Ask HTM - Responding to a Rental App Denial, Crummy 529 Plans, and Buying Land as an Investment for Family #961

Summary

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.

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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."

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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."

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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."

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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."

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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.

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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.

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

Transcript

[Matt]

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[Joel]

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[Matt]

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[Joel]

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[Matt]

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[Joel]

I'm Joel.

[Matt]

I'm Matt.

[Joel]

And today we're answering your listener questions.

[Matt]

You know what, buddy? We hope everyone had a fantastic weekend and we're gonna hear from a listener who had his rental application denied. So we're gonna talk about what you should be doing when you've got a new pad that you're interested in moving into. We're also going to talk about how not all states are created equal when it comes to saving for your kids college. We're going to talk about 529 accounts. And another listener. He's interested in investing in land for his family. He wants to get his fingers in the dirt, Joel. He wants to go full Yellowstone.

[Joel]

He wants to be the next Ted Turner.

[Matt]

Yeah. Where the buffalo?

[Joel]

Rome.

[Matt]

Did you ever eat? Well, shoot. Does Ted's even exist anymore? Ted's.

[Joel]

Of course, yeah. Oh, does it? They're around. Yeah. Okay.

[Matt]

Or you could go and eat buffalo.

[Joel]

And I think get you a bison burger. That buffalo that he serves at the restaurants comes from the ranches that he. And I think he's still like the.

[Matt]

Number two landowner in the entire country.

[Joel]

He's number one and he's number two. Is that what it is?

[Matt]

Something like that.

[Joel]

The catholic church owns a lot of land, I think, in the country, but do they? Yeah.

[Matt]

Did you learn that from watching conclave? No.

[Joel]

I did watch that, though. Well, and Ted Turner, actually, I saw an interview with him recently. I think he's having some significant health struggles, but. But he's planning on turning some of his land into ecotourism so people can actually, instead of just being privatized land that he enjoys and works on, I think more and more Americans are going to be welcomed into touring some of that land. Super cool. It's almost like privatized national parks, which.

[Matt]

Is why not set up a little retreat for folks to hit up?

[Joel]

Yeah, I'd go there. I would totally go check it out.

[Matt]

Sounds like fun.

[Joel]

Hop in a four wheeler, roam around those lanes.

[Matt]

Yeah.

[Joel]

Watch the buffalo roam.

[Matt]

Walk around, be silent. Not talk to anybody.

[Joel]

That's right. Let's get to Ted Turner's ranch. Okay, Matt, real quick. I just wanted to highl listener Vincent, he sent us an email and he mentioned that he saved 100 bucks a month by switching from his old cell phone service to US mobile. And then he also mentioned he saved another $40 a month negotiating with his Internet provider.

[Matt]

So, man, Vincent's over there stacking those wins.

[Joel]

Yeah, I love that. I think that's actually a really good point to make, Matt. That one win often induces another. You just kind of get excited about winning.

[Matt]

Discipline begets discipline.

[Joel]

Yeah, I wouldn't know, but I'll take your word for it.

[Matt]

Oh, please. I'm sure you've seen this in your life.

[Joel]

Not as much as you, but y would say that.

[Matt]

So he's saving $100 a month. I want to know what kind of plan. What kind of premium Cadillac gold plated plan was he on? If he's saving, he's paying. I'm guessing 115amonth prior and now he's paying like 15 bucks a month.

[Joel]

Yeah, that was the thing that actually shocked me the most was when you actually, when you, when you see the studies about what the average price of a cell phone bill is for consumers in America. I think it's like north of $80. And that always shocks me because I'm like, man, even like average plans with the big guys can be less than that. So who are these people? And if I'm paying, you know, 15ish dollars a month, how in the world are people out there still paying over 80, over 100? And Vincent was not to throw shade at you, Vincent, but like you did the right, you did the right thing, you got out of that deal. But man, it's incredible to think that there are still cell phone plans that cost that much.

[Matt]

We're patting Vincent on the back here. We're not at all dragging your name through the mud out there where the buffalo roam, Vincent.

[Joel]

But I, yeah, I don't think it's mud, Matt.

[Matt]

Yeah, so you're asking how did that happen? The way it happens is that the prices come down over time and you just keep, it's on autopilot, autopay, and you keep paying the same amount and you don't think it's all that expensive because it's just what you're used to paying. But the advances, specifically when it comes to cell phone service providers, man, it has only gotten cheaper and cheaper. And I will, for that reason I would say that it's better than what it is that home Internet does because with them you have to like, you have to continually go back to them because, you know, to advocate for yourself because they always bump you back up. Whereas with the cell phone service providers at least you're just sticking around on the plan and paying the same thing. And if there are other providers out there, as it drops, the prices come down, you know, at least you're not paying more than what you were. That's the thing I hate the most about home Internet is the fact that it resets and then all of a sudden you're having to hop on the phone again, make the call, threaten to leave, look up the other, the one other competitor that's out there, that's, that might be offering a deal depending on where you live.

[Joel]

It's one of the only industries that's been anti inflationary over recent years. Right. When you think about most things in our lives we pay more for, cell phone service is one of the few things that we can pay less For.

[Matt]

It's amazing, man.

[Joel]

US Mobile even has like this, this light plan you can pay $8 a month for. So if you're like, I'm not really a heavy user. I'm not watching videos on the go. I don't use a whole lot of data. The $8 a month plan is incredible. Like, it's when you think that you can pay. Vincent was paying more than $100 a month for cell phone service. You can pay less than a hundred dollars a year for a cell phone service.

[Matt]

I think his mind would be blown. He probably just assumed that, like, there's no way that that's legit. I'm not even click on that option. I'm not even. Because there's no way that that's possible. But no, it is.

[Joel]

Totally it is. And I'm not doing that plan. But let's say I got a cell phone.

[Matt]

You're on the 10 gig plan, right? Yeah. Okay.

[Joel]

But if I got a cell phone for my kids, that's totally the plan I'd put them on.

[Matt]

So reasonably priced most likely too. They're probably. Hopefully not using a ton of data. And I will say that brings up a good point. Makes me think of how you do need to be a little bit more mindful and a little more careful if you're used to having unlimited data. Because I do think a lot of folks can get by with the 10 gigs. But if you are spending more time on the road or traveling where you're not at home, where you're automatically. Yeah. Where you're automatically logged into your WI fi or at work, where you're automatically logging in, you can creep up towards that 10 gig and you have to be just a bit more thoughtful in your media consumption. It makes me think of like Aldi. Right. I'm not gonna say that Aldi is just like Whole Foods. Right. Cause it's not. It's not even like Costco. There's some big differences there. But if you are willing to be a bit more mindful and limit your options, well, there's certainly money to be saved for sure. And that's how I think about US Mobile. It's not the same as Verizon Unlimited, but if you pay attention just a little bit, you have the opportunity to save a good bit of money.

