← So Money with Farnoosh Torabi
So Money with Farnoosh Torabi
1842: Ask Farnoosh: Gold Bars at Costco, S&P Hits a Record, Rising Credit Card APRs, and a Counter-Offer Dilemma
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Farnoosh Tarabi
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One study found that using babbel for just 15 hours is equivalent to a full semester at college. With over a dozen languages and bite sized lessons you can do in just 10 to 15 minutes a day, learning a new language has never been more doable. So here's the deal. I want you to learn another language. So I'm teaming up with Babel to gift you 55% off subscriptions, but only for so Money listeners go to babbel.com somoney that's spelled B-A B B E L.com somoney rules and restrictions may apply. So Money episode 1842 ask Farnoosh you're listening to so Money with award winning money guru Farnoosh Torabi. Each day get a 30 minute dose of financial inspir 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. It's officially summer tomorrow. June 21st, first day of summer. Also my son's birthday, who just graduated from fifth grade. Happy birthday, Evan. Lots of milestones in our household this month. We had our anniversary. 13 years. Thank you, thank you. My son's turning 11, finishing fifth grade, rising up to middle school. Now here's the kicker. The kids are still in school even though it is late June and we have a heat wave. Our district just announced that the entire final week of school will be early dismissal days because of the heat. And at that point, I'm just thinking, why are we still doing this? Why aren't we just home? A lot of kids aren't even coming next week because maybe they ha. They can afford to, right? They haven't missed a lot of school this year and they're just like, I'm out of here. And there's no testing, there's no schoolwork, there's no homework, there's no real learning that's going on this last week of school. So I don't know, it's very confusing. Over on my hyperlocal podcast, the Montclair Pod, we're diving into this very issue. We've actually got a conversation coming up with our town's new superintendent of schools. Good luck to her. One of the questions we're asking about education is like, why? Why is the school year so long? I know that New Jersey has a mandate we have to have. I think it's 180 days of school. But come on, we. It's so late that the camps around here, which rely on a lot of the Montclair kids to go to these camps, are like, screw it, we're starting without you, Montclair. We'll see you when we see you. And I'll tell you, working on the Montclair Pod has been feeding my soul of late. It's such a great way to connect with the community, learn what matters to families, and feel a little more empowered to help shape the. The conversation that's happening in our town, especially when so much feels uncertain and overwhelming. So that's my psa is if you're feeling uncertain, if you're feeling like you want to do something and feel active and like you're moving the ball down the field in your area, in your community, be someone who starts conversations. Maybe you don't start a podcast, but you can start to engage with your community in other ways. Getting involved, it's something that I never really thought I would be doing as someone who lived in New York City for most of her adult life. And New York is so vast and big, and it's hard to feel like getting plugged in is very simple. You can't really move much in New York. Like, things are just set and locked in their ways. But in a town that's smaller, where you see people, the same people every day, it feels more tangible. And that's what I keep saying about this podcast. The Montclair pod is if I have questions about why something is going on in town, I can just drive to the location and ask someone and get the answer and. Or make, or send an email or make a phone call and get the person in charge of that thing and talk to them. There's not a lot of red tape. There's no publicist I have to, I have to connect with first. It's very accessible. And so to be a host of a local podcast in this town, it's unlocked and opened a lot of doors for me and my co host, so we can bring that information to our listeners, listeners and ultimately the community and hopefully make some change. Anyway, getting off my soapbox and onto today's show, we're diving into your questions today, including how to negotiate a job offer, how to ask for a counteroffer from your current employer, creating a financial plan for beginners, whether it's smart to borrow from your 401k, and how to pick the best balance transfer credit card. Because we know interest rates. Although the Fed did not raise them at their last meeting, we are seeing interest rates on credit cards continue to go up. Before we get into all of that, I want to thank everybody first who has reached out following the news about rising tensions between Israel and Iran. Many of you know I have relatives in Tehran. Thankfully, they're safe for the moment. But I don't know, I don't really have a lot of opinions on this conflict other than to say that it's just devastating for everyone. It hurts to think that maybe my kids, my kids, kids are never going to be able to go visit the country where their ancestors are from, where their families still Live. That is heartbreaking when you actually think about that. I've not been to Iran since I was a baby. My parents took me there after I was born in the States for a visit. Had my first birthday in Shiraz. I don't remember it. Obviously we have photos, we have some video, but it's just really unbelievable. Like, think about where you're from, you know, where your family is from, where your ancestors came from or where they currently live. And maybe there's a good chance you could probably go there and visit with your family because it's safe, because there's not a war going on. And for us, that's never really