and keep investing. It doesn't mean that you can't over time, like, increase your spending. Right. I think you and I have also found ways to loosen the reins in regards to that. But you want to do the right things first. And he's at a particular age and place to be able to kind of double down on such.

[Matt]

Yeah, it can have such a massive impact. And for, for him, he's thinking about bumping it up like 5%, right? Well, if you run the numbers that simple, increase 5%, it can cut five years of your working timeline off. Well, we'll link to a classic Mr. Money mustache post that really very clearly and easily lays this out, but it might even incentivize you to try to even increase your contribution amounts over time. But the heart of your question here, 401k versus Roth IRA. Yes, we are leaning the same direction you are. And I'm going to say Roth ira certainly get the full match with your 401k of course. But then, or I guess with your wife, but then make sure that you are maxing out her Roth ira. And if you want to contribute more than that, increasing 401k contributions after that can make sense. So could opening a taxable brokerage account if early retirement is a goal of yours. But the taking the Roth route is great because it's such a flexible account. It's giving you greater levels of tax flexibility in the future as well. And actually on the note of tax it like you are likely going to continue to earn more and more money. So you are in a, you're currently in a lower tax bracket. Let's go ahead and bite the bullet now. Pay the tax man and never have to worry about taxes in that account for the rest of your life.

[Joel]

Well, at some point you might get to the point where regular contributions to a Roth IRA aren't allowed because it's not even possible. And so actually being able to fill that bucket up while the bucket's accessible makes sense because at some point you might lose access to that bucket. I like the kind of having some pre tax, some post tax money. It allows you that tax flexibility in the future. I think that's underrated because later in life you can kind of. It's like a choose your own adventure when it comes to how much you pay in tax. Depending on which buckets you're withdrawing from. I do think that can be a really smart way to apportion your funds. And it just makes sense too in regards to a 401. Get the match, you're sticking some money in there, then go into the Roth IRA and then go back into the 401. You might be neck and neck those accounts with how much money you're setting aside in both of them over time. Then when it comes time to tap them, you've got a lot of options. Right. Love it. That flexibility comes in quite handy. We've had different guests on the show, Matt, who have different post tax and pre tax preferences. I think there's a compelling case for both. But I do think that combo of the 401, get the match, the Rothnecs, it's like this lethal in a good way option for people and I think it's the route that most people should consider. There's certainly outliers where if you're a super low income earner, you might want to go Roth IRA and Roth 401. If you are an incredibly high income.

[Matt]

Earner, like might be time to get the tax break on both.

[Joel]

Yeah, yeah. So those are it's. There is no one size fits all. But I do think for the average person, that's the combo that makes the most sense.

[Matt]

And specifically for Bryant's situation, it sounds like, based on what he told us, that's what I would do. One caveat, though. Like, we've been. I was just praising his desire to want to increase his percentage of saving and investing. I will say this is just assuming, like, you are the one that has listened to us for so long, and so I'm just assuming that your wife is also on the same page. That being said, just for the sake of argument here, let's say that she's starting to kind of change her tune a little bit. It's just like, man, we've been working so hard, and I want to be able to go with 2 ply toilet paper or, like, maybe it's time for a second car. What's something else that comes in twos? Comes in twos, Joel? No, but I want twins.

[Joel]

That'd be a much bigger expense. That would be for many years to come.

[Matt]

I just want to say that it's not just about what your goals are. Obviously, like, y' all are a team, right? I mean, y' all are married, y' all are. Y' all are partners for life. And so don't be overly frugal. And maybe what she would potentially call cheap in an effort to sort of win this little battle and you end up losing the war decades down the road. Like, the goal is for y' all to amass incredible amount of wealth so that decades down the road, you've won the war. You're both living the life, you're proud, and you can look back fondly on the sacrifices that you have made as a couple. I just wanted to throw that out there.

[Joel]

Yeah.

[Matt]

I just want to make sure that you are reaching some of those goals that you'll have together, that they are, in fact, both of y'. All.

[Joel]

What is he should be telling his wife? Matt and Joel told me to save 60% of my income, and she hates us because we just ruined her life and like that. But that's, I think, where some people get sometimes when they start learning about compounding returns and what that can do. And they're like, I'm just going to put all of my eggs in that one basket.

