2025 Investing, Renting vs Buying, $$$ Planning with ‘Money with Katie’

Summary

Morning Brew Daily Podcast Summary

Title: Morning Brew Daily
Host/Authors: Neal Freyman and Toby Howell
Episode Title: 2025 Investing, Renting vs Buying, $$$ Planning with ‘Money with Katie’
Release Date: January 1, 2025

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On the January 1, 2025 episode of Morning Brew Daily, hosts Neal Freyman and Toby Howell welcomed special guest Katie, the mind behind the Money with Katie podcast. The episode focused on crucial personal finance topics for the new year, including investment strategies for 2025, the ongoing debate of renting versus buying a home, and effective financial planning tools. Katie shared her insights, strategies, and personal experiences, providing listeners with actionable advice to enhance their financial health in the coming year.

1. New Year’s Resolutions and Financial Health

The episode kicked off with a discussion about New Year’s resolutions, both personal and financial. Neal and Toby shared their own resolutions, setting the stage for Katie's practical financial advice.

• Neal’s Resolution:
  Neal expressed his desire to visit the remaining two U.S. states he hasn't been to—Kansas and Alaska.

  “This year I really want to see the two remaining United States I haven't been to. Those would be Kansas and Alaska.”
  (00:27)

• Toby’s Resolution:
  Toby aimed to complete her first Ironman triathlon, building on her previous marathon experience.

  “I think my goal is to just do my first Ironman triathlon.”
  (00:51)

Katie transitioned the conversation to financial resolutions, emphasizing the importance of having a clear vision for one's financial future.

2. Practical Steps to Improve Financial Health in 2025

Katie outlined actionable steps listeners can take to enhance their financial well-being in the new year. She emphasized the importance of setting a vision for money's role in one’s life rather than merely sticking to a budget.

• Establishing a Financial Vision:
  Katie advised listeners to envision how money can improve their lives beyond basic budgeting.

  “You are not going to, quote, unquote, become responsible with money unless you have a vision for the role that you want money to serve in your life.”
  (01:59)

• Conducting a Financial Checkup:
  She recommended dedicating separate weekends to dream about aspirations without initially looking at numbers, then later analyzing spending and income to align with those dreams.

  “Pick two different weekends to do these exercises. Don't try to do it all at the same time.”
  (02:20)

• Connecting Vision with Data:
  Katie emphasized the importance of marrying one's financial vision with actual spending and earning data to create a realistic plan.

  “Set your vision, you'll sit down, you're going to get intimate with your own numbers and then you're going to start putting pen to paper and making the plan.”
  (04:03)

3. Money with Katie Wealth Planner

Toby Howell introduced Katie's Wealth Planner, a comprehensive financial tool designed to help individuals manage their finances effectively.

• Importance of a Wealth Planner:
  Katie discussed how traditional financial tools often miss the mark by not linking current behavior to future outcomes. Her Wealth Planner provides a structured approach to budgeting and long-term investment planning.

  “It should give you some scaffolding around which you can build your budget... it should help you determine some high level guidelines for what you should be spending.”
  (05:54)

• Features of the Wealth Planner:
  The planner assists users in understanding their current financial position and projecting future scenarios based on different spending and saving habits.

  “It should be able to help you understand what your path forward looks like if you continue to earn, spend, and invest in the way that you have been.”
  (06:00)

4. Achieving Financial Independence and the FIRE Movement

Katie delved into the principles of the FIRE (Financial Independence, Retire Early) movement, offering guidance for listeners aiming to achieve financial freedom.

• Defining FIRE:
  Katie explained FIRE as an approach where individuals save and invest aggressively to retire earlier than the traditional age.

  “Fire is in many ways an approach to challenging the status quo. It says you can retire as soon as you have enough investments such that you can live off 4% of the balance every year.”
  (08:09)

• Calculating Savings Rates:
  She highlighted the significance of understanding one's annual expenses and savings rate to determine the timeline for achieving financial independence.

  “If your savings rate is 10%, you can assume that it means it's going to take you roughly 41 years to become financially independent.”
  (08:30)

• Current State of the FIRE Movement:
  Katie noted that while the movement has a dedicated following, shifts like increased remote work have introduced more flexibility, potentially altering the urgency felt by members.

  “With the shift to work from home and telework, there's a bit of a... the urgency out of it for some people.”
  (11:13)

5. Navigating Lower Interest Rate Environments for Retirement Savings

Addressing the changing financial landscape, Katie provided advice on saving for retirement amidst declining interest rates.

• Long-Term Investment Focus:
  She stressed that long-term investments are less impacted by short-term interest rate fluctuations, advising listeners to prioritize contributions to retirement accounts and maintain a diversified portfolio.

  “Your savings account yield matters so much less than your bigger picture investment questions like... how much are you contributing to your long term investments every single month.”
  (12:32)

• Optimizing Savings Strategies:
  Katie recommended focusing on asset allocation and diversification rather than chasing high-yield savings accounts, which may no longer offer the same returns.