been the situation. For me, for 40 years, I've not gone back because, well, I'm a journalist. That's a strike. They don't like journalists, especially from America, and especially women journalists from America whose parents left the country during the revolution. So I have a lot of sort of targets on my back. And for me in particular, it's not safe. And as an extension of that, my family wouldn't be safe traveling with me. It would actually be a lot safer for a non Iranian to go to Iran right now just to hang out. And it's funny, on Instagram, I do see these folks who are not from America necessarily, or like, maybe they are, but they have no reason to be targeted or questioned. They're just going and they're enjoying the culture, they're enjoying the food, they're visiting all the sites. And so I just live vicariously right now through those feeds. Sad. But thank you to everybody who has reached out and to everybody who is impacted by this conflict. Just know that I'm thinking of you. My heart goes out to everyone in the Middle east on all sides of this tragedy. It's just the stupidest thing. I don't know. I don't have a lot of articulation for this other than it sucks, it's stupid, and I wish it would stop. We're just gonna have to hold on and pray for everybody. Moving on. If you missed any of the episodes this week, I want to offer a little bit of a recap. Many of you wrote in saying you really loved the episodes this week. So if you haven't listene, here's what happened. We had Monday Wall street veteran and the king of calling the BS on market hype on the show, Barry Ritholtz. Barry and I go way back. We used to collaborate@thestreet.com many years ago when I was a correspondent there and he would come on and often share his insights. He has a new book out called how not to Invest where he walks us through the biggest investing mistakes people make, including himself. And I tell you, it was a really important conversation, especially right now as we're seeing the market do weird things like it's down, it's up, it's up when we don't know why it's up. And if you've ever been tempted to follow a hot stock tip or panic during a downturn, he's got some important messages for us. Again, very timely. That was Monday's episode and then on Wednesday I brought back Nicole Stanley on the show, who has often been here to talk about how to get out of debt, her family and finances. On Wednesday we discussed ADHD and money. And even if you don't have adhd, I think this episode will resonate. Because here's the thing, the world is overwhelming. We're distracted. It's hard to sometimes feel like you can do what the traditional financial advice is telling you to do. Have a budget, stick to a budget, manage your spending. A lot of the patterns people with ADHD experience things like impulsivity, disorganization, anxiety around money. It shows up for everyone at some point, right? So I think this episode could be relevant to everybody. Don't be turned away by the title if you're not somebody who's living with adhd. Someone actually wrote in this week and said I love the episode. I almost skipped it because I didn't think it would be relatable to me, but actually it very much was. So that was Wednesday with Nicole Stanley. Okay, we have a reviewer of the week, a new reviewer who will get a free 15 minute chat with me. A money session. I want to say thank you this week to LP20 Madison, who wrote in saying she loves the show. Really appreciate the way Farnoosh tackles topics from today's news and helps break down information in a very digestible way. Her responses to listener questions are my favorite as they're often topics I'm pondering myself. I'm grateful for the interesting people she interviews who may not have been on my radar. It helps expand my resources and knowledge. I've been an avid listener for years and recommend to others I know. Thank you for what you do, Farnooch. Thank you so much Madison. That note is really it makes my week and I as you know, pour a lot into this show, especially this Friday episode. And I have started this new kind of weekly dissection of the news which we'll get into in a minute. And I'm loving it. I love, for me, it's an education because sometimes I miss the headlines and I'm sure then you do too. So to go through the week of what were some of the top news issues, financial issues this week, why they're important is something that I'm hoping to make recurring in this episode and I'm happy that it's being helpful to you. And so really quick, if you'd like to get a free 15 minute phone call with me, just email me FarnooShowMoneyPodcast.com or DM me on Instagram arnouchtarabi. You gotta be following me there first, then DM me and I will send you a link where you can pick a time for us to have a conversation. All right? Now, speaking of that news roundup, let's get to it. It's again a segment I've started here on the Friday episodes to give us a but hopefully meaningful look at the headlines that are impacting our financial lives. The first is that if you've been just eyeing the stock market lately, which is okay to do, we don't have to be blind to it. But sometimes you check in, you're like, oh, that's interesting. And it has been interesting because The S&P 500 closed at a record high recently. This week on June 17th. What is driving this surge? The New York Times cites a few factors we have. Firstly, tech giants like Apple, Nvidia, Microsoft are crushing it, thanks to a lot of the AI buzz. Solid earnings inflation, at least the data shows it seems to be cooling. Corporate profits are up and a lot of sidelined cash from earlier in the year when things were really uncertain is finally being invested. So the stock market is liking that. But as I mentioned, the gains are heavily concentrated in just a handful of stocks. And the broader market isn't really soaring, really. So when that happens, things can be fragile. So don't let the headlines