[Joel]

No doubt. All right, let's mention the beer we're having on this episode, Matt. This one's called Indominus. It's a quadruple. Al is called a quad because I don't really know how to pronounce the quadruple. Rupel. Ruppel. Rupel.

[Matt]

It's a quadruple.

[Joel]

Okay.

[Matt]

I saw the Southerners say it.

[Joel]

That's right, Joel.

[Matt]

This is the quadruple.

[Joel]

It's by Bold, Bold Monk Brewing, which is a local brewery here for us. We'll give our thoughts at the end of the episode. If you have a money question, we'd love to tackle it. We'd love to hear from you. Just record a voice memo, state your name at the at the top, then tell us your question and hopefully we can take it on the next Ask Htm episode. If you want the full Instructions, go to howtomoney.com/Matt let's get to a question from a listener who's doing an awesome job investing for her future. But the savings maybe not so great.

[Dejan]

Hi guys, this is Krista from Centreville, Virginia. I am 51 years old and married with two elementary age kids at home. My question is surrounding retirement and emergency fund savings. I currently max out my 401k plan with my company and I'm also participating in the catch up contribution. I haven't started on the emergency fund though, because I'm putting in about 19% of my income into retirement. There isn't really much left to then save for the emergency fund. So my question is, is it wise to pause retirement savings at my age in favor of fully funding the emergency fund or can my existing HELOC act as the emergency fund if we ever need to use it? Thanks so much.

[Matt]

Is it wise? That's the heart of Krista's question here, Joel. But before we answer it, I will say life with elementary age kids, man, it's a total blast. But it can feel all encompassing. Not just physically and emotionally, but financially as well. So Krista, I want to start off by congratulating you. Kudos on hitting a 19% savings rate despite being a life stage where that is not always easy. I think that's truly incredible. She said she's also got catch up contributions so we're talking $31,000.

[Joel]

Not those mustard contributions.

[Matt]

Suck it away, dude. Yeah, she's laying it on thick.

[Joel]

Sorry dad joke. I too have young kids and, and my kids know that mustard yeah, run thick. But yeah, no, you're right Matt. That's incredible. Like to be, to be have a savings rate that substantial, especially when you're kind of the age Krista is, she's not too terribly far off from where we are and you aren't in that kind of sandwich generation area where you might be supporting or Helping older parents, you've got young kids to take care of. It can be tough to hit all those financial goals that you have for yourself. But a savings rate, I will say is divided up into money you're funneling into liquid savings or debt you're paying off. And then also on top of that money that you're investing for your future. So all three of those things could be considered part of your savings rate. The thing is, if you skip the savings portion and you go straight to investing, there are some real potential downsides. Matt, you've shared this story on the podcast before.

[Matt]

I've made this mistake. Yeah.

[Joel]

You want just briefly recount your early Roth mess up?

[Matt]

Yeah. Bottom line, I didn't have money set aside in my savings account because I heard about the beauty of compounding interest. And so I'd socked that money away into a Roth account. I saw that balance decline cause it happened to be a down year and boom, I had less money on hand that I then needed for a move back to the big city where I was offered a job.

[Joel]

So even though investing is a great thing, you just got too far in front of it.

[Matt]

Right.

[Joel]

And makes you think about like all the federal layoffs that have been happening recently. Right. You would be in a tough position. Right. If you were to lose your job for some reason. It's not that there aren't other places to turn for money in Krista's case. It's just that she'd be tapping a debt vehicle instead of liquid savings. And because of her high savings rate, it's very much possible for her to increase that liquid savings. And I think from where I'm sitting, I would prefer for her to focus on that for right now.

[Matt]

Totally. Yeah. She's just funneling all the savings dollars in one direction when you should be splitting them up. So we would suggest that you dial back, in fact, reduce your contributions to 401k, all the way back to just getting the full match. We at least want you to do that because you can't beat that return on those dollars. But then put every other dollar into your savings account until you achieve at least three months worth of liquid expenses. And then after that, then you can ramp up your investing back to where it currently is. Although if you are a bit more cautious or maybe you feel the need to acquire a little more savings and you can put, let's say 16 to 17% towards your investments, towards your 401k and then the, the rest of it can slowly grow your savings pile until maybe you have an additional one to two months worth of expenses on hand based on the fact that she currently has no emergency fund. Yeah, I think Krista is going to be very comfortable even having like two to three months sure of savings. And so for, and I think should do the trick. And I think that's totally within the bounds of what's reasonable.

[Joel]

But this brings up kind of a really important part of Christa's question is, well, aren't there alternatives to cash in savings? You guys are kind of this kind of old school. Matt and Joel, you're telling me that I need money inside of a high yield savings account, but what about, surely.

[Matt]

There'S a more sophisticated option product out there for me.

[Joel]

Investment returns are going to outpace money that I have in my savings account. So why don't I, in hopes that I don't have to tap any sort of emergency fund, just have the HELOC on the back burner in case it's needed, like kind of one of those break glass in case of emergency things. Let's dive into that. Matt, we do think, I think it is true to a certain extent at least that it can be a great potential backup E fund. It's just far too risky though to make it your primary one. So if you've got, let's say four months worth of cash and you're out of the job for six months, I think the HELOC then can help bridge the gap. So it's nice to have the HELOC as a backup to the backup. But if you have no savings and you lose your job, you'd have to tap the HELOC right away. It becomes your first recourse, which I don't think is a good thing. Think about how much debt you might accrue over the course of three to six months. That probably in these days at like a 9% rate, it could take you years to pay that off, which puts you in a weaker overall financial position. I just don't like the idea of the HELOC being the first line, the first fail safe. I think liquid cash saving should be the first thing then. You know what, hey, if you have another resource that's potentially better than a credit card for tapping some money. Yeah, maybe it's the backup to the backup, but I just don't think you want it being that main thing and having zero insulation between yourself in an emergency and having to tap the HELOC for that emergency.

[Matt]

Totally. In addition to that, your bank also has the ability to reduce your line of credit in Many cases. So the access to your home equity, it can actually dry up before you need it the most.

[Joel]

Especially if there's like a tightening in the economy. Banks might say, well, we're going to restrict our lending in the HELOC front.

