← So Money with Farnoosh Torabi
So Money with Farnoosh Torabi
1878: Ask Farnoosh: Should I Sell My House? How to Build Credit Without Credit Cards?
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Capital One Bank Guy
Banking with Capital One helps you keep more money in your wallet with no fees or minimums on checking accounts and no overdraft fees. Just ask the Capital One Bank Guy. It's pretty much all he talks about in a good way. He'd also tell you that this podcast is his favorite podcast too. Ah, really? Thanks Capital One Bank Guy. What's in your wallet? Term supply See capitalone.com bank Capital One NA member FDIC Race the rudders. Raise the sails. Raise the sails.
- [00:31]
Farnoosh Tarabi
Captain, an unidentified ship is approaching.
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Capital One Bank Guy
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Farnoosh Tarabi
So money episode 1878 ask Farnoosh you're listening to so Money with award winning money guru Farnoosh Tarabi. Each day get a 30 minute dose.
- [02:09]
Capital One Bank Guy
Of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh herself.
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Farnoosh Tarabi
Looking for ways to save on gas.
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Capital One Bank Guy
Or double your double coupons?
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Farnoosh Tarabi
Sorry, you're in the wrong place.
- [02:23]
Capital One Bank Guy
Seeking profound ways to live a richer, happier life.
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Farnoosh Tarabi
Welcome to SO money. Welcome back to SEW Money everybody. I'm Farnoosh tarabi. It's Friday, September 12th. Ask Farnoosh. Friday I'll be answering your biggest money questions and we're gonna share what's happening in the financial world. There's been a lot going on in my personal media world. This week I was on the WNYC show, all of it talking about how couples can navigate unequal incomes. We had some pretty interesting callers. I'm gonna share some of my advice that I gave during that segment later on in the show. It's a top I love because, you know, I wrote a book about when she makes more. I'm well versed in how to navigate money when you and your partner make different amounts. I also gave some big sisterly advice on how to guide your younger sibling through a questionable money decision on the Cut.com, new York Magazine, and my hyper local podcast, the Montclair Pod. Well, we broke some significant news this week, some not great news. Our school district is in a lot of debt, a lot more than originally thought. Superintendent Ruth B. Turner came on the show and she shared the update with us very candidly. And the next thing we knew, New York's PIX11 TV was reaching out to cover the story and interview us. So they were in our house like earlier this week. And so I joked that, like, our news made the news. I have to say it's so interesting to be launching a new podcast that has nothing to do with thought leadership. Like, this podcast is very different from the Montclair Pod, but I am evidence that there is room for new podcasts in this world. Even with so much to choose from, the key is to figure out how to fill a void. I encourage you if you want to start a local podcast about your town, your city, or even just your neighborhood, not only are you providing a huge civic benefit to your neighbors, but it can also be commercially successful. We are engaging with brands, we are are working with sponsors. People are reaching out to us, even though we don't have a very big audience. I mean, so money is, I mean, it pales in comparison to my audience here on SO Money. But the key is that we've really identified who's listening. And if you're a sponsor and you want to get in front of those people, then you want to work with us. Here's what's ahead on the show. So we're going to talk about how couples navigate unequal incomes. We're also going to talk about the big headlines this week, from inflation to debt, and why Americans are spending several hours a day thinking about money. Questions from the mailbag include a couple in their early 40s selling their multimillion dollar home to live mortgage free. Should they? And how to build credit. If you don't really want to open up a credit card, how do you do that? Before we dive in, I want to remind everyone to go back and listen to this week's episodes. If you missed any of them. On Monday, a fresh conversation about, well, what if there's Crypto in your 401k? Yeah, there are some new laws that could make that a reality. But you are still in control of your retirement accounts. The onus is now on us to make sure that nothing shady gets into our portfolios. Tess Wearsmith, an accredited financial counselor, investing educator, came on the show. She's the founder of wealth with Tess, and she broke down the intimidating world of investing into simple, actionable steps that can help us, especially right now with the last few months of the year, kind of finish strong and create a bigger plan for long term wealth. She walked us through some of those recent headlines about crypto and other alternative assets in our 401ks. What's that gonna mean? And how to make sure that your account is working for you, that it's optimized for fees and roi. Then on Wednesday, we talked about how to not be financially tacky. You know, and as I was coming up with the title for that episode, I thought, I don't think anyone in my audience is financially tacky, but maybe you know someone who is. And you'll want to listen to this episode just to feel validated. Daniel Post Senning joined us for that episode. He's the great, great grandson of Emily Post and co president of the Emily Post Institute. So we got a masterclass in modern financial etiquette. And it was a replay from the summer, but I loved it so much I wanted to air it again. All right, next up, money news of the week. Let's turn to those headlines that are impacting our wallets. First, inflation