trick you into thinking now's the time to get in or sell at the end of the day, as Barry said on Monday, a week's worth of data, a day's worth of moves in the stock market is nothing to someone who is investing for the long term. Most of us are not planning to retire tomorrow. And even if you are, a lot of that money that you have invested for retirement will continue to stay invested. You're not pulling all that money from your 401k into a savings account, right? It's important to remember that you're in it for the long haul. Diversification is what is really important. So stick with your plan. But I think it's just interesting we get into this a bit in Monday's show where I ask Barry about why the stock market is doing doing so well when there is so much still uncertainty. I know that things like inflation and earnings are doing relatively well, but people are nervous, people aren't hiring as much as the jobs data suggests. And obviously now with all this geopolitical tension, that throws another curveball into our economy, our stock market. So I think if you want more context, definitely check out that episode with Barry on Monday. Next a headline from cnbc. The Federal Reserve held interest rates steady this month. But as we just talked about, credit card EPRs keep going up. The average credit card interest rate is now above 20%, in some cases over 24%. So if you're carrying a balance, this is the time to pay it down aggressively. I would emphasize more of my financial to dos on getting out of credit card debt, high interest credit card debt, than even I would say investing in the stock market market. I know that we want to try to do both at the same time. That's ideal. But if you are looking at maybe the next three to six months and you can get out of that credit card debt in the next six months because you're going to put everything you've got towards it and then you're going to have a clean slate and then you can go back to investing, then I would do that. Take this moment, take this summer to really focus on that. Or you can look at balance transfer offers which we're going to get into later in the show. Or maybe personal loan with a lower interest rate to minimize the interest rate burden. But that I thought was interesting. Personal finance isn't perfect. When the Fed does something which is manage interest rates, it's not always reflected in the interest rate market that we're used to. For example, mortgage rates have less to do with the fed funds rate and more to do with the treasury, where the 30 year treasury sits. When the Fed moves rates, that overnight bank lending rate, that usually translates into movement with credit card interest rates, variable interest rates on loans, student loans, HELOCs, things like that. But it looks like banks are raising their consumer credit card rates despite the Fed keeping rates steady. I don't know what's going on there, but maybe just looks like banks want to make more money. Shouldn't surprise us. Parents, this one's for you. A new study out of Ohio State says we're spending more time, more money and more Mental energy on our kids sports than ever before. Travel teams, private coaching gear. It's a full time job and it's taking a toll on families. And I have often heard from listeners about this very issue of how do I budget for all of my kids activities and sports? Especially if you've got more than one kid. And here's my two cents. It's okay if your kid doesn't have an activity every day. Really, your time and money are finite. Free play is still gold. I'm doing a segment on the bike bus in our town in Montclair, which is this grassroots effort get more people biking. We bike to school every Friday. It's this whole concerted effort. It's all volunteer work too. It's incredible. And the people, parents who are behind it are very much aware of how what I just talked about. Parents are spending money and time on these sports and at the end of the day they're like, look, it's important for kids to get outside and be active. Remember bicycling? Remember running? Remember just being in the backyard with a soccer ball and having some friends come over and not being coached or watched. That is the thing, right? We don't be taking our kids across state lines to games three times. I have a neighbor whose son is in hockey and golf and baseball and on a Sunday they'll have three games, one of which might have been in Pennsylvania in the morning and then driving back to New Jersey and I'm like, I don't understand this. Her husband's a big sports fanatic. So he loves it, he would do it and he doesn't care and it works for them. But in my family, if my kids came up to me and said that they need to cross straight state lines to a sports game and then they got to come back to New Jersey and go to two more sports games, I'd be like, pick one sport. Unless you're like really good at that sport that's going to require you to go across state lines that I have to take you to. I'm not sure we're going to do this next season. That's it. My parents. Look, I spent a lot of time by myself in the 90s, figuring out things, getting bored. And I do think that made me who I am, which is somebody who is resilient and creative and thinks outside the box. You gotta start questioning the time and effort and money that goes into it. When it starts to affect your ability to save for your retirement, pay your bills and do other things with your money that I Do think should take priority. The kids will be okay. Really, they will. And finally, a little Costco moment for you. This is a personal anecdote. This was not in the news, but I thought it was an interesting money story. So I was at Costco last week and checking out with my two children. So my priority right now is to find the shortest line possible. And I thought I found it. I found this line where there was just one gentleman at checkout. He had nothing with him. He was just speaking