[Matt]

They're looking to shore up their books as well. Yeah. So that's another con to making the HELOC your main, your primary emergency fund, which brings up even like Roth contributions, because sometimes we'll think about that as a backup emergency fund as well. But we also want you to avoid tapping those dollars if at all possible. Having a big Roth stash, it doesn't negate the need for having those liquid savings on hand. And I think, Krista, what you're trying to do here is a good thing. You would much rather invest than to save. And I think she's looking ahead a little bit. She's looking at her age, she's thinking, man, every year that I am not maxing out my account, that's a year lost. That's a year where I'm not experiencing the magic of compound interest. And one other thing that I don't.

[Joel]

Know when she started either. She said she's 51, but maybe she's like, I just started at like 46 and I feel like I've got it.

[Matt]

She might feel very, I mean, go.

[Joel]

Hard in that direction.

[Matt]

Totally. And for someone who's making the catch up contributions, I think that's the headspace that you are in, which I totally understand. But one thing that you mentioned, but you didn't mention was so you said that you are married, but you didn't mention your partner's income. And it sounds like whoever it is that you're working for, that you've got a good thing going there. When it comes to investments, I would say, is there a way for you to possibly keep investing there with your 401k, obviously you're getting the full match, but continuing to invest those additional dollars so that you can max that out while finding a way to divert some of the funds. Assuming, I guess, there's an additional stream of income that your partner is earning. You're in this together. I know, like when I am saving for my retirement, it's not just for me. And my wife is just like, sorry, out of luck. Like, we're doing this together money.

[Joel]

Like we're pulling eating at the buffet and she's gonna be eating fast food.

[Matt]

We're pulling our resources together. We are in it together. And research has shown that not only do is there a better result from numbers, from a financial standpoint, but that your quality of life and your levels of happiness are going to be better too. So hopefully that that's something else that you're considering as well, that you're pooling your resources together and that these are goals that you're both working towards. Hopefully it's not something that you feel that you have to shoulder completely on.

[Joel]

Yeah, that would be tough. Again, I think part of the reason Krista is doing this is because she has realized that investing is going to help her grow wealth, which is something we talk about on the show often. We talk about how wealth flows to owners. We did a whole episode on that, Matt. And the fact when you own a bunch of different companies through an index fund and you're investing in the stock market, you're an owner of American capitalism and you will over time make money because of that. It's a beautiful thing. But I think it's important to note too that to be risk on with your investments to kind of say, listen, I'm okay having a massive stock exposure, it's also crucial to have a pile of what I would say is risk off liquid cash that allows you some of that peace of mind and also that real financial backstop in case of an emergency. You want to take the both and approach because it's that Morgan Housel quote that's such a classic Matt where he says to save like a pessimist and invest like an optimist. But it's really hard to invest like an optimist when you haven't saved like a pessimist and you don't have any sort of actual liquid cash financial backstop were something bad to happen to you. Because yeah, hopefully if all things went perfectly then Krista would be just fine investing as much as she is now and not prioritizing savings. But the truth is life is always throwing us curve balls and you need to be prepared for that. And that's what the emergency fund does. The HELOC just not going to cut it, at least by itself. Alright man, we got more to get to on this episode including, well, if you get a big raise, are you suddenly behind on retirement investing? We'll get to that and more right after this.

[Matt]

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[Joel]

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[Matt]

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[Joel]

We're almost out of the cold winter months and the way I plan to help myself make it through is to think of the great travel I have planned this summer. Like the road trip I want to take with my kids out west. Going to take the whole month off, head towards Seattle for my cousin's wedding by car. I'm already plotting all the different Airbnbs we can stay on along the way.

[Matt]

Nice. I think that's a great idea. There's nothing like a cross country road trip during the summer months, and staying at Airbnbs is a great way to experience all the different towns and cities on the route. Plus, while you're gone for this long stretch of time, you could also be hosting guests in your home on Airbnb, making some extra money in the process. I was an Airbnb host myself for a while and I loved it. It was easy and it gave me the chance to make some extra ca.

[Joel]

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[Matt]

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[Joel]

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[Matt]

So it's safe to say it's never too soon to join aarp. They're here to help your money, your health and happiness live as long as you do. That's why the younger you are, the more you need AARP. Learn more at aarp.org wisefriend all right, we're back from the break, and Joel, it seems like getting a raise would actually put you ahead. That is not how this listener, how he's thinking about it. But before we get to that one, let's now hear from a listener who is having a tough time landing the home or the apartment that he applied for.

[Emily]

Hey, how to money listeners. My name is Dejan and I come from Georgia. I have a question. So I've been applying for homes to Rent, and I received a denial, and what they stated was very weird. I've never had this before, but it stated that I was denied due to lack of real estate secured loan information. And I would love to know what that is. If you guys can help me figure out what that is and what I need to do to be able to rent, that would be great. Thank you.

[Matt]

Bye.

[Emily]

Bye, Matt.

[Joel]

I'm not gonna lie. It feels like a weird denial letter to get.

[Matt]

I totally agree.

[Joel]

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. Like, you don't have a home loan, so you can't rent this apartment at home. I just don't understand why any landlord would make that the reason for not getting the apartment that you applied for. So the fact that you've been turned down, at least for this reason, is confusing. I would start asking questions. I would start pushing back in a kind way because I would want to know. I can't tell you exactly why they would turn you down for that reason. It doesn't make any sense to me. But I would be asking the question.

[Matt]

It would make sense if he was applying for a loan. Like if he was applying for a heloc, for instance. It's like, okay, what's the property that we're gonna take? Like what. What's the collateral? Like, what are you putting on the line in case you don't pay? Because that's what they're looking for, right? Because then if you don't pay, boom, they have access to Your house. That's not the case. So, Dijon, did you accidentally apply for a heloc? I doubt that that's the case, though. That's not like something you would accidentally do.

[Joel]

Whoops.

[Matt]

Instead of filling out the application for that sweet apartment or that, that nice.

[Joel]

House and this could be like a glitch in the matrix, I instead sign.

[Matt]

Up for a heloc. Where did I go wrong? No, I think that's not the case.

[Joel]

That's why you need to push questions because this doesn't sound like a legitimate reason to be turned around. This could be a simple mistake, but you're just not going to know if you don't ask. And it could mean, I think what they could be saying potentially, Matt, is that you don't have an installment loan of any kind on your credit report. And the truth is, you and I have said this before on the show, having multiple types of credit available to you can positively impact your score. And it makes you look like a more well rounded borrower as long as you're making those payments consistently on time. And so maybe if the installment loan thing and the lack of an installment loan is what they're point, if that's the reason you were denied, go get yourself an installment loan to help your chances. And we actually have some advice for you on that front too.