  “What your asset allocation is. Are you appropriately diversified? Those are the things that I think really move the needle in the long run.”
  (12:45)

6. Time Management and Its Impact on Financial Success

The conversation shifted to the relationship between time management and financial planning, with Katie sharing her personal journey.

• Historical Context of Time Perception:
  Katie explored how industrial capitalism transformed the way society views and manages time, leading to a more regimented and optimized approach to daily activities.

  “Time becomes something that someone else can pay for. And so by extension, it becomes something that can be wasted or something that can be optimized.”
  (14:44)

• Shifting from Optimization to Protection:
  She shared her transition from a highly optimized schedule to a more flexible and protected view of time, allowing for greater personal well-being.

  “Thinking about time as something I should protect. Now I'm empowered to say no to things that I don't think are good opportunities.”
  (17:18)

7. Reflections on the Last 40 Years of the U.S. Economy

Katie provided a historical overview of significant economic changes over the past four decades, linking them to current economic challenges.

• Tax Cuts and Corporate Buybacks:
  She traced back to the 1980s when corporate and high-earner tax rates were significantly reduced, leading to increased financialization and stock buybacks.

  “Before 1981, I think it was something like less than 5% of all corporate profits were used for stock buybacks. Now it's something like half.”
  (18:45)

• Impact of Citizens United:
  Katie discussed the Citizens United decision as a pivotal moment that granted corporations personhood, thereby increasing their influence over the political system.

  “When corporations were basically granted personhood in the United States, such that corporate interests really fully enveloped our political system.”
  (18:45)

• Resonance with Current Listeners:
  She explained that understanding these long-term changes helped listeners make sense of contemporary economic and political sentiments.

  “Pulling it all together, trying to weave those threads together, connecting those dots, it was actually very cathartic for me.”
  (21:08)

8. The Ubiquity of Personal Debt in a Financialized Society

Katie addressed the proliferation of personal debt as a byproduct of financialization, linking it to broader policy failures.

• Debt as a Symptom of Policy Issues:
  She argued that many personal finance struggles are rooted in systemic policy failures, making debt a necessary tool for individuals to navigate expensive living conditions.

  “Many of the most intractable personal finance problems... are often downstream of policy failure.”
  (21:34)

• Importance of Financial Education:
  Katie emphasized that understanding the financial system empowers individuals to make better decisions and manage debt more effectively.

  “Personal finance education becomes ultimately very critical... if you're aware of these conditions and you understand that the system is sort of set up to guide you toward a lot of debt.”
  (21:34)

9. Upcoming Book and Integration with Financial Philosophy

Katie teased her forthcoming book, which aims to blend personal finance advice with historical, political, and cultural contexts.

• Book Content and Purpose:
  Her book seeks to provide a comprehensive view of personal finance, acknowledging the societal factors that influence financial choices.

  “Our mission is to be that intersection of where your economic reality, where your political and cultural reality meets those personal financial choices.”
  (24:44)

• Release Date:
  Katie announced that her book is scheduled for release on June 10, 2025.

  “June 10, 2025.”
  (26:26)

10. Renting vs. Buying: Factors to Consider

The episode delved into the perennial debate of renting versus buying a home, with Katie offering a nuanced analysis.

• Price-to-Rent Ratio:
  Katie recommended using the price-to-rent ratio as a key metric to determine whether renting or buying is more economical in a given area.

  “The high level heuristic that can be very helpful here is the price to rent ratio in your zip code.”
  (29:45)

• Assessing Total Cost of Ownership:
  She outlined various factors to consider when buying, including mortgage interest, property taxes, insurance, and maintenance costs, versus the rising costs of renting.

  “You're talking about closing costs, mortgage interest, property taxes, insurance... what is going to be the total cost of ownership.”
  (29:50)

• Opportunity Cost of Down Payments and Investments:
  Katie highlighted the importance of considering the opportunity cost associated with down payments and the potential returns from alternative investments if one chooses to rent instead.

  “What is the opportunity cost of that money going to be, as well as the opportunity cost of your down payment.”
  (32:10)

• Personal Experience:
  Drawing from her own experience of house hunting amidst a challenging market, Katie emphasized that renting can often be the more financially prudent choice, especially when property prices are exorbitant.

  “We're probably going to keep renting because I literally just cannot make the numbers work.”
  (27:50)

11. Personal Reflections and Final Thoughts

As the episode concluded, Katie shared personal reflections on moving from California to Colorado and discussed her unique resolution for the year.

• Moving to Colorado:
  Katie recounted the challenges faced in the competitive housing market, ultimately deciding to continue renting while investing the difference.

  “I'm feeling like we're going to keep renting and investing the difference.”
  (28:10)

• Resolution to Have No Resolutions:
  In a refreshing twist, Katie declared her resolution for 2025: not to have any resolutions, advocating for self-acceptance and reducing pressure during the new year.

  “My resolution this year is to not have any resolutions.”
  (34:39)

• Promotion of Resources:
  Before departing, Katie promoted her Wealth Planner and encouraged listeners to engage with her content for further financial guidance.

