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How to Money
Ask HTM Special Edition: Tariffs, Market Volatility, & How It All Impacts You #973
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- [00:00]
Joel
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- [00:19]
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- [01:36]
Joel
Welcome to How To Money. I'm Joel.
- [01:38]
Matt
I'm Matt and today we got a.
- [01:40]
Joel
Special Ask how to Money episode for you. We're addressing tariffs, volatility and their impact on.
- [02:04]
Matt
You know what, buddy? 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, whether or not you should buy or sell a house. Perhaps these are all topics that we're going to be getting to during today's episode.
- [02:21]
Joel
Yeah, lot to cover and therefore we.
- [02:25]
Matt
Don'T have any short quick stories to share with us because we've got a lot to get to during today's episode.
- [02:30]
Joel
As you and I have discussed multiple times to the constantly changing policy that's got to factor into this discussion, too. It's not like there's some set in stone. Let's plan on this. There are still, like, tariffs that are supposed to come into being in, you know, less than three months. Will those or won't those happen? That's also part of the discussion here.
- [02:48]
Matt
Yeah, that's so true because. So we're literally recording this episode just, like a few days before you are hearing this out there, and even. And certainly between us recording and you hearing this episode, things could have changed. But literally, like, while we're talking, like, things are so dynamic, and I don't know if there's ever been a time where we've seen so much change in such a short amount of time. I heard specifically the tariffs I heard referred to recently as, like, the wax on, wax off tariffs. It's the Mr. That Trump is the Mr. Miyagi of international trade. There's some truth to that which totally cracked me up. But the beer that you and I are gonna enjoy during this episode is called a Yellow Rose. This is a smash IPA. I did not know that was a category of IPA.
- [03:31]
Joel
Smash burgers, but not smash IPAs.
- [03:32]
Matt
Smash IPA, I don't know. Lone Pint Brewery. They are the purveyors of this particular drink, but never called it a drink before. But it's a beer that we're gonna enjoy, and we'll share our thoughts at the end of the episode.
- [03:44]
Joel
True story. And by the way, if you have a money question, just go to howtomoney.com ask for the simple directions on how to submit yours, if you've got one about the macroeconomy, how it impacts your personal finances, Please do send your questions our way. Or you can just record your question on the voice memo app of your phone, email it over to us. Matt, let's get to a question specifically about international investing in the age of tariffs.
- [04:06]
Bryant
Hey, guys, this is Bryant, and I'm calling in from Qatar. My wife and I are both originally from the United States, but we are currently living and working in Qatar as professors, and we are worried about the kind of state of the US Economy, and we recently decided to keep living here. So we just turned down job offers at Texas A and M in order to kind of stay here and work here. Salaries are higher, costs are lower, There's. There's some perks involved, and we are kind of wondering where to go from here with our investments. We currently have most. Most of our investments are currently in the US Stock market, mostly in the Vanguard etf, voo, but given Kind of the decline of the dollar and the kind of fluctuation in the stock market currently. And with everything else going on, we are considering investing internationally. So we've been looking at some European ETFs, like the VGK and some other ones, and we were kind of just wondering if you have advice about that, what you think about that, if there's any picks that you would suggest. Thanks.
- [05:53]
Matt
Yes. Do you like how Bryant said, if we had any picks, we're here to dish out the stock tips?
- [05:59]
Joel
At least he's not asking about individual stocks. He's talking about, hey, should I diversify internationally? Which is. Honestly, that's a question as old as time, since the beginning of stock market investing.
- [06:10]
Matt
Yeah. Brian. He's a part of the VOO family. He feels like a brother to me.
- [06:13]
Joel
Joel.
- [06:13]
Matt
Because that's pretty much I'm fully invested in vu.
- [06:16]
Joel
Yeah. I'd be curious to know, by the way, what it feels like to be living internationally right now, reading about all this American news from overseas. It's like, right. We feel inundated by it. I wonder if, because he's in the Middle east, if it feels more or less impactful or maybe it feels even a little less unclear because the coverage is a little more sparse. I don't know. But it would be interesting to have that kind of bird's eye view. And what is it actually like living in. How do you pronounce it? Qatar. I've always had a tough time pronouncing that one, but that's.
- [06:46]
Matt
I think that's how you pronounce it if you are a local, like, if you live Qatar.
- [06:50]
Joel
That's how I always said it.
- [06:51]
Matt
Yeah. I mean, that's as. I think, as English speakers, I've always heard it referred to as Qatar. But folks who say Qatar, you have to be a professor living in Qatar to be able to say it that way. Jules, you're not allowed to say it like that.
- [07:02]
Joel
Okay, I won't.
- [07:03]
Matt
Just so you know.
- [07:03]
Joel
Good. Thanks for clarifying that ahead of time.
- [07:05]
Matt
A whole lot of other words you're also not allowed to say either.
- [07:07]
Joel
Right.
- [07:07]
Matt
Because of who you are.
- [07:09]
Joel
But that's true. Okay. But I also. I get the worry that Bryant is experiencing here. Right. I think a lot of the Northerners, norms that we've grown accustomed to, they're being shaken up right now. You and I were always talking about how politics shouldn't impact how you invest. That's particularly true. Right. We're getting to election season. People are like, oh, if the Democrat or the Republican gets elected that maybe I should shake things up because I don't know if they're going to handle the economy as well. And that has always been based on the reality that both the R and the Ds, they kind of tend to hold a belief in the benefits of global free trade. And for the first time in a long time, Matt, the free trade bias that's essentially been held for generations, it's being upended. And so, yeah, I do think the discussion of changing your investing strategy takes on a bit more weight in this environment. Like the question is different than what if an R or D gets elected. It's like, well, what if the way we think of the global economy is shifting dramatically?
- [08:01]
Matt
Yeah. And it does, I will say it appears like that sort of free trade approach to global trade is being upended. There's also a chance, of course, that it could just sort of be a blip on the radar in terms of stock market and investments. It could be just some of that short term volatility that is yet to be seen. And honestly that kind of, that's the filter I'm viewing all the questions that we're going to kind of get to today. We're going to address and try to answer the questions as best we can given what we know at the moment. So Brian's question, should he be investing internationally? There are going to be valid arguments on both sides whether or not you should continue to invest solely in the US companies or if you should expand that to international indexes as well. Because many believe that US centric ETFs like Voo offers enough overseas exposure that it just minimizes or it even completely eliminates the need to own funds that own foreign companies specifically. So basically you're getting enough diversification by owning a single index like Voo because McDonald's, Apple, Amazon, these are all companies who are doing a lot of business in countries around the world, which achieves a just like a good enough kind of result if you travel to Asia.
- [09:16]
Joel
Matt, you know how many KFCs you see a lot are there?
- [09:19]
Matt
I don't know. It's been a long time since I've been in Asia. So we have always felt this way. And honestly, 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.
- [09:35]
Joel
Yeah, And I think that's for multiple reasons. Right. Because despite, despite this growing anti free trade sentiment, the US economy, it's still the most vibrant in existence and our business environment, it's the envy of the world. When you think about the biggest companies in the world, it's not even close. The United States, especially when you're Talking about the Mag 7 or whatever companies in other countries, just can't hold a candle to the largest companies that we have in the United States here. Also, when it comes to the breadth and the diversity of companies and industries that the United States participates in, it's our belief too that there's no real stomach for significant tariffs to remain over the long term. Right. We've already seen tariffs paused, reduced, rolled back, and then exceptions created for specific companies and sectors, specifically like computers, smartphones.
- [10:27]
Matt
Right.
