Friday Flight - Credit Score Supremacy, Avoiding Alts, & Points in Purgatory #930

Summary

Podcast Summary: How to Money - Friday Flight - Credit Score Supremacy, Avoiding Alts, & Points in Purgatory #930

Release Date: January 10, 2025

In episode #930 of How to Money, hosts Joel and Matt delve into three pivotal personal finance topics: the importance and dynamics of credit scores, the pitfalls of alternative investments, and the often-overlooked fate of accumulated credit card points. Skipping over the introductory sponsorship segments, the hosts engage in a rich, informative discussion aimed at equipping listeners with actionable financial insights.

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1. Credit Score Supremacy

Understanding Credit Score Changes and Their Implications

The episode opens with a discussion on recent changes to how medical debt is reported on credit scores. Joel highlights a significant policy shift:

Matt (15:11): “The outgoing Biden administration has finalized a rule that is going to end the inclusion of all medical debt on credit reports. Moving forward, we've already seen the removal of sub-$500 medical bills from being reported to credit bureaus.”

This policy aims to alleviate the burden on approximately 15 million Americans by preventing medical debts of any size from negatively impacting their credit scores. However, Joel expresses skepticism about the longevity of this change:

Joel (17:02): “We're literally weeks away from transition to the next presidency, and this could be overturned with a stroke of a pen.”

Despite the potential short-term benefits, the hosts caution that without legislative backing, such changes may be transient, leaving credit scores still vulnerable to other financial missteps.

The Debate on the Relevance of Credit Scores

The conversation shifts to the broader debate surrounding the importance of credit scores. Joel and Matt critically assess advice from financial gurus like Dave Ramsey, who downplays the significance of credit scores:

Joel (19:50): “We advise caring about your credit score, even though [Dave Ramsey] doesn't.”

Matt adds nuance by acknowledging the pitfalls of obsessing over perfect scores:

Matt (20:17): “There are a certain segment of Americans out there who seem to be obsessing over the credit score to an unhealthy degree.”

Ultimately, they advocate for maintaining a "good enough" credit score (above 760), stressing that while striving for improvement is beneficial, extremes can lead to unnecessary stress without substantial financial benefits.

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2. Avoiding Alternative Investments

Skepticism Towards Non-Traditional Investment Vehicles

Joel introduces the topic with a reference to a Wall Street Journal piece by Jason Zweig, emphasizing caution against alternative assets:

Joel (26:15): “Jason Zweig... had a great piece on why we should give him the Heisman. We don't want alternative assets in our lives...”

Alternative investments like wine, whiskey, farmland, NFTs, and meme coins are scrutinized for their high fees, increased risk, and reduced liquidity. The hosts argue that these options often do not provide the diversification benefits they claim and can distract investors from more stable, traditional investment strategies.

Real Estate: The One Exception?

While generally advising against alt investments, Joel and Matt concede that traditional real estate investment holds merit, distinguishing it from crowdfunded or digital real estate platforms. They highlight the tangible benefits of owning property, such as local market control and potential rental income, which are not typically available with alternative investment vehicles.

Joel (29:18): “There's a big difference between paying $20 to rent a pickup truck versus financing a $75,000 decked out, whatever fancy pickup truck...”

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3. Points in Purgatory: Maximizing Credit Card Rewards

The Reality of Credit Card Points Usage

Transitioning to their third main topic, Joel and Matt explore the often-unrealized potential of credit card rewards. Referencing a Bankrate survey, Joel reveals that nearly a quarter of credit card users fail to redeem any of their accumulated rewards:

Joel (34:28): “Almost a quarter of folks ended up not redeeming any of their rewards in the past year.”

They discuss the common phenomenon of "spillage," where reward points remain unused, paralleling forgotten gift cards. The hosts advocate for strategic use of rewards, suggesting that cash back might be more beneficial for the average user compared to travel points, which can lose value if not utilized promptly.

Matt (35:18): “Where are you going to actually follow through and do the dang thing?”

Best Practices for Credit Card Rewards

To prevent rewards from languishing, Joel and Matt recommend regular monitoring and setting reminders to utilize points. They also caution against over-reliance on credit card points as a primary financial strategy, emphasizing responsible usage to avoid falling into debt.

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Additional Insights and Practical Tips

Debt Payoff Prioritization

The hosts reiterate that debt repayment remains the top financial goal for many Americans, underscored by rising consumer debt and high-interest rates. They encourage listeners to leverage tools and resources, such as those offered by Navy Federal Credit Union, to manage and eliminate debt effectively.

Home Improvement and Energy Efficiency

In a segment blending personal anecdotes with practical advice, Matt shares his experience with home insulation. Highlighting the importance of addressing air leaks in crawl space doors, he demonstrates a cost-effective DIY approach to improve home energy efficiency, thereby reducing heating bills and enhancing comfort.

Matt (03:38): “This is a way to avoid spending thousands of dollars on an encapsulation which you may not need.”

Smart Car Buying Strategies

Joel and Matt discuss the advantages of buying used cars, noting that January is an optimal time due to higher inventory from trade-ins. They also touch upon the downsides of renting electric vehicles, citing challenges like limited charging infrastructure, which can make owning an EV a more practical long-term solution.

Joel (08:00): “If you’re looking for a used car, now might be the best time.”