[Matt]

Which might sound weird to say, hey, go out and get this loan in order to boost your credit score so that you can get the sweet spot. But it could increase your odds of getting accepted for the rental property you want. And that's because a poor credit score is often one of the top reasons for a denial. So looking to increase that by handling your credit well and by increasing your credit diversity is pretty crucial. And one of the easiest ways to go about doing that is through a company called Self. And it will cost you a little bit of money. But they've developed this product, this great method for helping folks to increase their score pretty significantly by helping individuals to make loans to themselves and then by paying those loans regularly and on time, it gets reported to the credit bureaus on your behalf. Which sounds totally shady and it is kind of gaming the system, but it's totally legit and it is a reasonable route to take. I will say, though, if you already have an installment loan, I, you know, there's a chance maybe you have a student loan. And guess what, that counts as an installment loan as well. And so if you're like, no, guys, I already have student loans and I pay those off or I pay on Those every single month. Well, then this isn't something I would recommend.

[Joel]

But it's even more baffling. Right.

[Matt]

It's clearly a mistake. I think were that to be the case, but this is for everyone else out there who doesn't have an installment loan. This is something seriously to consider.

[Joel]

Yeah, yeah. I mean, it depends on what your credit score is. If you're like, my credit score's already north of 740. I wouldn't jump through these hoops to try to just get an installment loan on your credit report. But if you're fairly new to the building credit game and you're like, I've got a credit card that's a revolving line of credit and that's all you've got, kind of being reported to the bureaus.

[Matt]

But I've heard that cash is king, so I've always done that. Guys, I thought credit cards were bad. If that's the case, then you might have a pretty low credit score.

[Joel]

Taking on more lines of credit and a diversity of types of credit can really over time be a boost to your credit score. And, and that company that you just mentioned, Matt Self, they're making the installment loan thing easy for people. It's one of those early fintech companies that actually has done a pretty good job by people to help them improve their credit. The truth is too, the credit scoring system is badly flawed. There are other types of reasons for denial too, that are typically insufficient income or bad references from friends or previous landlords. Credit, I think, is probably one of the main reasons. Make sure you're buttoned up on all of those fronts. It's a good idea to find other ways to stand out as a potential tenant too. Matt, you and I know this. As landlords, there are some tenants that just really stand out. It's typically the ones who show up on time. When we've talked about meeting, you're 10 minutes late. Then it just, it doesn't bode well from the get go.

[Matt]

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.

[Joel]

And like, be respectful. Right? That's just something else that's important. Fill out the application and then follow up. It's kind like searching for a job, Matt, where people just submit the resume and then they forget they ever submitted. And the fact that people who follow up with an employer after the fact in not just like, hey, what's the deal? But proactively In a kind way, like reach back out and say, hey, I'm really interested in this job. What's the status? That, to me, shows that you're taking initiative and you can do the same thing as a potential tenant. On top of that, it's a renter's market in much of the country right now, as rents have softened and landlords are facing more potential vacancies. Typically in many markets, Matt, when a landlord lists their property for rent, they're getting far fewer applications from potential tenants. And so I think tenants just doing that little bit of extra work, it can make you stand out in a much thinner field already. So that's what I would recommend.

[Matt]

I think it would go a long ways. And essentially what you're saying is to present yourself as an attractive potential tenant to the landlord and being responsive, man, I think that goes a long ways because it tell me as a landlord that, hey, like, this person is someone who's great at communicating. It tells me that there's a chance that they're going to be better about paying on time. It tells me that if there's something wrong at the house, that they're going to let me know pretty quickly, like, hey, the heat's out. Okay, great, we're going to fix that asap. Because obviously for you, you are very cold. If it's the middle of the winter, like I experienced not too long ago, but also for the sake of the house, I'm like, I don't. I don't want the pipes freezing and for it to cause additional problems. And so knowing that someone's going to communicate, well, that's just. It's kind of like icing or maybe more so, more like the cherry on top when it comes to some of the different pool of applicants that you're sorting through. Our last piece of advice, though, would be to stick up for yourself. I would ask why you weren't extended a lease offer, because if you know what the pain points are, I think these are things that you can directly address head on.

[Joel]

Like if they say, hey, guess what? Sorry, your. Your credit score was 20 points below what we typically accept. There are ways to push back against that, aren't there? Sure.

[Matt]

We both have had tenants who have put down larger security deposits, for sure. One of my favorite store instances of this as a landlord was a couple. And they, I mean, they came and saw the property, they're nice and everything, showed up on time, but they told me ahead of time, they're like, hey, just. We're just going to be upfront and be honest with you, our credit score, there's a lot of negative information on our credit reports. This is what we kind of had going on. And like, should we even apply? And I'm like, yeah, absolutely. Like, please do apply. But then their credit report came back and it was really bad. But I will say they sent a long email over, kind of explaining what they had been going through, how their life had essentially turned around, and they were on the straight and narrow when it came to their finances. And there's still some gaps. So actually I called them up and I asked some questions. I was wanting to get some things kind of fleshed out, I guess, kind.

[Joel]

Of figure out the why behind what's going on.

[Matt]

Yeah, it's like, well, okay, you explained this, but what about this? And I was just trying to, you know, make sure I was doing my due diligence. And at the end of that, after we had that conversation, I was satisfied. And so I just offered them the place. And this is why. This is one of my favorite examples of this. But she started crying, like on the phone because she thought I had called to let them off the hook gently, like, basically just to be polite, essentially. And, man, it made me only want to rent to them even more. The fact that they had done the leg, the legwork, they were honest about it and essentially to kind of give them another shot. Like, I think that there are plenty of landlords out there who are willing to have the conversation when otherwise it's on paper at least it may not necessarily be a slam dunk decision.

[Joel]

And what you might be highlighting here too, Matt, is that small time mom and pop landlords might be easier to actually negotiate with. Talking about some massive apartment complex landlord, giant corporate landlord, they probably have stringent requirements and, you know, barking up that tree, you might not really get anywhere. But if you're able to proactively, honestly engage that conversation, say, hey, my income might not be quite what you're looking for, but actually have, like, money in savings. I can even, like, I can prove that to you. And here I actually have great reference from my. For my last landlord. That's. That's a perfect way to kind of maybe say, hey, maybe some of the metrics aren't living up to your ideal tenant. But I've got all these other things going for me.

[Matt]

I want to make up for it in all these other ways.

[Joel]

It can help you sway, sway the landlord so that they rent that place to you that you actually want.