- [10:27]
Joel
When you think of a company like Apple, they're lobbying hard to have tariffs reduced on smartphones in particular. I think the administration is starting to understand how negative of an impact lasting tariffs could have. And it's obviously it's hard to predict when trade policy is kind of at the mercy of one man's whims right now. But the willingness to minimize tariffs and to shift when tides turn, I think that's at least somewhat positive. So one, we can see that the US Economy is incredibly resilient. And two, it looks like tariff policy can and will change. Right. As the American economy reacts negatively to the imposition of those tariffs. So I think those are two at least positive signs that being a US centric investor still seems like a reasonable idea. Right.
- [11:10]
Matt
But Bryant might feel differently. He might come down given the same information, he might make a totally different decision. And I think that's okay. There are a lot of really smart people out there who believe that international exposure is crucial for investors. And this was even before tariffs came on the scene. Even if international stocks have performed poorly versus US stocks over the past decade, that still doesn't mean that they will over the next decade. You know, like things could turn around, particularly if U.S. policy continues to march down this road. Brian, if you do feel that you need to change things up, I would say don't change things up like immediately. Like you don't need to slam on the e brake and pull ue. I would just consider buying other low fee funds that offer non US stock exposures with new investment dollars over time. Not that this isn't like a call to say just sell everything and completely upend your, your financial or at least your investing life.
- [12:06]
Joel
Yeah. I think if you're going to change your investing strategy, like make sure you write it down, be thoughtful about it and say no, no because of this, it's changed my happening in the world. It's changed my belief in this way and put pen to paper so that you have an informed view of why you're making those changes so you're not just making them emotionally and haphazard.
- [12:25]
Matt
Exactly.
- [12:25]
Joel
That's, that's a bad idea.
- [12:26]
Matt
And it makes me think too. So at the beginning or in his question, he was talking about how they chose to stay there in Qatar based on a coup, based on higher pay as well as lower costs, lower cost of living I think is what he said there. That's great. As opposed to thinking that oh, it seems like the US economy is in shambles. I'm not totally sure. I mean he did mention like the weakened US dollar, but hopefully he primarily made the decision based on some of these hard, tangible number crunching that he was able to do as opposed to projecting into the future what might be happening in a similar way. That's how I would want Bryant to approach his investing. It's totally fine to say I want to maybe diversify a little bit more internationally, but make sure you're doing that with a plan while looking at the numbers as opposed to that knee jerk.
- [13:14]
Joel
Emotional reaction in a proactive, not reactive way. The proactive, I think is exactly what you mentioned, Matt. Just buying into other index funds internationally over time to increase your exposure there instead of making some sort of whiplash sell, buy sort of thing in one of your tax advantaged retirement accounts. Bryant, he mentioned vgk, that's a good one for Europe specific investing. It's a Vanguard. Then there are funds like vxus. It's a broader international fund. It could do the trick as well.
- [13:44]
Matt
Also low cost.
- [13:45]
Joel
Also low cost.
- [13:46]
Matt
Also starts with a van. I'm pretty sure Brian's going to be into it.
- [13:50]
Joel
I think ultimately what it comes down to, Matt, part of what makes a good portfolio for anybody out there listening is if it allows you to sleep at night. If you are a nervous Nelly, if you believe that ramping up to let's say 20% international stock exposure over the coming years, if that would help you rest a little more easily, do it. If you gone, if you saw those, those jaw dropping multiple 5% drops back to back and you were like, I can't handle this. I'm looking at my 401k and I'm freaking well, then it probably means you are too stock heavy and you need to have a more balanced investment approach. Like don't do something. Don't have so much exposure to stocks that if we do have a correction like it's too emotionally difficult for you to stomach, I would also just note, don't sleep on target date funds either. They're still US centric. But part of the appeal is the inclusion of some foreign stocks and bonds. Target date funds could be another reasonable choice for Bryant and for other people out there. And it's something that we mention kind of frequently, especially because it is one of those set it and forget it things where you invest in the target date fund and it changes as you get closer to your retirement date.
- [14:56]
Matt
Yeah. But in a similar way, I feel like even VOO is a set it and forget it kind of thing. You know, it's like this isn't something that you really need to look at. It's an S&P 500 index fund. It automatically rebalances and takes into account the different companies that are included in the True.
- [15:08]
Joel
But as you're getting closer to tapping those retirement funds, certainly being 100% stock.
- [15:11]
Matt
Oriented, certainly if you are approaching retirement. But I mean, it seems, seems like Brian is just looking at how am I going to be able to maximize my returns moving forward. So I do think that there's a way to sort of steel man the international exposure case. And like this is an aspect of not terrorists, but just our current foreign, current White House's foreign policy. And hopefully this doesn't venture too much into, into politics. But like one of the things that we've heard recently is that the US Isn't going to be like the world's police. Right.
- [15:38]
Joel
Like that.
- [15:38]
Matt
It's not going to be like the global cop on the beat, as evidenced by the Vice President's statement that got the signal gate, whatever the thing, you know, this is a few weeks ago. It's just like, oh, I hate that we're bailing out Europe again. And there seems to be this distancing from other countries. I mean, not only in funding that we're cutting to other countries from a soft diplomacy standpoint, but also literally from a defense backing standpoint as well. So from a steel man best case scenario for investing internationally, it almost seems like that there is an opportunity for all these countries who have previously been reliant specifically on US Defense to have to get their books in order for companies to be like, oh, this is something that we're going to have to start doing. And I see potentially an opportunity for a lot of foreign countries to ramp up. I mean, they're talking about ramping up like Germany. Right. I mean, they're like, oh, we've already.
- [16:28]
Joel
Seen defense stocks in Europe going skyrocket.
- [16:30]
Matt
Yeah. And as companies get more efficient, that's going to lead to higher profits and potentially higher returns as well. So I could see that being sort of a best, not a best case scenario argument, but like a steel man case for international investing, specifically because of the US's stance towards other countries. But who knows?
- [16:48]
Joel
All right, Matt, let's get some more questions we've got. Specifically, we're going to get to a lot of questions that people pose in our Facebook group about tariffs and markets and how they should be reacting right now. This question comes from Justin. He says in explaining tariffs, can you discuss if a tariff is a form of a regressive tax policy for simplicity's sake? If tariffs raise the cost of groceries by 100 bucks equ for all consumers, that $100 is a much larger percentage for a person making 2 grand a month than for the person making 10 grand a month.
- [17:16]
Matt
Yep, yep. I mean, that's basically true. Terrorists are regressive in this way. And it's super fascinating because at least one of the major reasons offered for implementing terrorists was to help lower income Americans. So bringing back manufacturing jobs that were lost to other countries is one of the main goals. And I of course understand the thought, the thought process here. I just don't think that recreating a world where the US is a manufacturing powerhouse is likely or even makes the most sense for our economy makes. A few days ago or last week we were talking about, we were looking at the digital rendering or the flyover of the BYD factory in China, which it's like larger than Manhattan, it's like almost as big as San Francisco or something like that. Mind blowing dorms for their workers. And on one hand it's crazy impressive. And you're just like, this is amazing that this singular private company. But then to think, wait, are we going to compete with that? Not from a Do we have the ability to. But do we have the. Do we want to do that right? Like, like, is that the kind of manufacturing powerhouse that we're looking for the US to become? Is that the kind of job do you want to be confined to whatever corporate dorm, you know, because that's closest to the factory that you're now working in and you don't have a life outside of that. Do you want that for your K? You know, like. And that's where I have a really tough time grappling with the fact that this is something that's an actual goal or aim of the current Administration.
- [18:43]
Joel
It's one of those things to work at a Silicon Valley company where they have like professional chefs and masseuses and stuff like that. And so you're kind of coerced into staying, but you're not forced into being there. And I see that as, yeah.
- [18:54]
Matt
Perks of the job as opposed to being like, oh, no, no, you have to live in. It's like a modern day Hooverville. It's what it looks like it could turn into.
- [19:01]
Joel
Agreed, agreed.
- [19:02]
Matt
Where would you go down that path?