  “Check out my 2025 Wealth Planner... Level up your money moves this [e-mail].”
  (35:48)

Key Takeaways

1. Set a Clear Financial Vision: Understanding the role money plays in your life is crucial for effective financial management.
2. Utilize Comprehensive Financial Tools: Tools like the Money with Katie Wealth Planner can provide structured guidance for budgeting and long-term investment planning.
3. Understand the FIRE Movement: Aggressive saving and investing can significantly shorten the path to financial independence.
4. Adapt to Economic Changes: In a lower interest rate environment, prioritize long-term investments over high-yield savings accounts.
5. Renting vs. Buying Decision: Use the price-to-rent ratio and consider opportunity costs to make informed housing decisions.
6. Historical Context Matters: Recognizing the economic shifts over the past decades can provide deeper insights into current financial challenges.
7. Debt Management: Acknowledging systemic policy failures can reframe personal debt struggles and highlight the importance of financial education.
8. Personal Well-being Over Optimization: Balancing time management by protecting personal time can enhance overall well-being and financial decision-making.

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This episode of Morning Brew Daily provided listeners with a rich blend of personal finance strategies, historical economic perspectives, and practical tools to navigate the financial landscape of 2025. Katie's insights bridged the gap between individual financial actions and broader economic trends, offering a holistic approach to financial well-being.

Transcript

[Neal Freyman]

Good morning, Brew Daily Show. I'm Neal Freyman.

[Toby Howell]

And I'm Toby Howell.

[Neal Freyman]

Today, how are your personal finances looking for the year ahead?

[Toby Howell]

Don't worry. Money with Katie is here to put you on the path to Success. It's Wednesday, January 1st. Let's ride. Neil, Happy New Year's. Going to put you on the spot. What is your New year's resolution for 2025?

[Neal Freyman]

Yeah, well, I usually don't do resolutions. I don't think I've made a single one or actually committed to one. Maybe those are two different things. But this year I really want to see the two remaining United States I haven't been to. Those would be Kansas and Alaska. Those are the only two left. During COVID I just did so many road trips and just worked from from Airbnb all over the country. So I knocked off a lot of states.

[Toby Howell]

I have two left, Kansas and Alaska. Not a lot of things. Tying those two together would be a very long road trip as well. Maybe you have to take a cruise up to Alaska. Could be a fun winter holiday thing to do. My New Year's resolution. So last year I tried to run every single day. I made it about two and a half months in and then got injured. So I'm going to aim a little lower this year. I think my goal is to just do my first Ironman triathlon. I've done a couple of marathons. I think Ironman is the next step. Speaking of the new year, we're very excited for you all to hear this episode. Katie is one of our favorite people here at Morning Brew. She hosts the Money With Katie podcast and is one of the best personal finance thinkers and writers out there in the game right now.

[Neal Freyman]

Now, take out a pen and paper because you're going to learn so much from this podcast. We really hope you enjoy it. Katie, thank you so much for joining us and Happy New Year.

[Katie]

Thank you so much. Happy New Year to you, too.

[Neal Freyman]

So we're releasing this episode on January 1st, obviously a popular time to make resolutions for the New Year. What are a couple practical steps our listeners can take in the New year to improve their financial health specifically?

[Katie]

So I just had my friend Ramit Sethi on the show, so his perspective is sort of fresh in my mind right now. But something that I think he really gets right in his personal finance philosophy is this idea that you are not going to, quote, unquote, become responsible with money unless you have a vision for the role that you want money to serve in your life. Like, there has to be a more alluring end state that you are working toward than just, oh, I'm going to budget. Because, like, adults budget, right? So with that being said, if you are looking to do a little bit of a checkup for 2025, whether you are someone who has this stuff locked and loaded or you've maybe never sat down and looked at your finances before, I would say pick two different weekends to do these exercises. Don't try to do it all at the same time. Don't try to do it all at the same day. But in your first sit down with yourself, you are not going to look at your numbers at all. Okay? You're just going to spend some time answering the question, where can money improve my life? Where if I had the money, would my life really genuinely get better? You're probably not going to sit there and be like, oh, you know, I order more stuff on Amazon. There's probably some specific things that you might have never actually, like, let yourself really dream about before. So this is an opportunity to dream big for a second about how you would organize your life if money were not an object, and then put some numbers around that. So I had a friend do this and she was like, man, if money wasn't an object, like, I would get my hair washed and blow dried professionally every week. I would go into the salon and get it done so I didn't have to wash it all week. That would be amazing. So we start penciling it out and I'm like, this is like a couple hundred bucks a month. Like, we're not talking about a, you know, a billionaire level change here. It wasn't really insurmountable. But the point is, you want to get a holistic vision for, like, where would I live, how would I eat, how would I travel? I'm going to put some ballpark numbers around the type of life that I really want to live.

[Neal Freyman]

And.

