1848: Ask Farnoosh: Big Beautiful Bill Winners and Losers

Summary

So Money with Farnoosh Torabi - Episode 1848 Summary: "Ask Farnoosh: Big Beautiful Bill Winners and Losers"

Release Date: July 4, 2025
Host: Farnoosh Torabi

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Introduction

In this special Independence Day episode of So Money with Farnoosh Torabi, host Farnoosh delves into the intricacies of a significant piece of legislation—the "Big Beautiful Bill"—that has recently passed the House and is poised for President Donald Trump's signature. Farnoosh not only breaks down the bill's provisions but also explores its broader implications on various demographics and sectors. Additionally, she addresses listener questions on financial planning, investing, and educating the next generation about money.

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The Big Beautiful Bill: Winners and Losers

Legislative Passage and Political Climate

On July 3, 2025, the House narrowly approved the Big Beautiful Bill with a vote of 218 to 214, sending it directly to President Trump for his signature. The bill's approval came despite unanimous criticism from Democrats, highlighting deep partisan divides. House Minority Leader Hakeem Jeffries even delivered an impassioned 8-hour and 44-minute protest speech against the bill (02:26).

Who Wins?

1. High-Income Households and Corporations

   • Tax Cuts Extension: The bill permanently extends Trump's 2017 tax cuts, benefiting high earners and large corporations.
   • New Perks: Introduces deductions on overtime and tips, a $6,000 senior deduction, and increases the State and Local Tax (SALT) limits to $40,000 for five years.

2. Defense and Border Contractors

   • Military Allocation: Allocates $150 billion for military upgrades.
   • Immigration and Border Enforcement: Allocates over $70 billion, with an additional $46.5 billion earmarked for physical barriers.

3. Traditional Automakers

   • Auto Loans Deduction: Offers a $10,000 deduction for U.S.-built auto loans, significantly benefiting Detroit-based manufacturers.

Who Loses?

1. Low and Middle-Income Families

   • Cuts to Social Programs: Slashes approximately $1.2 trillion from Medicaid, SNAP, and food aid programs, potentially leaving up to 12 million Americans uninsured by 2034.

2. Energy Transition Sectors

   • Reversal of Clean Energy Tax Credits: Diminishes support for solar, wind, and electric vehicle (EV) industries, hindering progress toward sustainable energy solutions.

3. Taxpayers at the Bottom

   • Income Disparity: According to reports from Time and The Guardian, the poorest 20% in America could see their incomes decrease by about 4%, while the top 10% gain approximately 2%, a phenomenon described as a "reverse Robinhood transfer."

Broader Impact

• Deficit Growth: The Congressional Budget Office (CBO) estimates the bill will add between $3.3 to $3.4 trillion to the national deficit over the next decade.
• Healthcare and Social Security: Massive cuts to SNAP and Medicaid, coupled with new work requirements for Medicaid recipients, could exacerbate the financial strain on vulnerable populations.

Farnoosh's Personal Reflection

Farnoosh shares a personal anecdote about her family's reliance on educational subsidies, highlighting the bill's potential impact on families requiring specialized education plans (Individualized Education Plans - IEPs). She underscores the precariousness of dependents who rely on government support, emphasizing the bill's far-reaching consequences on everyday Americans (02:26).

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Recap of Recent Episodes

Before diving into listener questions, Farnoosh briefly revisits the past week's discussions:

• Monday: Crafting a financial plan that leverages science-backed principles.
• Wednesday: Evaluating the evolution and current relevance of the FIRE (Financial Independence, Retire Early) movement.

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Listener Questions and Financial Insights

1. Designing Your Investment Portfolio: Stocks vs. Bonds in Your 30s

Question from Lucia: "How much should you be invested in stocks versus bonds in your 30s?"

Farnoosh's Advice: Farnoosh introduces the age-based rule of thumb—110 minus your age—to determine the percentage of your portfolio that should be allocated to stocks. For a 35-year-old like Lucia, this suggests a 75% allocation to stocks and 25% to bonds. However, she emphasizes personalizing this guideline based on individual risk tolerance, investment goals, and financial situations. She also recommends consulting with a financial advisor to tailor asset allocations effectively.