[Matt]

You've seen the truth and you can't unsee it.

[Joel]

And compounding returns are awesome. But we would also say life has to be lived, and so you want to take advantage of both those things. Living an awesome life and saving and investing for the future. But, Bryant, best of luck to you, to your wife. You guys are doing awesome and I'm sure you'll continue to do so. Matt, let's get to another question. This one comes from someone who's in the money advice space.

[Angela (Listener)]

Hi, Matt and Joel. This is Angela in Richmond Hill, Georgia. I've been listening to your show for several years now and want to thank you for your thoughtful content. I'm an accredited financial counselor, and I really like your Ask how to Money episodes, as it makes me think about how I would respond if they were my clients. I did want to comment on two listener questions. The first was from around January of this year, and I just haven't gotten around to doing a voice memo. The listener was asking about maxing out their tsp. While maxing out early might seem like a good idea, once the TSP is maxed, the employee can't contribute anymore, which means they can't be matched for the rest of the year. So they're basically essentially leaving money on the table. The second question had to do with lowering insurance costs for a vehicle the listener called a few weeks ago. One of the things a listener mentioned was lowering his liability to the state minimum, and I don't know that that was clearly addressed. While lowering or even canceling property assurance, comprehensive and collision, especially on the Honda, makes sense, lowering the liability is exposing him to much greater risk. I find that most people don't understand the difference between property and liability on their policies and was curious about your thoughts. Thanks so much. Have a great day.

[Matt]

All right. Well, Joel, what do you think about Angela's feedback? Should we start a new segment called Joel and Matt Stinks?

[Joel]

I don't think so. Okay. Yeah, that might be ripping off somebody else.

[Matt]

Okay.

[Joel]

Okay. We could. Joel and Matt suck. I don't know.

[Matt]

Yeah, that's totally different.

[Joel]

Or are totally awful. Joel and Matt are totally awful. Maybe that. No. But if you do have, like, feedback. I love stuff like this. And we're like, oh, yeah, this is a good forum. I think, right now.

[Matt]

And it helps me to realize, too, that if we haven't parsed out, I don't know. There's nuance in a lot of these questions. And sometimes we. Sometimes we'll gloss over certain aspects of.

[Joel]

It or we'll miss something in a question.

[Matt]

Sure.

[Joel]

And it's kind of important. And so maybe we answered it three quarters of the way and we certainly left out a quarter. Or some people just disagree with our advice sometimes and they think that Maybe, Yeah, we really could stand to be informed. So we appreciate this sort of feedback. Love it all. I think we try to say regularly too that there's a lot of subjective nature, just like in our answer to the last question, to our advice. And even the way we view some of these things has changed since we started the podcast in terms of like balance and in terms of how we think about retirement and work. And that's informing how we answer questions. How do you think about life?

[Matt]

Yeah, yeah, it just depends on what aspect of life that you are taking into account. Like there's you got the financial side of things, but then you've kind of got the life fulfillment side of things and you've got the work satisfaction side of things. And there are a ton of different factors, for sure.

[Joel]

By the way, one thing Angela mentioned, she said that she was a. What? She said she was a budget coach or a money counselor. Money counselor. Right. And I think that's super cool. You and I, we've had people in her position on the show in the past for interview segments. And I think a lot of times knee jerk people go to financial advisors, they think that's the pro they need. And financial advisors can be expensive and it might not make the most sense for them where they're out on their wealth building journey. But a money counselor or a budget coach can often be a great use of your of your money for a specific period of time as you're trying to learn the ropes and you want some personal one on one feedback. So Angela, we're glad you're out there doing your thing and really do appreciate your feedback.

[Matt]

That's right, yeah. And Angela is right about maxing out your workplace retirement accounts too early, like for instance, a 401k or a tsp that she mentioned. And so again, for many folks this sounds impossible, right? Like again, we're Talking about over $23,000 over the course of a year. I think a lot of folks are thinking how am I supposed to make that happen, let alone doing it faster than over the course of a year.

[Joel]

Right. My problem is not that I contributed too quickly.