to the cashier. So I was like, great, I'm gonna get behind this guy. I'll be like, basically the next person in line. And then minutes go by, 15 minutes, 20 minutes, and I'm still behind watching this guy talk to the cashier. I don't know what's going on. I see cash being pulled out. I tell my kids to go sit by the hot dog stand and find a table and just hang out. And they did. And that was how I handled that. But then when I got to the cashier, I said, what happened? What was going on with that guy? What was that all about? He said, this man was here to buy two gold bars from Costco, and the total price of that was $6,000. So $3,000 each for a gold bar. And he initially tried to pay with his credit card. It didn't go through. So then he went and got cash. When I got to the line, the guy had brought the cash, and now the cashier has to count the cash twice. And this wasn't big bills. He had, like, fives and tens and twenties. So that's what was taking so long. And I. First of all, one question is, where did you get $6,000? In a jif. In a jiffy. On a Saturday? There's no ATM that I know of that gives you that money. Maybe the bank inside Costco gave it to him. That's all I could think of, because I don't think he went outside Costco and came back for it anyway. Also, why are you buying gold bars? Then I come to find out these gold bars that are priced at 3000 bucks each are at a huge discount to what they're actually going for in the market. In the market, they're as much as 3,500 a pop. So in theory, by buying two in that moment, he made a thousand dollars. But then he has to, of course, sell that somewhere to make that thousand dollars, and that. I don't know where he's going to do. And it just begs the question, like, should we be doing this Should I have been buying gold as part of a diversified portfolio? Look, gold, typically as an investment category is the hedge against inflation. It tends to hold value over time, especially when inflation takes away some of our purchasing power. It is a good diversifier in a portfolio. It, it moves differently than stocks or bonds. When the market is volatile, gold tends to be stable, maybe even increase in value. And many people like gold because in times of geopolitical instability, which we're in, and financial crisis, economic uncertainty, gold, it's tangible, right? It's also globally recognized and it's not tied to any one country's economy. So people think of it as like a crisis protection, crisis management asset. Is it worth it? I was actually talking to my friend who works in finance over the weekend about it. He goes, he should have just bought like a gold etf. Save time, save the weight in his trunk. Like just go online and buy a gold ETF and be done with it and add it to your port. Which I think is, is the right move because gold can play a supporting role, maybe 5% of your portfolio if you're concerned about inflation or market instability. But it's not like I wouldn't flip, I wouldn't be flipping gold. You know, it's just something to have in your portfolio as a long term investing strategy and I guess a psa. If you're at Costco and you see a short line with just one person in it with nothing to buy, that person might be buying gold and you want to avoid them at all costs because you're going to be in line for about 20 minutes and someone asked, why didn't you just change lines? The reason is because all the other lines, I would have been like 10th in line. This one at least. I felt really close to the goal post and I was stuck. I was stuck, to be honest. All right, so let's move on to the mailbag. We have Mandy in the audience who's job hunting and had a great panel interview and thinks she might get an offer from the company. But she's feeling conflicted because she really likes her current company. The work environment is nice, but the pay is low for her position. So she's wondering, if she does get an offer from this competing company, how can she tell her manager, her current manager, that she would like a counter offer from her current employer. The other thing is that the other company, they have much better benefits. The medical expenses coverage is double than the current employer, but they're not flexible about check in or working from home, which she gets at her current company, and she has a little one that gets sick often in daycare. So her current employer is more flexible. And at the end of the day, money is important. But flexibility and working somewhere that helps accommodate your personal life is incredibly valuable. And it's hard to put a number on that, but I get it. We want to be paid what our market value is. And so, Mandy, first off, congrats. Just want to say that on making it to the potential offer stage, that's a huge win, especially in this market where things are murky. And I've been hearing from people like it's been taking them many months, months to even get to the interview stage. And your situation is one that many working parents can relate to. So what are we dealing with here? You're wearing compensation and benefits at a new role versus flexibility and familiarity at your current job. If you want to invite a counter offer, here's how I would approach it. With your manager, you say, I want to be fully transparent with you. I've received an offer from another company, another organization. It comes with a significant pay increase and stronger benefits. But I'm conflicted because I truly value my experience here, especially because we have a very supportive environment. The flexibility is invaluable. It's helped me to thrive as a parent, as a professional. And I'm coming to you because I'm hoping that we can find a way to revisit my current compensation to bring it closer to what the market is offering. I'd love to stay. I'd love to continue to grow with our team. I want to see what's possible and find a way that this can feel more of a win win for you and I. If your