Notable Quote:
"It's important that we look at this as just a guideline. It's not okay for everybody." (14:02)

2. Teaching Kids About Money

Question from Johnny: "How can I help my kids learn about money and investing?"

Farnoosh's Strategies:

• Tools: Recommends the Money Savvy Piggy Bank with slots for Save, Spend, Donate, and Invest to teach children the diverse uses of money.
• Books: Suggests titles like The Lemonade War and The Ant and the Grasshopper to introduce entrepreneurial concepts and the importance of saving.
• Conversations: Encourages integrating money discussions into daily life without overwhelming children with complex topics like compound interest.

Notable Quote:
"It's not going to be maybe a teacher's full-time job. We're just saying let's sprinkle this in so kids don't start college... completely blind to the financial world." (14:02)

3. Backdoor Roth IRA: Step-by-Step Instructions

Question from Brooke: "Is there a place where I can get idiot-proof instructions for a backdoor Roth IRA?"

Farnoosh's Step-by-Step Guide:

1. Contribute to a Traditional IRA: Open and fund a traditional IRA, which has no income limits.
2. Convert to a Roth IRA: Initiate the conversion through your IRA provider.
3. Calculate Potential Taxes: Be aware that converted amounts may increase taxable income unless converted immediately.
4. Report the Conversion: Use Form 8606 when filing taxes to document the Roth conversion.
5. Consult a Professional: Seek advice from a CPA or financial advisor to avoid errors.

Notable Quote:
"Tax laws and retirement planning are complex and so if you want to talk to a certified public accountant, a financial advisor, or both, just to make sure you're not going to make an unintentional error, well worth your time." (14:02)

4. Managing High Credit Card Balances

Question from Instagram: "How do you manage credit cards with high balances?"

Farnoosh's Tips:

• Balance Transfers: Move high-interest debt to a card with a 0% APR introductory offer, ensuring to pay off before the promotional period ends.
• Prioritize High-Interest Debt: Focus on paying down the card with the highest interest rate first while maintaining minimum payments on others.
• Psychological Boost: Alternatively, eliminate the smallest balance first to gain momentum.
• Negotiate Rates: Contact credit card companies to request lower interest rates.

Notable Quote:
"You don't want to risk this money. Because the rationale behind this is that we tend to see recessions in a cyclical pattern." (Unspecified Timestamp)

5. Handling Medical Bill Debt

Question: "Where's the best place to go for help with medical bills?"

Farnoosh's Recommendations:

• Medical Advocates: Professionals who review bills for errors and negotiate on your behalf. Organizations include the Alliance of Professional Health Advocates and Health Advocate.
• Hospital Financial Aid: Many hospitals have patient advocates who can assist with payment plans or financial assistance.
• Fee Structures: Advocates may charge a flat fee or a percentage of the savings they secure.

Notable Quote:
"Medical advocates are essentially professionals who review your bills... and they can help negotiate on your behalf." (14:02)

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Conclusion

Farnoosh wraps up the episode by emphasizing the importance of staying informed and proactive in financial matters, especially in the face of legislative changes that can significantly impact personal and familial financial stability. She encourages listeners to utilize provided resources, engage in thoughtful financial planning, and remember that their financial choices and voices matter.

Final Quote:
"A little fire, a little financial clarity, hopefully a big reminder that your money and your voice matter more than ever." (Conclusion Timestamp)

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Additional Resources

For more detailed information and resources mentioned in this episode, please refer to the show notes available on SoMoneyMembers.com.

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This summary provides an overview of the key discussions and insights presented in Episode 1848 of So Money with Farnoosh Torabi. For a complete understanding and to hear the nuances of Farnoosh's advice, listening to the full episode is highly recommended.

Transcript

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So money episode 1848 Ask Farnoosh.

[Podcast Host]

You're listening to so Money with award winning money guru Farnoosh Tarabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh yourself. 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.