[Katie]

And then the next time you sit down with that vision in mind, now you're sitting down with your data. So that's your spending data from the previous year. That's how much you earned, that's how much you managed to contribute to your savings and investments, and you're basically going to go, okay, I have this vision. Is there anything here that I could actually have right now if I just made slightly different spending decisions or, okay, in order to save, say, 20% of my income, in order to make these, like, really serious steps toward this vision for my life, I actually have a new salary target. Like, I'm probably not going to spend a whole Lot of time worrying about if I'm going out to eat once a week or twice a week. I actually need to focus a lot of the energy on I'm negotiating for a new job, I'm switching companies. But the point is you're just going to start connecting the dots between where you are, where you want to be and it can actually be really, really fun. And the budgeting part, the sitting down and like making the plan part, that comes last because that's just the roadmap to how you're going to make these things happen. And you know what, it might take a while. When I sat down years ago and decided, hey, I actually, I want to have more money. Like, I am tired of feeling strapped all of the time. I don't think I should be, but I think I want to have more money. It probably took about 18 months for the changes to really kick in. But you're going to set your vision, you'll sit down, you're going to get intimate with your own numbers and then you're going to start putting pen to paper and making the plan.

[Toby Howell]

Well, let's talk about getting intimate with your numbers. As you just described it, you have this product, it's called the Money with Katie Wealth Planner. It is this prodigious spreadsheet that I've played around with. It's incredibly impressive to just even look at. Why is it important for someone to have a tool like that when it comes to managing their finances?

[Katie]

When I first became interested in personal finance, the most challenging thing was understanding how, how my current behavior was going to translate to the future. Like, I will never forget my first call with a financial advisor because I asked, okay, how much should I be trying to save? Like, I just got this job, I'm trying to sign a lease. Can I afford this apartment? Like, I had no idea. I didn't have any grasp on what was reasonable or what was too much. And since they were actually insurance salespeople, neither did they, honestly. But I think your personal financial tool, so whether you are using a wealth planner or you are using something else, should be able to do two things for you. Number one, it should give you some scaffolding around which you can build your budget. It should help you determine some high level guidelines for what you with your income, with your tax liability, with your goals, what you should be spending on everything from housing to travel that you can then plan accordingly so you can have a benchmark number to say. I'm actually going to dial that up because it's really important to me or, hey, that's great to know. I could spend 10% on my transportation, but like, I don't need that. I live in New York city. I need 10% for that. Secondly, it should be able to help you understand what your path forward looks like if you continue to earn, spend, and invest in the way that you have been. So that was the biggest thing that I felt was missing from most of the tools that I had tried and what I was trying to solve for. When I made the first 12th planner a couple years ago, I didn't need to know how much I was spending on shampoo every month. That didn't matter. I, I need to know how much longer am I going to have to work for income based on how I'm spending, how I'm investing right now. So that's what we built and that's what we have continued to iterate on every year.

[Toby Howell]

I think that's a perfect lead into this next question. You got your start writing about personal finance and part of that messaging was how to achieve fire, which is financial independence, retire early. For someone who is listening, who is working, maybe a corporate job right now, what is something you tell them as we enter into this new year that could set them on this path towards financial freedom? Towards fire.

[Katie]

Yeah. I still have so much respect for the fire movement. I would still consider myself on that path, although without the extreme frugality element. There was a period of time where when I was working in an office, I would figure out, I kind of became friends with one of the big EAs in the office and I got her to share the calendar with me that showed where the lunch meetings would be. And then I would bring tupperware to work and like go into the lunch meeting after it was over and like take some of the leftover food so I didn't have to buy groceries. So there was a, there was a period where I was quite extreme about it. I think I have a more healthy relationship with money now. But fire is in many ways an approach to challenging the status quo. It says you can retire as soon as you have enough investments such that you can live off 4% of the balance every year. And so what I would encourage someone who might be curious about that to do is to figure out how much your life costs. Very simple question, what do I spend in a year? How much does it cost to be me? And another way to ask that, the flip side of that is, what's my savings rate? So what percentage of my take home pay am I managing to invest? For the future future. Both of these questions will allow you to understand what your timeline to total financial freedom is. Now. Total financial freedom means like you no longer have to work for income. That's the end state that is probably many years away. But if you start organizing your life in this way, you are going to achieve some level of financial freedom really, really quickly. So for example, if your savings rate is 10%, you can assume that it means it's going to take you roughly 41 years to become financially independent. If you bump that up to just 15%, you now shave seven years off that timeline. You're looking at something closer to 34 years to financial independence as opposed to 41. So you get familiar with these numbers, you start to see, okay, the jump from 10 to 15%, that's really not that meaningful on a monthly basis. But if it's going to make my working timeline seven years shorter, that is really meaningful. If you can get up to 20%, 25%, you're talking between 26 and 30 years now. So it's all proportional. These formulas, it doesn't matter what you earn, it just takes what percentage of your income you're contributing to long term investments with an appropriate risk profile for that timeline. So people that are really hardcore Fire are saving 50, 60, 70% of their income and they're focusing on condensing their expenses as much as possible. So it's a movement that's very compatible with like the minimalist movement, for example.