company can't really come up to the money that you need or want, the question becomes, how much is flexibility worth to you at this stage in your life? Being able to work from home when your little one is sick, or having a manager who understands your situation has real economic and emotional values. So the questions are, can you negotiate for more flexibility with the new company if you can't get it from your existing one? Doesn't sound like you can, but it's worth trying. I would create a T chart, pros and cons, that assigns weight to each factor. Money, time, stress, growth potential. The next step is just advocating for yourself very clearly and calmly for what you need need from your current employer. If you do get this offer and make a decision that's based on both money and personal values, money and personal bottom lines, I'm very interested to know what happens next. And it may just be that the money you get from this next job is so much higher and so much more significant that you could take your kid out of daycare and get a full time caregiver who comes into your home and cares for them. And so one, your child is less prone to getting sick because they're not around more kids. And even if they do get sick, your caregiver can still come into your home if your nanny is comfortable with that. Some nannies won't be because they don't want to get sick. But in the end, your kid's probably not going to even get sick that much that often when they're not in a daycare center. So as a mom, I would tell you that's what I would look at. I'd look at what's the company that's going to offer me the most money, the most growth potential, the best benefits, and then I'm going to take that money that I'm making that extra money, some of it, and invest in a better situation at home with my family and my kids so that I can keep the lights on, I can keep working and have less interruption to my work. As soon as the weather warms up, I get the itch to refresh my wardrobe. But I've learned not to fall for fast fashion or overpriced labels. Instead, I turn to Quince and their summer styles are timeless, lightweight and beautifully made. I actually ordered a few summer pieces for my daughter, a gorgeous 100% organic cotton poplin smocked dress. I have it in my size too, and the most adorable tankini. And the quality is unmatched. The fabrics are soft and breathable, the fit is spot on and everything feels so much more expensive than it is. Quince makes luxury feel effortless. 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The Range Rover Sport combines a dynamic sporting personality with refined elegance and agility, delivering an instinctive drive that feels as purposeful as it looks. Its distinctly British design doesn't shout for attention, but it gets it. And when the road changes the Terrain Response 2 system with seven drive modes Adaptation apps Like a seasoned traveler inside, luxury is not an add on, it's a standard. Breathe easy with the cabin air purification system, enjoy serenity with active noise cancellation, and explore in comfort, whether you're gliding through city streets or carving through winding country roads. There's even a plug in hybrid engine option with an estimated electric range of 53 miles, because even raw power can be smart. Explore Range Rover sport@range rover.com US US/SPORT that's range rover.com US/SPORT Ready to order? Yes. We're earning unlimited 3% cash back on dining and entertainment with a Capital One Saver card. So let's just get one of everything. Everything. Fire everything. The Capital One Saver card is at table 27 and they're earning unlimited 3% cash back. Yes, Chef. This is so nice. Had a feeling you want 3% cash back on dessert? Ooh, tiramisu. Earn unlimited 3% cash back on dining and entertainment with the Capital One Saver Card. Capital One what's in your wallet? Terms apply. See capitalone.com for details. All right, an Audience member wants to know, do I have any favorite picks when it comes to balance transfer credit cards? So firstly, let's just talk about what these cards are, what they are intended for. A balance transfer credit card is designed to help us manage any existing debt that we have. It allows us to transfer that debt from one or multiple sources to one new card. This new balance transfer card that has a 0% interest rate, it's an introductory interest rate. So that means it's only going to be around for a little bit. It will expire usually anywhere from six months to. I've seen as many as 21 months. People like balance transfer credit cards when they're trying to reduce their interest payments. So if you know that you can within that 0% introductory period, you can and you're committed to paying down all of the loan, all of the balance in that window, well, you're going to save lots of money on interest because the interest is 0%. It's also nice for those who might have multiple credit cards with interest rates and they want to streamline it and consolidate it to one transfer balance credit card. It makes for easier payments. Instead of three payments, you're paying one payment a month. It does require discipline. Once that promotional period ends, any remaining balance on that card is going to be subject to the standard interest rate, which right now on credit cards it can be as high as 20%, 25%. So you're going to go from paying nothing to a lot if you're not mindful of that window. So balance transfer cards can be a smart tool for managing credit card debt. But a few things you want to consider, I already mentioned one of them, which is that window during which time you have the 0% APR, but then it expires. So being really mindful of that cutoff and being honest with yourself, can I commit to paying down a lot of this debt, if not all of it, during this window? Because otherwise, if you have a credit card with let's say like a 17% interest rate and yes, going over to a 0% APR is very attractive. But