[Farnoosh Tarabi]

Welcome to Somoney Money everyone. Happy 4th of July. Hopefully you're enjoying the backyard, maybe some fireworks, hanging out with friends, family. Today we are to celebrate freedom against the backdrop of a bill that threatens the financial and health freedoms of millions of us. Oh yeah, you thought I was going to wait to talk about the big beautiful bill or anything but the House just approved the bill yesterday by a razor thin vote of 218 to 214, sending it straight to President Donald Trump for his signature, even though Democrats uniformly called it cruel. And House Minority Leader Hakeem Jeffries delivered an epic 8 hour 44 minute protest speech. Let's get into it. What's in the bill? Winners and losers. Who wins? High income households and corporations for one. The bill permanently extends Trump's 2017 tax cuts and introduces new perks including deductions on overtime and tips, a $6,000 senior deduction and increased SALT limits. SALT stands for state and local tax limits up to $40,000 for five years. Also winning defense and border contractors. This bill allocates $150 billion for military upgrades, 70 billion plus dollars for immigration and border enforcement, and 46 and a half billion going to physical barriers. Also a win for traditional automakers, who will gain a $10,000 deduction for US built auto loans, a boost that especially benefits Detroit now. Who will suffer low and middle income families. The bill slashes 1 to about $1.2 trillion from Medicaid, SNAP and food aid, meaning up to 12 million Americans could be uninsured by 2034. Also at risk, energy transition sectors. Clean energy tax credits are reversed, dealing a setback to solar, wind and EV industries and then taxpayers at the bottom. According to Time and the Guardian, the poorest 20% in America would see their incomes drop about 4% while the top 10% gain about 2%. And they're calling that a reverse Robinhood transfer. Now big picture this bill. It adds an estimated 3.3 to 3.4 trillion to the deficit over the next decade. The Congressional Budget Office predicts that about 12 million up to 12 million more Americans will go uninsured. Massive cuts to SNAP and Medicaid, along with new work requirements for Medicaid recipients. The Senate passed the bill early on July 1, 51 to 50, with Vice President J.D. vance casting the tie breaking vote. The House vote mirrored that narrow margin again, 218 to 214 with last minute pressure from Trump and House Speaker Johnson, including late night White House meetings and text warnings that said, costing you votes? Yeah, a lot of fear right now in Washington and across the country, our legislators are more worried about their political careers than our livelihoods. When we don't have health insurance and our cost of Living goes up, but you get to keep your title. Is it worth it? I have links in the show notes if you'd like to learn more about this bill and its impact on our country. But I think today we'll celebrate, we'll have our barbecue, but we're also going to reflect a lot on what this will mean for our families. My son has an individualized education plan, an iep which we actually moved to a suburb in New Jersey for their public education that would support his learning differences, which he wasn't getting that same support in New York in a private school. So we came here in many ways. The attention and the subsidies that we got here because the Department of Education prioritized, used to prioritize that they used it. But now that funding will diminish according to this bill. And we're a fortunate family. Maybe we can find ways to outsource this help, but where does that leave most Americans? If you have a parent who is on Medicaid, I would be worried for them. I've got again links in the show notes with resources and even tools to help you take action. Before we get to your questions this week, a quick look back at our week of shows. On Monday we broke down how to make a financial plan that actually works using science backed principles to build a roadmap that you can stick to. And on Wednesday we asked is the fire movement still a thing? Is it still worth it? The financial independence retire early movement has evolved. Are the original promises still realistic? Let's get to your mailbag questions. First up, a question from Instagram. The markets are at an all time high and a rate cut may be coming this September. Where should we be putting our money right now? This is a smart question and it's one I've been getting a lot. Whenever the market's riding high and interest rate shifts are in play, it's tempting to want to make a move. You feel like you got to do something and react. But the key is to think of your money as serving you in in compartments, your savings in compartments or buckets based on when you'll need the money. That's how you're going to assign your money to certain places. First bucket is your emergency savings. Zero to six months. This is your rainy day reserve. In the event that you lose your job, you have a surprise medical bill, home, car repairs. This does not belong anywhere risky, preferably a high yield savings account. You can still find high yield savings accounts. Rates are around 4 1/2 5%. If the Fed cuts rates in September Those returns may shrink. So if you're not into that, another place you could put your money that is for the short term is in a short term CD like a 6 month CD. That is only if you don't anticipate needing this