- [19:03]
Joel
Yeah. When it comes down to go back to Justin's question, tariff polic are going to hurt the bottom half of income earners much harder than folks who have a lot more financial resources at their disposal. For example, avocados have been much talked about, Matt. Most of our avocados come from Mexico. And if an Avocado goes from $1.25 a piece to two bucks a piece, well, the person with the higher salary and the greater savings, they can more easily afford their avocado toast or their guacamole habit because it's better than the person who's living paycheck to paycheck that extra 75 cents per avocado. It really does add up. And that's just like literally one example of potentially hundreds of items that we buy regularly that could go up in price. And people who have less money coming in are just going to feel the uptick in prices more. Same thing happened with inflation over the past few years. Right. It was lower income households who felt more pain because of inflation. So yeah, on average richer households will pay more overall thanks to tariffs, but less as a percentage of their income. And we haven't really seen massive price bumps yet. But as those come rolling in, I think the rock solid belief that tariffs are going to benefit economically disadvantaged folks in our society could dissipate quickly as public perception turns even more sour. And I think that's part of what's going to lead to the inability for substantial tariffs to remain in place over the long term.
- [20:23]
Matt
Yeah. Going back to manufacturing, guess what? It's hard to manufacture avocados or coffee, for instance. Like you can't do that in the US I guess you could try.
- [20:31]
Joel
There's like three countries that produce the vast majority of the world's coffee.
- [20:33]
Matt
But if you. Yeah, if we made coffee in the US It'd probably be like the worst coffee in the world.
- [20:38]
Joel
And that's not because like, that is.
- [20:40]
Matt
Not the stuff I want to.
- [20:40]
Joel
Americans suck at making coffee that I want to drink. It's because we don't have the climate to grow the beans that we need to grow. Right.
- [20:45]
Matt
If we did have the climate, it'd be the best coffee in the world.
- [20:47]
Joel
That's right. Exactly.
- [20:48]
Matt
That's what Joel's saying.
- [20:50]
Joel
All right, we've got more of your questions to get to about tariffs and the markets. We'll get to a bunch of those right after this.
- [21:02]
Matt
Asking the right questions can greatly impact your future, especially when it comes to your finances.
- [21:10]
Joel
So if you're looking for a financial advisor you can trust, certified financial planner professionals are committed to acting in your best interest. That's why it's gotta be a CFP. Find your CFP professional@letsmakeaplan.org what does the future hold for business? Ask nine experts and you'll get 10 answers. Will we have another bull market in 2025 or we're going to get a bear market? What about inflation? Will it continue to calm or will higher prices remain sticky? Wouldn't it be cool if someone could invent a crystal ball that would give us some foresight?
- [21:41]
Matt
Well, until then, Joel, over 41,000 businesses have future proofed their business with NetSuite by Oracle, the number one Cloud ERP bringing accounting, financial management, inventory, HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. When you're closing the books out in days, not weeks, you are spending less time looking backwards and more time on what is next. Our business is really small, but if we needed netsuite, we would be pumped about the time, the cost savings that it provides. Whether your company is earning millions or even hundreds of millions of dollars, NetSuite helps you to respond to immediate challenges and seize biggest opportunities.
- [22:28]
Joel
Speaking of opportunity, download the CFO's Guide to AI and Machine Learning at netsuite.com howtomoney the guide is free to you at netsuite.com howTomoney that's netsuite.com howtomoneY hey there, folks.
- [22:41]
Matt
I am Matt.
- [22:42]
Joel
And I'm Joel from the how to Money Show. Matt, it's April and I've got spring break on my mind. Please tell me you got something fun lined up.
- [22:50]
Matt
Oh, dude. Typically I am a planner, but we're actually switching things up this year. We're going to go a bit more spontaneous. I've been searching on Airbnb for some inspiration. You know, we've narrowed it down to trying to find some warmer temperatures. We kind of got that spring fever. So we're gonna try to find something along the coast. Maybe, maybe some sand to dip my toes into.
- [23:08]
Joel
I like it.
- [23:08]
Matt
But how about you?
- [23:09]
Joel
Okay, so we've actually got our plans locked in. I'm taking the fam to this charming little Bavarian style town called Helen. It's up in the Georgia mountains.
- [23:17]
Matt
I know about Helen.
- [23:18]
Joel
Yeah, well, I found the perfect cabin on Airbnb, complete with a hot tub, which I'm definitely gonna need after running a trail half marathon while I'm up there too.
- [23:25]
Matt
Oh, that is right. I forgot about the half marathon. Man, it sounds like an adventure. And you know what? While you're enjoying that hot, you could actually have your own place listed on Airbnb. Earning some extra cash while you are away.
- [23:36]
Joel
True. And now with Airbnb's co host feature, I hear it's easier than ever for anyone who's been overwhelmed by the idea of hosting. A co host can do the hosting for you and help manage your reservations and your guests. Find a co host@airbnb.com host.
- [23:53]
Matt
Alright, man, we are back from the break. We're going to take some more questions that listeners posted over there in the Facebook group. If you are not a member of the how to money Facebook group, be sure to look it up. But let's see, Becca, she asked about retaliation. She was asking about gold and crypto as well. Joel, what are your thoughts there? Do you got any thoughts specifically about the trade war? Like that's, that's the part that seems the most ominous. Yeah, I feel like that's kind of freaking people off the most.
- [24:21]
Joel
I agree. And I think I'm glad she asked about this because retaliation is, is real, right? You can, you can punch somebody in the nose, but then I don't know if they punch you in the ear back like you're both hurting. So you have to take that into account. You might say, great, we got the upper hand here in the beginning, but.
- [24:37]
Matt
Do you ultimately get kicked in the pants?
- [24:38]
Joel
Right. Do you ultimately have the upper hand? That's the question. And I think tariffs are kind of a two can play at this game scenario. And we're already seeing other countries, a lot of our Canadian neighbors to the north, canceling trips to the U.S. other countries too. Just saying. I'm not vacationing there because I'm so mad about the US Trade policy. And that impacts the airlines, that impacts hotels, that impacts other travel leisure industries. And so if the US Continues to have an antagonistic approach to trading partners, particularly friendly ones or ones we've been friendly with over many, many decades, it could hurt the bottom line of US Companies who sell some of their goods and services abroad. I'm just thinking of a company like McDonald's. I could see consumers in other countries saying, like, boycotting.
- [25:23]
Matt
Yeah, I'm not even interesting.
- [25:25]
Joel
I'm switching to my local fare instead. So not only will their costs rise, US Companies, costs rise, but demand could go down too, internationally. And so I do think that erosion of faith in the US As a mutually beneficial trading partner, it could potentially create some of the most harm.
- [25:43]
Matt
Totally. And that's the part that doesn't make any sense at all. China. Okay, I totally understand that. If you start doing some research or reading about the amount of intellectual property theft that has taken place from China in, like, the billions of dollars annually that you could assign a dollar amount to. Okay, I kind of understand the argument.
- [26:02]
Joel
There, but the argument more of an adversarial relationship there.
- [26:05]
Matt
Yes, absolutely. As the other predominant world power. But when it comes to, like, Canada and even Mexico, I understood at the very beginning when border crossings were still a thing. And that's something that the Trump camp that they campaigned on, like, shutting the border, but that's, like, all but completely gone away. And so the. And what gives with Canada? There's, like, hardly any illegal crossings. Oh, my gosh. Like, the fentanyl stats about the number of pounds that were crossing the Mexican border as opposed to the Canadian border was, like, laughable. Like, I don't. These aren't real numbers, but it was something like every 30 days, like 3,000 pounds of fentanyl from Mexico. And it was something like seven from Canada.
- [26:46]
Joel
I believe it.