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Conclusion

Episode #930 of How to Money offers a comprehensive exploration of crucial personal finance topics, blending expert insights with relatable discussions. Joel and Matt provide listeners with balanced perspectives on credit scores, investment choices, and credit card rewards, all while emphasizing practical strategies to enhance financial well-being. Whether you're aiming to optimize your credit, avoid risky investments, or make the most of your credit card perks, this episode delivers valuable guidance to help you navigate your financial journey.

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Notable Quotes:

• Matt (15:11): “...medical debt of any size can no longer plague people on the credit front.”
• Joel (17:02): “...this could be overturned with a stroke of a pen.”
• Matt (20:17): “...obsessing over the credit score to an unhealthy degree.”
• Joel (26:15): “...we don't want alternative assets in our lives...”
• Joel (34:28): “Almost a quarter of folks ended up not redeeming any of their rewards in the past year.”

Transcript

[Joel]

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[Matt]

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[Navy Federal Credit Union]

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[Joel]

Welcome to how to money. I'm Joel. I'm Matt and today we're talking about credit score supremacy, avoiding alts and points in purg.

[Matt]

Look at you Joel. Alliteration on point today with our Friday flight to the max, our weekly roundup of the news stories that we came across this week and specifically the ones we think you should pay attention to and how it's going to impact your wallet. We hope everyone is staying warm out there. It's like nationwide sub zero or sub freezing temperatures most of the country.

[Joel]

It is except for in California which oh geez. Our hearts go out to all our friends, everyone impacted out there, listeners out there.

[Matt]

Yeah, well I was going to say so we talked recently about my sort of closed foam versus open cell spray foam with a house and all that insulation. Yeah, yeah, all of that. I don't want to talk about that. I've got another sort of insulation breakthrough.

[Joel]

More of this old house talk.

[Matt]

I've got a lot of research trying to figure this thing out. Especially now when it's so cold in the house and you can feel the cold through the floors, man. And so I've been considering getting our crawl space in the existing part of the home spray foamed because that's something folks do. They anyway, especially just for comfort.

[Joel]

Like, I know it will reduce your energy bills, but it will also just make your feet warmer in the winter.

[Matt]

Yeah, absolutely. It makes. It just insulates that crawl space even more. But I got to thinking about it and I'm not going to do it. And here's why. Because I came across honestly a bunch of different articles. But cinder block has a fairly high R value value or whatever. Like it's fairly insulated. And on top of that, you consider the fact that there's like a foam board on the outside of that, then an air gap and. And then brick. Well, all that equals to a fairly insulated crawl space.

[Joel]

So you don't need to add more.

[Matt]

So you don't need to do that. You could, but you don't necess. It's not necessary, I guess is what I'm saying. And that got me to.

[Joel]

It might be overkill.

[Matt]

It might be overkill. But then I've got to ask myself, well, why is the crawl space so cold? So here is my insulation breakthrough or my insulation realization, Joel, which is that the very crawl space. Did you like that?

[Joel]

Yeah, I like that.

[Matt]

The very crawl space door that I was going through is not insulated. And so I looked it up. Guess what the R value is of a half inch piece of plywood of.

[Joel]

OSB gotta be minimal.

[Matt]

It is less. It's less than 1.

[Joel]

Okay.

[Matt]

So basically I've got a. You know, most folks, if you've got a brick house, like you have a fairly well insulated crawl space.

[Joel]

That's where all the cold air is coming in.

[Matt]

But it's like there's not even a door on there. Like the cold air is just pouring in. And it makes so much sense because in the. On our main level of the house, like that is the coldest section. And that's one of the things where it's like, man, why is it. It's just so cold down here? It's not actually that cold in other parts of the main floor, but that portion of the house near the laundry room. Oh, which happens to be where the crawl space access is.

[Joel]

My question for you then is, am.

[Matt]

I going to Insulate that door. Well, yeah, you better believe it.

[Joel]

Is it similar though to when you have like attic access and people will put those. I've got one of those zipper door things above it, ET Space hatch, basically. Is that what they put on the crawl space door?

[Matt]

I've only minimally looked into it, but I know that I am at least going to put some foam backer board which adds a little bit. But I'm also considering they sell these different canister kits even at Home Depot where it's much more affordable and you can. It's a spray foam application and I'm thinking about buying one of those consumer grade spray foam application kits. Going in the crawl space, putting a mask on, shutting the door and spraying over it.

[Joel]

Spraying the back of the door.

[Matt]

Yeah. Letting it cure and then cutting my way out essentially just with like a razor blade.

[Joel]

So it's still really half home improvement, half escape room.

[Matt]

Yeah, it's really tight. Because you don't. That's, that's one of the other issues with actual air leaks that can come in. So sometimes it's not just insulation, it's the fact that like, hey, if you can see there's a gap. If you can see sky out from your crawl space, there is cold air obviously getting in there. But anyway, all that to say this is a way to avoid spending thousands of dollars on an encapsulation which you may not need. Instead, I'm going to take this low cost budget approach to finding the most low hanging fruit. And man, that crawl space door is 100% the lowest hanging fruit when it comes to keeping that, that space warm.

[Joel]

All right, well, let us know how it goes.

[Matt]

Yeah, I will.

[Joel]

How it changes kind of your, the environment near where that door is in your main house.

[Matt]

It has to. Yeah, but that.

[Joel]

Yeah, you're right.

[Matt]

I'm really hopeful.

[Joel]

A small amount of DIY I think could save you a lot of money and get you where you want to go without overdoing it.

