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.

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.

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]).

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]).

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])

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]).

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])

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])

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

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.

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.