- [26:46]
Matt
And so the adversarial relationship in particular to Canada makes very little sense to me. But Beck was also asking about gold and crypto, how that would be impacted. And so let's start with gold, because it's done quite well for investors as they've turned there during uncertain times. It's actually outperformed the S and P by a lot over this past year. Given the volatility that we've seen. If you zoom out a little bit more, you see that it's essentially matched the S and P over the past five years. But then beyond that, it doesn't do so well. And especially if you look at the last, even the last five to 10 years and you eliminate the past most recent four months, things start looking a whole lot more normal. It's the volatility that we've most recently experienced that's really throwing the average returns.
- [27:32]
Joel
Off, which is on average when people turn to goal, it's like a flight to safety. Right. And so I think that's why Beck has asked about that. Well, should I be flying to safety? And part of that depends, I guess on your view of where the world is headed.
- [27:43]
Matt
Yeah. But still, if you have time on your side as an investor, look into the stock market. That's going to be a better choice from a long term historical perspective. As far as crypto goes, we still dislike crypto, generally speaking. And we've got a carve out though for bitcoin. Bitcoin is not unlike the other cryptocurrencies, but inflation, tariffs, currency fluctuations as well. Currency inflation. This could lead to more investors moving into the bitcoin direction. Still highly volatile, basically. It's still acting like a security, it's acting like stocks. You got to be aware of that. We want you, Becca, as well as all how many listeners out there to stay invested in the market. But I certainly think having some bitcoin might be wise. Certainly dabbling a little bit. No more than 5%. I give that a thumbs up.
- [28:32]
Joel
Yeah. Again, going back to something we mentioned earlier though, making huge shifts in how you're invested makes very little sense. But if you're making smart calculated moves in different directions because you are being thoughtful about the future of bitcoin, of money, of companies, of US based companies specifically. I get that. But you don't want to make knee jerk responses.
- [28:55]
Matt
Yeah, in large part because I think we are optimistic and we're hopeful that things are going to go back to normal. Not too far future.
- [29:03]
Joel
Yeah, I didn't say that.
- [29:04]
Matt
Well, but you know what I mean.
- [29:06]
Joel
All right, let's get to a question from listener Sarah. Sarah, she says, I have a current college student. We used 529 funds for freshman year, but it's now depleted. Student's father wants to keep adding to 529. I want to save in a high yield savings account. What are your thoughts with the current volatility in investments right now?
- [29:24]
Matt
I think Sarah and the student's father are both right to a certain extent.
- [29:29]
Joel
Yeah.
- [29:30]
Matt
I'm not sure where Sarah lives, but much of the answer comes down to the state that she lives in. Because if she gets a tax break for funneling those dollars through a 529, well of course do that. If not, well then the high yield savings account is the right answer. We're going to get to why I said that. I think you're both right here. Let's say you do live in a state that gives you a tax break. That still doesn't mean we want you to invest those dollars once you put those dollars into the 529. Notice I said to funnel those dollars through the 529 as opposed to like parking it there in like a long term. Like airport parking. No, no, no. Like we're talking about like you doing the drop off like at the, at the gate or at the whatever, you know, they got the numbers there at the airport. We're not talking about like the long term parking where you're having to hike.
- [30:14]
Joel
It's almost like a legal form of money laundering. Right. Where you're literally funneling it through this account, passing through just to get a tax break. But you don't have to take much action with those that money beyond that, it's totally. And then you can spend it at your discretion for college needs. Yeah.
- [30:28]
Matt
And most 529 plans, they offer fixed income choices that do resemble the returns that you're going to see with a high yield savings account, albeit with slightly lower returns. But put the money in the account, you get the tax break, but then keep the money in the most conservative choice, which is probably going to be like a money market equivalent kind of fund. So you're not actually investing those dollars. You are treating it a bit more like cash.
- [30:51]
Joel
And that's essentially the advice we would give you, tariffs or not, on market volatility or not. It is one of those things where if the money needs to be spent immediately or in the very near term, you don't want to invest those dollars. Even if it's 2023. Right. And you're like, the market's roaring. This is great. Should I be investing? No, you shouldn't. If you need the money soon. We've always said for people with young kids, we're all about investing inside of those 529 funds. If you're doing the other investments you need to make as an individual in your tax advantaged retirement accounts first. But yes, we do want you putting money then in the 529 fund and investing those dollars for their future. You want that tax advantage money to grow. But when you're getting closer to needing to spend that money down, you got to de risk. Right? You want to make sure your 529 plan money is not invested in something that could cause you to see significant drops in the balance in a short period of time. And so at this point, investing in like A heavy stock based portfolio inside of the 529 plan would be the farthest thing from smart. Like, it would be a terrible idea. The risks of losing a chunk of this money so close to needing it, it's just not worth the potential reward.
- [31:57]
Matt
Exactly.
- [31:58]
Joel
You might say, oh, man, the fixed income fund is paying 2.5%, 3%.
- [32:03]
Matt
That seems lame.
- [32:04]
Joel
Average return on the new S and P. The guys cite that all the time on the show. Man, that's like an average annual return of something like 10%. I should be invested in the stock market. Well, no, you don't want to take that risk when you need the money soon.
- [32:17]
Matt
Yeah. If it was me, if I had a freshman in high school, I would be willing to still be 100% invested in securities or in stocks. If I had a sophomore, I'm going to start taking some chips off the table. If I had a sophomore, I think I would reduce that down by a third to 66% in stocks, maybe the other third in more of a cash equivalent. Junior year I'm pulling even more off. But. But by senior year I would want to be. You want to have that money liquid pretty much ready to go in cash where you are not going to experience the ups and downs of the market.
- [32:50]
Joel
It'd be different too, right? I think if she had a freshman and she had plenty of money, some of it was actually even going to be for senior year or even beyond for college costs. But we're talking about the money going essentially directly to funding the college.
- [33:05]
Matt
Exactly. She said she's got a current college student.
- [33:08]
Joel
Yeah.
- [33:09]
Matt
Let's keep moving though. Jessica asks if I'm worried about a layoff. My husband works for the va. Is there a way to look into what unemployment benefits we would qualify for? I'm a planner and yes, I like to plan for the what ifs before they happen. Is unemployment state by state? We have emergency savings. Does that factor into how much unemployment you qualify for? Also, I'd love an example copy of a bare bones budget for a family of four. For instance, how can you realistically get. I'm sorry, how low can you realistically go on food?
- [33:40]
Joel
Ooh, yeah, that's a good. I want you specifically to address the food question in a second, Matt, because I feel like that's something you and your families have been attentive to.
- [33:47]
Matt
That's the tldr.
- [33:48]
Joel
But even the challenge that you guys instituted for yourself a few years back, which you've talked about on the show, we'll get to that in just a.
- [33:54]
Matt
Second, but you might have to remind me. But move on.
- [33:56]
Joel
Okay.
- [33:56]
Matt
Or keep moving.
- [33:57]
Joel
So let's specifically talk about the layoff fears first. That was Jessica's first question. I get that insecurity. You know, government workers, they used to have some of the most secure positions around. That's no longer the case. If I were in your shoes, Jessica, I'd be hoping for the best, but I'd at least be planning for the worst. Planning for a potential job loss. Yeah. That means some things for your finances, but it also means networking. Right. And looking for other work just in case, because you want to be prepared and you want to have kind of irons in the fire going because you're not sure kind of where things are headed. And then when it comes to unemployment benefits, yes, it is a state by state thing. And no, your emergency fund has no impact on how much money you receive from those unemployment benefits.
- [34:43]
Matt
Yes. Not like family assets and FAFSA and applying for college.
- [34:47]
Joel
They're not like, wait a second, she's.
- [34:49]
Matt
You've got plenty of money.
- [34:49]
Joel
Jessica's loaded. We're not going to give you any of those unemployment benefits. That's not how it works.
