Podcast Summary: How to Money – Ask HTM Special Edition: Tariffs, Market Volatility, & How It All Impacts You #973

Release Date: April 21, 2025
Hosts: Joel & Matt
Produced by: iHeartPodcasts

Introduction

In this special edition of How to Money, hosts Joel and Matt delve deep into the current economic landscape shaped by tariffs and market volatility. The episode, titled "Ask HTM Special Edition: Tariffs, Market Volatility, & How It All Impacts You," addresses pressing questions from listeners about how these factors influence personal finances, investments, job security, and everyday spending.

Understanding Tariffs and Market Volatility

Joel (00:00) kicks off the episode by emphasizing the importance of managing retirement accounts, subtly transitioning into the broader topic of financial management amidst changing economic policies.

Matt (02:04) introduces the core focus: understanding how tariffs affect investing, employment, income, consumer spending, and significant financial decisions like purchasing or selling a home. He underscores the dynamic nature of tariffs, comparing recent discussions to the "wax on, wax off" metaphor from The Karate Kid, highlighting the intricate and often humorous side of international trade policies.

Joel (02:47) and Matt (02:24) acknowledge the fluidity of tariff policies and their unpredictable implementation. They stress the importance of staying informed and adaptable, as policies can shift rapidly, influencing various aspects of the economy and personal finances.

Listener Questions and Expert Insights

1. International Investing Amidst Tariffs

Listener: Bryant from Qatar (04:06)
Question: Should Bryant diversify his US-centric investments into international ETFs given the current decline of the dollar and market fluctuations?

Matt (05:52) responds by highlighting the timelessness of diversification in investing. He notes that US-centric ETFs like Vanguard's VOO inherently provide some international exposure since major US companies operate globally. However, he also acknowledges that specific circumstances, such as geopolitical shifts and policy changes, might warrant a more deliberate international investment strategy.

Joel (09:16) adds that despite anti-free trade sentiments, the US economy remains robust, with the largest and most diverse companies globally. He points out that tariff policies may be temporary, especially as lobbying by major corporations like Apple seeks tariff reductions.

Matt (09:35) advises against abrupt investment changes, recommending thoughtful, incremental diversification into international funds to mitigate risk without overhauling one's financial strategy.

Key Takeaway: Diversifying investments internationally can be beneficial, but should be approached cautiously and incrementally, considering the resilience of the US market and the temporary nature of tariff policies.

2. Tariffs as a Regressive Tax Policy

Listener: Justin (17:16)
Question: Are tariffs a form of regressive tax policy, disproportionately affecting lower-income consumers?

Joel (19:02) confirms that tariffs function like regressive taxes. He explains, “Tariffs are regressive in this way... they’re a super fascinating because at least one of the major reasons offered for implementing terrorists was to help lower income Americans.” He provides the example of avocados increasing in price due to tariffs, which disproportionately impacts those with lower incomes.

Matt (20:22) discusses how tariffs aim to rejuvenate manufacturing but often overlook the practicality of domestic production for certain goods, further implicating tariffs as regressive.

Key Takeaway: Tariffs act similarly to regressive taxes by disproportionately increasing costs for lower-income individuals, challenging their effectiveness as a policy tool intended to aid economic disadvantaged groups.

3. Retaliation Concerns: Gold and Crypto

Listener: Becca (24:20)
Question: How might retaliation from tariff-imposed trade wars impact investments in gold and cryptocurrencies?

Joel (27:31) explains that gold has outperformed the S&P 500 during recent volatility but cautions that its long-term performance aligns closely with stock indices outside periods of significant downturns.

Matt (28:32) expresses skepticism about cryptocurrencies, differentiating Bitcoin as a potential hedge against inflation but underscoring its volatility and uncertain regulatory status.

Key Takeaway: While gold may offer some protection during market volatility, cryptocurrencies remain risky and unpredictable. Investors should approach these assets with caution and consider their long-term investment strategies.

4. Educational Savings: 529 Plans vs. High Yield Savings Accounts

Listener: Sarah (29:03)
Question: Should Sarah's family continue contributing to a 529 plan or switch to a high yield savings account amid investment volatility?

Matt (30:14) advises based on Sarah's state-specific tax benefits. If Sarah's state offers tax breaks for 529 plans, he recommends continuing contributions while utilizing conservative investment options within the plan to minimize risk as college expenses approach.

Joel (30:27) reinforces that for funds needed in the short term, such as current college expenses, investing in volatile assets is risky. He suggests maintaining a balance between investments and liquid savings to ensure financial stability.

Key Takeaway: For education savings earmarked for the near future, prioritize tax-advantaged accounts with conservative investment options or high yield savings to protect against market volatility.