then if you haven't paid off the debt after that deadline, you're going to jump to maybe a 25% interest rate. So you're worse off than when you started. So make sure you read the fine print on that. The other thing is that some balance transfer credit cards charge balance transfer fees. So if you're carrying over $1,000 from an old credit card with an interest rate to this 0% card, there may be anywhere from a 3 to a 5% fee. So of that thousand dollars, you'll get charged, let's say 5% and that's going to be added to your balance. So there is a cost to transfer initially, sometimes, sometimes not. There are cards out there I've seen 0% balance transfer and I'll mention one of them right now. Chase Slate Edge. Chase Slate Edge. This card is a balance transfer card. It's a 0% APR on purchases and whatever you're transferring over to the card for the first 18 months. This is I think the gold standard in the industry. And, and full disclosure, when I was an ambassador for Chase for many years, this was the product that I was most obsessed with and that I would talk about the most. And even when I was at Money magazine as a reporter, our editorial team really loved the Chase Slate. It was back then it was called Chase Slate. Now it's called Chase Slate Edge this card because it really does exceed some of these other cards in the market. It has again, 0% APR for not just your balance transfers, but also the new purchases that you make on this card within an 18 month period. Some cards, it's just the balance transfer that gets charged at the 0% APR. Anything you charge new on the card is subject to a variable APR, which could be like as much as 20 or 30%. Just keep in mind though, after 18 months, the chase Slate Edge card does convert to a card that's charging you interest and It's a variable APR. But right now it's anywhere from 20% to 30%. It's based on your credit score as well as what the market market rate is. But also there's no annual fee. Not all cards offer zero dollar fees for transferring the balance. So I like that. So it's free to basically move your money over and there's no interest for the first 18 months on whatever you're bringing over and whatever you're charging new. And I like the 18 months. 18 months is like a good healthy amount of time. It's a year and a half. It's a nice bit of time to work out whatever debt you have. Just to give you the behind the scenes of how balance transfer cards work. So you apply for a balance transfer card, hopefully you get accepted. Then once you're in, you request a balance transfer. You do this either online, you can call the credit card issuer and you'll have to provide the account details of your old credit card and the amount that you want to transfer. Now keep in mind that sometimes you have a bigger balance that you want to transfer than what this card allows. The balance transfer card limits are based on many factors, including your credit status. Different cards have different limits. But if you've got like $50,000 worth of credit card debt, my guess is that that balance transfer card is not going to be able to absorb all of that. I've seen limits as high as 10,000, but not much more. You can always ask to extend the credit line once you're in and you have been paying your balance off and all that good stuff. That's advice for anyone. If you want to increase the limit on your credit card, you can usually ask. And based on your standing and your credit worthiness, you may or may not qualify. But these are the steps. You apply for the balance transfer credit card, you request the balance transfer, then the new card. The new balance transfer card will pay off your old credit card debt by transferring the balance to your new balance transfer card. So the debt goes from the old card to the new card. And now you're making payments on this new card, your old card. What are you going to do with that? What do you want? What should you do with that? I would not close it if possible. I would keep it open. Having that limit on that credit card can help ultimately your credit score. Especially if this was a card with a high limit. Especially if this is a card that you've had for a long time. You want to keep it in the mix and you might want to attach one small bill to it every month that you're automatically paying off. That's just some parting advice on that. You can compare balance transfer credit cards online to pick the one that's right for you. But keep in mind the window for the 0% APR, any balance transfer fees, and what is the limit on that credit card typically so you can prepare for how much you'll be able to transfer over. All right, a question about investing from someone in the audience who says they're late to self educating on personal finance. They do have a simple IRA through their job, which they've been contributing to and matching, but that's basically it. This person says they have a modest savings account, some leftovers in the money market account that seem like they're never going to make much money. Not a lot of returns there. Retirement savings is really important to this person, but also they want to buy a house. House. And they're just. It sounds like there's a lot of like confusion about where to start, where to turn your attention and how to prioritize. All right, so for someone who is like this person in our audience or anyone listening who is new to the personal finance world. And you know that saving is important, as is investing. You're trying to juggle both short term interests and goals like you want to buy a house in the next few years with your long term goals like retiring one day and the backdrop of the economy very uncertain. So what is the first thing I would recommend somebody do? Number one, get clear on those goals. Do you really want to buy a home in the next few years or is that just something you think you're supposed to do, but you haven't really done the math, you