- [34:53]
Matt
Exactly. That's something that you are paying into. You will receive those benefits. And each state has its own formula.
- [34:58]
Joel
The employer pays into it.
- [34:59]
Matt
Yeah, yeah, exactly. The formula. Formula is based usually on a percentage of your recent wages with a fairly low cap. In our state, I believe the weekly max is something like $365.
- [35:09]
Joel
And it goes a lot lower than that if you make less, too.
- [35:11]
Matt
Yeah. My guess is that your husband actually makes more than that at the va. But also know how long those benefits might last. And so we're typically talking anywhere between three and six months. So your liquid savings, your emergency fund is going to be crucial, even though unemployment benefits are certainly going to be helpful. And then when we're talking about the bare bones budget. Joe, you were saying, what challenge were you talking about as far as you.
- [35:36]
Joel
Were trying to do $2 per person per meal for many years and you were able to achieve that?
- [35:42]
Matt
Well, back in the day, we were doing $1 per meal per person. $1.
- [35:47]
Joel
Dude, you're making me think of the commercials to support families in countries that are economically challenged.
- [35:53]
Matt
Matt, granted, this is when the kids were really little. It's not like they're eating a ton. Things are different now as they've gotten bigger. I mean, literally, man, it's crazy how. I don't want to get all sentimental, but kids, they grow fast.
- [36:05]
Joel
Yeah.
- [36:05]
Matt
They eat A lot of food. And when it comes to your grocery budget specifically, it comes down to how dialed in your current grocery spending is. Because let's say you're a baller like Joel and you get your groceries delivered from Whole Foods.
- [36:20]
Joel
Is that true?
- [36:21]
Matt
And then everything else. Well, you don't do Whole Foods, but you've done the delivery.
- [36:24]
Joel
Delivery. I've been getting the delivery from cost.
- [36:26]
Matt
I've talked about buying the discounted instacart gift cards, but. And then let's say all the rest of your groceries you buy at the local farmer's market on Saturday mornings and it's super fresh and organic. And you can't get any groceries that are any more expensive than that because that's kind of like as expensive as they get there. Well, you're gonna be able to, I mean, oh my gosh, you just. By going, that's the limit. Yes. I mean, you could cut back in such a significant way if that's what you're used to. However, if you already got your groceries dialed in, let's say you are, you've been an Aldi shopper. You are very intentional about your spending there, man. It's really difficult to cut back on your spending, specifically on groceries. So that's, I mean, I think that's one that can vary pretty wildly. But I will say the way our family has implemented a bare bones budget is all other discretionary spending I've essentially slashed by 2/3. And so it's literally hit with a multiplier Joule of 0.33. Because what I know is that even if things aren't doing like, aren't so great for our family, we're still going to want to celebrate Christmas. Like, we're still going to go on vacation. Kate and I are still going to want to go on date nights. They're just not going to be as nice. The presents aren't going to be quite as big, the vacation's not going to be quite as long or exotic perhaps, but there are still certain aspects. The kids activities, they may not be doing quite as many of them, but there are still certain things that, like, the reason they're on our budget currently is because we've prioritized them. But we're just going to have to find a way to prioritize them to a lesser extent. Not necessarily eliminate them completely, though I know if push comes to shove that that's something that we can do. So that's how we approach the bare bones budget. It's tougher when it comes to groceries. Because there's sort of a floor as to what it is that you can get by on, but all other discretion. Same thing with your housing. Like housing, transportation and food, man, those are really tough to make adjustments on.
- [38:18]
Joel
Hard to turn on a dime. Yeah, like you can plan to change those, but it's really hard to be like, I'm gonna sell a car tomorrow because I love life upheaval. Yeah, you might be able to, but you might not. Also, I would say one of the biggest food line items in people's budget is. And sometimes they don't think about it like this craft beer. It's eating out.
- [38:37]
Matt
Craft.
- [38:38]
Joel
Okay. Yeah, no, yeah, yeah, yeah.
- [38:39]
Matt
You keep the craft beer budget and then you cut eating out.
- [38:42]
Joel
You can't eliminate that. That's your craft beer equivalent, of course. Course. But it's eating out. And people under assume how much they spend eating out at restaurants.
- [38:50]
Matt
And when you look, especially lately, man.
- [38:52]
Joel
When you look at the data over the past five plus years, the amount of money we spend eating out versus at grocery stores, it's increased significantly as a culture. And so that's the biggest thing I think, to combat is some of the eating out. Yeah, you might be able to save a little bit more by switching. If you don't shop at Aldi yet going there, you could probably, you know, cut some of the more expensive items from your grocery list. The savings are going to be smaller there than they're going to be.
- [39:15]
Matt
Don't you underestimate Aldi, dude. Even going from Kroger, which is like an affordable grocery store, even going from, I mean, this. And I've got the records, I got the receipts, man, Literally going back, you know, decades. Not decades, but years and years and years. Switching from Kroger to Aldi, straight up, getting item for item. We cut our grocery budget by 30%.
- [39:33]
Joel
I totally believe that.
- [39:34]
Matt
30% overnight.
- [39:35]
Joel
I totally believe that.
- [39:35]
Matt
I couldn't believe it.
- [39:36]
Joel
So I do think that's an important tip. But I also just want to highlight that there are other ways that people are not really thinking that they're spending money or they're spending thoughtlessly, especially eating out. It's just something that. And the average meal, eating out costs four times what the meal at home costs. So remember that. And if you want to get, I think, inspired to make cheaper meals that are still tasty at home, check out our friend Frankie Salenza. He hosts a show, Struggle Meals. He came on episode 846 to talk about that, and he's like, all about making good food. That's good for you for not much money at all, which I love. So, yeah, definitely check out that episode and hopefully that'll be inspirational if you really do want to cut that grocery budget.
- [40:17]
Matt
Totally. And he was into mountain biking, which is something that I remember standing up. I feel like I like him even more. All right, let's keep moving. Pascal asks, is this a ridiculous time to put my house up for sale and move? Oh, what do you think, Joel? I'm reading into the question and what I'm going to say is that if you're looking to move to, like, a different country, again, going to, like, I'm kind of going back to the whole emotional response, the Qatar answer that we gave earlier. If you feel like that the worst, like that the future of the US Isn't bright, I don't know. Like, that feels more like a, like a knee jerk sort of reactionary response as opposed to maybe you're moving for another job opportunity to be closer to family. Maybe you're moving because you need, you're downsizing or you're upsizing. Maybe your family's growing and you need a bigger house.
- [41:02]
Joel
See, that was my, these are all.
- [41:03]
Matt
Good reasons to move.
- [41:04]
Joel
That was my assumption in the question. Was that Pascal was asking based on, hey, is it just a terrible time to list my house because of what's going on with the market? My answer to that is actually, no, not really. I think you're right, though, Matt. If you're like, I'm thinking about moving to a completely different country because I'm worried about the future of the United States, I would say that's probably overblown.
- [41:26]
Matt
There's a lot of folks out there who feel that way.
- [41:28]
Joel
I don't harbor the same fears. But I will say it's not that the housing market is immune from trade policy changes. It's just that other factors influence your decision whether or not to move a whole lot more. Like, I'd love to know how long you've owned the home, why you're moving. Are you moving to a lower cost of living location? Are you hoping to rent for a while after you sell this house? That would be helpful information to have. Ultimately, no, it's not a ridiculous time to sell your home. Home prices are high even though mortgage rates remain steep. And so you got to make sure you price the home right and you market it well because homes are staying on the market longer these days. But you could still do quite well as a seller in this market, especially when you think about where home prices were a few Years ago. Matt, think about Pascal. If even if he's only on the home for four or five years, just the appreciation on the home in that amount of time could be significant. But the question is, what are you going to do after you sell the home?