[Matt]

Yeah. And that's why I was thinking the foam backer board, because I was think thinking, you know what, I could even cut it to be slightly larger than the actual door.

[Joel]

Yeah.

[Matt]

And that's, that's really affordable. Right. Just a piece of whatever. Maybe I'll even double it up. I don't know. Yeah, but sticking that on, they're making it slightly larger. That way when it closes, it's like it overlaps the crack in the door.

[Joel]

Oh, yeah.

[Matt]

You know what I'm saying?

[Joel]

For sure, it makes total sense.

[Matt]

I think that because there's always a gap.

[Joel]

I mean, plywood there. It's not. There's always a little gap there, it seems like.

[Matt]

So that's a good way to fix that. Anyway, I wanted to share that with all the folks out there who might be thinking something similar where they're like, man, my feet are so cold. How do we, how do we fix this? Yeah, this might be a solution.

[Joel]

I like it, I like it. And that's enough house talk, though.

[Matt]

Yeah, enough, enough. Which. That truly is like our favorite channel now. I have that set as a. Do you really on the same. Because the Samsung, it's got all these free channels included and whenever you turn the TV on, it always goes to some default channel. And so I always have it set there because I love seeing all these home improvement projects.

[Joel]

It's like classic Americana.

[Matt]

I love it. I think most people here talk like this or they think about having to do something like this themselves on their own home and they just get bummed out. I get stoked.

[Joel]

Yeah, you love home improvement projects. I'm like most of the people listening who are like, screw that, they're not terribly interested. But let's move on with the Friday flight message. Talk about let's do homes. Let's talk about cars. Turns out January is the best time to buy a used car. This is according to our friends over at Car Edge. You know, we had Ray and Zach on the show last year and they provided a lot of great advice when it comes to shopping for cars and getting the best price. Well, the reasons that January is the best time to buy a used car is because there are more trade ins on the lot because, you know, people upgrading their car, buying the new car, trading in their old car in December, that's a popular time to do that. Makes sense for used cars now in abundance.

[Matt]

That was one of the things they said was that you get, you get a good deal at the end of the month, you get a better deal at the end of the quarter, you get the best deals at the end of the year.

[Joel]

Yep. So if you want to buy a new car, you might want to wait eleven and a half months within spring actually is typically when people start to look to upgrade their, their used car ride too often because of a tax refund, cash infusion. So we're in this sweet spot where there's an abundance of used cars and not all that many people looking. Car prices, obviously they fluctuate according to supply and demand and so supply is high, demand isn't. So basically for everyone out there, if you're like, I'm looking for a used car, I don't know when I'm going to start. Well, now might be the best time, actually. And it might even be a good time to consider an electric vehicle. Specifically from rental car company Hertz. They bought. Oh, yeah, we've talked about this before, Matt, but this continues to be a problem for them. They bought a ton of Teslas. They weren't able to rent them out in the numbers that they hoped. And they're even, I saw, I think it was in Jalopnik. They're even soliciting people who just rent an ev. Now they're telling them at the end of the rental period, hey, do you actually want to buy this car? Here's what we'll sell it to you for.

[Matt]

You don't even need to take your things out. Just keep on driving.

[Joel]

Really, really incredible. Like, Hertz really wants to get rid of some of these teslas and other EVs that they bought. Their loss could be your gain. It's at least worth taking a look to see. But I mean, some of those cars are priced at sub $20,000. That's not bad for like an EV if it's in good condition.

[Matt]

Absolutely. And it makes sense that they're wanting to unload these because, like, if you think about it, if you, let's say you're a business traveler and you're just flying into a city for the day, you're not thinking about, like, you don't want to have to learn how to drive an ev. You don't want to have to learn the ins and outs of a Tesla if that's not what you typically drive. You want something that you're used to, you're going to get to work or the office, wherever you're visiting. I don't know how this works. Make your sales calls or something like that.

[Joel]

You don't want to have to find a place to charge.

[Matt]

No. Yeah. And when it comes to. If it is an overnight trip, where are you typically staying? Most folks are staying at a hotel. But how many of those give you the ability to charge? I mean, it's not that easy. And this is something Kate and I learned firsthand when we went out to Colorado. I wanted to try out the Tesla, and I was like, man, it's kind of a pain in the butt actually to stay at a condo where I can't charge the thing. And we were forced to find the superchargers, which was fairly easy. But still budgeting the time to. Because you still have to sit there while it's charging, even on a supercharger. And the cost was just as expensive as gasoline.

[Joel]

Yeah, that's why it's like better to own it makes a ton of rent.

[Matt]

All the advantage is being able to drive it home, pulled into your garage and do that slow basic charge.

[Joel]

That's where the real savings come in.

[Matt]

Absolutely. Now the real savings is buying not a new car, but a used car. Because the average price of a new car these days, Joel, is it's still close to $50,000, which is, it's difficult for me to wrap my mind around.

[Joel]

I want to say, if I'm recalling correctly, it's like $48,273 average price for a new car.

[Matt]

So expensive. 20% of buyers now have a monthly payment of $1,000 or more. And certainly some of this we can blame on inflation, but that's only a part of it. Felix Salmon over at Axios, he highlights that our tastes, they account for most of the price increase. We like nice things. We're less content with compacts and sedans than we used to be. And upgrading to the SUV or upgrading to that truck, it costs dramatically more. And so when you're thinking about your next car, just keep that in mind for some fol folks, a 3 row SUV, maybe it is necessary, but if not, man, a smaller car is going to save you a lot more money in almost every way as well.