haven't really asked yourself if this is, from a values perspective, really important to you. Because saving for a home is a huge financial feat. You have to save for the down payment, the monthly mortgage, the taxes, the insurance. Renting, on the other hand offers flexibility. And I'm not saying that buying a home is a bad idea. I own my home. But you have to make sure you're doing it for the right reasons. So get clear on your priorities. You talked about having this simple IRA with an employer match. Fantastic. You're contributing to that. You're actually doing great. I think this is, you're not giving yourself enough credit. The fact that, that you knew to take advantage of that match because it's essentially free money, very, very smart. And I feel good about you having that established. Amongst other things you want to establish from there. You want to get an emergency fund together. I didn't hear in the question anything about whether or not you have a savings account. If something happens, you lose your job, you want to take time away from work, you get an unexpected bill, having three to six months worth of your expenses saved somewhere, preferably a high yield savings account as a cushion is, is a priority. It's something definitely to work towards and to put that at the top of your to do list. So you've got your long term savings addressed with that simple IRA and that match. You're working on a rainy day reserve for the immediate. And then let's go back to that house that maybe you want to buy at some point in the next few years, five years, that's. That would be a short term goal. How do you do this? Well, with whatever is left after you account for your bills and you account for your retirement and you account for this rainy day account. If there is money left over, then you can think about allocating that to a siloed special compartmentalized account. Could be just an additional savings account within wherever you're banking to start putting money towards that account, towards that goal. Now you're going to need thousands and thousands of dollars for this. Where is that going to come from? Well, that's for you to figure out. And some things to think about would be can I start bringing in more money, can I reduce my expenses, can I downsize for now so that I can shore up more cash for this goal to buy in the future? And will I qualify for any first time home buyer credits or benefits? You don't know what you don't know. So doing a little bit of research to see what you could qualify for, what the market is like, really, how much are you going to need to actually figure out what to save and how to save along the way? Keep educating yourself, stay curious, keep listening to this podcast and other podcasts and read books. Education curiosity is the key. We don't grow up with financial literacy. I had a little bit of a running start than others because my parents talked about it, but I still had to learn things the hard way as well. I got into debt, had to figure my way out. The key is to always be on the lookout for yourself. Read the fine print, ask the questions. Know that nobody cares more about your financial life and your financial well being than you. Take that to heart. But I have to just give you credit that you are investing for retirement. You know enough to save for that match and you knew enough to write in and ask a really good question about how to prioritize. You're not alone in that. This. Thank you so much for your question. All right, borrowing Money from your 401k. When should you do it? What should you watch out for? If you have a 401k at work, you may be able to borrow against the 401k. You take a loan from the account, typically up to $50,000 or 50% of your vested balance, whichever is less. When you repay the loan, usually you do it through your paycheck. It's automatic, with interest going back into your account. That's an attractive quality for borrowers. It's like, well, if I'm paying interest, at least I'm paying it back to myself and not a financial institution. The loan term for a 401k loan is usually 5 years. But there are rules around this. If you leave the company, whether voluntarily or not, that loan typically comes due right away within 60 days. So that is one of the caveats to the 401k loan, among other caveats. But let's first talk about maybe some of the pros. When you look across the financing landscape. So compared to credit cards, personal loans, which are other avenues you might take, the 401k loan requires no credit check. It's your money. So borrowing doesn't require credit approval and it does not impact your credit score. The interest rates tend to be lower than other kinds of financing. Credit cards obviously carry double digit interest rates rates. Personal loans right now also maybe in the 10, 12 and higher percent interest rate. And on 401ks, the interest rate could be as low as 5 to 7%. It's usually the prime rate plus 1 or 2% that makes it very competitive and very attractive to those of us who are looking to borrow some money. And like I mentioned earlier, you can set up repayments to come directly out of your paycheck. So that does help with staying on top of the loan. Now for the cons. This is your retirement account. This is money that you have dutifully set aside for your future self. And this is one of the hardest aspects of building wealth. It's caring more about your future self than your current self. Delaying gratification. When you take a loan out of your 401k, while the loan is unpaid, the borrowed money is no longer invested. So that's going to cost, it's going to cost you long term gains. There's also this thing called double taxation. You repay the loan with after tax dollars and then withdraw the funds in retirement. Those will get taxed again. And there's also a pretty good chance of default because as we know, people are not staying at their companies for five years on average. It's