5. Selling a Home During Economic Uncertainty

Listener: Pascal (42:21)
Question: Is now a bad time to sell a house due to current market conditions influenced by tariffs and economic shifts?

Joel (41:01) and Matt (42:21) discuss that selling a home is more influenced by personal circumstances than macroeconomic factors like tariffs. Joel suggests that if Pascal is selling for reasons such as job relocation or family needs, it's not inherently a bad time. Matt adds that while market conditions can affect selling outcomes, flexibility and personal reasons often outweigh broader economic concerns.

Key Takeaway: Personal motivations and circumstances should guide real estate decisions more than current economic conditions, though understanding market trends can aid in optimizing sale outcomes.

6. Early Retirement Offers

Listener: Alex (48:33)
Question: How should one evaluate early retirement offers, especially for federal employees nearing retirement?

Joel (48:33) and Matt (49:10) explore the pros and cons of accepting early retirement offers. They emphasize the importance of assessing one's financial readiness, such as having sufficient savings and understanding the implications of leaving a stable job. Joel notes it can be a strategic move for those pursuing financial independence, while Matt highlights the need for careful planning to avoid potential financial setbacks.

Key Takeaway: Early retirement offers can be advantageous for those financially prepared and seeking personal fulfillment, but require meticulous financial planning to ensure long-term stability.

7. Protecting Savings While Remaining Aggressive

Listener: Pam (52:05)
Question: How can a middle-aged investor protect existing savings while remaining agile and aggressive to catch up on retirement?

Matt (52:05) recommends adopting a strategy to "save like a pessimist and invest like an optimist." This involves securing an emergency fund in high yield savings accounts and continuing disciplined investments in low-cost index funds.

Joel (53:51) adds that maintaining a strong savings rate diminishes anxiety over market fluctuations, enabling investors to stay committed to their financial plans despite volatility.

Key Takeaway: Balancing secure savings with continuous, disciplined investment practices allows investors to protect their assets while pursuing aggressive growth strategies for retirement.

Practical Financial Strategies

Diversification and Investment Adjustments

• Incremental Diversification: Gradually incorporate international ETFs to mitigate risk without disrupting existing US-centric portfolios.
• Tax Loss Harvesting: Utilize strategies like selling similar but distinct funds to realize losses for tax benefits without significantly altering investment exposure.
• Low-Cost Index Funds: Maintain investments in broad-market index funds such as VOO or VTI to ensure long-term growth while minimizing fees.

Budgeting Amid Tariffs and Inflation

• Minimalism: Adopting a minimalist lifestyle by reducing frivolous spending can help cushion the impact of rising prices due to tariffs.
• Grocery Budgeting: Transitioning to cost-effective grocery stores like Aldi and minimizing dining-out expenses can lead to substantial savings.
• Discretionary Spending Cuts: Focus on cutting non-essential expenses by approximately two-thirds to manage increased costs in essential categories like food and housing.

Managing Educational Expenses

• 529 Plans: Continue contributions to 529 plans with conservative investment choices to leverage tax benefits while safeguarding funds for immediate educational needs.
• High Yield Savings Accounts: Utilize these accounts for funds required in the short term to ensure liquidity and protect against market downturns.

Conclusion and Final Thoughts

Throughout the episode, Joel and Matt emphasize thoughtful, strategic financial planning in the face of economic uncertainties driven by tariffs and market volatility. They advocate for a balanced approach that combines secure savings with disciplined investing, diversification, and minimalistic spending to navigate the complexities of the current financial landscape.

Joel (64:00): Reflects on the balance between enjoying life's pleasures and maintaining financial flexibility, underscoring the show's core philosophy of living a "rich life" through purposeful money management.

Matt (63:54): Reinforces the importance of minimalism and strategic spending, encouraging listeners to prioritize financial freedom over material acquisitions.

Notable Quotes

• Matt (02:04): "This is the Tariffs Special edition. How it's going to impact investing, how it's going to impact your job, your income, what you're spending..."

• Joel (09:16): "Despite the tariff-induced market volatility, we still feel that most folks will do just fine investing in low-cost total stock market index funds OR S&P 500 ETFs over the years."

• Matt (12:05): "Don't change things up like immediately. Like you don't need to slam on the e-brake and pull ue."

• Joel (19:02): "Tariffs are regressive in this way... bringing back manufacturing jobs that were lost to other countries is one of the main goals."

• Joel (54:15): "They can weather the storm."

• Matt (61:24): "More minimalism is almost always good advice."

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This summary provides an in-depth overview of Episode #973, capturing the essence of Joel and Matt's discussions and the valuable advice shared with listeners navigating the complexities of tariffs and market volatility.