1758: Ask Farnoosh: Trump Tariffs, Retirement Decisions, and Car-Buying Tips

Summary

So Money with Farnoosh Torabi: Episode 1758 Summary

Released on December 6, 2024, "Ask Farnoosh: Trump Tariffs, Retirement Decisions, and Car-Buying Tips" delves into pressing financial questions affecting listeners as they navigate economic uncertainties. Host Farnoosh Torabi provides expert insights on impending Trump-imposed tariffs, strategic retirement planning, and savvy car-buying strategies, all aimed at empowering her audience to make informed financial decisions.

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1. Understanding the Impact of Trump Tariffs

Farnoosh begins by addressing questions from the Huffington Post regarding the new tariffs announced by President Donald Trump. These tariffs include a 25% tax on goods from Mexico and Canada and an additional 10% on Chinese goods set to take effect with Trump's presidency.

Key Points:

• Price Increases: Tariffs are expected to raise the cost of imported goods, directly affecting consumer prices across various sectors such as apparel, toys, furniture, household appliances, and technology.

  "President Trump announced that he's going to impose a 25% tariff on all goods from Mexico and Canada, as well as an additional 10% tariff on Chinese goods." [16:36]

• Affected Categories: The most impacted areas will likely be major home appliances, technology, furniture, and groceries due to their heavy reliance on imported materials and components.

  "The three product categories that I think are going to be most affected are major home appliances, technology and furniture." [16:36]

• Economic Implications: Economists predict that these tariffs could exacerbate inflation, increasing the financial burden on both businesses and consumers. Yale’s Budget Lab research suggests that additional tariffs may add $2,000 to $7,600 to a household’s annual budget.

  "Additional tariffs could add another 2,000 to $7,600 to a household's budget, depending on your consumption profile." [16:36]

Strategies to Mitigate Impact:

• Advance Purchases: Consumers are encouraged to buy big-ticket items like washers, dryers, refrigerators, and electronics before tariffs take effect to avoid higher future costs.

  "If you're in the market right now for a big ticket item that's likely created overseas or manufactured overseas, you might want to pull the trigger before the end of the year." [16:36]

• Energy-Efficient Investments: Investing in energy-efficient appliances not only reduces long-term costs but also qualifies for tax credits under the existing Inflation Reduction Act, which may be revoked under Trump's administration.

  "You get up to a maximum of twelve hundred dollars back through the Energy Efficient Home Improvement Credit." [16:36]

• Secondhand Market: Emphasizing the benefits of refurbished or gently used items as a cost-effective and environmentally friendly alternative.

  "You can get secondhand clothing, toys, books, furniture, cars, technology. It's all available to us as secondhand." [16:36]

2. Expert Car-Buying Tips Amid Tariff Concerns

Listener Sandrine shares her concerns about purchasing a car in the current market, influenced by post-pandemic supply chain changes and the upcoming tariffs.

Advice Provided:

• Timing Your Purchase: December is highlighted as an optimal time to buy due to dealerships aiming to clear out old inventory. Purchasing before the tariffs take effect can safeguard against price hikes.

  "If you're thinking about it, now would be a good time to get one before December 31st." [16:36]

• Negotiation Tactics: Farnoosh advises negotiating virtually by contacting multiple dealerships via email to obtain the best offers before visiting in person, saving time and enhancing bargaining power.

  "Find the sales managers' emails and request their best offers across various dealers to secure a competitive price." [16:36]

• Financing vs. Cash: Evaluating the benefits of paying in cash versus financing. Paying cash can eliminate interest payments and provide immediate ownership, while financing may preserve liquidity.

  "If you can comfortably pay in cash without disrupting your financial goals, consider cash. Otherwise, weigh the interest savings against maintaining liquidity." [16:36]

• Insurance Savings: Shoppers are encouraged to obtain multiple insurance quotes, inquire about discounts and bundling options, and regularly renegotiate policies to reduce costs.