[Matt]

Retirement accounts like the worst humble brag of all time, but there are some go getter financial independence minded folks out there who really do attempt this. And so in an effort to just get that out of the way, they just ratchet up their contribution amounts to the sky getting much smaller paychecks for a while until they hit that max early on, which maybe emotionally feels really good, but it certainly seems like you're you're doing the right thing here, but you might be leaving money on the table like Angela mentioned, if you max out your contributions, let's say by June, well, you run the risk of missing out on any mashed dollars that would have been yours had you taken just the steadier Taurus approach over the course of the year.

[Joel]

And similar to an earlier question, I mean, so much depends on your employer's performance plan documents because in some cases you won't be missing out on the match and in others you will. The best approach is typically to figure out what your bi weekly contribution should be in order to make 26 equal investments with each paycheck. That leaves nothing to chance. You are doing equal investment amounts. And yes, Matt, you talk about funding the Roth in full on day one of the year as soon as you possibly can because that way your money is invested for a longer time. And I think like people want to optimize all the way. That's kind of what they're going for here to, to, to fund their account early. But if it means, yeah, your money's invested longer but you have fewer dollars to invest because you're not getting the full match, that's a problem and you want to avoid that. But then some companies will have language in their plan around something known as true ups where they'll ensure that you get the full match even if you stuffed all that money into your 401k early on. And they'll basically cut a check at the end of the year for whatever match you might have missed out on during that year. As long as you max it out, you're going to get the full amount of the match that the employer offers. You just know what your plan documents say because some are generous in that way, others are not. And you don't want to make a mistake and miss out on matching dollars because you funded too early.

[Matt]

Exactly. And this might be something you have to dig into a little bit because there probably aren't going to be a ton of folks at your company who are investing in this way.

[Joel]

That's the question the HR person does not often get.

[Matt]

Exactly. So you certainly reach out to them. But it might take you doing a little command f searching some of these terms like true ups and having to dig in deep to become a little, to become an expert there on your specific plan. Angela also referenced insurance. And this is a case where you don't want to be cheap. Right. I think especially if your vehicle is older, you might want to eliminate comprehensive coverage in order to save on insurance. Costs in order to keep that money there in savings. But it's one thing to shop around and compare rates with other insurance companies, but if you are cheap, you might opt for inferior coverage amounts putting you at a significant financial risk. And we're specifically talking about liability insurance here because state minimums, they are not indicative of what your coverage should be. There is no, there's no one size fits all answer to how much you should be insured for. Because my answer would be very different if I was like a previous caller, 20 or 25 years old, my net worth is like zero or even negative. Right. If I've got 10, 20, 30,000 in student loans, there's a big difference between that and where I've been. After, let's say decades and decades of investing regularly in the market, insurance becomes more important. Yeah, it's more initially it just kind of seems like a nuisance. It's like, oh, this is thing that you have to do. But the older you get and the more wealth you build, it's, I see it with rosier colored glasses. As I get older, it's like, oh man, what a great thing to have to be able to make sure that I've mitigated that risk.

[Joel]

Yeah.

[Matt]

We won't get into specifics here, but when it comes to the liability insurance that we have on our old 190,000 mile minivan, Joel, I've got 20 times what our state limit is.

[Joel]

Wow.

[Matt]

Which sounds kind of crazy, but not when you consider the, I don't know, some folks are just more litigious than others. Right. It doesn't really matter if you've got an older ratty looking minivan, they're going to try to come after you. But specifically, I mean we live close to a fairly, you know, we live in a big city or near a big city where there are like Lamborghinis driving down the interstate. And when I see that when I'm sharing a lane. Yeah, sharing the interstate highway lane with like a Lambo, A, you try to.

[Joel]

Race them in your minivan.

[Matt]

Hey, I'm getting into a different lane because I don't want to be behind them. But B, like that's a really expensive vehicle and you could easily blow through not just your state minimums, but like, like something that's even substantial, even something that's 10 or 20x, it would not be difficult to blow through some of those liability minimums. And so you need to keep all this into account where you live that matters. Right. And so I guess that's what I'M getting at here. Like for instance, if you lived in a small little town where you know everybody and nobody's really suing each other and everyone drives 10 year old Toyota pickup trucks. Okay. You probably don't need to go with like some super off the charts coverage amount.