is creeping back up. Consumer prices rose 2.9% in August. That's up from July. Tariffs are a major culprit. Businesses are passing along those higher costs to us and households now, in the short term at least, expect inflation to rise faster. And even though long term expectations remain stable, consumers are also nervous about their jobs. The New York Fed reported this week that confidence in finding work has fallen to a record low. I believe that. I know many people who lost their jobs last fall, big jobs, and have not been able to find anything interesting. Since they've been interviewing, they've been not hearing back or they just don't see a lot of opportunities right now. More people expect unemployment to climb. And even though spending expectations have not shifted dramatically, that's a problem. Look, if you're worried about losing your job right now or one of you losing your job in your household, now is the time to create a plan. Now is the time to start cutting back on areas of spend that aren't important to you or won't be important to you in the event that you'll be bringing in less money. This hurts. Parents are going into debt to cover the basics. They're borrowing money just to pay for their kids needs. A new survey shows 6 in 10 parents, 60% have taken out loans and have taken on more credit card debt to pay for their kids needs. I'm not sure how old these kids are. Are they the kids that are taking 16 different electives and sports and tutors and the latest backpack and. Or is it kids who have graduated from college and, and our boomeranging back home? Because we know that's happening in droves. It's probably all of the above. It's leading to financial stress and burnout. Do we need a survey for that? That's kind of obvious, but I'm not happy about this. I think that parenting, affording, childhood has gotten a lot out of hand. My son is in sixth grade, he wants an iPhone for a lot of reasons, we're not getting him one. But the cost is also ridiculous. Like I'm really going to hand this child a four figure device made of glass to take to school. Oh, and here's another funny story. A friend of ours, you know, these labubus that thankfully my daughter, who's 8, is not into, but in some social circles with young girls and young boys, these are very popular. And they can go for as high as $800. They're like the beanie babies I think when I was growing up. But they're uglier. And this story came up amongst our friend group that, you know, one mom was saying that she had one of her daughter's friends over their house and her labubu, you know, went missing or something. And they don't, they can't find it. And who knows if it was even lost at their house. But the parent of that child who lost the Labu boo, which was $800, was like, you need to pay for the labubu. And the parents are fighting over this. I mean, I think it's so ridiculous. I'd be like, don't get your daughter an $800 toy and have her leave the house with it. It's not my responsibility. And then the question became, well, how can people even afford it? And I'm like, you know, maybe they're not, maybe they're putting it on their credit cards as this survey suggests. And finally money is on everyone's mind. A study found that the average American spends nearly four hours a day thinking about money. Do you think about money four hours a day? I mean, this show is what, 40 minutes, 30 minutes? So that might be part of it. I hope it's a lot of good stuff that they're thinking about. And the survey found that while some of that thought is stressful, it's also motivating thoughts. It's people who are budgeting, who are listening to maybe money podcasts, they're trying to improve their credit, they're trying to focus on paying down debt. So that's good. You know, I wish it wasn't four hours. Maybe it's just a phase. And we all, we just talked about how people are worried about jobs and creation. Inflation is creeping back up. So naturally money is on a lot of people's minds. Let's stick together during these times, okay? Now, this week I went on wnyc, one of my favorite shows, all of it with Alison Stewart. Alison sadly wasn't there, but the fantastic David first was filling in as anchor and we talked about income disparities in relationships. So do you live with someone? Are you in a relationship where you and your partner make different levels of money, maybe different tax brackets? What do you do? How do you manage the money so that you both feel like, you know, somewhat equal financial players in the relationship? So here's my advice. Number one, money does not equal more power. Although we say that in our society often money is power. Money is power. I think that holds true in business circles when it comes to deals and negotiations. But one partner earning more doesn't mean they get the louder voice or the final say in the relationship. Financial decisions should come from a place of respect and equality. And that may seem obvious, but this is an ingrained philosophy mindset. We've been raised and conditioned to believe that money is power. If I make more money, my job is more important, my role in this relationship is more important because money is important. And yes, money is important. No one is saying money is not important, but it is not the only way to be a contributor, an important contributor in a relationship. Two, if you are the caregiver in the home, if you're the primary caregiver, if you work part time and you're shouldering a lot of the household responsibilities, or if you're, or if the household responsibilities entirely fall on you, that's not just the doing of that job, right? It's also the mental load. And often the lower earning partner takes on more of the childcare or home Responsibilities. But don't let this be about earning your keep. A lot of times people do this stuff around the house, and they fall into these roles because they feel guilty. Well, I'm not making more or anything, so I have to do this to sort of be validated in this relationship. If