← So Money with Farnoosh Torabi
So Money with Farnoosh Torabi
1965: Ask Farnoosh: Smart Moves After Debt, Student Loans, How to Invest Through the Noise
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- [00:00]
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Farnoosh Torabi
Episode 1965 Ask Farnoosh
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So Money Podcast Intro Announcer
you're listening to so Money with award winning money guru Farnoosh Torabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers, and from Farnoosh herself, looking for ways to save on gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to so Money.
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Farnoosh Torabi
Welcome to so Money, everybody. Friday, April 3rd. Good Friday. Hope you're all having a wonderful end to your week. This is Ask for News Friday, and it's spring break for us. So I'm taking a little bit of a pause this week, spending some time offline with my family. But I don't, of course, want to leave you hanging today. So we're still going to dive into a lot of your questions from the mailbag though, from earlier this year back back in January. But let me tell you, they're just as relevant now as they were a few months ago. We're gonna be talking about navigating student loans, family financial dynamics, what to do with extra cash once debt is behind you and should you downgrade your life to upgrade your finances. Before we get into it, a quick look at what you might have missed this week on SO Money. All fresh episodes. On Monday, we sat down with Chae Wong, serial entrepreneur and founder of a new company called Pelgo, which is help everyday workers reskill and stay sane in the AI economy. So we talked about what it means to reskill right now. What are the jobs that we don't even know about that his team predicts will be here in the future. And then on Wednesday, we learned about the high five banking method, a different take on budgeting, a practical system to organize your money in a way that actually works in real life. And our guest was Sireniz Pierce. Also, quick announcement. Registration is officially open for my annual Book to Brand workshop A Lot live event in New York City, an immersive in person experience. It's happening October 9th in New York. We're bringing together top publishers, top agents and authors to help all of my audience who want to learn how to write a nonfiction book or a memoir, help you build a platform that gets attention, gets that book proposal out the door and connected with the right agent. Many of our attendees have gotten fantastic results, have books on the shelves. Early bird tickets are now available at. I'll put that link in our show notes. All right, now for the mailbag. First up, Cherish wants to know. My parents took out parent plus loans for my degree with the agreement that I would pay them myself when the time came. I also have student loans in my own name. Now my husband and I are looking to buy a house, but I'm not sure how to explain these monthly transfers to my parents to a lending agent when we apply for a mortgage. In total, the transfers to my parents are about 5% of our take home income. So maybe it's not a huge deal either way. All right, let me just start with some reassuring news. Cherish. You're not an outlier here. You're not a red flag. You're not doing anything weird or irresponsible. Lenders see this a lot, especially with millennials where parents took on Parent plus loans when tuition costs exploded with a very clear understanding that their college going child would ultimately them back. Now this is important to understand. Here's where people get tripped up. What lenders care most about is who legally, legally being the operative word, owns the debt. Parent plus loans belong to the parents. They are legally your parents responsibility even if the child you is the one making the payments every single month. From a lender's perspective, that distinction is important. If a loan is not in your name, it is not technically your debt. So when an underwriter is looking at your financial picture, they are looking at the debts that are legally tied to you. They're also of course looking at your monthly obligations. And if this is a monthly obligation, that's going to be factored in. But it's not as severe as oh my God, she's got this debt, it's tied to this bank and it's got her name on it. And then they also look at the big picture like how does this all stack up against your income? Monthly transfers to parents usually don't fall into the category of I have credit card debt or I have a loan with a bank. They're often viewed more like family support or a recurring personal expense. It's not formal debt, again, like a car loan or credit card balance in your name. Now that being said, it doesn't mean that lenders ignore it entirely. Which brings us to the next key point. Your qualification for a mortgage really boils down to your debt to income ratio. That is the big metric that lenders care about. How much of your gross monthly income is already spoken for by your required debt payments. And in this case you say that these payments to her parents are about 5% of your take home pay. That's really modest. If everything looks solid, like you have good credit, your income is stable, you