[Joel]

Yeah, I think that's really important to highlight, Matt. I think a lot of it's like that Spiderman meme where all the spider men are pointing at each other. I think it's really easy to point at inflation, but then there's a finger pointing back at you and it's like, well, did you have to buy the biggest possible car on the planet? And when you're talking about those big SUVs, we're typically talking about seventy plus thousand dollar rides. And so maybe you need it, maybe you don't. And if you don't, you can save a lot of money. And this coincides perfectly with something else I saw about the amount of space that the average American has in their home these days. The number of homes with extra bedrooms just hit an all time high. So like we are gluttons for space and we're expanding, maybe even when we don't need to.

[Matt]

We're just such a fancy rich nation.

[Joel]

Yeah.

[Matt]

Our tastes have exceeded our pocketbooks.

[Joel]

That's true. That's right. Yeah. And so, yes, similar to buying the larger car that Extra space is going to cost you big time. Zillow estimates that the average three bedroom home costs $336,000, but the average four bedroom home costs $496,000. That's more than $150,000 difference, which is substantial. And there's nothing wrong with having a home office or having a guest room. Right. Having maybe a little bit more room than you need, but, and especially, you know, post Covid more people working from home. Like, I get that you want a separate space like that, but given that homes are one of our most expensive purchases, it's important to go in eyes wide open and know that buying a beastly home, one that's maybe larger than you actually need, with space that you're not going to put to use very well, it comes with financial consequences. And Matt, I think sometimes people think about, well, what about when my, the, the rare occurrences where people are staying at your home.

[Matt]

Yep.

[Joel]

Or maybe hey, the holidays just, just finished and you had someone staying at your home for four or five days and you're like, gosh, don't want to live through those tight quarters again next Christmas when it comes around. Well, maybe think about renting that special person in your life, your parents or whoever they might be renting them something around the corner. And that is way cheaper. You pay for it yourself even. How much cheaper is that than renovating, adding on or buying a new bigger house?

[Matt]

Tens of thousands of dollars. And the same thing is true when it comes to vehicles. Like a common thread between silk houses and autos is the fact that like we're planning for these edge case scenarios that rarely happen and we catastrophize what would happen if we were in need.

[Joel]

Right.

[Matt]

And so like I'm thinking of like going back to cars and trucks. Folks are like, well, I want to have a truck because I want to be able to pick up the new refrigerator because we're going to upgrade our appliances or whatever. Couple of things here. First off, Costco and Home Depot, they all deliver.

[Joel]

Yeah.

[Matt]

So you don't even need the truck. Secondly, if you actually do need pickup, well, you could borrow it. But let's say you don't have any friends with trucks. Okay. You can still go to Home Depot and rent the stupid truck for 20 bucks for a flatbed. And there's a big difference between paying 20, 25 bucks to rent a pickup truck versus financing a $75,000 decked out, whatever fancy pickup truck that people are spending so much money on these things.

[Joel]

And I think it's Just so easy to feel that, especially in the aftermath of a visit like that and say, we gotta do something about this house. It's getting too tight. But is it really getting too tight?

[Matt]

Let's just sign up for some payments.

[Joel]

Yeah. And it's just interesting to see that Americans have gotten accustomed to having more space than they actually need. Part of that is increasing home sizes, part of that is declining family sizes. It's kind of both of those things happening simultaneously. But we used to get by with a heck of a lot less space in this country. And to think, I don't know, the 2500 square foot house is getting pretty tight for my family of three. Like, I think that's the phenomenon that you and I would love to combat a little here.

[Matt]

Absolutely.

[Joel]

Joel.

[Matt]

Let's talk about debt, specifically medical debt, because it's no longer going to show up on credit reports or actually will it, Joel, we will see.

[Joel]

That's all the headlines are saying.

[Matt]

At least it's another political tug of war. The outgoing Biden administration, they have finalized a rule that is going to end the inclusion of all medical debt on credit reports. Moving forward, we've already seen the removal of sub$500 medical bills from being reported to credit bureaus, which has helped a lot of folks not have scores crushed thanks to just, you know, a minor bill that they couldn't afford to pay or even maybe that they forgot to pay. But this much bigger rule change would mean that medical debt of any size can no longer plague people on the credit front. And it would impact close to 15 million people. Yeah, according to the CFPB. But I think it is unlikely to stick because again, of the way that we arrived to this rule being implemented, it's not that we don't feel for folks who have medical debt, certainly, but.

[Joel]

And it's not that the system doesn't have meaningful problems with how medical debt.

[Matt]

Is, but the way you arrive at solving these problems matters a ton. And to say carte blanche. Oh, we're gonna change the rules, we're gonna change the standards. As to the idea is that, well, everyone's credit score is gonna be boosted. But, like, think about the last time you had. Like, just think about grade inflation with teachers. What if a teacher says, hey, I'm only going to give A's this semester. Well, guess what? That A no longer means anything because everybody got an A. And so what do colleges then do? They're like, okay, well, we're actually looking for people that have higher than a 4.0. We're looking for the students on there that have the 4.2, 4.3 who are tacking on the AP classes. That's what I see happening here is that there's not going to be this sort of long term benefit to folks because lenders are still going to cover their butts. They're still going to find ways to filter through applicants that are out there and they want the best applicants who are looking to take loans from banks and credit unions.

[Joel]

Well, the other thing is that this might be, this might not live for.

[Matt]

Very long because this is assuming the best that it is able to stick around.