that person is you, I want you to know that your contributions as a caregiver, as the primary household manager, there is economic value in that. Outsourcing, childcare or house management will cost thousands of dollars every month. You need to be prot. This isn't just something that you're doing to earn your keep. Don't do it with guilt. Do it with empowerment and with focus and an eye on your future. So when you're doing this and you're bringing economic value into the household, are you being compensated? Do you have access to savings? Do you have access to a retirement account through possibly a spousal ira? Do you have a credit card in your own name so that you can build credit? That's fair. And speaking of fairness, it's important for couples, especially where one person makes more or less, that they talk about what would feel fair to each of them, and that will look different for every couple. It may mean splitting costs down the middle, but that's hard when you make different amounts of money. So maybe it's about contributing percentages of each of your incomes to a joint account from where you buy and afford the things that you both want to contribute to. The important thing is that both partners feel like equal stakeholders. So what does fairness mean to us? How do we level the financial playing field? What are the expenses that are going to be joint versus individual? And I do like the idea of having three accounts in all relationships, but especially where there is disparate income for each person to feel like they have some financial autonomy, even if they're making less than the other person, because that can carry this feeling of feeling less than. I mean, imagine you're making less than your partner, and all the money's going into one pot. And one day you're like, I want to go buy a gift for my parents. I want to go to the spa. I want to donate my money to a cause I care about. Now I have to have a conversation with my partner about it. And I don't make as much as my partner, and maybe they don't have the same values around what I want to spend on in these areas. And so now it's like a whole back and forth, and I might just give in. I don't want you to give in. I want you to feel good about your spending choices and I want you to feel like you have some financial Runway that's just for you. So to make that functionally possible, have your own bank account. I'll give you another piece of advice. Make sure that each person's money in the relationship has meaning. Just because you make less doesn't mean that your money isn't as valuable as the other person's money. Every dollar counts. And if your income is at a level where, you know, maybe it can't cover all the big expenses or even half of them with your partner every month, but saved it can do really meaningful things, then maybe your primary money function in the relationship is to save for big things down the road like the annual vacations, the college savings accounts for your kids. This isn't about equality being 50 50, but it's about creating a system where both people feel good, equally good about it. They feel equally valued. That's the balance that you're seeking. You know those nights when your mind just won't quiet down? Your to do list keeps running. You're thinking about tomorrow's early alarm or juggling the endless schedules. That's when the right sheets really matter. With Bolen Branch you can finally unwind. Their signature sheets have a softness so extraordinary that your whole body relaxes into sleep. 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Capital One Bank Guy
Banking with capital One helps you keep more money in your wallet with no fees or minimums on checking accounts and no overdraft. Fees fees? Just ask the Capital One bank guy. It's pretty much all he talks about in a good way. He'd also tell you that this podcast is his favorite podcast too. Ah really? Thanks Capital One Bank Guy what's in your wallet? Term supply See CapitalOne.com Bank Capital One NA Member FDIC.
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Farnoosh Tarabi
All right, now let's get to your questions. This is from Ashley who emailed me with an incredible story. She and her husband, both in their early 40s, have built a net worth close to $3 million. They've saved 1.6 million in investments, plus $260,000 earmarked for college. Their home is worth two to two and a half million. They have a three and a quarter percent mortgage rate, and they could walk away with 1.2 to 1.5 million if they sold. They're wondering, should we sell the home, pay cash for our next house, and live mortgage free? They want to slow down while their kids are still at home. They need about $6,000 a month in take home pay to sustain their lifestyle. All right, Ashley, congratulations. Your story is an absolute model of financial discipline, intentionality. I couldn't help but feel a little bit in your shoes with some of the situation that you're in, being in your 40s with their kids. And I have a 3% mortgage rate. And if I sold and walked away from this house, yeah, we probably have seven figures in our bank account. But then what for us, you know, we've done the math. We thought about it. We want to stay in the neighborhood. And I don't think that if we sold, we could find and we don't need a comparable home, but we can't really find anything that would suit us, that would allow us to stay in this town and feel as though it was a financially better idea. So a few things for you to consider. One is your mortgage rate. At 3.25%, you're holding onto one of the best debt deals of the last century. It's essentially good debt keeping. It allows your money to keep compounding in the stock market, which historically returns more than 3.25% now. Second thing to consider is liquidity. If you sell your home and you're going to extract seven figures from the sale, you're going to pay cash for the next home, which locks up a lot of your money into that next home. Keeping a mortgage preserves some level