have savings and all your other debts are reasonable, you and your partner. This alone is very unlikely to derail a mortgage application and it won't even probably hurt hurt your chances of getting a really good Interest rate or closing quickly. I think in situations like this, people often imagine the worst case scenario. I remember when I was applying for a mortgage in 2020, I was in the midst of a lawsuit with a company that was involving another business that I had started. And we were going back and forth with this lawsuit and I was really worried about this being basically a dead end for me for applying for a mortgage and cause the lawsuit wasn't over a lot of money. My mortgage broker told me not to worry and that's what I want to end on. If you want to talk to a mortgage broker before you apply, that might be very helpful. Mortgage brokers will help you find a good lender, but also they're very experienced in knowing how the underwriting process goes. And they can be your advocate and your communicator, your go between. As the underwriter has questions about your paperwork and your financial history, they can inform them in a way that they would understand and calm the waters. That was very helpful to us as we were applying for a mortgage in 2020. Not just because of this lawsuit that I was involved in, by the way. We just ended up abandoning it. It was Covid. We had a mediator and the mediator was like, I think y' all should just go your separate ways. Which we did. And so it ended up not being a big deal at all. But in that moment I was having like panic attacks. But my mortgage lender was able to create the narrative essentially around it, the honest narrative that would not freak out the underwriter in a way where if I was explaining it, I might say the wrong things or say things not the best way and ruin my chances like shoot myself in the foot. I don't think that what you're going through is as cautionary or nerve wracking as like me, a potential lawsuit to communicate to a mortgage underwriter. But since we were on the topic, I thought I'd bring it up. All this to say, I don't think you have anything to worry about. Okay, thank you so much for listening, Cherish and keep the questions coming. All right, another question about student loans. When the student loans are finally gone. Now what is the question? Our friend in the audience, Marissa, wants to know. I'm about to pay off the last of my student loans. So first of all, congratulations. Let's give Marissa a huge round of applause. That is a big deal. Now what this will mean in her financial life. It's going to free up about $700 a month. And Marissa wants to be really intentional about where that Money goes. Here's some background. She's 34, she's married with one kid. She works in education. Her state offers a pension plan which she does pay into. And she expects to be able to retire around the age of 60. A little bit before 60 and she's expecting to take home about 75% of the salary from her highest earning year, which is great. She also maxes out a Roth IRA every year. So now she's wondering where should that $700 go? I should also mention her state pension plan does offer a 401k. No employer match. They also offer a 457 plan. She's also asking me whether it's smart to invest in a taxable brokerage or whether there's something else that she should consider. All right, Christie, let me just start off again by congratulating you. This is quite the finish line for these student loans. And I love that you're trying to be proactive and be strategic and intentional with this 700 dol because we could easily eat that up every month and not even know where it went. And I also want to acknowledge that at your age, you are far from behind. You have a solid pension, you have a max out Roth ira, you've got a clear retirement timeline. This is about optimizing. How can I put this $700 in a place where I can refine my financial plan? Optimize. What I would say is if you do decide that you want to play some catch up with your retirement and you want to supplement that, I would say first let's look at the tax advantaged accounts that you have at your disposal. You mentioned your employer offers a governmental 457 plan. I think that's often the sleeper hit. A 457 plan functions similar to a 401k. It's available to teachers, public sector workers. I like it because the contributions are pre tax, which lowers your taxable income. Now kind of like a 401k. But the big advantage is flexibility. With a governmental 457, once you separate from service, meaning you leave that job, you can access that money without the early withdrawal penalty, even if you're under the age of 59 and a half. So you still pay income tax, but there's no penalty. And that matters a lot if you're planning to retire. Like you said around 58. If you want optionality, the other route you might want to consider is that 401k, there's no match. So I don't love it. But it is a great tax advantaged account again with some low cost investments inside solid option. If I had to rank them though, I would say 457 first. Then look at the 401k you asked about the brokerage account. That can make sense, especially if you want flexibility for your goals before retirement. But if you really want this $700 to go towards retirement, I would not put that in a taxable account, at least not as my first stop. Use your tax advantage space first. Once that's maximized, then you can layer in taxable investing. And then finally I'll just say treat that extra 700 bucks the same way you are managing your student loan payment, which is that you invest automatically, consistently. And the good news now is just that this money is going towards your future freedom consistently. And again, congratulations. Next week, actually we're talking about the 529 plan for those listening who have young ones that they want to get college ready and financially ready for college. 