[Neal Freyman]

What is the state of the fire movement? Is it growing, is it strengthening? Like I just haven't heard so much about. And I wonder if broader changes have, you know, led more people to seek out this type of lifestyle or less.

[Katie]

My assumption, based on just kind of vibe checking it, is that there's still a pretty devoted micro. You know, there's always going to be that microcosm of people who is very attracted to this. But I do think that with Shift to Work from Home and Telework, I think that there's been a bit of a maybe, I don't want to say existential crisis, but like if you're not having to go into an office every day, that is probably going to lower the pressure that you feel. It certainly lowered it. For me, the difference between being physically in an office from 8 to 5 every single day all week long, that is a different mindset than someone who can, okay, well I can actually continue to earn money from my house, or maybe I'm going to work part time. There's a little bit more Flexibility now, which I think maybe taken the, the urgency out of it for some people, which I think ultimately is healthy.

[Neal Freyman]

Let's talk about saving for retirement. So the last couple of years have really been the golden age of cash. Thanks to those really high interest rates. I could stick my money in a high yield savings account, maybe get something like a 5% yield. That though is going to change. Interest rates are coming down, which means yields in cash accounts are going down. How should people approach the lower interest rate environment we are entering? And I don't mean low low, but lower than.

[Katie]

Yeah. So first of all, I would say any money that you are hoping to keep saved and growing for the long term shouldn't be in cash anyway. So your cash accounts, whether high yield or not, should really be for short term savings, money you intend to spend within the next couple of years. So can you seek more yield in money market funds or bonds? Could you do that? Sure. I personally don't really stress myself out too much over savings account rates because in the grand scheme of things, your savings account yield matters so much less than your bigger picture investment questions like, okay, how much are you contributing to your long term investments every single month? What is your asset allocation? Are you appropriately diversified? Those are the things that I think really move the needle in the long run. So I always kind of tell people like, hey, don't overthink things like savings account yields. Ideally your, your short term savings are on the dollar side when compared to the money that you are saving and investing for the long term. I think probably the only, the only use case where I would say that's different is if you are saving and investing for something like house down payment, where you are probably going to be accumulating quite a lot of money in this account. But again, in the grand scheme of things, if you're only going to be saving for, we'll say, you know, fewer than five years, that's not really a meaningful amount of time for interest or your returns to compound anyway. So is it maybe not perfectly ideal or perfectly optimized? Sure, but it's not going to be, it's not going to be a game. Changing change.

[Toby Howell]

Let's shift gears a little bit and talk about time management. You've discussed this need to create these neat time blocked chunks of the day for yourself, even bringing in ideas like industrial capitalism to describe just how regimented your days had become. Take us through though, how your relationship with time time has changed and evolved as you've kind of grown into yourself.

[Katie]

Yeah, well, I am quite Type A. But to put it simply, I, I had gone down this rabbit hole learning about how the historical introduction of industrial capitalism fundamentally changed human beings relationship to their time. And it goes something like this. When we shifted as a society from like craftsmen and people that were working for themselves or you know, working in this way that they were like, it was like artisanal, right? You're picturing someone like the cobbler with shoes. You're shifting from that to like wage based factory work. We began to be paid by the hour. Now this is different from someone who again used to make a living by like working for themselves, like a craftsman or something. If you are being paid by the hour, that means you are clocking in, you are clocking out. Suddenly the hour becomes a commodity. And this was a big, a big thing kind of in the dawn of industrial capitalism that like workers wouldn't be allowed to have their own clocks in the factory because the person that controlled the time was kind of in control of how much was getting done. And so there would be, I read stories about like factory people that controlled the factory floor, kind of like, you know, setting back the clock a little bit to make them stay a little bit longer. Anyway, your time becomes something that someone else can pay for. And so by extension it becomes something that can be wasted or something that can be optimized. And so before industrial capitalism, this whole concept of time would have felt pretty foreign to people. Time was not thought of as something that could be, quote unquote, wasted or bought by another individual. It was just something that passed. And that got me thinking about the way in which I had sort of internalized this idea of my own time and how it was contributing to this sense of just constantly being in a rush, constantly being behind, constantly being busy. This like sense of urgency that no matter what, I always felt like I was falling behind. And I kind of saw this connection between these two ideas. And so I started to interrogate where that was coming from and A, whether it was actually allowing me to do my best work and B, honestly if it was preventing me from being happier while I was doing that work. And ultimately I realized that I think the obsession with optimization for many people is just a response to things becoming more untenable and frankly not trusting yourself to handle that.

[Neal Freyman]

So after you had this realization like, what changes did you make?

