Podcast Summary: How to Money – Episode #979 Release Date: May 5, 2025

In Episode #979 of How to Money, hosts Joel and Matt tackle pressing financial questions from their listeners, offering practical advice and actionable strategies to help everyday individuals achieve financial stability and growth. This episode delves into three main topics: breaking the paycheck-to-paycheck cycle, selecting the best accounts for saving a home down payment, and navigating student loan forgiveness plans. Additionally, they address questions on using credit cards for medical debt and deciding whether to sell an infrequently used vehicle to accelerate debt payoff.

1. Breaking the Paycheck-to-Paycheck Cycle

Listener Question: Ann from California Ann, a 61-year-old single woman, finds herself trapped in the paycheck-to-paycheck cycle and is seeking assistance from a financial coach who can provide personalized budgeting and financial planning without focusing solely on investments.

Hosts' Response: Joel and Matt emphasize the importance of seeking a budget or money coach rather than a traditional financial advisor, who typically prioritizes investments over budgeting. They recommend low-cost options and reputable organizations such as:

• Money Management International (MMI): Provides debt management and personalized budgeting assistance.
• National Foundation for Credit Counseling: Offers certified counselors to create tailored financial plans.

Matt underscores the value of community and open conversations about finances to reduce shame and foster accountability. Joel highlights the significance of realistic expectations, acknowledging that overcoming financial struggles often requires gradual habit changes and time.

Joel [06:35]: "There's nothing to feel ashamed about. There's a way forward."

2. Saving for a Down Payment: Money Market Accounts vs. Alternatives

Listener Question: Phil Phil is saving for a down payment on a house within 12 to 18 months and is considering a money market account versus a high-yield savings account or a Certificate of Deposit (CD).

Hosts' Response: Joel and Matt discuss the suitability of various savings vehicles based on Phil's timeline and liquidity needs:

• Certificates of Deposit (CDs): Not recommended for Phil due to potential penalties if funds are needed before maturity.
• Money Market Accounts/Funds: Suitable for higher liquidity with competitive returns. They mention options like Vanguard's VMFX and Fidelity's Cash Management Account, which offer features like debit cards and checks.
• High-Yield Savings Accounts: Preferred for simplicity and competitive rates without the rigidity of CDs. Online banks and brokerage firms like Betterment also provide attractive rates and additional benefits.

Matt advises against investing for short-term goals to avoid market risks and emphasizes maintaining liquidity.

Matt [22:19]: "You can't go wrong either way here because they're very similar account types."

3. Navigating Student Loan Repayment and Forgiveness

Listener Question: Heather from Ohio Heather is concerned about her sister's escalating student loan balance despite consistent, on-time income-driven repayments. She seeks clarity on forgiveness eligibility and guidance on managing the growing debt.

Hosts' Response: Joel and Matt explore the complexities of student loan forgiveness, especially under fluctuating political landscapes. They discuss:

• Income-Driven Repayment Plans: Heather's sister is on a plan that cancels loans after 20 years, but the increasing balance is alarming.
• Policy Uncertainty: The hosts express skepticism about broad forgiveness measures but remain hopeful that existing income-driven plans will stay intact.
• Strategies to Maximize Forgiveness:
  • Reduce Adjusted Gross Income: Contribute to traditional IRA, 401(k), or HSA to lower taxable income, thereby reducing loan payments.
  • Consider Marriage Filing Separately: If applicable, to isolate income.
  • Prepare for Potential Tax Bills: If loan forgiveness becomes taxable, start saving to cover possible tax liabilities.

Joel emphasizes the emotional toll and reinforces the importance of staying informed and prepared.

Joel [37:47]: "Be prepared and be ready. Be saving up."

4. Using Credit Cards to Pay Medical Debt

Listener Question: Matthew Matthew is considering using a rewards credit card to pay off an upcoming $3,000 medical bill and seeks advice on whether the benefits outweigh the risks.

Hosts' Response: Joel and Matt weigh the pros and cons:

• Pros:

  • Rewards and Sign-Up Bonuses: Potential to gain significant rewards if the balance is paid in full promptly.

• Cons:

  • Risk of Accumulating Debt: Only advisable if Matthew can pay off the balance immediately to avoid interest.
  • Exploring Medical Aid: Before opting for credit cards, check if the medical provider offers financial assistance or reduced rates.

Matt advises using the rewards card only if Matthew is certain of timely repayment.

Joel [43:14]: "I think if I had a $3,000 medical bill, I would be looking to get a new credit card."

5. Selling an Infrequently Used Vehicle to Pay Off Debt

Listener Question: Anonymous The listener owns three paid-off vehicles, including an old truck that sees minimal use. Selling the truck could provide $5,000 to pay off the house faster.

Hosts' Response: Joel and Matt analyze the decision, considering both financial and practical aspects:

• Benefits of Selling:

  • Immediate Cash: $5,000 can significantly reduce the mortgage balance or other debts.
  • Reduced Ongoing Costs: Lower insurance premiums, maintenance, and storage fees.

• Potential Drawbacks:

  • Insurance Implications: Selling a vehicle might not always lower insurance costs, especially if it affects policies covering younger drivers.
  • Convenience: Owning an extra vehicle provides flexibility in emergencies or unexpected situations.

They recommend assessing the total cost savings versus the convenience and necessity of keeping the vehicle.

Matt [46:06]: "The cost of insurance, which has skyrocketed… holding onto it when you're using it so little likely means that there isn't enough value."

Conclusion

In this episode, Joel and Matt provide nuanced and thoughtful responses to their listeners' financial dilemmas, emphasizing personalized solutions over one-size-fits-all advice. They advocate for proactive financial planning, informed decision-making, and leveraging available resources to achieve financial well-being.

Listeners are encouraged to engage with the podcast through the website howtomoney.com, where additional resources and tools referenced during the episode are available.

Notable Quotes:

• Joel [06:35]: "There's nothing to feel ashamed about. There's a way forward."
• Matt [22:19]: "You can't go wrong either way here because they're very similar account types."
• Joel [37:47]: "Be prepared and be ready. Be saving up."
• Joel [43:14]: "I think if I had a $3,000 medical bill, I would be looking to get a new credit card."
• Matt [46:06]: "The cost of insurance, which has skyrocketed… holding onto it when you're using it so little likely means that there isn't enough value."

This summary is intended for informational purposes and reflects the discussions from How to Money Episode #979. For personalized financial advice, listeners should consult with a certified financial planner or advisor.