[Joel]

Yeah.

[Matt]

But it's just another instance where your context and specifically where you live and where you're driving it matters.

[Joel]

I think a lot of times frugal people are. They're getting the quotes and they are getting quotes for state minimum coverage and they're not thinking about well, how much do what are my insurance needs. And so the it's. They're just comparing prices between the lowest common denominator insurance policy and they probably need to get quotes for insurance is going to cover them in case of a more substantial claim or encounter with a Lamborghini or something like that. Right. So yeah, you do need to be careful and it's kind of like you must be over 48 inches to ride this ride or something like that. They still let people as tall as me ride those rides. Right. And so I think you don't want the bare minimum. That's not going to be enough for a whole lot of people. So I do appreciate Angela mentioning that. Not sure why we didn't address it and answer that question. I don't even remember that question right now, Matt. But I think it also, it might make sense if you're kind of confused, you're not sure how do I decide what sort of coverage I need? This is going to vary person to person. Kind of like you're mentioning, you might want to hire an independent insurance agent, not just to help you shop rates with a bunch of companies, but to offer some advice. Right. About what kind of coverage limits you might need given your financial situation. And my guess is an independent insurance agent should be able to help you on that front.

[Matt]

Yep. An independent broker, even with homeowners, the ability to talk through replacement costs. Right. Price per square foot, what just kind of what the trends are. I think that can be really helpful.

[Joel]

For what are the trade offs between me going with a $2,000 deductible versus a $5,000 deductible. What are the premium changes? Can I self insure for that? Those are good questions to ask. And then there's. Yeah, there's a site called trustedchoice.com where you can find an independent insurance agent near you. So be sure to check that out. That could be an important task for you to look into this week or in the coming weeks.

[Matt]

Absolutely, Joel. We got more to get to. We're going to hear from a listener who's interested in cutting back on their grocery spending, as well as how much they're spending going out to eat. We'll get to that and more right after this. This episode is brought to you by Navy Federal Credit Union. With rising housing prices and steeper mortgage rates, Navy Federal knows homeownership may seem too expensive to be achievable, but that's why they offer a homebuyer's Choice loan that can open the door to affordable homeownership. Navy Federal's homebuyer's Choice loan has no down payment options available, which means you don't need to wait years to save money. And with their no refi rate drop, you may be able to lower your rate in the future without refinancing.

[Joel]

Plus, while most lenders require borrowers to purchase private mortgage insurance unless they can make a 20% down payment, Navy Federal doesn't require PMI. Finally, they offer fixed payments, so your monthly payment will always be the same. So if you're looking for your first home or your next home, you can open the door with a Navy Federal Home Buyers Choice loan. Visit navy federal.org to learn how you can achieve home ownership. Navy Federal Credit Union terms and conditions apply. Equal Housing lender loans subject to approval and eligibility requirements. Learn more@navy federal.org hey, it's Joel and Matt from how to Money Matt, it's almost spooky season and do you remember the Halloween we spent together in Ireland?

[Matt]

How can I forget Joel? Nothing screams SP season like driving through the Irish countryside in the dark while it's raining, visiting abandoned castles.

[Joel]

The best part is that we got to experience a couple of amazing Airbnbs along the way. Like one in a tiny village right off the coast. Something about walking right out your door into the fresh Irish countryside that just makes a trip spectacular.

[Matt]

It was beautiful. And if I remember correctly, that was the house that also had amazing folk art, but it was Irish folk art so I feel like it was hitting you on like on all cylinders. All the fields, the one we shared with the host and her kids to save some money, I actually remember that one. I still remember sitting around her wood burning stove while she shared some of her favorite local spots for us to check out the next day. That trip was unforgettable and it was super affordable, which as you know, we love.

[Joel]

If you're thinking of traveling this spooky season, you can hire a high quality local co host to handle Everything from creating your listing to designing and styling things while you're away too. Find a co [e-mail] host.

[Hello Divorce (Advertiser)]

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[Joel]

All right, we're back from the break. Matt, it's time for the Facebook question of the week. This one comes from Steven. He says homeowner's insurance question. Do premiums go up on homeowners insurance for using it the same way they do on car insurance? Our house was struck by lightning. Some appliances are fried. That sounds terrible. It's one of those act of God things you can't do much about. Right. He says in the siding where it got hit is gonna need to be repaired to Our deductible is $5,000. Any guidance or advice is appreciated.