[Joel]

We're literally weeks away from transition to the next presidency, the next administration, and this could be overturned with a stroke of a pen. So when we don't arrive at legislation in the proper way, which is typically through congressional action, which they have been loathe to work, it seems the sort of back and forth politics and legislation that we've seen specifically from executive branches and administrations going back and forth, we see more of that and that means that these changes aren't necessarily standing the test of time.

[Matt]

Yeah, they're not here to stay.

[Joel]

Yeah. Oh, and by the way, we have an episode. Go back and listen to episode 716 if you want to know how to fight back against medical debt. The system sucks. Dr. Virgie, Dr. Virgie, she was wonderful. And the system is again not consumer friendly. The health care system, the health insurance system and then the reporting of health debt to your credit report. But if you want to know how to battle that in your life, you got to stick up for yourself. Episode 716 is for you. We'll link to that in the show. Notes Matt, this brings up too, you're kind of getting at maybe how credit scores are becoming less relevant if we're not taking into account certain factors for credit reports. And I guess the importance of credit scores has been widely debated in the personal finance community. Some people think that they matter. Other people would say that they don't. Dave Ramsey in particular is one of those guys who would say he loves.

[Matt]

The I love debt score. That's what he calls it.

[Joel]

Hates that thing. Right. And you and I have said, well, no, it's not the best thing in the world, but it's smart to jump through the hoops to make sure that your credit score stays solid. And so this Yahoo Finance article detailed why you shouldn't listen to Dave Ramsey's advice on living without a credit score. And we wholeheartedly agree with it. The credit scoring system is flawed. The credit bureaus are error prone and not great at responding to your concerns. There was actually another lawsuit just filed against TransUnion this week because guess what? They don't deal with consumer complaints well at all. And that's phrasing it nicely. But at the same time, the game isn't all that hard to play once you kind of dig into the rules. And not playing the game of trying to have a solid credit score makes your life harder. You know, not tending to your credit score, it can lead to higher mortgage rates, higher insurance costs in most states around the country, to not getting a rental that you're interested in getting if you know you are. Let's say you're trying to go down the street and you say, oh, hey, I want to apply to live at this property. Well, the landlord might say, I don't know. Your credit score is pretty rough. Sorry, you can't live here. So you're only harming yourself if you're not paying attention to your credit score. And we've got resources on howtomoney.com about how to tend to your credit. But I think, despite what Dave Ramsey says on this, we advise caring about your credit score, even though he doesn't.

[Matt]

Yeah, but it's also possible to pay too much attention to your credit score. The Journal documented someone, someone who is attempting to attain a perfect credit score. He was already at 840, but guess what? Joel wasn't good enough. He wanted the coveted 850, and he achieved it.

[Joel]

One of those type A folks, I guess.

[Matt]

Yeah, through some trial and error. But, dude, this. What a hollow victory. Talk about like majoring in the minors. Maybe at the end of this little section, I'll ask you what your credit.

[Joel]

Score is, but I don't. Honestly, I don't know right now.

[Matt]

You don't even know? Because, honestly, it doesn't even matter. I was. Anytime we talk about credit score, I.

[Joel]

Know it's good enough.

[Matt]

I'm always curious. I'm like, all right, well, actually, where am I sitting right now?

[Joel]

Probably, like, maybe I'm guessing I'm like 780.

[Matt]

I bet you're higher than that, actually. But there are a certain segment of Americans out there who seem to be obsessing over the credit score to an unhealthy degree. But the truth is, anything above a 760 is fantastic. And that's going to get you qualified for the best loan terms out there. And so what we would say is that it's kind of fun, right? If you're just like, like the way I'm talking about it, be like, oh, you just kind of keep an eye on it. And it's kind of fun to be like, oh, yeah, actually, I'm. I'm 10 points higher than you. But also, don't make this.

[Joel]

If that's what you want to compare your friendships.

[Matt]

Like, like just some healthy competition. Right. Like, makes me think of that one time when we're like, all right, where do we think Netflix is going to be at the end of the year? We never followed up on that.

[Joel]

Actually.

[Matt]

You remember that. That was. This is like, years ago when Netflix tanked or whatever, and you and I, we had a small, friendly wager.

[Joel]

Yeah.

[Matt]

On Netflix, the price of their stock. But don't take it too seriously. Don't waste your time and energy trying to push your score way up above anything that is actually going to move the needle when it comes to the kind of loan terms that you might be able to qualify for. In the case of your credit score, good enough is great.

[Joel]

Agreed. And I think if you are kind of wondering where your credit score stands, it's a good ide to get a picture of that. You can typically get that from a credit card company that you do business with, or you can check out credit karma.com. that's a good place to kind of not just get an idea of what your score is, but then you can also. They've got like, the scorecard that. That'll help you help highlight the places where you can improve your credit. But again, if you're in that 770 plus range, don't sweat trying to raise it significantly. And it was really interesting to see this. The journey of this guy Matt, trying to improve his score to 850 and how much time and effort it took.

[Matt]

I feel bad for the guy. Yeah, like, honestly, like, that's what, like, as a waste of time.

[Joel]

We only have so many hours on this earth.

[Matt]

Yes.

[Joel]

Don't waste it thinking about a perfect credit score.