  "Get quotes from at least three insurers, ask about discounts, bundling, and safe driver programs to lower your insurance costs." [16:36]

3. Navigating Retirement Planning: Traditional vs. Roth 401ks

Addressing Carolina’s question about maximizing retirement contributions and choosing between Traditional and Roth 401ks, Farnoosh breaks down the differences and considerations.

Traditional 401k:

• Tax Benefits Now: Contributions are made pre-tax, reducing current taxable income.

• Taxation on Withdrawals: Taxes are paid upon withdrawal during retirement.

  "Traditional 401k contributions lower your taxable income today, and you pay taxes on the withdrawals in retirement." [16:36]

Roth 401k:

• Tax Benefits Later: Contributions are made with after-tax dollars, offering tax-free withdrawals in retirement.

• No Income Limits: Unlike Roth IRAs, Roth 401ks do not have income restrictions.

  "Roth 401k contributions are made with after-tax dollars, and withdrawals, including earnings, are tax-free in retirement." [16:36]

Considerations for Decision-Making:

• Current vs. Future Tax Bracket: High earners in high-tax cities may benefit from Traditional 401ks to reduce current tax liabilities, especially if they anticipate a lower tax rate in retirement.

  "If you’re currently in a high tax bracket, contributing to a Traditional 401k can provide immediate tax relief." [16:36]

• Future Tax Rates: Anticipating potential tax increases, a Roth 401k may be advantageous to lock in current tax rates for future withdrawals.

  "If you anticipate your retirement tax bracket will be the same or higher, a Roth 401k could make more sense." [16:36]

• Geographical Considerations: Retirement location impacts tax implications. Consulting a tax professional is advisable when planning to retire in a different state or country.

  "If you're moving to a lower tax state or country, consider how that affects your retirement withdrawals and tax obligations." [16:36]

Diversification Strategy:

• Hybrid Approach: Contributing to both Traditional and Roth 401ks allows for tax diversification, offering flexibility to manage taxes effectively in retirement.

  "Contributing to both accounts provides flexibility to withdraw from different tax buckets, minimizing overall tax liability in retirement." [16:36]

4. Building Community and Continued Support Through So Money Members Club

Farnoosh introduces the So Money Members Club, a platform designed to foster a community of financially motivated individuals. Members receive monthly live financial training, access to live office hours, and an engaged network to support their financial goals.

Features:

• Monthly Workshops: Covering topics from real estate and investing to debt consolidation and point optimization.

• Interactive Support: Live office hours for personalized financial advice and community-driven discussions.

• Exclusive Benefits: Free money consultations and extended trials to foster member engagement and growth.

  "In 2025, we have now decided on what we're going to learn during those monthly live workshops, including topics like real estate, investing, and debt management." [09:05]

5. Listener Feedback and Engagement

Farnoosh highlights positive listener feedback, showcasing testimonials that emphasize the podcast's impact on personal financial strategies and relationships.

Notable Listener Quote:

"Farnoosh's steady stream of informed and relevant guests bring new points of view to my inner financial dialogue and stoke important conversations with my partner." – Brooklet 80 [09:05]

Farnoosh responds by offering a free money consultation to listeners who leave reviews, encouraging continued community support and engagement.

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Conclusion

In Episode 1758, Farnoosh Torabi equips her audience with actionable strategies to navigate the financial challenges posed by new tariffs, make informed decisions about retirement accounts, and optimize car purchases in a fluctuating market. By fostering a supportive community through the So Money Members Club and actively engaging with listener feedback, Farnoosh reinforces her commitment to empowering individuals to achieve financial well-being amidst economic uncertainties.

Stay Connected: For more insights and to join the So Money Members Club, visit SoMoneyMembers.com.

Transcript

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[Farnoosh Tarabi]

So Money Episode 1758 Ask Pharnoosh.

You're listening to so Money with award winning money guru Farnoosh Khourabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh herself. Looking for ways to save on gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to so Money.