[Matt]

Plus, they're like, I'll cut the grass too. I'm like, done, sold.

[Joel]

Yeah. So I just ultimately don't take this lying down. There are ways to push back, and that's a really weird reason to get denied. So please do let us know what you find out as you do push back. All right, Matt, let's get to another question from a listener who's excited about investing. But wait a second. Isn't investing supposed to be boring?

[Tyler]

Hey, Matt and Joe, this is Josh coming to you from Michigan, and I have a land purchase question for you today. My wife and I are in Money Gear 6. I feel like we're kind of finally hitting our stride financially. We have a couple kids and we are now kind of getting to the stage where we're wanting to pursue some other investment opportunity, something a little more exciting, but trying to balance that with obviously being, you know, risk adverse a bit with kids and then also being just financially responsible. The dream would be to purchase land to then someday build on it like a vacation home that we could potentially have as a short term rental within the thought of this being kind of the family vacation spot to someday pass this down to our children, kind of for that legacy aspect, something we've never had in our families but kind of always dreamed of having and being able to kind of build upon our family tradition. And so I guess my question today is really just how do I think about striking the right balance between. This is something that would kind of put us a bit tighter in our budget. Something that's doable, but obviously depending on the cost of this investment and the timetable, something that could put a bit of a financial constraint on us, but also be very exciting at the same time and something we're looking forward to. So thanks so much for taking time to answer this. If you're ever in Michigan, check out Eastern Market Brewing Company in Detroit. Awesome. Just Detroit, nostalgic vibes and just a fantastic place to start your exploration of the city. Take care.

[Matt]

Oh, Detroit, Joel. Specifically, Eastern Market Brewing. I looked it up. Yeah, it looks cool.

[Joel]

Oh, it does it okay.

[Matt]

It's got like this giant brick built. It makes. It's like what you think of when you think of Detroit, like old brick buildings. Yeah, it's pretty cool. And I will say I've still never.

[Joel]

Been to Detroit, but I. It's high on my list. I want to go same.

[Matt]

You know, it's interesting because I wonder, like, we hear from listeners a good bit and part of me feels that I don't travel enough because. But it's also because we're hearing from Folks who live all across the country and oftentimes they are recommending their favorite breweries, which, oh, it so happens that those are my favorite things to do when I go to visit these towns.

[Joel]

You look up their cool breweries and you're like, why have I been there?

[Matt]

I need to. I need to do this more often. But then, like, I'm a fan of the. Was it that the happiness hypothesis. Not hypothesis, the happiness quotient or something like that, right? Where it's like that your reality divided by your expectations. And so if my expectations are always exceeding my reality, I'm always. There's always all these breweries and towns I want to visit. And if that number is larger on the bottom, I'm never going to be happy, Joel. So I just need to be content with the amount of travel and the amount of breweries that I'm visiting.

[Joel]

Or you just need to go out there and experience more awesome breweries.

[Matt]

And if I so happen to visit Eastern Market, then my happiness is going to shoot through the rain roof.

[Joel]

Well, we will of course reach out to Josh and other Detroit listeners if we do make it out there.

[Matt]

So another reason I wanted to bring up the Eastern Market is because I was like, as I was checking it out, one of the first things I came across was a little listing or a page, and it was just like, you can be co owner of Eastern Market Brewing Company. Really, which you would think, oh, what a cool, fun, exciting way to invest your money. But just like Josh's question, we think that there might be better ways to handle your money than to kind of go with the more exciting option. You know what I'm saying?

[Joel]

Might be overrated, and oftentimes almost always is overrated. When it comes to investing, we typically highlight why boring is better. It's just typically because you get the job done with less headache, with much time less needed too. But I will say this too, Matt. As Josh's question unfolded, it's clear to me that he's not just looking for excitement. That was kind of how he prefaced it in the beginning. But as he elaborated, he basically said he's looking to make an investment that can also allow for personal use, which I totally get. Neither you or I have owned a vacation rental, but that can be a decent combo and a reasonable choice for some people. It kind of allows you to have your cake and eat it too. Ish. And we'll talk about the ish and the downsides of that as well. You might be able to make some money while simultaneously having A family travel haven which allows you to make memories in the same location year after year. Think about those pictures and not only are the pictures on your phone, but they're hung up in eight by tens around that house that you go back to every year. And you get to relive the memories of your kids growing up in that awesome rental property that you own. I just want to say it's important to note, Josh, this type of investment, it doesn't typically provide the highest return. So you're making significant trade offs in order to go in that direction.

[Matt]

Yeah, you have to be okay with making less than if you opted for a different type of investment, even just the overall stock market, because you might be in fact seeing less of a return on your investment. But I will say you are in money gear number six. So you are at the point in your money journey where you can opt for a less optimized investment route without feeling like you're completely derailing your financial future. You mentioned buying land though, and you kind of immediately started thinking about what it is that he should do. But I think it's worth directly addressing the fact that if you're talking about purchasing 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 to purchasing land, to buying that dirt than there are to buying, let's just say, a rental property that's already functional, that already exists, that's already been built. So for instance, you could opt to buy, let's say, a lake lot. But then you realize down the road when it is that you saved up the money you tried to build there, that the terrain doesn't allow you to. Or maybe there are some sort of like infrastructure problems.

[Joel]

So it's happened with a lot of people, specifically with lake lots. And you hear those radio, radio advertisements.

[Matt]

Where you get the flyers in the mail and you're like, why wouldn't I do that?

[Joel]

It's $10,000 for an acre around this lake. That sounds like a no brainer, but there's a reason that that land is being sold so cheap.

[Matt]

Most of the time it feels like getting your foot in the door, right? Like the ability to get in on the ground floor. But then instead what you just ended up doing is like you slammed the door on your foot as opposed to getting your foot in the door. And we've got a friend who did something kind of similar to this, Joel. Like this is a while back now, but he came across a good deal to purchase Some property in the neighborhood that we were living. And in the end he ended up. I can't remember how much he paid for that, like maybe 30 or 40,000, something like that, if my memory is correct. But he couldn't build on it. He purchased it hoping to build his family's dream house, essentially. And in the end, it's. I don't even know what he ended up doing with it. It ended up sitting there as like natural space because you couldn't build on it.

[Joel]

Well, I want to say it was like a FEMA flood map that prevented him from building there. Actually, he did build one thing on that property. Do you remember what it was? A sidewalk.