- [42:22]
Matt
Yeah, exactly. You got to take factors into account like financing, because if you've got a 3% mortgage and you're looking at something if rates are closer to 7% now. So financing is a huge factor as well. If it. So much of it I think comes down to flexibility and how much flexibility you have to move or to not move right now. Because if you got to move, you got to move, right? Like if, if it's for a job, can maybe consider becoming a first time landlord. If that's something that you've never thought of, but you're like, wait a minute. Oh, that sounds totally awesome. This, this is a 3, 2. This would make a killer rental.
- [42:53]
Joel
Plus I got that, you know, my mortgage is a thousand and this will rent for two grand. Sure, it's a great time to start being landlord.
- [42:59]
Matt
That's a. But for a lot of folks who are thinking, okay, I just, I got to sell this house. We need the equity from the sun to buy the new family home because we're moving for jobs. It's not a dumb move. That being said, if you have flexibility though, as to when you might list this house, if, if it was me personally, because of the uncertainty in the market, I think a lot, I mean, countries, there are entire countries that are hitting the pause button on certain things. There are certain industries that are like, yep, we're just kind of, we're going to, to ride this thing out and see where things land. Because of that, we're seeing employers and it's all trickling down to consumers. The level of uncertainty is leading folks to not want to take risks, which means that you, I think that you may not be able to get the most for your house were you to sell it like right now, as opposed to letting things shake out and seeing where things land in 30 to 90 days. Perhaps if it was me, that's what I would do.
- [43:52]
Joel
Yeah. But you just still have to remember like where, what was the home valued at a few years ago and are you going to do pretty good and if it's time to go, is it time to go? If you have flexibility though, Matt, Yeah, Pascal might be able to do better by waiting to sell. But also it's spring selling time. You could do worse as well. You could do a whole lot worse than selling Right now.
- [44:13]
Matt
Yeah. What if tariffs lead to sky high prices and inflation starts going up and the Fed's like, oh, guess what we're not going to do at all this year. You know, we talked about those two rate cuts. Yeah, not happening. That's not going to be great for the market. And mortgage and financing costs.
- [44:26]
Joel
But then again, if the cost of building those homes goes.
- [44:30]
Matt
Yeah.
- [44:30]
Joel
There's like so many knock on effects.
- [44:32]
Matt
That are hard to predict, different effects that it's truly hard to take them all into account. So you got to do it for personal reasons. And people buy and sell homes all the time because they were at the stage of life where they needed to do that.
- [44:43]
Joel
No doubt. All right, Matt, we've got more listener questions. We'll get to some more good ones, including how you can benefit from a market downturn. We'll get to that right after.
- [44:58]
Matt
Asking the right questions can greatly impact your future, especially when it comes to your finances.
- [45:06]
Joel
So if you're looking for a financial advisor you can trust, certified financial planner professionals are committed to acting in your best interest. That's why it's gotta be a CFP. Find your CFP professional at letsmakeaplan.org what does the future hold for business? Ask nine experts and you'll get 10 answers. Will we have another bull market in 2025 or we're going to get a BE? What about inflation? Will it continue to calm or will higher prices remain sticky? Wouldn't it be cool if someone could invent a crystal ball that would give us some foresight?
- [45:37]
Matt
Well, until then, Joel. Over 41,000 businesses have future proofed their business with NetSuite by Oracle, the number one Cloud ERP bringing accounting, financial management, inventory, HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. When you're closing the books out in days, not weeks, you are spending less time looking backwards and more time on what is next. Our business is really small, but if we needed netsuite, we would be pumped about the time the cost savings that it provides. Whether your company is earning millions or even hundreds of millions of dollars, NetSuite helps you to respond to immediate challenges and seize your biggest opportunities.
- [46:24]
Joel
Speaking of opportunity, download the CFO's Guide to AI and Machine Learning at netsuite.com the guide is free to you at netsuite.com howtomoney that's netsuite.com howtomone hey there, folks.
- [46:37]
Matt
I am Matt.
- [46:38]
Joel
And I'm Joel from the how to Money show. Matt, it's April and I've got spring break on my mind. Please tell me you got something fun lined up.
- [46:46]
Matt
Oh, dude, Typically I am a planner, but we're actually switching things up this year. We're gonna go a bit more spontaneous. I've been searching on Airbnb for some inspiration. You know, we've narrowed it down to trying to find some warmer temperatures. We kind of got that spring fever. So we're gonna try to find something along the coast. Maybe. Maybe some sand to dip my toes into.
- [47:03]
Joel
I like it.
- [47:04]
Matt
But how about you?
- [47:05]
Joel
Okay, so we've actually got our plans locked in. I'm taking the fam to this charming little Bavarian style town called Helen. It's up in the Georgia mountains.
- [47:13]
Matt
I know about Helen.
- [47:14]
Joel
Yeah, well, I found the perfect cabin on Airbnb, complete with a hot tub, which I'm definitely gonna need after running a trail half marathon while I'm up there, too. Oh, that is right.
- [47:22]
Matt
I forgot about the half marathon. Man, it sounds like an adventure. And you know what? While you're enjoying that hot tub, you could actually have your own place. Place listed on Airbnb, earning some extra cash while you are away.
- [47:32]
Joel
True. And now with Airbnb's co host feature, I hear it's easier than ever for anyone who's been overwhelmed by the idea of hosting. A co host can do the hosting for you and help manage your reservations and your guests. Find a co host@airbnb.com host.
- [47:49]
Matt
I know y'all watched the Super Mario Brothers movie. I almost decided to bring this back with Terrorists Terrorists Terrorists. Terrorist Terrorists Riffs.
- [47:57]
Joel
See, I haven't seen it.
- [47:58]
Matt
What? You haven't?
- [47:59]
Joel
No. My. My son's watching, but I don't.
- [48:00]
Matt
Peaches, Peaches, Peaches, Peaches, Peaches.
- [48:03]
Joel
It's a.
- [48:03]
Matt
It's a good jackpot scene.
- [48:05]
Joel
Now I'll have to.
- [48:06]
Matt
You'll have to. Let's keep moving. We've got listener questions to answer. This one is from Alex, who wrote how to determine whether it's worthwhile to take any early retirement offer. I know folks who are working for the federal government and are, like, five to nine years away from retirement, but some of them have been receiving offers to retire early and still get their pension benefits. Joel, kind of sounds like a scenario where folks are getting to have their cake and eat it, too, potentially, right?
- [48:34]
Joel
Potentially. It depends on the individual for sure. I mean, I. I like this especially for people who are financially independence minded, like they've been working towards that. It's, it's kind of like arranging your own layoff. It's one of those things that doesn't, it doesn't come around for everybody. Some sort of, of early retirement offer. And we talked about something akin to that, like with Sam Dogan back in the day, the dude who runs the website Financial Samurai. And it can be a brilliant move if calculated correctly. And he was just talking about when layoffs are happening at the workplace, if you kind of volunteer and you get a sweet severance package to walk away. I think he got like two years worth of pay or something like that.
- [49:10]
Matt
Something insane.
- [49:11]
Joel
Most people don't get that much. Nope, it's like six months at the max. But that can be if you are in a good financial position. Like something that only increases and benefits your financial standing while allowing you more flexibility. But so much depends right on your likely job stability, your overall financial situation. Because if you got a big chunk of savings you've been investing for years, well, you can totally use an early retirement offer to allow you to vacate your position earlier than you thought you might be able to. But if not, like if you're, if you're in more tenuous financial circumstances, you have to be really careful before taking an early retirement retirement offer because you might find that you don't have gainful employment lined up and you're in a much worse financial position.