cash for the next six months. So that's something you have to determine. This is savings that can cover your essential expenses. Not all of the extras, but just the things that you have to pay because they are required. Your housing payments, your food bill, your gas bill, your utilities, your energy, your water, all of that stuff. Not your eating out budget, not your clothing budget. Bucket number two, short to midterm goals. We're talking one to five years. This again is not money that you really want to risk. But if you do want to set aside money for a down payment on a home, tuition for college, a new car or whatever else that requires some savings, but you don't need it for the next few years, stay conservative. You can look at treasury bills, CDs, again, they go up to five years, or a short term bond fund for three to five years. The key here is that again, you're not risking this money. Because the rationale behind this is that we tend to see recessions in a cyclical pattern. Although we haven't had one since 2020 and that was just a one one off, that was just a short term recession because we then got the stimulus. But about every six to seven years there is a recession, historically in the US market, in the US economy. So with that in mind, if we have a recession, we think we might be in one right now. But let's just be hypothetical. Let's say you start investing today and in three years there's a recession that, that could really impact the returns on your investments. It may take a couple of years for the market to get back on its feet and you're taking that money out in year five, you may be taking it out at a loss. And then the third bucket is for long term investments. Think retirement. Or if your kids are really young and you've got college in the next 15 years, then you're looking at a diversified portfolio. Low cost index funds like we always talk about on this show that track the broad market. 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All right. Lucia wants to know how to design your portfolio and specifically, how much should you be invested in stocks versus bonds in your 30s? I'm going to get into the asset allocation throughout the decades here thanks to this question. It's a good question. I've come across this rule of thumb over the years in my work and it's adjusted over the years too. Even this rule of thumb, I think as we're living longer. But it started as a rule of thumb where you take the number 100 and you subtract your age and that number that you're left with, the percentage of that is the percentage of your portfolio that should be allocated to stocks. Now we're living longer. So many people, and I myself included, use 110 and subtract your age and then that is the number you allocate to stocks. So for Lucia, who's 35, 110 minus 35 is 75. So 75% stocks, that's called the age based rule. Then the remaining percentage, 25% for Lucia, would be allocated to bonds. But Capital B, this is just a general rule of thumb, right. It's important that we look at this as just a guideline. It's not okay for everybody. You want to factor in your risk tolerance, your investment goals, your time horizon, your personal financial situation. All of this needs to be taken into consideration when determining your portfolio's asset allocations. I know people who are in their 50s, but they don't have dependence and they're super healthy and they're a hundred percent in the stock market. They're also extremely risk tolerant. I don't think if I'm 50 and I don't have kids. I'm doing that because my risk tolerance just isn't where that person's risk tolerance is. So to some extent, this is an extremely personal decision. It would be helpful if you wanted to talk to a financial advisor on this piece of your investment strategy. I don't think necessarily working with an advisor to pick your stocks or pick your bonds makes that much sense these days, especially with all of the automated platforms that we have. But talking to a human who has experience and can elaborate on stock charts for you and show you patterns and to give you that reassurance that you need to maybe take your portfolio to a higher stock allocation, I think that could be worth it. And then the other thing is that you're 35 and as you get older, you want to adjust this allocation. A lot of the automated platforms, they don't do this for us. They will auto rebalance, which means that in any given day or month, however often they auto rebalance when your portfolio goes off kilter. So if you set it for say 75% stocks and 25% bonds, but then because of the swings in the market now you're like 80% stocks and 20% bonds, it will reallocate to get back to that initial allocation desire. But it's not going to adjust because it's, oh, now Lucia's 45. So we need to be thoughtful of that. That's something that you need to be on top of. Johnny wants resources for helping kids learn about money and investing. I actually posted something to the effect of how we never learned about money growing up in school. At least I didn't. Did you now? I think more schools are making this mandatory. Public schools. At least it's becoming state issued, but we have a ways to go. And Anyway, in the 80s and the 90s, this was definitely not part of the curriculum. And I joked on Instagram that while I wanted to learn something, anything about money as a kid growing up, I really did. Instead, I was taught how to square dance. And it's a joke, but honestly, I