Welcome to so Money everybody. I'm Farnoosh Tarabi. December 6, 2024 A new episode of Ask Farnoosh. We're going to tackle your money questions. I even have a question this week from the Huffington Post. They reached out and they wanted to know, hey Farnoosh, what is going to go up in price with these new Trump tariffs? What should we be saving up for? What should we buy now to avoid the higher prices in the new year that's likely going to happen when these tariffs get implemented? I've got answers and from our audience, folks want to know how to buy a car right now? Are there new ways to save? Are there new negotiations? What's the supply chain like with the tariffs too? What should they do? And then if you're at a company and your employer offers you a retirement account, they might confuse things a bit and offer you more than one kind, and they give you options, and then you're not sure what to do. Do I open up, say, the standard 401k or there's this thing called the Roth 401k? What's that? Should I do it? I have some answers. We're going to unpack all of that. But first, some levity. Some levity. I had a moment this week where I really felt my age in a good way. I was working out, and my trainer said, you have really strong knees. And I just thought, yeah.

Yes, I do.

And it's the little things now, my friends. It's the little internal body things that really make you feel alive. And, like, all the work that you're doing to invest in your health and your wellness are paying off. And I tell you, maybe like 20 years ago, this wasn't quite the compliment, but I took it. I took it and I ran with it. And then I went to Instagram and I asked my followers there, tell me your midlife truth. Tell me something about being in midlife without telling me you're actually in midlife. But it's like, we know. Mine is that my knees are in good shape, and it was the best compliment of my week and our audience. I have a funny crowd on Instagram. Y'all are very funny and, you know, but honest, too. This is all. I can very, very much relate to a lot of these replies. One person said, I've decided this is, I think, my favorite. If I can no longer look young, I want to look wealthy. And this is actually my friend Dawn. Dawn and I went to graduate school together, and she's a journalist and now an activist. And dawn does look wealthy in the sense that she looks like a woman who knows her worth. She looks confident, she looks rested, even though I know probably her days can be stressful, like all of our days. But, yeah, she does look like an empowered woman. And I think that's. At least that's how I interpret it. And especially coming from my friend Don, who I admire so much. So, yeah, I want to look wealthy. I love that. I love that statement. And then I also love this. I just got a salmon sperm facial to stimulate collagen growth. You know, we're trying all the things. And while I probably will never do this in midlife, there is going to be a phase, if you're not there yet, where there's going to be a lot of experimentation to sort of see what is going to work for you. What's going to be your new routine to treat and invest in your body, in your health, in your wellness. And you want to look good, you want to feel good. So whatever salmon sperm facial is for this person. For me, a few months, a month ago, I tried acupuncture and cupping for the first time related to a lower back injury, which was more of a sign of being in midlife than the cupping, I would say. And by the way, anyone else in the 44 to 45 age group or is past that and can attest to this, this Stanford study that came out earlier this year that said that for a while we thought that aging was sort of this equal progression, that with every year your body ages kind of in a measured way, an equally measurable way. Well, they found that age 44 specifically and 60 are the two ages in your older life, in your mid life and beyond where you age aggressively. Those two years are. Well, they can be pretty rough. And I'm raising my hand. I'm definitely feeling like 44 was my most challenging health year yet. Mostly physical. I had some workout injuries that I don't think I would have had in my 20s and 30s, but now my body is changing and so I can't maybe do the same things. I was taking an airboxing class and when I was in my 30s, I took kickboxing and, you know, all the different classes. And I took like a very basic airboxing class and threw out my lower back and I was down for the count all day, next day. And thankfully I'm recovered now and I know that it was relatively a quick recovery because lower back injury can be a very prolonged injury. I think the acupuncture and the cupping might have helped, as did the heavy medication. But 44 and 60, I don't know. Just not to digress, but let's go back to Tell me you're in midlife without telling me you're in midlife. One person says, I'm plotting to get out of my marriage. No shame. Next person. I'm letting people see the fruits of my creativity. I have no time to hide. Yes. One person says, I have a garden and a video. Bird feeder and chickens. I love that for you. Another friend in the audience says, I go to bed at 9 most nights and I love it. I feel like for me, nine would feel. I would feel very anxious in bed, at least in the beginning. Like, I'm not doing enough. I left things unfinished. I could do another hour. I'm like, I'm not really tired, so maybe I Should go be productive. For me, I find that 10pm 10 to 10:30 is the sweet spot because I don't have to get up until usually 7am so if I even get to bed by 10, I'm getting nine hours. Even 11 is eight hours. But I find that the sleep, sleep is not the high quality that I used to get in my 30s. There will. I almost always will wake up in the middle of the night and it's just, I don't know, my body just wakes up and it's either like in the middle of the night or it could be like 5am which is a really tough time to wake up. If you're not ready and you were hoping for two more hours of sleep, you're not rested when you get up at 7. So the quality of my sleep I think could be better. And then lastly, my friend Adam said we set our smart lights to a matching shade of blue when we watch Jeopardy. Okay, that is a very loaded tell me your midlife without telling me your midlife sentence because there's like Jeopardy here and smart lights and you're watching TV together. Very cute, very cute couple, you two. But yeah, I find that when I'm on the screen, I need another layer of lens. I have my contact lenses, but I need like a filter. It used to be a nice to have and now it's a must have. So thanks for indulging me, everybody, on Instagram. As I said, very funny, very funny audience. I have. We're going to hit the mailbag next, but two things I want to bring up. One is that I have just decided on my entire 2025 curriculum for our so Money members. If you are not a member, let me tell you a little bit about this. Okay? So not long ago, I decided I wanted to create a community for our podcast listeners where we could get more engagement, more education. And the so Many Members Club was born. Every month as a member, you get a live financial training hosted by me.