much less. You might get laid off, you might have a change of heart. You don't want to work there again. So you leave your job. You don't get to continue paying off that 401k loan with that five year term. The loan is due in full within a short period of time, usually within 60 days. Otherwise that that loan is now considered an early withdrawal which is subject to income tax and penalties if you're under the age of 59 and a half. So when there are dire circumstances, I'm talking you've exhausted all other options and you do have this Money in your 401k staring at you and you need to pay off an urgent medical bill. You have a serious life matter you have to afford. I get it. Life happens. No guilt, no shame. But this is not my go to to for financing again because I care about my future self. I've worked really hard to invest for my future self. This means maybe delaying Your retirement. It may mean having to work longer to make up for the fact that the money you took out as a loan no longer was compounding during those five years or maybe less. How common is this? Well, I found that borrowing from a 401k is kind of common. About 20%. 1 in 5 of 401k participants have an outstanding loan at any given time. Why? People are turning to this for immediate financial needs, paying off high interest debt, funding a home purchase, or covering unexpected expenses. But I and other financial educators would agree that this should be a last resort because of the risk of derailing your retirement savings. So yes, you can do it. It should you do it. That's questionable. And lastly, a friend in the audience wants guidance on how to make sure everything is taken care of when they pass accounts, funeral arrangements, all that. It's overwhelming, this person says, thinking about it. But I don't want that to be the reason why my loved ones may struggle getting a hold of my assets. What's a first good step? Would it be easier to get a lawyer to handle all of this instead? But what kind of a lawyer? Talk to me like I'm five years old. All right, I will say that working with a professional estate planning attorney is critical. I know there are a lot of websites out there that can draft you a will in under a few hours or whatever it is. That makes me kind of nervous. This is serious stuff. You know, you're not building a contract between you and your roommate or a personal loan contract. This is an estate plan which is pretty involved. You're talking about how you want not just your assets managed in your absence, but also your health. Because within your estate plan, you would also designate someone to be your healthcare proxy in the event that you're incapacitated or you're no longer able to make good financial decisions on your own behalf. Somebody else needs to do that for you. Who is that person going to be? There's a lot to consider. And working with an estate planning attorney who does this, this all day, who has seen all of it, the good, bad and the ugly, who can tell you, here are the things to look out for. Here are the things to absolutely have figured out in fine print so that you don't, to my friend in the audience's concern, have your family scrambling, by the way, when they're also in deep grievance. This is the best gift that you can give your loved ones when you are no longer around, is to make sure that everything is laid out clearly. So working with an estate Planning attorney is really, really important. You can usually find a good estate planning attorney by asking your friends and your colleagues. I like to get a good referral. We just worked with an estate planning attorney in New Jersey to re to update our estate plan. We had moved from New York to New Jersey, so when you change states, it's important to just make sure that your estate plan still valid in your state. And we'd had another child in between, so we had to obviously include our daughter. And we worked with an estate planning attorney whom I by going on Facebook and doing a search within our town's Facebook page where families are sharing resources and asking questions. And the resources are all over the map, from child care to estate planning attorneys to the best pizza. And a lot of people had recommended this one estate planning attorney and he was fantastic. Got us all squared away. It was a couple thousand dollars and now we are relaxed knowing that God forbid something happens to one or both of us, our children are taken care of, our assets are taken care of, we know who's going to step in. It's all in writing. Many people die, unfortunately, without a will. If you listened to our episode on Monday with Megan Gorman, who wrote the book all the President's Money, I think it was Abraham Lincoln who died without a will. People didn't live as long as they did today. But maybe he. So maybe he was going to get around to it and then he didn't. Of course, he was killed. So that was very unexpected. But it happens. And, and when it does happen, you don't have a will. What happens to your assets is now up to the state, your state's laws. And most people don't want to follow through on all of their state's laws. It's similar to getting. It's similar to why you would get a prenup before you get married in the event of a divorce. Without a prenup, who decides? The state. The state decides how the assets get divvied up. And most people are not in agreement with that, so they get a prenup. So to my friend in the audience who asked this question, invest in a good estate planning attorney. I'm hesitant to recommend an online tool for this, especially if you've got children, especially if you have very specific requests for how you want things to play out when you're no longer here. And that's our show this Friday. Happy first day of summer to everybody. Stay cool, keep your questions coming. You can email me Farnoosh@somoneypodcast.com DM me on Instagram. 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