of flexibility. What I'm hearing from you is that you're really craving freedom. You want more time with your kids. You want less pressure to earn aggressively. And that doesn't necessarily require being mortgage free. It may just be as simple as adjusting your work hours. It may mean transitioning your careers or setting firmer boundaries with your employers. Maybe it means scaling back other expenses. Run the numbers both ways. If you sell and buy mortgage free, your monthly costs go down, but your investments might shrink. Your liquidity might be less, might be more vulnerable. If you stay your Cash keeps working in the market and the house continues to appreciate hopefully. And you have a really strong savings habit, so you might not need to touch that equity until retirement. My take is this. Unless the stress of the mortgage becomes unbearable, I would lean toward keeping it and letting your investments grow. And this is important. If being mortgage free would give you enormous peace of mind and let you enjoy these next 10 years more fully, more peacefully, then there is something to be said about emotional roi. And I will say that that sometimes outweighs the math. Next question is from McCain and this is about credit. Can you build credit without credit cards? She asks. Well, credit cards are definitely the fastest route to building credit. They're not the only way, however. And so I'm going to offer some alternatives. All of this stuff gets factored into your credit score, your FICO credit score. One is that you could take out a car loan or if you have a student loan, if you're already paying off any sort of loan, a mortgage, a car loan, a student loan. All of that does go towards your credit report and helps you to build credit. You can become an authorized user on someone else's credit card. It could be a trusted family member, a spouse who has good credit to add you to their card. You don't even need to use it, but that person's payment history does benefit you. Both of your sort of payment activity gets reported on each of your credit reports. So this is why it's important that you only do this with someone that you trust that you know is credit worthy and that will help you to build credit. There are also ways to report alternative payments, have that be reflected on your credit report and build credit. So there are services like Experian Boost that let you add rent, utilities and streaming payments, for example, to your credit file. Now, these aren't always recognized by all the lenders, but they help. There's also what's called a secured credit card. Now, I know you don't want to do any sort of plastic, but if you're hesitant about the traditional cards in particular, there is an alternative that's called a secured card and it's backed by your own money money, your own personal deposit. It works like a debit card, but it is reported to the credit bureaus and it does ultimately impact your credit score. A lot of people will use a secure card when they don't have any credit. And it's kind of like a credit card with training wheels. You use it successfully for about a year where you again, the collateral is your, is your deposit you draw down on the card, you pay it back with your own money, keep the balance positive, and after a year of good behavior, good activity, you could be promoted to a real credit card. And again, this is something that people who don't have credit will access first. People who are new to this country might use a secured card to start establishing some credit so that they can qualify for the the meteor types of credit. But I'm curious why you don't want to use a credit card. I can guess, maybe. Why Are you worried you're going to run up a tab? You're not going to be able to pay it back? If you are, I would just say this. You could still open up a credit card and attach a few automatic bills to it and have them automatically reconciled every month via a personal checking account. So you open up a credit card, you attach a utility bill to it, maybe a streaming service, and when those bills come due every month, you pay for it out of your checking account to that credit card. And you never even have to put this in your wallet. You never have to attach it to Amazon or anything. It's just there to stay active, really and stay in good standing. And that eventually can help you build some credit. And that's our episode this Friday, everybody. Thanks for tuning in. And as a reminder, on September 30th, I'm teaching a live investing workshop. Seats are Limited. It's 90 minutes. Everyone who registers will get their recording. So if you can't join live, you can watch it later on your own time. I'll be talking about how I invest my portfolio, how I've been building it over the decades, where I invest my strategies. There's no crypto, nothing really alternative, just straightforward advice that you can learn in an afternoon and be on your way. Investing does not have to be hard. It's not complicated. People are paying thousands of dollars for investing courses and trading classes. I'm very worried for them. Just take my class. I offer it once a year. I answer your questions live. Go to somoneyworkshop.com to learn more and register. Thanks for tuning in and I hope your weekend is so money. When you're a forward thinker, you don't just bring your A game, you bring your AI game. Workday is the AI platform that transforms the way you manage your people, money and agents so you can transform tomorrow Workday, moving business forever forward.
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Capital One Bank Guy
Banking with Capital One helps you keep more money in your wallet with no fees or minimums on checking accounts and no overdraft fees. Just ask the Capital One Bank Guy. It's pretty much all he talks about in a good way. He'd also tell you that this podcast is his favorite podcast too. Ah, really? Thanks. Capital One Bank Guy what's in your wallet? Terms apply. See CapitalOne.com Bank Capital One NA Member FDIC.