[Katie]

Well, I blew up my calendar. So I got rid of all the little color coded time blocks and I started thinking about my time a little bit more holistically. So I would, at the beginning of A week, be like, these are the things that need to get done this week in order for me to meet the deadlines that I have to meet at the beginning of every day. I'm not sitting down anymore and going, okay, these are the 15 minute increments. And I'm going to plan all the micromanage all this ahead of time. I tried to give myself a little bit more latitude around when I get things done, how I get things done. And I started to think about it, this mental shift between optimizing my time and protecting it. And so if I'm thinking about my time as something I have to optimize, I'm trying to cram in as much as possible. If instead I'm thinking about it as something that I should protect. Now I'm empowered to say no to things that I don't think are good opportunities to tell someone, hey, I actually can't get that done this week. Let's talk about it next week. And it's been a nice, it's been a nice mental shift for allowing me to slow down a little bit.

[Neal Freyman]

Let's keep on this topic of maybe history. Last month you did a show on the last 40 years of the US economy. Incredible episode. Everyone should go listen. It went absolutely viral. This is a topic that fills up entire books. So would you mind giving us the TLDR on the last 40 years? And I'm also curious why this episode seemed to have resonated with people.

[Katie]

Yeah, I think because we tend to have a lot of recency bias about what political and economic forces are driving the ship right now. So a lot of the analysis that I was reading, it was comparing, say the last four years to Trump's first term. And really like the beginning of the history in a lot of these analyses seem to start around the time of the pandemic. I think because the pandemic was such a paradigm shifting event and there was a lot of change that followed, also because inflation had become such a huge headline. But I think as I zoomed out and I really thought about, okay, why are we in this position right now? Why did, did right wing economic populism have such a moment in this last election? It occurred to me that I think the real story of the economy that we're in right now did not start four years ago, it started 40 years ago. That's when we started cutting corporate tax rates and tax rates for the highest earners for the first time and started associating those tax changes with, this will bring growth, this will bring prosperity. That's when stock buyback regulations were loosened pretty substantially. So before 1981, I think it was something like less than 5% of all corporate profits were used for stock buybacks. Now it's something like half. Obviously that's going to lead to an increase in financialization. And finally the death knell, I think, was probably Citizens United. So when corporations were basically granted personhood in the United States, such that corporate interests really fully like, enveloped our political system. So if you're just talking about this election at the rhetorical level and you are considering those 40 years of changes and how they have led us to where we are now, and you know, these appeals are being made to this deep seated sense that I think a lot of Americans feel that something has gone very, very wrong. I think if you have one candidate who seems to represent the status quo insofar as they're coming from the incumbent administration, and then you have another who is promising to blow it all up and saying, literally, I'll fix it, I don't think we should be surprised that the I'll fix it rhetoric was effective. And so over those 40 years, pulling it all together, trying to weave those threads together, connecting those dots, it was actually very cathartic for me, honestly. So I'm really happy that it resonated with so many people.

[Toby Howell]

I do want to drill a little deeper on something you just said, which is like the financialization of our world. One of the byproducts of that is just this explosion in the availability and ubiquity of personal debt. Student loans, car loans, credit cards, mortgages. These are all things that our listeners are no doubt very familiar with. How does that fit into, in shape, in your opinion, just like the current economic landscape that we find ourselves in right now?

[Katie]

Oh, man. Yeah. Well, okay. At the most microcosmic level, I think we perceive and experience a lot of policy failings as personal finance problems. Like, like, okay, I can't afford to buy a house, my car payment is too expensive, Childcare is too expensive. These are personal finance problems. Yes, but, but with perhaps different housing, with maybe the median home not costing $400,000. Maybe you don't need a car anymore if you have public transit options. Maybe you don't need $2,000 a month for daycare if we treated child care like infrastructure. So I would say before we even talk about debt, we have to talk about the fact that a lot of the most intractable personal finance problems that feel the hardest are often downstream of policy failure. But if you make a society very challenging to thrive in. You have to give people some way to pay for the things that they need. Right. And what better way to structure a system like that than making the way that they pay for these things that they need done so with for profit financing. And I think it sounds kind of conspiratorial, but it's really not. I think the availability of credit is why we haven't reached a tipping point sooner. But that's why I believe personal finance education becomes ultimately very critical. Because if you're aware of these conditions and you understand that the system is sort of set up to guide you toward a lot of debt, a hyper competitive individualist mindset. But you can see that there is a better way. I think it can shift the decisions that you make. It might also allow you to have a more accurate perception of what you have control over and what you don't have control over. So I think you'll, you'll interact with, for example, convenience, discretionary consumer purchases differently. If you can see the connection between as, as Gia Tolentino writes, like the relief that that experience is going to bring you and the entirely connected squeeze that you are experiencing. And I think that that context matters. So for me, having that realistic understanding of the system that I exist within allows me to make better financial decisions in the short term. And that applies to the way that I interact with debt. I don't want to engage in rampant consumerism anymore. See that like, okay, corporate interests have a really outsized influence on like the policies that are affecting me. Well, I don't really want to make those corporations all that richer. I don't want to funnel my money back to them. I don't want to see my fellow worker as my competition. Yeah. So I think ultimately our current system does make personal finance education necessary to thrive. Particularly that around the way we engage with debt. My dream would be that we live in a world where you do not need to have a sophisticated understanding of the financial system to live a life of dignity. But that's not yet the world world that we live in.