[Matt]

As I'm reading through that profile, I'm just like, dude, there's so many better things you could be doing with your life, but instead, this is the thing that you've chosen to obsess over. Yeah, but, Joe, we got more to get to more Friday flight. We're gonna get to points purgatory and more right after the debt payoff is the number one financial goal that Americans have for 2025. I love seeing that, because debt, especially consumer debt, it can be such a bummer. It not only puts you in a precarious financial situation. The stress that it creates, it can be overwhelming. It impacts every other aspect of your life. That's why Navy Federal Credit Union is here to help you. They have all the financial tools and resources you need to dominate debt right now. They offer a 0% intro APR on credit card balance transfers for 12 months.

[Joel]

That's a pretty sweet offer. You can also get $250 when you spend $2,500 in your first 90 days on a cash rewards or cash rewards plus credit card. Visit Navy federal.org to start dominating debt. Navy Federal Credit Union members are the mission. Navy Federal is insured by NCUA. After the insure rate expires, variable APRs are 15.15% to 18% based on creditworthiness. Rates are subject to change. ATM fees for cash advances are up to $1 at non Navy Federal ATMs.

[Matt]

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[Joel]

Matt we were able to get customized Indochino suits and we love them. Getting to customize everything, it kind of endears you to the final product in a different way, including the best friends out embroidering on the inside of the jacket takes a couple of weeks for your custom suit to arrive. The fit and the fabric though, they're second to none. I feel like a total stud when I hit up a wedding in my Indochino suit. My next one though, it's going to be tweed.

[Matt]

Matt Ooh, I like it man. Yeah. You can even set up your measurement profile on Indochino's website and you can choose customizations without even leaving the house. Or sign up for a premium in person experience just by booking an appointment at a showroom near you and let an Indochino style guide walk you through every step for your 2025 plans. Look your best in Indochino. Visit Indochino.com and use code how2money to get 20% off any purchase of $499 or more. That's 20% off at ind o C-H-I-N o.com promo code howtomoney a new year often feels like it offers a chance to spark real change. But resolutions can feel daunting, especially when they're important. Joel like creating a will or a trust. It may feel overwhelming, but you know it's about time you did it. Well, trust and will, they make creating your will easy, like lounging on the couch easy. And you can get 10% off [e-mail] howsofmoney that's right.

[Joel]

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[Matt]

Check one of your goals off early this year with Trust and Will. Protect what matters most in [e-mail] HowToMoney and get 10% off plus free shipping. That's 10% off and free [e-mail] HowtoMoney.

[Joel]

All right, Matt, we're back. Now it's time for the ludicrous headline of the week. This one comes from the Wall Street Journal. The headline reads, you're invited to Wall Street's private party. Say you're busy. More and more is being written about alternative assets right now. Jason Zweig, he's the investment columnist over there at the Journal. He had a great piece on why we should give him the Heisman. We don't want alternative assets in our lives, in our portfolios, even though financial advisors are pushing these alternative investments on us as individual investors more than ever before. And there are all sorts of ways. Now, we've documented this on the show in the past for people, the average person, to invest that were essentially unavailable to previous generations. We talked about. And some of that's good, right? Like the advent of index funds in the 70s. Like that's a beautiful, wonderful thing that makes it easier to invest. And then there are other ways that you can easily invest but in products that might not make sense for you. So wine, whiskey, real estate. Those are some of the alternative assets that people can now invest in.

[Matt]

There's invest in farmland, Farmland, Acre Trader, Vinovest.

[Joel]

I mean there's all of these websites out there that make it easy to invest in all these different things. Hey, why don't you diversify your portfolio and invest in some farmland or some art, right? Stuff like that. And then it even got Pretty wild with NFTs and meme coins over the last few years. And you can do this all like from the comfort of your home and your PJs on a slick looking website. So I think people are more tempted or even just like some of the partial real estate investing websites, Matt, the crowdfunding real estate websites, that's another one that attracts people and the accessibility I think makes it seem normal or even good. But then these alternative investment products come with often in small type, often in places that are hard to find. Significantly higher fees. Oh yeah, lots more risk, significantly less liquidity. I'm with Jason Zweig here. We don't believe that anybody out there listening needs any alternative investments in their life in order to be diversified and in order to build wealth wisely. In fact, I think a lot of people you're maybe majoring on the miners if you try to put too much of your focus in there, kind of like trying to get that perfect credit score. It's just not important.

[Matt]

Agreed. One small caveat is real estate because that is something that you and I are invested in, but not this sort of crowdfunded approach to investing in real estate. It's not even something that we talk about all that all that often these days. Like when's the last time you bought a house, Joel?

[Joel]

It's been a minute.

[Matt]

Like I haven't purchased a home in the 2000s because, well, my personal home. But when it comes to investment in real estate, because the deals were back in the teens and harder to come by now. And if you already have a property, that's fine, it's sure hang on to it, especially if you got that, that low interest rate mortgage rate baked into it. But for somebody who is interested in growing their wealth right now and they're just getting started and that is not an area I would say that you should be focusing on unless it's something that you're really, really passionate about.

[Joel]

And I think there is a difference in my mind between owning long term real estate that you invest in locally and you self manage or renting out a portion of your house. Right. Short term rental style. There's a big difference between that and between some of these alternative investment styles because there are advantages you can have as a local real estate investor that you don't have when you're investing via some of these other newfangled websites. And yeah, there are higher fees in real estate, but there are also advantages to real estate too that the index fund investor just doesn't quite have. But yeah, I think that's, that's like the one exception I'll give to this. I just don't, I don't wrangle regular real estate investing, owning other, owning, owning more properties into the alternative investment sphere. I think I'm talking about all these other things or all these digital ways to invest that seem super sexy and they, they talk about and they tout magnified returns by investing in art or watches or whatever. And hey, look at what's happened with like watch valuations, Matt, over the past few years. Those have gone down and it's been said that, oh, Rolex watches, they only go up in value. That's not so that's not the case. Not necessarily the case. Stock market's been going up. The value of your Rolex watch has gone down.