Live office hours where you can walk.

In, ask me whatever you want, or just stick around and listen to what other people are asking. And we have a very engaged community. You can ask questions on the go. I usually answer. If not, another member chimes in. And it's just a great place to hang out if your goals are to be financially successful, more educated around money, and also maybe you want to connect with like, spirited people who care about wealth and financial wellbeing. It's a good place especially, especially as we head into 2025. A lot of uncertainty, a lot of changes. And some of us, I know we're looking to latch onto sure things. And the so Many Members club is a sure thing. It's not going anywhere. I'm not going anywhere. And very excited to announce that in 2025. We have now decided on what we're going to learn during those monthly live workshops. Everything from real estate to investing to how to manage your money. As someone who might be in the sandwich generation or in midlife, you've got growing children, aging parents. That seems to be a recurring theme amongst our members. How to consolidate and refinance your debt. A lot of us are carrying student loan debt still, or we have personal loans, business loans. We want to learn how to be better with our debt. We're going to talk about it. And also fun stuff like how to maximize your points so that maybe in 2025, this is definitely on my vision board to sit in first class going somewhere international for free. Could that be in your future? Well, we're going to talk about how to actually optimize your points and I'm so excited. I'm so excited to grow this community. If you've been listening to the show, you know that for a while during Black Friday week I ran a promotion where you got a free month trial of the so Many Members Club. And I hope those of you who are in the club right now from that promotion are enjoying your time. If you have any questions, reach out, but stick around. 2025 promises continued programming and engagement. You can go to so many members.com to learn all about it. Next we're going to go to our Apple Podcast review section. Pick our reviewer of the week. This week we're going to give special thanks and a shout out to Brooklet 80, who left a review on November 19, saying that she's incredibly grateful for this podcast. Brooke says, I've been tuning in regularly since 2020 and it consistently makes me think, reevaluate and dream. Farnush's steady stream of informed and relevant guests bring new point of views to my inner financial dialogue and stoke important conversations with my partner. I'm also constantly impressed with the wide ranging topics covered on the Ask Farnoosh episodes and I've personally benefited from many of her answers. Thank you Farnoosh. Well, thank you Brooke. Thank you for this review. It means a lot, you know, subscribing to this show, leaving a review, it really supports the show. It's the number one way to encourage others to subscribe. Keep the show going. We're entering our 10th year. Everybody can you believe it. So Brooke, I'd love to extend a free money consult to you. You email me farnushomoneypodcast.com you can direct message me on Instagram as well at farnushtarabi. Let me know you left this review. I'll send you a link. You pick a time that works on your schedule. You pick a time that works for you, for us to have a money convo. Or it can be a career convo. We can talk about whatever you want. It's all on the table. Brooke will also get a free 30 day trial of the so Money Members Club. So highly encourage you. If you've been meaning to leave a review, do it. Pick one every Friday. Okay, we're going to hit the mailbag very soon. We're going to talk about tariffs and what they're going to mean for our budgets and what we might want to buy before the end of the year before prices go up. We're going to talk about retirement plans and we're going to talk about how to buy a car in 2025. Actually, December maybe, if you can swing it. December tends to be one of the best months to buy. All that coming up after our break.