[Matt]

Well, no, the city required him to build the sidewalk. And he. He didn't put it there, he stuck it somewhere else. Okay, but like, because they said it doesn't have to be. You just have to. Whatever frontage of your lot, you are required to develop that much sidewalk somewhere else. And so he just. But there's no sidewalks on either side of him. So he's like, that's stupid. I'm not going to build a sidewalk only in front of my lot. And so he added onto a sidewalk in a part of the little downtown area that we would frequent.

[Joel]

The lot that he owned that was unbuildable was also taxable on an annual basis. And so you just have to terrible that there are. Are massive potential pitfalls in buying land. Because unless you are a builder who really knows what they're doing. Josh, I would just say avoid that and look to buy a rental property.

[Matt]

Get something that's already there even if they're already built.

[Joel]

Yeah, even if it takes you longer to save up and actually make that thing. I think what Josh is saying is like, oh, if I get the land, then we can look forward to this. We can start planning for it. It's going to take us years probably to pull off, but we'll get there eventually. I would rather you just save the month and then.

[Matt]

Or buy a more affordable piece of more affordable property that maybe had. It doesn't have quite as much land, but let's say it's just got the little cabin but enough land that you can still have some of those rustic adventures. I'm picturing him, maybe he's thinking like, oh, we're going to go camping there.

[Joel]

For the first wyoming or something, five.

[Matt]

To 10 years, and then eventually we'll save up enough to be able to build. But I think there's ways that you can do that affordably now without taking on the undue risk.

[Joel]

Okay, so let's talk about other potential downfalls. Matt, let's blow some more holes in Josh's plan. Not on purpose, Josh, but just to hopefully, hopefully play devil's advocate and help you think about this before you take the plunge and sink big bucks into it and then realize, oh man, that wasn't all that I hoped it would be. There are other significant downsides of owning a vacation rental. I think for a lot of people it sounds better in theory than it ends up being in reality. Because think about this, like, will you need to paint or make repairs every time you visit? That's one of the downsides I hear from some folks who go down that path. Like every time they go. One of my friends, one of our friends friends is, has a rental property in Asheville. He has been there so much recently trying to fix it up. Every time they go, they don't get to enjoy it. They're working right. And I think that is the tale I hear from a lot of people who own vacation rentals. It's far less relaxing than you hope for because there's always something to do. And so, yeah, it's more than okay, I think, to make the trade off of a smaller return for personal enjoyment. But make sure you've either got the extra cash or the personal willingness to do those fixes that are inevitably going to be required. I have another friend, Matt, who bought a condo at the beach and then it turns out the HOA was being poorly run. He has to run for HOA president in order to kind of help get the board back in line and get the finances of the HOA back in shape. That's a part time job for him. And it's been a massive pain, which.

[Matt]

Is fine if you want to sign up for a part time job.

[Joel]

But he didn't know he was getting into that when he bought the condo. And then so just you have to realize that there are all these like potential pitfalls that you can't see. They're like fine. They're nicely covered up.

[Matt]

Right.

[Joel]

With, with what looks to be a patch of dirt. It looks like you're, you're, it looks like you're stepping into a safe spot. But ultimately you fall in, you break your leg and you're like, ah, what happened there? And that's just, yeah, there, there are significant potential downsides, I think more so with buying land, but just to buying vacation property in general.

[Matt]

Yeah, I mean, and it's not all that different than how we approach folks who are Interested in becoming real estate investors as well. Like it, it is kind of a part time job. And so you have to be okay with either spe than you otherwise would because you've got management, or you need to have the time on hand to be able to DIY it. Which I was gonna say that's totally fine if that's a goal of yours, Josh. Like, so you mentioned your kids and if you are okay with when you go on vacation and when you go to visit that house, spending your time painting, fixing toilets, things like that, that's totally fine if those are lessons that you're trying to impart and it's kind of like something, there's a little bit of sweat equity that you're doing alongside your kids, I think that that could be, I think that could potentially be cool. But if you're thinking that like, oh, all my vacation, I can't spend any time during the week doing that because I've got a full time job, you're like, oh, well, we'll be able to do that during vacation. What you're actually doing though is eating into your vacation. And all of a sudden you're doing the opposite of what you maybe expected to do on the front end, which is like relax and. But I'm just saying, instead of being.

[Joel]

Your home away from home, it becomes your job away from home.

[Matt]

Your job away from home. Yeah, exactly. Which is totally fine though, if that's a goal of yours. It makes me think of a friend of ours. Call Carl, Mr. 1500. I've heard him talk about what I think he calls construction tourism. Or he'll go and visit a friend and hang out for a week or two, that kind of thing, while he helps him to do some sort of big house project. If that's how you're thinking about this, Josh, I think it could, it could pay off.

[Joel]

I've been waiting for him to pay me a visit, but otherwise we do.

[Matt]

Want you to be extremely cautious when it comes to how it is you're approaching this. Regardless, make sure that you continue like you're in money gear stuff. So you are maxing out your other accounts. Make sure that you're continuing to do the boring things before taking on this lifestyle plunge. But at the end of the day.

[Joel]

I would do it.

[Matt]

I mean, so I spent, we spent this whole time kind of pooh poohing on his dream. But that's the thing. Multiple times in the question he said this was a dream of theirs. And so if this is a massive goal for you and your Family. Go for it, man. But just make sure your eyes are wide open as you are performing your due diligence.

[Joel]

Just make sure. Because, Matt, the thing about dreams is so much of the time you wake up and you're, you're like, oh, wouldn't that be fun if that actually existed? But that's not real life. And so you want to know, think about, imagine what that dream would look like in real life and not just what it looks like in the dream state. Like, you want to like, walk through some of those actual scenarios, put yourself in the shoes, worst case scenario of you owning the rental property. And I guess the other thing to think through is how much time would you actually spend there? I think the more time you plan on spending there, the more sense it makes to actually own it. If you're like, oh, we'd go one to two weeks a year, it makes sense for the most part from a financial perspective perspective to rent it. Also, would you have somebody managing the property to rent that out when you're not there so that it was bringing in income? Those are all really important questions. They're financial questions, but they're also just kind of emotional questions about how you're going to approach the property and how significant of a role it's going to play in your life. But yeah, not trying to poo poo on the goal altogether. If this is a legit dream and you have thought through all the details, Josh, I think you're in the place to be able to make this a property.

[Matt]

That's right. All right, we got more to get to, including. We're gonna hear from a listener who has recently gotten a fat raise. We'll get to that and more right after this. This episode is brought to you by Navy Federal Credit Union. At Navy Federal, their mission is to help members of the military, veterans and their families achieve their financial goals. That's why they offer great savings and investing options like certificates. Certificates come with sky high rates, and some even have the flexibility to add money anytime during your term.