- [49:52]
Matt
Yeah, but taking Alex as he or she wrote this early retirement. So like if we're taking retirement in the traditional sense of the word and you are going to be totally set, this totally changes this conversation from a financial conversation to a life fulfillment conversation. Right. Like this is on Maslow's hierarchy of need where you've just graduated to the next level and we're talking about, you know, these are more like self actualization needs as opposed to do I have enough money to pay the bills? Do I have enough money to be able to afford some of the more, you know, some of the luxuries in life, some of the things that I want to do. And so much of that comes down to how it is you want to spend your time. And so I think that's, if you are closer, closer to retirement, I think you might be more in that camp, which leads to less number crunching and more soul searching. Yeah, soul searching and writing and journaling and trying to figure out what do I want my days to look like. And if that's the case, Alex, I would Highly recommend for you to literally do something like that, like go on a silent retreat, spend some time just completely away from what it is that you are doing in the day to day to shake things up to help you to maybe almost stumble upon whatever it is that you might want to spend the next decade or two doing.
- [51:04]
Joel
Yeah, I mean I love the idea for lots of people if this means, hey, I was still planning on working to get that pension because that was a huge part of kind of my retirement income plan. But because that comes along with the early, this early retirement offer, why don't I just ride off into the sunset now I am fully financially prepared. If that's the case and you have other things you'd rather be doing with your life kind of like you're talking about Matt, I think it's great. I think this can be the perfect accelerator to get going in retirement earlier than you had placed and maybe enjoy some more of those early retirement years that you were going to be working instead. So yeah, I think that's, I think it's great advice. All right, let's get to a question from Pam. She says, I'm a middle aged investor. I'm 46. I'm looking for advice on how to help protect what I've already saved while still remaining agile and aggressive. I recently increased my income after years of struggling to save money. So I will be actively trying to catch up on my retirement over the next 10 plus years. Years. I'd love to hear how this market will help or hinder my ability to catch up on saving.
- [52:05]
Matt
Yeah, way to go Pam. On increasing your income. It totally, I'm sure it feels good. She said that she was struggling when it came to being able to save and invest, which means that she's actually able to do it now because she's got more money flowing in. It's going to allow her to ramp up those contributions. And in her words, she's looking to protect what she saved while being aggressive as well. And I think there's only one way to do that and that is to invest like an optimist and then save like a pessimist. So keeping your savings, classic Morgan household quote. Yeah, yeah, yeah. I did not coin that phrase. Those savings, those dollars, the money that you've got there in the emergency fund needs to be secure and liquid in a high yield savings where you have enough on hand to give you that peace of mind, you know, given a meaningful financial downturn. And then just keep investing in low cost index funds as well, like clockwork and the goal is to have enough cash so that you don't have to ever touch those investments at an inopportune time, like right now. That's something you want to avoid at all costs. And right now, specifically, given the fact that you're talking about having not made a whole lot of progress perhaps up until now, just realize that some of this volatility that you're seeing, it doesn't really impact you nearly as much. This is something that when you've been saving and investing for decades and decades and you've built up a fat, you know, nice sized nest egg, that's when this volatility can really take a bite out of your overall net worth.
- [53:31]
Joel
The number can change quite a bit.
- [53:33]
Matt
Yeah. And obviously, let's say you've been investing for a few years. It still sucks to see your investments go down by three grand. It's different though, when it's 30 grand or 100 grand or 150. And that's the kind of swing that some folks out there who have been investing for 20, 30 years, that's what they're experiencing right now.
- [53:51]
Joel
I will say I do think no matter the size of the drop, the people who have more cash on hand who feel comfortable that they can cover bills if something unexpected does happen to their job or to whatever. Like if they feel more financially prepared from a liquid cash standpoint, my guess is they don't feel the loop de loop in their stomach when they look at their retirement account balance. Nearly as much.
- [54:14]
Matt
They can weather the storm. Exactly.
- [54:16]
Joel
It's much easier to weather the storm. That's why that, hey, if I've got the cash on hand and savings to back me up and I'm still doing the investing thing like clockwork, well then you don't have to. That should reduce worry significantly. And as we said before, right. Dollar cost averaging into those tax advantaged accounts, that's where it's at. Do that through thick and through thin. And then, you know, once you reach the age of 50, Pam, you're a few years away. You'll have the ability to contribute even more to those accounts as those contributions limits rise. You say you're making trying to catch up on retirement account contributions, well, GUESS what, at 50, you get to contribute more, which is pretty cool.
- [54:50]
Matt
Another thousand bucks.
- [54:51]
Joel
Yeah. So into the IRAs and then even more into like 401ks, 403bs. And so if you're getting to the point where you're maxing any of these accounts, just know that in a few short years you're going to be able to funnel even more into those accounts, which is, which is awesome.
- [55:05]
Matt
Super sweet. Yeah. And that kind of goes to the volatility sort of point I was making. Your savings rate, Pam, the amount that you're able to set aside right now into those accounts actively, as opposed to seeing the returns on that money, that is going to have the biggest impact on your retirement.
- [55:20]
Joel
That's so underrated. Is there people don't talk about it enough. The more, the higher your savings rate, the more, the less you have to worry essentially about the machinations of the market.
- [55:29]
Matt
And he asks, during times of market volatility, is having your money in something like betterment that does automatic tax loss harvesting better than having all your investments in voo, which I love that so many folks are going back to vu, Joel. But I think some of this, some of the answer here depends on what your definition of better is.
- [55:49]
Joel
And they're not mutually exclusive. Like, you can do tax loss harvesting into vu. Right. But I get what Annie is getting at. And the short answer is yes, we're always hoping that our investments go up. But tax loss harvesting is a tool that you're able to utilize. You're able to sell investments when they're down. The thing is, you don't want to sell them permanently. We don't want you locking in those losses, moving into cash because you're fearful. But you can sell those investments and then rebuy a very similar fund, let's say, going from Voo, let's say, into VTI, like Vanguard's S&P 500 fund, into the Vanguard Total Stock Market Index Fund. Right. And when you do, when you sell and then rebuy an incredibly similar fund immediately, this allows you to show a paper loss while changing your holdings minimally. And this, this is an awesome move for people to make for tax purposes. When it comes down to it, brass tax, you can only claim three grand a year in investing losses. And if you experience more losses than that, let's say you, you have a $10,000 drop. Right. And you sell and then you buy another very similar fund that's not the exact same. Well, you can roll those losses into future tax years. That's. That's kind of cool. So tax loss harvesting. Yes. In market volatility, it's a way to. It's a silver lining, I guess, of sorts to the. Yeah. The downturn in your portfolio that you're seeing.
- [57:11]
Matt
Yeah.
- [57:11]
Joel
So Joel.
- [57:12]
Matt
Joel said, yes, that it is better, but it just depends on what you're willing to pay for. That's like, so that's, that's why I feel like it kind of depends on what your definition is. Because someone would say, well, is Whole Foods better than Aldi? And it's like, well, depends on what you like to pay for. Because if you don't want to pay for tax loss harvesting, you want the.
- [57:30]
Joel
Organic free range chicken or just whatever.
- [57:33]
Matt
If you don't want to pay for it, then if you don't want to pay it, it's like, so it's 0.25%. Like that's the fee that you're going to pay. If you're fine paying that fee, then yeah, it is better because they do it automatically. But if you don't want to pay that fee, that's something that one would say is not better because you can DIY that tax loss harvesting yourself, do your research, know how it works. But it's certainly possible to manually do this on your own. If you're not wanting to do that, then betterment is totally the way to go. Especially there. Within your brokerage account. Jennifer asks, I have a first time college student heading off to school in the fall. I'm wondering what if any federal student aid or loans will still be available. Also wondering, with all the federal cuts to universities and punitive cuts for diversity, will universities have to raise tuition?