know how to square dance, okay? And a follower of mine took issue with this and said, farnoosh, it is not the responsibility of schools or teachers to teach kids about money. Parents should do this. And my thinking is it takes a village, okay? Why don't we prioritize financial education in our country? Period. Question mark. Why can't schools and families be on the same page about this? And of course parents, caregivers can and should play a role. Johnny. And our audience wants resources, but I Think we need all the help we can get. It just, I think, speaks to the prioritization in our schools. How can we think that learning about money and budgeting and investing and earning and saving is not worth a child's mind? I get that not all teachers are equipped to teach this, so bring in other people who can teach it. It's not going to be maybe a teacher's full time job. It can be a seminar, it can be a field trip. We're not talking about rehauling curricula. We're just saying let's sprinkle this in so kids don't start college or the real world. Completely blind to the financial world. Now for helping kids, specifically for Johnny, I'm not sure how old his kids are. I think for kindergarten till about third grade, I would always recommend this tool called the Money Savvy Piggy Bank. It's a piggy bank that has four slots. Save, Spend, Donate and invest. It was the first to offer this type of piggy bank. Now I think there are iterations of it. Different companies are creating their own sort of style of this piggy bank. But Money Savvy Generation was the first to come out with it, won a bunch of awards. And I like it because it demonstrates that money has many use cases. You can save, you can spend, you can donate, and you can invest. So it starts those conversations early and doesn't let kids think that the only way to use money is to go to Target to spend it. Then I think there are some great books again for this age group and then maybe a little bit older. The Lemonade War is a great book. I remember seeing it in bookstores years ago and we might even have it in our house. It's the story of these siblings, Evan actually, and Jesse. Evan's the name of my son. And they have a lemonade stand competition over the summer. They compete to see who can make the most money. And they learn about entrepreneurship and teamwork and all that good stuff. And honestly, lemonade stands in real life are a great way to teach kids how to count money, how to sell, how to be entrepreneurial. My daughter is a Girl Scout right now and she loved selling those cookies. She loved counting the money. She loved taking the money from the customers and giving them their change back. She's seven and I think, wow, what a worthwhile experience. There's also another book called the Ant and the Grasshopper. This was published probably about 10 years ago, and it's the modern retelling of the classic fable that teaches kids about the importance of saving and planning for the future. And beyond actual tools, there's also the importance of talking to your kids about money and not necessarily sitting them down and having lectures on compound interest. I don't think that's fun, and I actually think that can backfire. But I think that teaching your kids through your own demonstration and modeling, that talking about money and budgeting and being a conscious consumer is cool. And invite them into those conversations when it feels appropriate. Having money conversations with your partner in front of your kids, as long as they're not too sensitive, I think are healthy things like, we need to budget for next month's whatever for camp. I think it's helpful for kids to witness this. Why? Because we all arrived in our financial lives probably not knowing a lot. We somehow made it through. But what I think separates those who become really successful and those who don't, one of the things is that maybe they grew up with a fluency around money or an understanding at least of like, money exists and it's important and I should be curious about it. So to the extent Johnny and everyone else who has a kid or is taking care of a kid, to the extent that you can foster dialogue, conversation and curiosity about money, encouraging them to go and learn about it and letting them know that this is important, like money is an important tool, it's not the most important tool, but it's an important tool and we have to be mindful of it. As they get older, just having that baseline understanding of money and not being afraid to talk about it, not feeling like it's taboo, they are going to be miles ahead of their peers because these are the people that end up becoming the most resourceful. When you are curious, you ask questions, you get answers. And then Brooke wants to know, is there a place where I can get idiot proof Instructions for a backdoor Roth ira? Yes, it's called the Sew Money podcast, Brooke. And I'm going to tell you how to do it. It's good stuff, because we know the Roth IRA is the holy grail of financial investments, financial tools where your contributions and those earnings can be withdrawn in retirement, tax free. First of all, why do people want to do backdoor Roth IRAs? Because after a certain income, you no longer become eligible to invest in a Roth ira. But there's this irs. I don't know if it's like a loophole. It's just a little bit of a maneuver, a strategy to essentially open a Roth ira, even though you technically don't qualify for one because of