[Joel]

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[Matt]

Sign up@navy federal.org Navy Federal Credit Union members are the mission Savings products insured by ncua. Investment products are not insured, not obligations of Navy Federal and may lose value Hi, this is Joel and Matt from the how to Money podcast.

[Joel]

We're almost out of the cold winter months and the way I plan to help myself make it through is to think of the great travel I have planned this summer. Like the road trip I want to take with my kids out west. Gonna take the whole month off, head towards Seattle for my cousin's wedding by car far I'm already plotting all the different Airbnbs we can stay on along the way.

[Matt]

Nice. I think that's a great idea. There's nothing like a cross country road trip during the summer months and staying at Airbnbs is a great way to experience all the different towns and cities on the route. Plus, while you're gone for this long stretch of time, you could also be hosting guests in your home on Airbnb, making some extra money in the process. I was an Airbnb host myself for a while and I loved it. It was easy and it gave me the chance to make some extra cash.

[Joel]

And now hosting your home is easier than ever on Airbnb with the Co Teacher Access, a network of high quality local co hosts who can help you handle everything from getting your home ready to helping your guests once they arrive with whatever they may need. Find a co [e-mail] host.

[Matt]

You probably think it's too soon to join AARP, right? Well, let's take a minute to talk about it. Where do you see yourself in 15 years? More specifically your career, your health, your social life? What are you doing now to help you to get there? Well, well, there are tons of ways for you to start preparing today for your future with aarp.

[Joel]

What about that dream job you've dreamt about? Sign up for AARP reskilling courses to help make it a reality. How about that active lifestyle you've only spoken about from the couch? AARP has health tips and wellness tools to keep you moving for years to come. But none of these experiences are without making friends along the way. Connect with your community through AARP volunteer events.

[Matt]

So it's safe to say it's never too soon to join aarp. They're here to help your money, your health and happiness live as long as you do. That's why the younger you are, the more you need AARP. Learn more at aarp.org wisefriend.

[Joel]

All right, Matt, we got more money questions to get to now. It's time for the Facebook question of the week. This one comes from Emily in the How2Money Facebook group. She says currently looking at opening a 529 for each of my twins. I was trying to decide whether to go through Vanguard directly or through a state plan. The expense ratios seem to be lower through Vanguard. We're in Mississippi, though, and the in state plan that would give us a tax break is not great.

[Matt]

That's right. Yeah. So, Emily, almost all 529 plans that are out there, they've gotten a lot better over the past few years. That being said, Mississippi, it's still one of the holdouts who is still charging their residents way too much when it comes to the investments within a 529 plan.

[Joel]

Come on, Mississippi.

[Matt]

Every investment option that they offer is north of 0.5%, with most of the options being closer to 0.7%. But there is at least a meaningful state income tax reduction on up to $20,000 per year. That is if you are married, filing jointly. So despite these pretty high fees, the tax deduction would easily more than make up for it. We hate, and we would love, in fact, to see Mississippi correct this injustice. But I would totally still participate if I were you. As long as you are doing great when it comes to investing in all the other ways, you don't want to, you know, you don't want to over prioritize the 529 account before you are investing for your own retirement. But it essentially comes down to fees and 0.7. Like you're either, you're paying fees no matter what, you're either paying 0.7 to expense ratios with the investment or so in Mississippi, the state income tax is, is 4.7. So you're either paying 0.7 to your investment or you're paying 4.7 to the state for the income tax on that money that you would otherwise get. Essentially a buy for the year, low fees. It's about a 4% spread.

[Joel]

If you're trying to reduce fees. Well, reducing the fee that comes to you in the form of state taxes. The quote unquote fee, more important in this case. Yeah, exactly. And to get the sweet tax break, you've actually got to contribute directly to the Mississippi state plan itself. So that's why we would suggest doing that. 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.

[Matt]

I like that strategy.

[Joel]

Yeah. That way you can get the deduction, but move the funds at a later date to reduce ongoing fees. So you're trying to get the best of both worlds here. Just check to see whether your state has a clawback rule or not. Sometimes they say, oh, well, if you contributed the plan and you got the deduction but you pulled that money back out or you moved it down the road to Vanguard too soon, well, actually, you're gonna have to pay that state tax. And so, yeah, there might be a chance that if you, if you did it Too soon, within 12 months or something like that, that they want that tax money back. You don't want to have that tax benefit revoked. That's half the reason or not half the reason doing that, but that is a substantial benefit of contributing to your 529 plan. That, that would be a massive loss. Matt, this kind of makes me think about 401k plans that have a match but also have high fees. We have listeners reach out about that from time to time. Should I just abandon my workplace retirement account, my 401k because the fees are so crappy? And the answer is always, almost always to say, well, if you have a match, make sure you get the match no matter what, even though the fees are terrible and you have to hold your nose and invest inside of that 401k despite the fees being high because the match more than makes up for it. I think in this case, the state tax break, the state tax deduction more than makes up for the crummy fees inside of the Mississippi state plan.

[Matt]

Totally. Yeah. I will say, if you are listening and you aren't in a state that has a state income tax deduction, head over to Morningstar and look up some of the better state plans that are, that anyone is eligible to participate in. I think Utah has been like, at the top for a while. Like, they're always ranked under the, the, their gold plans.

[Joel]

Ohio, Georgia, those are great plans.

[Matt]

Those are, I think those, yeah, those are more in like the silver range. But guess who doesn't even make bronze? Joel? Mississippi, Mississippi, they're not ranked at all.

[Joel]

No medal for Mississippi.

[Matt]

Sorry about that, Emily.

[Joel]

Not on this front.

[Matt]

We got one more, though. Let's hear from Tyler. He writes, I am almost 37. A couple of years ago I switched employers and now I'm doubling my salary compared to the last employer when. But now because of this big change, I am all of a sudden kind of far behind the 3 times your salary in the 401k by age 40 goal when I was previously way ahead. Logically, I know that this is still A win. But is it really necessary to push hard to get back on track to meet this new goal? I'm contributing 11% to a 401k and max on a separate Roth IRA. I don't want to pull more right now if I don't need to. It just hurts my head to now be considered behind. Tyler's had a paradigm shift. Should he be concerned about this? Joel?

[Joel]

Yes, it sounds like Tyler. And you're. You're snatching defeat from the jaws of victory here. I don't want that to be the case. I think this is. This is a huge. This is a time to say congratulations because doubling your salary is insane.

[Matt]

Yeah.