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[Farnoosh Tarabi]

All right, we're back and we're talking about how the Trump tariffs may interfere with our spending plans in 2025. If you're in the market right now for a big ticket item that's likely created overseas or manufactured overseas. Well, you might want to pull the trigger before the end of the year because as we know with tariffs, businesses don't get creative. Usually when it comes to offsetting tariffs, what they do is they pass those extra costs onto us in the form of higher retail prices. A reporter at Huffington Post recently reached out to me and other financial experts for our take on what are some of the things that we might want to buy before the end of the year. Assuming these tariffs go into effect early 2025, how can we better prepare for rising prices? I'll put that link to the Huffington Post article in our show Notes, but essentially the article goes into first explaining what the tariffs are going to be. President elect Donald Trump announced that he's going to impose a 25% tariff on all goods from Mexico and Canada, as well as an additional 10% tariff on Chinese goods. And that he says is going to start on the first day of his presidency. And many economists predict that his plans are going to make inflation worse. They'll increase costs for US Businesses and consumers. And the Scharf terror proposals could cause price hikes across a variety of products, from apparel to toys, furniture, household appliances, travel. The three product categories that I think are going to be most affected or will be significantly affected are major home appliances, technology and furniture. So these three product categories, if you already in the market for a washer, dryer, a refrigerator, an iPhone or a smartphone, a dining room set, this might be the time to be shopping around because these products are typically assembled overseas or they depend on imported steel and aluminum. So let's get into it. If you're looking to buy a home appliance right now, tariffs are going to increase the cost of materials. Companies will raise their prices. If you're thinking about upgrading your washer, your fridge, I think now's a good time to strike before the tariffs kick in. Better yet, my pro tip for anyone in the market for a kitchen appliance is to go for the energy efficient appliance. Spend a little bit more if you have to, but here's why it's well worth your money. Because there's right now, in effect still before the end of the year, the Energy Efficient Home Improvement Credit, which was part of President Biden's Inflation Reduction Act. It gives homeowners the chance to claim 30% of the cost of eligible energy efficient improvements to their home. So that includes like windows and solar panels. You get up to a maximum of twelve hundred dollars back. This Trump has said he will eradicate. So keep this in mind as you're shopping. Technology is also at risk when it comes to tariffs. No surprise there. Most electronics are built through global supply chains. And when the manufacturers have to spend more, the retail price of that new phone or laptop that you've been eyeing will probably go up as well. And in the last go around, we did see costs for laptops and TVs go up because the key parts in these pieces of technology, the microchips, the displays, the batteries, are sourced overseas. I for one, am for sure, mark my words, getting my iPhone before the end of the year. I need an upgrade. My phone has many cracks, but I've been winging it. I've been dealing. I mean, the phone still works, the camera still works, I can type easily. But it's going to be time soon and I think better sooner than later. That being said, I don't know what Donald Trump's relationship is with Apple, because here's what's also going to happen. He's going to pardon certain companies, he's going to pardon maybe certain industries. He doesn't want to annoy his biggest campaign donors or his biggest supporters, right? So I think if you're in the market for a Tesla, a Model 3 or a Model Y, which has a global export hub in Shanghai, you might be okay. I feel like Trump and Elon Musk have a friendship going, right? So would be surprised if Tesla prices went up because of tariffs. That's just my guess. And then furniture, most furniture from big name brands are not made in the United States. So here too, we can expect tariffs on couches and tables and dressers and beds. Ikea, in fact, has already announced that the tariffs will push its prices higher. Now, what is going to be the overall impact of tariffs on the average American? Researchers at Yale's budget lab found that the new tariffs. We already have tariffs and we're already paying for it. But these additional tariffs could add another 2,000 to $7,600 to a household's budget. Depending on your consumpt your consumption