- [58:17]
Joel
Hmm, all right, that's a good question. So federal student loan availability, Matt, from what I've seen, it has not changed at this point. And so, Jennifer, your student should still have access to federal student loans per normal. What's been in flux is student loans repayment plans. And so like the SAFE plan that was launched by the Biden administration that has been axed by the courts. So like those more generous repayment plans, they're not as generous and there's still a lot of flux. We're going to actually tackle that on the show with an expert soon, so stay tuned for that episode. But make sure, Jennifer, that you fill out the FAFSA by the end of June and ideally sooner rather than later, because that can help your student qualify for need based aid. On top of that, don't forget to apply for scholarships and to look for other ways to minimize debt, like getting a campus job. That was something I did when I was at school, Matt. I became a resident assistant and that reduced my room and board fees dramatically. And so I was able to go to a private school out of state and take on very little student loans because of those moves. Those are the kind of things Jennifer, I would Just tell you to at least consider. And if you're looking for more tips about scholarship hunting and the like, go back and listen to episode 860 that we did with Jocelyn Pearson, person who. That's all she does. She eats, breathes, and sleeps scholarships. So there are a lot of ways to get free money to pay for that education in hopes to avoid those student loans or at least just minimize them.
- [59:39]
Matt
Yeah. And your other question about federal cuts and the potential raising of tuition, that only applies to a couple of elite universities, and then those tend to have pretty large endowments. Harvard, for instance, I think they've got like over $50 billion in their endowment. Is that right?
- [59:54]
Joel
Yeah, it's pretty crazy.
- [59:55]
Matt
Billion with a B. So while it's not benign, I wouldn't worry about it actually increasing the cost of tuition across the board. And interestingly enough, while the sticker price of college continues to go up, the msrp, the advertised price, the actual net price that students pay has been going down, particularly in recent years. There are fewer high school grads who are opting to go to college post Covid, which has also led to price reductions. So that I wouldn't worry too much.
- [60:23]
Joel
That there's a supply and demand element here. And when fewer kids are choosing to go get a higher education, it makes shopping around even more important. Because colleges, they can't. I think people just assumed they can just raise the price to whatever they want. People are gonna have to pay it, and that is not the case. Students have choice, and that's where kind of the dream school thing comes in. Matt. We talk about how don't settle on one school and assume that's where I have to go, no matter the cost. No, no, no. Cast your net wide and find schools that will all offer more significant financial aid to you and your family so that you can reduce the cost. Because ultimately the institution that's on the diploma isn't as important, I don't think, as the education that you receive. So keep those student loans to a minimum, please. All right, Matt, let's. Let's leave everyone in this episode with some advice that a listener left on the how to Money Facebook post.
- [61:13]
Matt
That's the opposite of a question.
- [61:14]
Joel
It is. It is. Listener Pamela said. I think the best way to deal with. With all this is to stop buying stuff frivolously. Time for the minimalist life.
- [61:23]
Matt
Oh, I'm for it.
- [61:24]
Joel
Yeah.
- [61:25]
Matt
This is something that we've been preaching for a long time, and it's true. Like, terrorists are like. Essentially, terrorists are like a Sales tax and depends on where you want to go with this because, like, ours. Is sales tax bad, Joel? It depends on what the alternatives are. You know, like, like. Cause it makes me, you know, what it makes me think of are states that don't have income tax and they only have sales tax. And those are states that we have seen a whole lot of people flocking to. Like, I'm thinking of specifically Texas and Florida.
- [61:55]
Joel
Tennessee.
- [61:56]
Matt
Tennessee as well. And even some of the other states that have that, they do actually have an income tax, but it's actually a lot lower. Those, like they take the other top.
- [62:06]
Joel
Slots and some of those states have been reducing their income tax because they have to compete with states that don't have one.
- [62:11]
Matt
They're competing. And so much of it comes down to what the alternative are. And so this isn't like some sort of universal defense of international tariffs. But it is interesting to see that when given the choice between states with income tax versus taxes that are more associated with spending, that, hey, here's something that I am willing to give a little on when it comes to what I'm willing, you know, the number of dollars I'm spending. So I don't know, I like that. It puts a lot more control. It gives you the power to almost dictate the amount that this is going to impact you. And for a lot of folks out there to decide, hey, I'm going to really pare back my spending. This is something I've been wanting to do anyway. It's almost like a kick in the pants, a push up, you know, not I say kick on the pants because I said getting kicked in the pants earlier when we're talking about fighting. And that's not the kind of kick in the pants I'm talking about here. A little, a nice pleasant breeze at your back as you are encouraged perhaps to spend less. I'm not.
- [63:04]
Joel
Yeah, well, okay.
- [63:05]
Matt
I don't want to make the argument though that like, you, you don't need to have a new iPhone.
- [63:08]
Joel
Right.
- [63:09]
Matt
Hey, if you want a new iPhone, get you a new iPhone.
- [63:10]
Joel
That's right. But just know that those arguments, especially from officials in power, that's so stupid. Those are degrading.
- [63:17]
Matt
Yeah, exactly.
- [63:17]
Joel
I don't want to hear that.
- [63:18]
Matt
Exactly.
- [63:19]
Joel
It's not okay. But from us it's different because we're trying to incentivize you to have more financial flexibility and power in your life. We're not trying to tell you you don't need that thing. We're just trying to say, hey, there's better opportunities and the best things that money can give you is freedom and flexibility, not more new stuff. Totally. And I will say when prices go up, buying less and buying secondhand is. Is going to save you more money. It always has. But the stakes could be going up if tariffs remain. So, you know, we're all likely going to face increased prices in one form or another. But I think more minimalism is almost always good advice, so.
- [63:54]
Matt
Totally.
- [63:55]
Joel
Yeah.
- [63:55]
Matt
All right, We've gone long. This is the Yellow Rose Smash ipa.
- [63:58]
Joel
Which you think I dug it.
- [64:00]
Matt
Taste super tasty, dude.
- [64:01]
Joel
Texas beer seems to be somewhere. Texas IPA seem to be somewhere in between west coast and East Coast. It's like they found this middle ground.
- [64:08]
Matt
Yeah.
- [64:08]
Joel
And I'm. I'm here for it. I like this one totally.
- [64:10]
Matt
Like, when you pour it, it's got the haziness going on, but it. Yeah, it kind of had some of those west coast, like grapefruit bitterness, like bitter edge. Bitter notes to it.
- [64:20]
Joel
Yeah.
- [64:20]
Matt
Is what I'm trying to say with kind of old school looking label to boot. Doesn't it kind of just like look like it's been sitting on the shelf fading for like a day?
- [64:30]
Joel
It does.
- [64:30]
Matt
There's some cans that you see and it looks like it came straight out of some AI generated computer with vivid colors and whatnot. And this looks like, I don't know, it looks like it's been sitting on the shelf since the 80s, but it did not taste that way.
- [64:44]
Joel
No, that's just the.
- [64:45]
Matt
It's the vibe that they're going for. But that's gonna be it for this episode. Leave us a review if you haven't. And of course you can head over to the website for more personal finance goodies. That's howtomoney.com buddy. That's going to be it for this one. Until next time, best friends out. Best friends out. Joel, we've all got different tasks in life that we enjoy doing. For me, that would be closing out the books on our family's personal finances every month. Nerd. But then there are some chores that are more of a pain. And for me, that would be grocery shopping, something I try and avoid if at all possible.
- [65:31]
Joel
Well, that's where Walmart steps in, because their subscriptions help you to stay stocked on the items you use most, whether that's milk and eggs or kitty litter and cleaning supplies. Find everything you need for your home at Walmart, in stores, online, and in the app.
- [65:46]
Matt
Asking the right questions can greatly impact your future, especially when it comes to your finances.
- [65:53]
Joel
So if you're looking for a financial advisor you can trust trust certified financial planner professionals are committed to acting in your best interest. That's why it's got to be a CFP. Find your CFP professional at letsmakeaplan.org Discover.
- [66:09]
Pamela
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