[Matt]

Yeah. I will say if investing more is one of your big goals for 2025, be careful which brokerage firm that you choose to go with because more of the different, you know, as we're talking about apps here, there are a lot more investment apps that are more like traditional investing apps are incentivizing risk these days more than some of the big ones that we are actually fans of. So it started with Robinhood, of course, but they've actually gotten better since their inception while other newer companies have leaned harder in the gamification direction. And new research shows that it is particularly effective at getting younger investors with less investing knowledge to trade more frequently, which of course leads to worse results. There's that study that showed that the best performing portfolios were the unfortunately were those of people who had died and they hadn't been touched. Because you're not getting in there and you're not messing, you're not buying and selling at inopportune times.

[Joel]

I feel like you should reiterate that because every time I see that it's kind of baffling. But it makes a lot of sense that people who aren't living can't tweak their portfolio because they do better.

[Matt]

The less active of an investor you are, the better your results are going to be. So instead of realizing your potential behavioral biases and you know, and helping out some of these newer apps out there and some of these newer platforms are exploiting your behavioral issues, your biases, because it's better for their bottom line to get you to trade more often. And this is why the more boring companies that we've always recommended, like Vanguard and Fidelity, are still great. And it's almost like a rite of passage for younger investors to get sort of distracted by the shiny, the novel, the sexy, the new, which I almost want to be okay with because when you're younger, you've got less money at, at risk, like, like the stakes are lower. And part of me says, well, better to learn these lessons now while you're younger, with fewer zeros than, you know, 20, 30 years from now. But of course, the reason we have the show is for people to learn from our mistakes, to learn from other people. Like, why make the same mistakes that your parents have made when you can learn your lessons, like in a secondhand way? But I think there are still going to be some folks out there who might have to experience it themselves.

[Joel]

That's exactly. You know, in our conversation with Josh Brown, that's that was one of the things he said was like, no, people should be like, given the chance to screw up. And I think people should certainly be given the chance to screw up. But wouldn't it be better to avoid it completely and to learn from other people's beats? Right. Yeah. So I agree.

[Matt]

That's why we have the show, because that's what we're trying to advocate for. People are still going to Meme Bros. Are still going to Meme. You know, like folks are still going to go out there and do the dumb things.

[Joel]

And if you want to do. And Matt, we talk about like maybe sandboxing to some of your investing as well. Like if you have this die hard desire to trade or to speculate on individual stocks, you want to have a.

[Matt]

Little bit of fun.

[Joel]

Yeah, that's okay. But just do it with a small portion of your portfolio and make sure you can lose sleep or you won't lose sleep at night if you lose the money that you're trading inside of that account. But I would siphon that off and do it somewhere else and do the boring thing with the vast majority because it's the tried and true way to build wealth and it's far less mentally taxing. So, yeah, let's talk about credit cards for a second. For the extreme credit card nerds, getting the right reward credit card can be massively beneficial. And Matt, I think about hearing from listeners the exotic trips that they've taken, the cool places they've gone and how much money they've saved because they just played the game, they know the system, and they've just changed essentially the method of their payments. And it's led to some pretty cool perks. And we've talked about that on the show. A reasonable amount. Most recently in episode 899 with our friend Chris Hutchins from the podcast all the Hacks. Well, there was this new survey from Bankrate and it made me think twice about rewards, credit cards, or at least want to add some nuance into the conversation. What Bankrate found was that the average person, they're not paying much attention to the credit cards they're using and to the points that they're racking up. Almost a quarter of folks ended up not redeeming any of their rewards in the past year. So they, hey, maybe they accumulated the rewards, but they didn't spend any of them.

[Matt]

Kind of forgot about them.

[Joel]

Yeah, exactly. I think that's a big part of it. It's. It's almost like the gift card that you were given a couple years ago, it's lost somewhere or it's been forgotten about. And I think it can be fun to play the game. It can be really cool to accrue those travel points. But the truth is, using them for the cost of the trip, that's the real joy. I mean, if you miss out on that connection, what are you actually doing? Plus, the longer those points linger, the less valuable they become. And travel rewards, man, they might sound great in theory, but what do they look like in practice in your life? I think it's a good question to ask because it turns out, based on this Bankrate survey, cash back cards were the crowd favorites. And although, yeah, they might not provide the best theoretical return for your spending, they might be the best real life choice for a lot of people because the credit card rewards, the best ones that you can get are the ones that you're actually going to use.