[Matt]

5,000 bucks. All right, that's. Does this bring back. Are you having ptsd? Does this bring back bad memories, Joel? So your house didn't get struck by lightning, but the tree.

[Joel]

That's right.

[Matt]

Got struck, which is why came through the roof.

[Joel]

That's right. No, I don't honestly, like, it was not a fun experience, but it could have been a lot worse. I did not. I don't have terrible memories about that situation. Yeah, fortunately, unfortunately we weren't in the house when it happened or else I probably would have worse memories. Sure.

[Matt]

Yeah.

[Joel]

So.

[Matt]

But to answer Stephen, I mean, it varies from state to state because every state is going to have an insurance commissioner and it's their job to regulate the insurance companies and enforce the rules. In most states, filing a claim will cause your insurance premiums to increase. But how much? It partly depends on the insurance company. Some may not bump up the rates all that much, while others might consider dropping you altogether. Like, you use it and you use it, you lose it, Right? Like that's one of the, one of the refrains that you sometimes hear. It's not common after a single claim, but it can happen. Which means that in your case, you do need to be careful before you file a claim. I would 100% be considering the long term consequences. And in your case, Joel, it wasn't just like a couple of appliances that got fried. Right. And having to repaint the siding where it got charred. It was much more roofing substantial than that flooring, Framing.

[Joel]

Framing.

[Matt]

Yeah, it was water damage touched a.

[Joel]

Whole, whole lot of areas, which made meant the price tag went up, which meant the reality of claiming, filing claim made a whole lot more sense. And so, yeah, how much your premiums can increase depends on a lot of factors. Right. Including the at fault nature, which. This is not the case, Steven. This wasn't your fault. This was, like I said, an act of God. The overall claim amount, that can impact too how much premiums go up for you. And rates have already been subject to higher increases over the past couple of years. Insurance companies are feeling the pain of higher payouts. We read about the wildfires in Los Angeles, read about the hurricane damage in the Southeast. It just feels like we're experiencing greater levels of more natural disasters, which means higher claim amounts. And we're also talking about just everything costing more after a significant bout of inflation. A premium increase of 20 to 40%. I don't think that would be out of the question. And if you're paying, let's say 3,000 bucks a year for your homeowners insurance right now, well, they might say, hey, you actually need to pay four grand or 4200 or 4500 starting next year.

[Matt]

I don't like it.

[Joel]

And it's important to mention that this claim is going to stick on your clue report, which would likely up your rates when getting quotes from other insurance companies in the future. So you might say, hey, definitely don't like that. I'm going to file a claim, I'm going to get paid out. And then at some point, maybe six months down the road after I've like gotten far enough away from this incident and fixing everything back up, I'm going to go to another insurance company and that's how I'm going to be able to lower my rates. Maybe, maybe, but maybe not. Because they're all going to know about the claim you filed and that's going to impact the quotes they give you too.

[Matt]

That's right, yeah. So let's go back to the deductible, $5,000. This is a good thing because it's actually helping to keep your premiums lower. And on top of that, it makes it less likely that you are going to file a claim, Steven, which keeps your premiums reasonable like we just discussed. And so I would run some numbers. How much is it going to cost for you to get these repairs done? Because if we're talking, let's say $7,000 in total or six, certainly five. Right. Like you don't file a claim. That would not make much financial sense in this case. Self insuring would be the right call. But let's say if. Oh, actually it's not just the siding. Some of the framing got charred or something. Oh, it's all the appliances. They're all on the fritz.

[Joel]

Oh, the electrical is damaged now, too.

[Matt]

Oh, my gosh. Yeah. Now we got to upgrade all. We got to upgrade our panel. And the service is actually, it's so. I don't know, I'm just making. These are terms I've heard, like as I've renovated homes, the service coming from the street, there's something wrong with that. Well, if that were to be the case and the replacement expenses and cost is coming in a good bit higher, then I think filing a claim could be the smartest move.