[Toby Howell]

Shifting gears deeper into the Katie Verse actually, because the Katie verse is sprawling. You are writing a book right now. First tell us what it's about and then why someone might be interested in reading it.

[Katie]

I think my book is perfect for anyone who wants to have a really robust personal finance read that is also grounded in a lot of this historical, political and cultural context. On the Money with Katie Show. Our mission is to be that intersection of where your economic reality, where your political and cultural reality meets those personal financial choices. And that means that we're talking about not just the choices that we have, but why those are the choices that you have. What, what political norms or cultural norms are the reason that those are your choices. So I think that that is something that I really tried to bring into this book and really codify in this book basically is like this is my philosophy that is inclusive of all of these things. I think I got frustrated with personal finance advice that didn't seem to acknowledge the elephant in the room. Like in my mind it feels really weird to discuss something like negotiating tips for women without really understanding the state of gender pay gap data, the state of US childcare policy, or lack thereof. It's really hard to talk about consumption habits and budgeting without talking about cultural norms around like your physical presentation. If you're a woman in the workplace, what's actually expected of you and your appearance in order to treat you with dignity and respect. Those were the themes that I, I wanted to explore while also being like, okay, all of these things are true and here's where the rubber meets the road today. So here's how you should think about your long term financial planning so that you can be set up for success.

[Neal Freyman]

So the people want to know, when is it coming out?

[Katie]

June 10, 2025.

[Toby Howell]

Wow. It's coming down the pipeline.

[Katie]

How it's coming down the pipe.

[Toby Howell]

Speaking of something we talked about earlier, so how is the time management aspect and of trying to juggle everything you do with writing this, this seemingly. It sounds amazing book.

[Katie]

Well, thanks. Fortunately, a lot of the work that I do is all interconnected, so they're even though they're. They're. These ideas are appearing in different formats or being explored in different ways. A lot of it is connected. So a lot of the work influences one another, which is really helpful. Ultimately though, I think in retrospect I probably bit off more than I could shoot. You sure you both are familiar with that feeling? And in the future I probably would take a. More I'm resisting the urge to say the word optimized because that's not. That's not what I'm trying to do anymore and more protective approach to. To what I agree to do. But the good news is that the book is done so that's a problem for future me to figure out.

[Neal Freyman]

When you're not writing this book, you and your husband have been house hunting. I'm curious what that process has been like. This is a historically clogged up housing market, mortgage rates, prices are sky high. Nobody Wants to move, take us through that experience.

[Katie]

Oh, man. Yeah.

[Neal Freyman]

This just turned into a horror podcast, by the way.

[Katie]

Seriously. So, you know, shifting to true crime. Okay. Yeah. Last night actually, I was next door with my neighbors here and they bought their home in 2019, I think, here in this neighborhood that we live in in California, and somehow got on the subject of mortgage payoff and they were like, yeah, like they pulled out their sheet and they showed me, you know, this is our, our mortgage and this is our interest rate. Should we pay it off early? It was like 2.6%. I was like, under no circumstances should you be trying to pay that off faster. But their mortgage for their home next door that's very similar to ours is about half as much as the rent that we pay to live in our house. So it's a crazy world out there. We are actually moving from California to Denver, Colorado in the spring. And so that's why we're house hunting and looking for a new place to live. And we were very open to, okay, well, we'll rent or we'll buy. We're not really married to either path. We're just going to let the numbers kind of guide this decision as well as the inventory that's available in the rental market and the, the, you know, the market for buyers. And honestly, the long and short of it is we're probably going to keep renting because I literally just cannot make the numbers work work. The location that we're looking in still has median prices that are so far beyond reasonable. Two bed, two bath, 1.1 million needs work. Right. And it just, unless we're going to be in the house for 10, 15 years, I just don't feel super confident yet that, that it's the right path. So I, I'm feeling like we're going to keep renting and investing the difference.

[Toby Howell]

Yeah. Rent versus buy is a debate debate that has been debated a lot and I'm sure a lot of people listening have had that debate. Can you take us through and take them through some factors they should be considering when weighing renting versus buying?

[Katie]

