Podcast Summary: How to Money – Episode #961 Release Date: March 24, 2025

In Episode #961 of the "How to Money" podcast, hosts Joel and Matt dive into listener-submitted questions, offering actionable personal finance advice. This episode covers three main topics: navigating rental application denials, evaluating 529 college savings plans, and exploring land investment for family use. Additionally, the hosts address concerns about feeling behind in retirement savings despite a significant salary increase.

1. Responding to a Rental Application Denial

Listener: Dejan from Georgia
Issue: Denied rental application citing "lack of real estate secured loan information."

Discussion Highlights:

• Understanding the Denial: Joel interprets the denial as possibly indicating that the applicant doesn’t have a mortgage, which seems like an unusual reason for a rental denial.

  Joel [22:34]: "I interpret that to mean that since you don't have a mortgage, you can't rent the house. Which feels like a weird thing to tell somebody who's trying to rent your place."

• Possible Reasons: Matt suggests it might relate to credit diversity, as having an installment loan can positively impact credit scores.

  Matt [23:10]: "Is it wise? That's the heart of Krista's question here, Joel."

• Solutions Offered:

  • Credit Diversity: Encouraging applicants to diversify their credit by obtaining an installment loan if they only have revolving credit.
  • Proactive Communication: Advising Dejan to engage with the landlord to understand the specific reasons for denial and to present himself as an attractive tenant by demonstrating responsibility and reliability.

  Matt [27:10]: "Or if they're like a no show and then they touch like later that night or like, hey, can I come see you tomorrow? I'm just like, I mean, maybe, yeah, but probably not."

2. Evaluating Crummy 529 Plans

Listener: Emily from Mississippi
Issue: Deciding between Vanguard directly vs. Mississippi state 529 plans for twins, amid high state plan fees.

Discussion Highlights:

• State Plan Fees vs. Benefits: Joel and Matt discuss Mississippi’s high expense ratios for its 529 plan, which are significantly higher than Vanguard’s fees.

  Joel [48:18]: "Come on, Mississippi."

• Tax Benefits: Despite high fees, the state offers tax deductions that can offset the costs.

  Matt [49:40]: "Basically, a buy for the year, low fees. It's about a 4% spread."

• Strategic Suggestions:

  • Initial Contribution: Recommend contributing to the state plan to avail the tax deduction.
  • Later Transfer: Suggest moving funds to a lower-fee provider like Vanguard after securing the tax benefits, ensuring compliance with any state-specific rules regarding transfers.

  Joel [50:04]: "But I will say this. You might be able to move those $529 from the Mississippi state plan over to Vanguard later down the line."

3. Buying Land as an Investment for Family

Listener: Josh from Michigan
Issue: Considering purchasing land to build a vacation home for family use and potential short-term rentals.

Discussion Highlights:

• Risks of Land Investment: Joel and Matt outline numerous pitfalls, such as unbuildable land, unexpected maintenance, and the challenges of managing a vacation rental.

  Matt [37:35]: "When you are choosing to buy land in order to potentially build a home in the future, well, that's a lot riskier of a proposition because there are more potential pitfalls."

• Alternative Recommendations:

  • Existing Properties: Suggest opting for already built rental properties to minimize risks and avoid the complexities of raw land investment.
  • Maintenance Responsibilities: Highlight the ongoing responsibilities that come with vacation rentals, which can detract from the enjoyment of the property.

  Joel [42:52]: "Your home away from home, it becomes your job away from home."

• Balanced Approach: Encourage thorough due diligence, including understanding local regulations, potential HOA issues, and financial implications before proceeding.

  Joel [43:17]: "Make sure your metrics are tracking the important stuff that you really want to achieve, not the artificial things that aren't really that helpful."

4. Handling a Big Raise and Retirement Investing

Listener: Tyler, Age 37
Issue: After doubling his salary through a job change, Tyler feels he's falling behind the goal of saving three times his salary in his 401(k) by age 40.

Discussion Highlights:

• Reassurance: Joel and Matt emphasize that Tyler is not truly "behind," highlighting the significance of his salary increase as a major financial win.

  Joel [52:36]: "You are not behind because those three times salary by 40 goals, it's not that they're lame, but they aren't the real sign of success."

• Focus on Spending: Advise Tyler to focus on maintaining or moderately increasing his savings rate rather than strictly adhering to salary-based benchmarks.

  Matt [54:59]: "If you do that, you'll be able to meet whatever goals you'll have much faster."

• Maximizing Savings Opportunities: Encourage leveraging the raise to further boost savings and investments while maintaining a balanced lifestyle.

  Joel [57:23]: "You should be super pleased and definitely celebrate."

Insights and Conclusions

• Credit Management: Diversifying credit can enhance rental application prospects. Being proactive and transparent with landlords can mitigate unusual denial reasons.

• 529 Plan Strategy: Balancing state tax benefits with investment fees is crucial. Taking advantage of immediate tax deductions while planning for future fund transfers can optimize college savings.

• Real Estate Investments: Investing in land carries inherent risks that may outweigh potential benefits. Opting for existing rental properties is generally safer and more manageable, especially for those new to real estate investing.

• Retirement Savings: Salary increases should be viewed as opportunities to accelerate financial goals rather than triggers for anxiety. Focusing on net worth growth and responsible spending can lead to sustainable financial health.

Notable Quotes

• Joel [22:34]: "I interpret that to mean that since you don't have a mortgage, you can't rent the house. Which feels like a weird thing to tell somebody who's trying to rent your place."

• Matt [49:40]: "It's about a 4% spread."

• Joel [52:36]: "You are not behind because those three times salary by 40 goals, it's not that they're lame, but they aren't the real sign of success."

Recommendations and Resources

• Credit Improvement: Explore installment loans through platforms like Self to diversify credit and potentially boost credit scores.

• 529 Plans: Consider initial contributions to state plans for tax benefits, then transfer to lower-fee providers like Vanguard when possible. Always check state-specific transfer rules.

• Real Estate Investments: Conduct thorough due diligence before purchasing land. Consider existing properties to reduce risk and maintenance burdens.

• Retirement Planning: Celebrate salary increases by enhancing savings and investments. Focus on net worth growth and sustainable financial practices over rigid benchmarks.

For more detailed discussions and additional resources mentioned in this episode, visit howtomoney.com.

Disclaimer: The hosts promote certain financial products and services, some of which they may have affiliations with.