[Joel]

And there's always a gray area here. Like, it's never like the exact formula, I don't think. But I do think, I think of insurance, homeowners insurance as well. Mostly there for catastrophic reasons. Like if something significant happens that's incredibly beyond your ability to pay for or just doesn't make any financial sense to file a claim. So I think you're right, Matt. If it's kind of close to that deductible amount, yeah, that's something you cover. You don't involve insurance at all because you don't want it on your clue report and you don't want to raise your premiums. But if that's not the case and you've got a good bit of cash sitting on, which hopefully you do have a good bit of cash, having a deductible that high, that means you're willing to take on the responsibility of self insurance. I think hopefully you can handle this on your own. But again, there's always a gray area in there, a sliding scale, and it can be difficult to know the exact way to proceed.

[Matt]

All right, let's get to one more quick one. This is from Grace, and she writes, we are trying to find a way to limit our grocery and restaurant spending. And we thought we had a winning idea of getting Visa gift cards because the card won't let you pay when you run out of money. We could get one for each family member and not important, but a bonus. Then in our real budget, there is just the buying of the gift card for this purpose instead of a million little transactions. Grace, I hear you as the one who keeps up with the budget, all those small expenses get on my nerves. But she writes, then it turned out that there are fees to get the cards. They were quite prohibitive. Any other ideas? Cash isn't great because you can't use it to order doordash or anything like that. But maybe we will have to try it. Any other ideas? Well, I see the benefit of not being able. I see not being able to get doordash as a positive.

[Joel]

Yes.

[Matt]

Of going with cash. Let's go ahead and address that one right out of the gate. Don't do doordash.

[Joel]

Yeah. If you're really trying to limit your.

[Matt]

I hate doordash, man.

[Joel]

How much you spend eating out or just on food in general, don't make it so easy. This is the number one thing you want to eliminate. And there are other other things you can do, of course, which we'll talk about to reduce your grocery spend. But you know, doing the app based takeout orders is one of the, is one of the worst things you do. So I do think actually moving to cash is a reasonable choice here, dude. Because it's gonna prevent the worst thing in the world that you can do and it's also gonna put those limits on you.

[Matt]

Yes.

[Joel]

That don't come with fees.

[Matt]

I will say if you're looking for more convenience. Cause folks are thinking, well I don't want to like roll with hundreds of dollars in my wallet or in my purse, kick it old school and only put the amount of money that you want to spend on discretionary spending in your checking and, or whatever. Like a, like sometimes newer banks these days are calling them spending accounts but like that's, that's kind of how these accounts were created back in the day. And I think most people, including myself, like I only kind of, it's random the amounts of money I have in my, in my checking account, in my spending account as versus my savings. Like basically I try to keep as little in my checking account as possible so I can earn the interest in the savings account. Right. Like that's what us optimizers are out here doing. But I think you can take a more methodical approach and if you. So it sounds like she is tracking her spending anyway because she's talking about all the purchases that she's inundated with at the end of the month and maybe she hates them just as much as I do. But that being said, you probably know how much you're spending every single month on eating out and groceries and things like that. And so simply just move that amount of money to your checking account and then you are going to roll with your debit card. And I think that can be a nice. Granted there are always going to be workarounds. Right. Like you could just say, oh, well then I could just go in there and transfer that money over. Well, in a similar way, you could also go to the atm.

[Joel]

That's right.

[Matt]

And pull more cash out.

[Joel]

There's always a way to circumvent your desire to save money.

[Matt]

You are still potentially your own worst enemy here. Nothing is is you proof.

[Joel]

Right. There's no complete cure for humanity that Matt has found yet or that I found yet. But I think making it harder on yourself to do the things that are in your worst interest in terms of saving on your grocery bill makes a lot of sense. And then where you shop matters. We talk about that all the time. Oh yeah, low cost grocery stores. Aldi and Lidl in particular, Trader Joe's, solid for savings. Just find a grocery store where you can buy stuff for less and you know, buy the off brand stuff. The store brand stuff, I guess you might say. And I think also Matt, at least what we found is planning ahead just saves our butts. Like the more we're flying by the seat of our pants, the more likely we are to make a bad decision on a whim. And so we've been taken to like on the smoker smoking like two chickens or something like that. Yeah, on the weekend it's like $10 for two chickens right. @ Costco. And then I smoke both of them and we have like three or four meals we plan to make out of those chickens throughout the week. And so it's not very expensive, but it does take a little bit of foresight. And so yeah, I did. I think just the more you can plan and figure out multiple meals with a limited range of ingredients the weekend ahead of time, that that'll save your bacon too. And because eating out, really, when it comes down to it, I think for.