Yeah. So I think that the high level heuristic that can be very helpful here is the price to rent ratio in your zip code. So last year it was a pretty big headline that I want to say in 70% of U.S. cities, maybe more than 70% of the U.S. it was net cheaper to rent your home than to own it. Now these are dynamics that change the, the buyer's market and the rental market are not, they're generally both trending up, but they're not moving in in perfect correlation with one another. So in some periods of history it's cheaper to own. In some periods it's cheaper to rent. Right now, generally speaking, it's going to be cheaper to rent. And so things can look for. When you are making this decision for yourself is okay, you probably know generally speaking what kind of interest rate you can get and what kind of mortgage payment you would have for a home that you would be interested in living in, then you're considering the unrecoverable costs associated with that decision. So you're talking about closing costs. That's not building any equity, that's just for you to get the keys. You're looking at mortgage interest. How much are you going to be paying? These, you know, loans are amortized, so you're really front loading that interest, which means if you're not going to be in that house very long, then majority of the payments that you're making are probably going to be not all that different from rent. From the perspective of how much equity you're building, your property taxes, your insurance, you're probably going to want to set aside about 1% per year the value of the home for maintenance and repairs. And that's not talking renovations, that's like the H Vac system breaks down. So once you have a sense for okay, all in, what is kind of the total cost of ownership that I'm looking at and what would it cost to rent, rent a, a similar home or a similar place, then you can really start to get into the weeds of okay, if I'm fleshing this out over the next, say 10, 15 years and I know that my housing costs on the buy side are going to remain relatively fixed because that monthly payment's probably going to be fixed based on the kind of loan you get. The taxes and insurance are going to change, but the bulk of that payment should remain the same. But I know rent is going to be rising by, I don't know, you can actually look in your zip code what the historical rents, you know, increases or decreases are. Rents do go down. But if you want to be, you know, really safe and get okay, I'm going to assume that this is going to go up by about 3% per year and you can just compare at what point does the rent begin to exceed the price of ownership? And in the meantime, what is that margin that I could be investing? What is the opportunity cost of that margin? If I could be putting that in the stock market market, what is the opportunity cost of that money going to be, as well as the opportunity cost of your down payment. You really can't get into a house these days or be competitive in this market unless you have a large down payment in most cases and in most markets. And that's also money that could be earning more for you elsewhere. So I think it's a. There's like a great New York Times rent versus buy calculator that'll include all of these factors in it and really wrap it up for you and kind of spit out the. The. The path that might make the most sense for you, that is inclusive of all these different variables. But I've lived in several different places in the last couple years. My husband's in the Air Force, and so we move every two years. And we're finally settling in Colorado now. But the. The math just really has been super warped, really, since we've begun looking. And that would have been what, 20. 20. 2021? Yeah, 2021. So. So I would just encourage people, like, if you feel like it's impossible to buy a home, that's because it kind of is. And, like, there's no shame in renting. The only thing that I would say is if you're going to rent instead of buying, you should be looking at, okay, what should I be investing then to kind of make up that difference if I'm not going to be? Even if there's just a tiny sliver of equity that I would be building in those monthly payments, I do want to make sure I'm building equity in some asset. And that's where public markets can be a really good alternative.

[Neal Freyman]

Toby Hoffman, do you think about opportunity costs on a daily basis?

[Toby Howell]

I mean, every time I have breakfast, I was like, I could have had this for breakfast or that for breakfast.

[Neal Freyman]

All right, Katie, what are you going to miss most about California?

[Katie]

Proximity to Lake Tahoe, I think.

[Neal Freyman]

God, I've never been.

[Toby Howell]

I've never been either.

[Katie]

Oh, man, it's such a stunning place. We live, like, an hour and a half away. We honestly should go more than we do. But I think there's. We would live in, like, the Sacramento area. And Lake Tahoe is beautiful. Visiting San Francisco is always really fun. So we have a lot of nearby, kind of amazing nature here, and there's.

[Neal Freyman]

None of that in Colorado, unfortunately.

[Katie]

Yeah. Famously lacking in amazing nature.

[Neal Freyman]

All right, Katie, we have time for one more question. It's January 1st. We got to ask you, what are your resolutions for this year?

[Katie]

I think my resolution this year is to not have any resolutions. Honestly, Neil, I think I. I've gone.

[Neal Freyman]

33 years without a resolution.

[Katie]

Yeah, I kind of feel like I always put a lot of pressure on myself this time of year to become a completely different person and I'm like, you know what? Maybe I'm okay, maybe I'm fine the way I am.

[Toby Howell]

I like that resolution to have no resolutions. That is all the time we have. Katie, we could talk to you all day. Thank you so much for jumping on the show. Every time you come on the show, you leave Neil, myself and everyone listening with just head full of new ideas to mull over. If you want more Katie in your life, she has an incredible podcast. It's called Money with Katie. You can also head to moneywithkatie.com to check out her wealth planner, read her writing and follow her on social. We will link everything in the show notes as well. We cannot wait for this book to come out. Katie, you've done a great job getting it across the finish line and we can't wait to have you on the show again sometime soon. And Happy New Year.

[Katie]

Oh hi, it's me again, Money with Katie. Thanks for listening and I would like to be the first of your friendly neighborhood personal finance pundits to welcome you to 2025. If you're like me, January rep represents a clean slate for your financial goals. So if you're trying to figure out a new annual budget, start saving for a big goal or wipe out debt, check out my 2025 Wealth Planner. It's an easy to use spreadsheet that works on Macs, PCs, Excel, Google Sheet, you name it. You can track all of your financial info in one place. You'll see your spending at a glance, your net worth, your retirement timeline, and get smart recommendations on what your budget should look like based on your income and saving savings goals. Level up your money moves this [e-mail] WealthPlanner that's moneywithkatie.com WealthPlanneR and with code New Year New Budget 20, you can get 20% off right now. That's code New Year New Budget 2 0.