your income. So it's the back door and in to the Roth ira. Five steps. Step number one is you contribute to a traditional ira. If you don't already have a traditional ira, you open one, you contribute the money and there's generally no income limits, right, for contributing to a traditional ira. So this is why we start there, then you convert it. Step number two, you convert the traditional IRA to a Roth ira. So once the money is in the traditional ira, you want to start the conversion. You can do this with the help from your IRA provider or the financial institution where you have this ira. Step number three, calculate the possible taxes so you don't get hit with a surprise. Traditional IRA contributions are typically made with pre tax dollars. You'll usually owe taxes on the amount converted to the Roth unless. This is what I recommend you do unless you convert immediately. So don't sit on the conversion. Do it on the same day if you can. The converted amount will be added to your taxable income for the year of conversion. Again, that being said, you can minimize the taxes owed by converting immediately. Again, talk to the IRA provider about helping you facilitate this. Do this quickly. Let them know, I don't want to have a tax event. You'll probably still have to fill out a form to just let the IRS know you did this. And that's called form 8606. And that's step number four is tell the IRS when you're filing your taxes, report the Roth conversion with Form 8606. It's going to basically track the basis in your IRA accounts and make sure you don't get taxed twice on the same money. And then the fifth step is don't just take my word for it, okay? Consult with a professional if you're still nervous. Tax laws and retirement planning are complex and so if you want to talk to a certified public accountant, a financial advisor, or both, just to make sure you're not going to make an unintentional error worth your time. Okay, next question. Also from Instagram. How do you manage credit cards with high balances? Okay. If you're juggling multiple credit cards, consider first if you have good credit, a balance transfer offer with a 0% APR. Just make sure you read the fine print on fees and make sure that you do pay it off before the promotional interest rate expires. That zero percent won't be forever. You can transfer some of that credit card debt that has a high interest rate over to this 0% APR card. Depending on how much debt you have, you may Be limited as far as how much you can transfer. A lot of these cards cap out at 10k, 12k. So if you're looking at more than that, then it may not solve all of your problems. But this at least will alleviate some of the interest rate burden that you're suffering through right now. With the remaining cards that have interest rates, you want to start with the card with the highest interest rate. This is technically your most expensive debt. And tackling that with the highest priority, which means that while you're paying the minimums on everything, this card gets extra attention. It gets an additional principal payment or two or three principal payments to knock down that balance, shrink your interest burden and get yourself out of that debt asap. The other strategy that people love, and this offers more of a psychological boost, is to identify the card with the lowest balance. Don't care about the interest rate, it's just a low balance and I'm going to pay that off in the next pay cycle and it's going to feel great because it's one less entire card on my to do list to knock out. And from there maybe you go to the system where you're tackling the highest rate card as a priority, but maybe to begin, just get yourself a little bit more excited, motivated, rewarded. Identify the card that has the lowest balance and get that off your plate as soon as possible. You can also call your credit card company and ask for a lower rate. And sometimes, believe it or not, they say, sure. And finally, where's the best place Farnoosh to go for help with medical bills? So I borrowed this question. I was on the Kelly Ripa podcast this week. She has a fantastic podcast called let's Talk off Camera. We actually did a whole hour live on Sirius XM and then that live recording is now available on her podcast. But one listener called in with some medical bill debt question. And one thing that I got stumped on was who can I talk to who could be a medical advocate for me? Because I recommended medical advocates, I just didn't know them off the top of my head. Medical advocates are essentially professionals who review your bills. They spot errors which are shockingly common, and they can help negotiate on your behalf. And you can find them through organizations like the alliance of Professional Health Advocates. Or you can even search via trusted directories like Health Advocate or nah A C. Health advocates sometimes charge a flat fee, others a percentage of what they save you. And if you're low income, you can check with your local hospital's financial aid or billing department. Many have patient advocates on staff who can help you access assistance or payment plans. All right, and that's it for this July 4th of AskFarnouche. A little fire, a little financial clarity, hopefully a big reminder that your money and your voice matter more than ever. Be safe out there, be strong and I'll see you back here on Monday. I hope your weekend is so money.

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