profile, you may be on the lower end of that. One way to circumvent this, you can't maybe avoid it entirely, is to shop secondhand. And you can do this across multiple categories. Like, you don't just get secondhand clothing now, right? You can get secondhand toys, you can get secondhand books, secondhand furniture, cars, technology. It's all available to us as secondhand. Sometimes it's called refurbished, gently, used I think we're going to see a huge increase in that market and I'm happy to see that because it's not just a great cost saver, but it's helpful to the environment. Finally, I also want to mention that grocery prices, maybe a fourth category here, are going to see prices go up. We've already experienced inflation at the grocery, at the grocery level, and I don't think it's going to get any better with these tariffs. Because when you consider that Mexico and Canada are the biggest suppliers of agriculture, of agricultural products to the United States, those 25% tariffs you better believe are going to affect our costs for fruits and vegetables. You know, on the one hand, I want to support American made goods, I want to support American farmers, I want to support American business owners, and I will. But will they be able to keep up with the demand if everyone stops eating avocados from Mexico? I don't know if like California can supply all the avocados, right. And if they have to, because now there's demand, their prices will also go up. See, it's not like you're going to save money by going American. You're going to probably end up paying more either direction. And now sticking with tariffs, we're going to talk about the auto market and tariffs. Sandrine says. I've been a faithful listener of so Money since I moved to the US in the summer of 2017. I sent in a question about two years ago and a lot has changed changed since then. I went through a separation and then a divorce. I received two promotions at work, moved twice, and now I'm in a new and much happier relationship. I've continued to learn from you and your guests over this time period and I love following along your journey. My partner and I are looking at buying a car. I have never owned a car. I don't know anything about cars except the traditional financial wisdom that I hear on your and other podcasts. So I'm wondering how much of that traditional advice applies. Post pandemic, we're looking at certified used vehicles. The market has completely changed since COVID Is it still possible to negotiate the price at the dealership? Should we pay cash if we can, or take out a loan and repay it quickly? From our research, car insurance also seems cost prohibitive. Any advice you have on lowering costs associated with car purchases and ownership would be appreciated. All right, Sandrine, I do have some tips on buying a car and I love that you're already thinking certified pre owned. I think that's always a smart move. If you can snag a really good car that's certified pre owned, which we talked about earlier of this idea of buying secondhand. It is always a great value because with that secondhand price tag you get a pretty good condition car and you get that manufacturer warranty. So that being said, I do want to put this all in the context of the these Trump tariffs when they go into effect tariffs, as I mentioned, they can have far reaching implications on a variety of industries and markets, including the auto market. Why the United States and European automakers, they rely on Mexico and Canada for car production and China, not for nothing, is the second biggest source of imported car parts. I'm reading right now an article on Yahoo Finance where they write about how analysts recently estimated that a 25% tariff on Mexico and Canadian car parts could add about $2,100 in cost for each U.S. assembly vehicle and cars produced in Mexico or Canada could cost eight to $10,000 more. So then your question comes at a very timely moment. There is a strong case for buying a car right now. If you're thinking about it, now would be a good time to get one before December 31st. And as I mentioned earlier, December typically is a time of year when auto dealerships are looking to offload the current year's cars. They want to sell the 2025 models. They don't want to have any more 2024s on the lot. So for if you see a 2024 car, I would still try to negotiate even though that'll be priced lower than a 2025 model. I do think you want to negotiate. It never hurts to ask for a negotiation and one of the best tips I ever got on car negotiation and this works well for me because I would rather be any place else but a car dealer. You can and should find who the sales managers are, the online sales managers. You can go on to any local car dealerships website, get that online sales managers email and email them and say I'm interested in this