[Matt]

Absolutely. Yeah. Where are you going to actually follow through and do the dang thing? But having said, be careful how you're using your credit cards, especially if you are a newer listener or if you've had a history of overspending or getting into consumer debt. But either way, check out the Golden Rules of Plastic. This is an article we've got up on the site. We don't want poor usage of credit cards to increase your debt load or to harm your credit score. Like we talked about earlier, the Financial Times, they just published an article about how US credit card defaults, they're actually at a 15 year high, which isn't great macro data or on an individual, you know, micro level. Basically the lender doesn't think that the debt will be repaid, so they write it off. That is what it means when credit card debt is in default. We've discussed how paying off debt, how it's basically like this apex goal for Americans and we love that, especially as interest rates have climbed. But never having a balance, well, that is crucial to smart credit card use to be able to completely avoid it altogether or to get out of that debt. If you have acquired some, we will link to that golden rules of plastic article in the show notes as well. But if you need some additional help, we would, well, we would love to hear from you. Send us a voice memo. We'd love to hear the particulars of your personal situation. But if you are someone who is like, no, no, no, guys, I can't wait for you to maybe get back to me on a show off in the future. I need help now. If so, we would recommend to reach out to an organization like Money Management International that provides credit card debt counseling. We want consumer debt to be something that is in the rear view mirror for you.

[Joel]

I think I just saw this stat today, this morning, Matt, when I was looking at my email and the number has ticked up the percentage of people who use credit cards who don't pay them off on time and in full every month. That is just going up that number. I think it's like 48% of families now have some sort of recurring credit card debt. And that with a high interest rate attached that is putting you behind in your finances. It's like running on a treadmill. But like have you seen the treadmills for the guy who runs marathons in like two hours and they try to put people on.

[Matt]

It's like the size of a room.

[Joel]

Like a small room.

[Matt]

And it's like can you run at the pace?

[Joel]

And you can't. I couldn't. I couldn't run it for eight seconds, I don't think. And people just fall flat on their face because that's how fast he runs. But he runs that fast for 26 miles. That's what like perpetual credit card debt is doing to your finances.

[Matt]

The algorithm knows you, Joel.

[Joel]

Yes, it does.

[Matt]

20, 20, 2021. Joel would have been like, wait, what? I'm being fed treadmill videos of I.

[Joel]

Get fed way too much running stuff.

[Matt]

World record marathon runners.

[Joel]

It's pretty ridiculous. I love it. Well, Matt, we talked about the downsides of buying gift cards ahead of Christmas. And I have more hesitation, I think, than you do. You're more laissez faire about gift cards.

[Matt]

And I, yeah, let people make their mistakes.

[Joel]

That's right. I won't be able to think twice. Although there were some good discounts out there that made gift cards cheaper, which we're down with. I mean, I think about the annual Target 10% off gift card sale we didn't talk about on the show, but it's usually kind of after Black Friday before Christmas. And if you're a big time Target shopper, hey, go get that discount. But just remember to not be a spillage statistic. And spillage is when gift cards linger for months or for years without being spent. And this is great for retailers because they, hey, they got the money in their pocket already. They sold the gift card and then if that gift card never gets presented, that's cash in their pockets. But it's important for you to not be that statistic and to spend the money because as we've documented, there's no guarantee that the store you have a gift card for sticks around for forever.

[Matt]

That's right. If you're a TGI Fridays. Was it Fridays?

[Joel]

Yeah, that was the last one. But this has happened at many different times, right, Where a store is just going out of business and you're like, wait a second, are my gift cards worthless than they might be. So make a plan to spend your gift cards quickly, like let's say in the first quarter of 2025 or another option. If you have a gift card and you're like, I'm never using that. I don't really like this retailer. Why did Aunt Edna give it to me? Use a site like hardcash.com you can sell a gift card online. You're going to get depending on where it's to pennies on the dollar or let's say 60 cents on the dollar or something like that. But getting something is better than getting nothing. Just don't. I think the key here is to not let your gift cards languish or get lost.

[Matt]

That's right. Actually, have you continued to use the Costco Instacart gift card hack?

[Joel]

Duh. I will say on the online purchases, they limit two Instacart gift card purchases per 14 days.

[Matt]

Oh, really?

[Joel]

Yeah. But then so I ran back into the store to get a couple more, but yeah, it's working out well for me so far.

[Matt]

It still is a hoop that you're willing to jump through for sure. Get that sweet discount. Well, that's a situation where it totally makes sense to get the gift card 100%.

[Joel]

Yeah, I'm not anti gift cards. I'm just anti gift cards.

[Matt]

Going to waste.

[Joel]

Yeah, going to waste. Or I prefer for you to get them at a lower price.

[Matt]

Well, that's going to be it for this episode. We hope everyone has a fantastic weekend that you stay warm out there. We'll see you back here on Monday with a fresh Ask how do Money episode? Head over to the website specifically check out our credit card tool. If you are looking for a credit card that aligns with how it is that you spend your money, or specifically the kind of rewards that you're looking to garner from your credit card, you can sort it by airline, you can sort it by business cards, personal cards, cash back, and of course you can find [e-mail] credit card tool. Joel that's going to be it for this one, buddy. Until next time, best friends out. Best friends out.

[Joel]

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[Matt]

That's right, and for a limited time they're doing free 30 minute strategy sessions. So start today by booking a free strategy session with one of their experts by going to domainmoney.com howtomoney I am.

[Joel]

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[Matt]

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[Joel]

By earning cash back rewards with Colgate Palmolive rewards available while supplies last. Limits apply us only January 1, 2025 through March 31, 2025. For full terms, visit cprewards.com do you.

[Colgate Palmolive]

Want to see into the future? Do you want to understand an invisible force that's shaping your life? Do you want to experience the front what makes us human? On tech stuff we travel from the mines of Congo to the surface of Mars, from conversations with Nobel Prize winners to the depths of TikTok to ask burning questions about technology, from high tech to low culture and everywhere in between. Join us Listen to tech stuff on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.