[Joel]

And maybe it was happening more like two years ago, two and a half years ago in the heart of, like, where employees kind of got to call the shots when it came to marching down the road and getting. Getting a better offer from another employer. It's happening less and less these days. So that's a massive money win. You should be super pleased. Pleased and definitely celebrate. This is a logical question, though, in some ways, Matt, that follows after you pop the champagne, getting super pumped about your raise. You are way ahead, and now you feel behind. But the truth is, Tyler, you're not. You're not behind because those three times salary by 40 goals, it's not that they're. They're lame, but they aren't the real sign of success. And if it was, I think you could have met your goal by keeping your salary artificially low.

[Matt]

But then of course, that would have obviously been a dumb move. So this is why we typically think about savings goals in relation to. To not what it is that you earn, but what you spend. And so if you do that, you'll be able to meet whatever goals you'll have much faster. Now, if you are able to keep your lifestyle in check, you're saving and you're investing a good portion of that raise, you're going to find that you're going to grow your net worth at a much more rapid clip. So for you specifically, Tyler, I see this being the perfect time for you to ramp up your savings. You're saying that you don't want to do it if you don't have to. But man, what better time to up your savings rate than when you can continue living like you used to be living. The white coat investor, he talks about doing this when it comes to. They appeal to doctors. Right? White coat investor. And if you can continue living like an intern or a resident, once you are officially a doctor, you are going to get so far ahead. But the problem is oftentimes as soon as you're graduated, I don't know what it is when you're a doctor, like you are making that doctor salary and all of a sudden you sign up for all the payments you on all the loans, you buy the big house, as opposed to delaying some of that spending. Like we want you, Tyler, to be behind the curve when it comes to consumption. Like we want you to be a late bloomer when it comes to some of the money that you're spending. Not forever, but just long enough to where you will essentially be perpetually riding that wave of having invested your money and seeing that and having seen that asset, that net worth amount continue to grow.

[Joel]

And one of the things you're highlighting here too, Matt, is, is to have a different goal that doesn't throw shade on the bigger paycheck. And so instead of saying, well, it needs to be this much X my salary, say, no, no, no, I'm trying to amass this much X my spending. And we'd suggest, Tyler, tracking your net worth, increasing that rate of that going up is a good goal. You want to see your net worth continue to grow and it's not going to every single year, especially when there are stock market downturns. But what you want to achieve at A minimum is 25 times your annual expenses. This then takes, doesn't take your, your pay into consideration. And again, if your spending doesn't rocket upward, you're going to be able to get closer to that goal much more quickly. Now, I'm not sure how far off you are at this current moment, but you're likely well on your way. And then, you know, 11% to your 401k and maxing out your Roth is great, but like Matt, you're hinting at like now is the perfect time to kind of ratchet that up in a more significant way. But more than anything, just 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. So hopefully that makes you feel better. Tyler, you should already feel great that you're making so much more money, but hopefully that makes you feel feel better about not being behind because I don't think you are.

[Matt]

I don't think you are behind. I think he's latched onto the saying that it's a rule of thumb that for some folks can be helpful. But sometimes we have, like, we read an article and we come across something that sticks with us or we have A conversation with a co worker and we're thinking, man, that guy's smart. Or she's, she's pretty brilliant, so I'm gonna do what she said. Or even the advice we hear from our parents, like, there are certain sayings that kind of get embedded in our brains and it can be hard to shake those. Like everyone's always heard that, oh, renting is throwing away money. But like what about 6 plus percent, 30 year mortgage rates right now and home prices that are through the roof? What if I'm only gonna live there for a couple years and the transaction costs are so incredibly high? There are ways that some of these sayings can completely derail our finances if we, I think if we overly fixate on them as opposed to them at times being helpful guidelines.

[Joel]

And what if my mortgage is going to be five grand but my rent is going to be 2,500amonth for a really similar place? Yeah, you know, those are all the things you have to take into account. But the simplistic first personal finance approach is to say, must buy house. That's the way to build wealth. Right. So that's why we try to have the new nuanced convo and hopefully this, the nuance in regards to. Your question is helpful, Tyler.

[Matt]

But Joel, let's get back to the beer that you and I enjoyed, which was an Indominus, which is a quad by Bold Monk. And I'm going to say, I really like this one, man.

[Joel]

Makes me want to launch into a Gregorian chant.

[Matt]

This is so good. It's been a while since we've had a quad here on the show and I will say 6 ounces of a quad. So you and I, we split this 12 ounce beer. It's the perfect amount.

[Joel]

Yeah.

[Matt]

Because any more than that starts feeling a bit indulgent. Let's just be honest, even here at how to money, for us to enjoy something overly nice here in the middle of the day, I don't know, feels healthy, you know, like six ounces. That seems like the right amount.

[Joel]

We're limiting our intake. Well, yeah, this, I thought this was creamy robust. It had like brown sugar and figgy vibes too. And by the way, the, this brewery, local brewery here, they have one of the best actual like brewery setups in terms of brew. Pub is dope. It's so. It's such a lovely place.

[Matt]

You and Emily spend time, y'all go there all the time.

[Joel]

Yeah, we really love that place. The food's good, the vibe is great and they have a great outdoor space. When the weather's nice. So I like this beer, but that's a dude. It's a good beer. Some of their beers are just okay. This is one of their better beers.

[Matt]

Yeah, I would totally. Yeah, this is. This gets above a 4 if I were to check in, rate this thing on untapped. But it's got that malty brown bread kind of flavor. It reminds me of the molasses bread that my grandma used to make. She would make it in, I think back in the day, the way they would do it, they would always make it in essentially in a coffee. And so it kind of had the, you know, like the big.

[Joel]

Oh, yeah, the old Folgers cans.

[Matt]

Yeah. And so it had, like the lines around it. And I remember as a kid thinking it had raisins in it. Maybe that's when I fell in love with raisins and different, different baked goods. But it has this incredibly nostalgic sort of flavor profile that it's hard for me to find something else that I want more than that right now. Yeah, maybe I'm gonna go home and bake some bread.

[Joel]

Yeah, this is a tasty one for sure. All right, Matt, let's get to do it. For this episode, we'll put links to some of the resources that we mentioned in today's show up on the [e-mail] and there are other helpful resources. Literally, you just click on one of the top tabs and you can find a list of resources that we think are important for everyone out there trying to get their personal finances in order. That's [e-mail] youm know it, man.

[Matt]

So until next time, best friends out. Bye. Best friends out.

[Joel]

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[Joel]

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[Matt]

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[Josh]

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[Matt]

Podcasts, or wherever you get your podcasts.