particular car, be very specific and I want to know if you have it, what does it cost and then do that across a variety of dealers and that way you get their best and final offers, which usually won't be their best and final offers, but you'll get a pretty good sense of where will give you the best price and then you can go to that dealer and start from there. You've saved yourself probably hours by just doing this widely distributed email approach. But the Yahoo Finance article was also very good with this point, which is that you shouldn't panic. Buy a new car right now because of these tariffs. If you're already in the market, you've already identified the kind of car you want, you've got the money, then, sure, if it's available now, go for it. Because then you're hedging against the potential of these tariffs going into effect and affecting sticker prices. And then again, going electric EV could also help you take advantage of that inflation Reduction act credit, which I think is definitely going to go away in 2025. New electric vehicles are eligible for a tax credit worth up to $7,500 and then up to 4,000 for used ones. So the certified used car that you're eyeing, $4,000 credit if it is an EV, and that's thanks to Biden's inflation Reduction act, which could disappear under another Trump term. Things have definitely gotten better since COVID I think supply chain has gotten much better. So I wouldn't worry about is it appropriate, is it acceptable to negotiate? You should always negotiate. Negotiate virtually first, then negotiate at the dealership. As far as whether you do it in cash or you do a loan, I think if you can comfortably pay in cash, depleting your emergency savings or disrupting any other financial goals, I would consider cash. I just paid off a lease using cash. Because when I looked at what I would be paying in interest to finance the remainder of that car, I just thought, no, you know, I love being liquid. I love some cash liquidity, but I really couldn't justify the interest. I know interest rates have come down since the beginning of the year, but I would do the math. Just see, you know, what would you save in interest if you did it all in a lump sum with cash, and. And then it's yours, you know, you don't have to worry about those payments. Then you mentioned lowering your insurance costs. Getting quotes from at least three insurers is the way to go. Ask them about discounts. Ask them about bundling your auto insurance with any other insurance that you may have, whether that's renter's insurance, homeowner's insurance. Ask about safe driver programs. A lot of times these quotes that we get initially don't include these incentives, these, you know, safe driver program incentives. If you are a driver with a good track record, I mean, you should not be paying as much as everybody else, right? Because it's all based on risk. So ask about discounts and ask about things like that. And also one thing to note is that you can renegotiate and change even your car insurance every six months or every 12 months so you're not locked in forever. Exciting. I'm so happy for you. Sandri. I love all these updates. I love where you are in your life. You sound like you're in a much better place. Thank you for sticking with this show and I'm so glad that it could has been a value to you. All right, shifting gears now to 401ks versus Roth 401ks. Carolina in the audience says that she and her husband are prioritizing their financial future and maxing out their 401ks. And now they're trying to decide between a traditional 401k or a Roth 401k. Their company offers one of each. Can they do both? Should they do both? Let's break it down. Down. Let's break it down. First, let's talk about what we're talking about. 401K versus Roth 401K. The traditional 401K, the contributions are pre tax. They lower your taxable income today and you pay taxes on the withdrawals in retirement. The Roth 401K is sort of a hybrid of a Roth IRA and the traditional 401K. Contributions are made with after tax dollars like the Roth ira and then the withdrawals, including earnings, are tax free in retirement. But where the 401k similarity comes into play is that you can contribute a lot more in a Roth 401k than you can a Roth IRA. The contribution limits are higher as well as there are no income requirements. With the Roth ira, you are no longer eligible to contribute once your income exceeds a certain point. But with a Roth 401k, that rule doesn't count. So I think a Roth 401k, if you have access to this through your job, it's a wonderful opportunity. You get the benefit of getting those withdrawals in retirement tax free. You don't have to worry about becoming ineligible. But generally speaking, there are a few considerations before you decide. One is what is my current tax bracket? Carolina here lives in a high tax city and