[Matt]

Most people this is the worst man.

[Joel]

The grocery store savings. You can save money there, but the biggest savings is just eating out less and eating at home more at the.

[Matt]

End of the day. I will also say that I am not totally, completely against these prepaid cards if it allows you to save even more money by the fact that you're not eating out as much or maybe splurge purchase like buying stuff like on a whim in the grocery store. I think that, hey, you got to spend three bucks. Oh, you got to spend five bucks a month in order to have this card okay, well, if it allows you to save $50, $100, 200 bucks by not eating out, then I think that might just for you, be the price of admission here in order to kind of implement some behavior change.

[Joel]

And some of those grocery stores will. If you buy the groceries online and you opt to go pick them up, someone else actually does the shopping for you. It's much easier to stick to your list. If you're not going into the grocery store itself, you're much less likely to succumb to. You're actually. It's pretty impossible to come to like the shelf on the side. Right.

[Matt]

Where buying on a whim.

[Joel]

Oh, hey, these. The chips are two for $5 this week. I should stock up. You're going to do that if you go in the store. But if you just buy online the stuff that's on your list and then you opt to go pick up at some grocery stores, you're not paying a dollar more. You're not paying anything. They'll just add that on as a service for you, bring the groceries out to your car. That can be the best of both worlds for a lot of folks, I think, when it comes to. To making it easier to eat at home and to save you money at the same time.

[Matt]

Yeah, that's right. So, Grace, we hope that helps. Let us know what you end up doing too, because I'm kind of curious to see if like, oh, going with the old school cash envelopes, if that. If that's what's required in order for you to stick to the budget. Joel, let's get back to the beer that you and I enjoyed, which was Amarbits by Southern Grist, which I'll say this isn't the first Southern. We've had a lot of Southern Grist. I think you're drawn to the Southern Grist Brewery.

[Joel]

Good labels.

[Matt]

Is that. Is that at the labels? It must be the name of the.

[Joel]

But I also saw. I'm also. We've had so many beers. I want to try something that's unique.

[Matt]

Yeah.

[Joel]

Something I've never had before. And so this was a marshmallow infused ipa.

[Matt]

Indeed it was.

[Joel]

I think this is a takeoff on Lucky Charms. It looks like it with the rainbow on the front and stuff.

[Matt]

It's literally. Yeah. It's got like little four leaf clover all over the place. It's got like the little like graveyard headstone looking marshmallow. You know, the kind of fake marshmallow that we're talking. The crunchy kind of marshmallows.

[Joel]

So what are Your thoughts?

[Matt]

One of my favorite.

[Joel]

Yeah, me neither. I was gonna say one of my least favorites, actually. It's got, I think I just don't like marshmallows either.

[Matt]

I think that's it. Like, it's very. It's not often that I'm like, oh yeah, with some marshmallows. Like, even when you kind of toast it just right when you're doing s' mores or whatever. That's not really, that's not my jam. But I will say the creaminess lent itself to the IPA as far as the. Because sometimes you'll have IPAs that have lactose in there. But there's something about this one with the bitterness from the hops that seemed to kind of. Kind of.

[Bryant (Listener)]

Yeah.

[Matt]

That kind of clashed with the marshmallow, the sweetness that they're trying to pull out there. So it's like almost two competing flavor profiles that were going head to head.

[Joel]

Yeah, a little bit.

[Matt]

But still fun to. Fun to enjoy and drink.

[Joel]

It's good to experiment. This experiment fell flat on its face.

[Matt]

We shared it. So it's a 16 ounce. Can I drink my 8 ounces? Looks like you left one ounce.

[Joel]

Might not finish. Yeah. All right, that's going to do it, Matt. For this episode we'll put links to the show notes, some of the, some of the stuff we mentioned up on our [e-mail] that's right, buddy.

[Matt]

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

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