she and her husband are both high earners. So contributing to a traditional 401k does help to lower their taxable income now, which, depending on their bills and their cash flow, it may be advantageous given this high marginal tax rate. It's especially valuable if you know already that you're going to retire in a lower tax environment like a less taxed US City or overseas somewhere. You also want to take into consideration your future tax rates. Nobody has a crystal ball. Even the best financial advisors can't know with certainty where taxes are going. But I think many financial advisors would say let's plan for rising taxes because that's kind of what we've experienced over the decades. If you anticipate that your retirement tax bracket will be the same or higher than it is now, then a Roth 401k could make more sense because you're going to benefit from those tax free withdrawals. Pay taxes on the investments today when you're in a lower tax bracket. The other thing to consider is where will I live in retirement? If you're going to be moving to a lower tax state or country like I mentioned, this could mean a lower overall tax liability in retirement. But keep in mind that tax treaties and rules on US based retirement accounts vary by country. So if you say, okay, I'm going to move to Spain in retirement or Italy where the taxes are less, you still want to consult a tax professional who has expertise in international retirement planning to be sure how that country would tax your withdrawals from either of these accounts. And then finally, I think if you have the ability to contribute to both or you have the desire to contribute to both, many financial planners, and I would agree with this, say it's impressive important to diversify your tax portfolio, your tax strategy in retirement. So contributing to accounts that are exempt from taxes in the withdrawals in retirement, as well as those where you get the tax benefit today, can be a way to diversify your tax exposure. So when you have the option available to be both in a traditional and in a Roth, sometimes doing both gives you that flexibility to withdraw from accounts in a way in retirement that minimizes your taxes in retirement. Especially like let's say if in retirement, you know, it's a long period of time. For some of us it could be 30 years. You might live in one state or one country during part of your retirement, you could move. And so depending on where you live, you know, you might benefit from having one sort of account over another in terms of the tax implications. Bottom line, just continue to invest. Whatever you do. You can't really go wrong from an investment standpoint. From a tax standpoint, of course, you want to take some things into consideration. You want to take into consider your current tax bracket, your future tax rates, where you might possibly live in retirement. And then you might say, you know what, I don't know all the answers. So I'm going to hedge and I'm going to contribute say 70% to one account and 30% to another, or 50, 50, just giving myself some diversity as far as the tax buckets in the end is a solid plan. You know, if you've been listening to this podcast for a while now, you know I love a hybrid approach. I love being able to do a little bit of everything and that rarely will. I say you gu to go 100% in this direction. The reality is our lives are complex. Our goals sometimes overlap and we don't have all the answers. So when we have opportunities to get access to various financial vehicles, various ways to say, various ways to invest, I say, you know, consider it all and be selective and don't feel the pressure to go in a single direction. And know that whatever you choose to do today, Carolina or in 2025, you can always adjust. Assuming you're still with this employer and they're still offering these retirement benefits that you can try it out for a while, see how it's working for you, you might realize, you know what, we really need to have the tax savings today because our costs are going up, our tax brackets maybe not the best. So we want to be able to be as tax conservative right now. And I know that maybe that's going to hurt us down the road, but this is what will make life better for us right now. And that's a valid conclusion. And that's our show. Everybody. Thanks so much for listening to Sow Money. As a reminder, if you are liking what you're hearing, hit that subscribe button for us. Leave a review and share this with a friend. I'm so grateful for you. I hope that you have a wonderful weekend. We're gonna, I think be getting our.

Christmas tree this weekend, so wish us some luck.

Some good luck tree shopping Shopping. Hang out with me on Instagram to see how it all looks in the end. I hope your weekend is so money.

[Kandi Burris]

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