529 all the things you want to know. Some of the new news around the 529the myths. We have a great guest on that for you on Monday. And finally, our last question. I actually did a workshop this week for entrepreneurs to teach them about investing. It was for the Entrepreneurs Organization Global Network of Entrepreneurs. And someone in the Q and A asked me a question that I wanted to bring to the show because I thought it was really relevant. I hear this constantly. They asked, given all the uncertainty in the markets, should I divest from the US Investments in my portfolio and focus more on international stocks and bonds? And my answer was no, do not divest, but do diversify. And those are two very different things. Divesting from the US because you're nervous about headlines is essentially a form of market timing which last I checked, nobody's really good at doing that. It's a bet that you know what's going to underperform and when. I mean, who knows that historically it's not a winning strategy. Diversifying, on the other hand, is about risk management. It's not about having a crystal ball. It's about admitting, look, I don't know how the market's going to perform next. So I'm not going to put all of my eggs in one basket. The US is diversified. If you're invested in the S&P 500, yes, that's a very diversified index fund. Nothing against it, but you even heard one of our guests recently talk about the importance of diversifying beyond that too, because a lot of what you're seeing make up the S&P 500 now are tech stocks. Nvidia Meta Alphabet. The weight of those stocks in that index is considerably high. So you think you're like investing the S&P 500 and you have all this broad exposure. Yes. And you're very heavily invested in tech. So a good rule of thumb for all investors all the time, make sure you're diversified across sectors, geography. And so if you're just in an S&P 500 index fund and you are concerned about the volatility in the market, I wouldn't take money out of the S&P 500, but I might add to the portfolio, maybe add an international index fund. Often you can find a low cost international stock market index fund that includes a mix of developed and emerging markets. Keep your US investments just add exposure to different again economies, political systems, geographies, currencies, interest rate environments and then you can rebalance over time. I would say this is especially important for folks who are closer to retirement when your time horizon shortens, how much volatility you can stomach. If you're self employed or running a small business, tax season can get complicated fast. Between figuring out deductions, staying compliant and just keeping everything organized, it's a lot. And with so many people starting side hustles and launching their own businesses, for many this is the first time they're navigating tax season as a business owner. That's why TurboTax experts for business is such a game changer. They match you with an expert who actually understands your industry. These pros have an average of 12 years of experience and they help you save money by finding every deduction and minimizing penalties to maximize savings. 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- [17:49]
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- [18:12]
Carvana Customer
I sold my car in Carvana last Night.
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Farnoosh Torabi
Well, that's cool.
- [18:15]
Carvana Customer
No, you don't understand. It went perfectly. Real offer down to the penny. They're picking it up tomorrow. Nothing went wrong.
- [18:21]
Instacart Advertiser
So what's the problem?
- [18:23]
Carvana Customer
That is the problem. Nothing in my life goes to smoothie. I'm waiting for the catch.
- [18:26]
Instacart Advertiser
Maybe there's no catch.
- [18:27]
Carvana Customer
That's exactly what a catch would want me to think.
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Farnoosh Torabi
Wow. You need to relax.
- [18:31]
Carvana Customer
I need to knock on wood. Do we have. What is this?
- [18:33]
Farnoosh Torabi
Table wood?
- [18:34]
Instacart Advertiser
I think it's laminated.
- [18:35]
Carvana Customer
It okay? Yeah. That's good. That's close enough.
- [18:36]
Farnoosh Torabi
Car selling without a catch. Sell your car today on car pick up. These may apply
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- [19:24]
Farnoosh Torabi
So by diversifying in this way, you can make your portfolio more resilient without having to divest. And that's our show, everyone. Thanks for tuning in. Like I said, on Monday we're going to be talking about five to nine plans. If you've been thinking about saving money for your child's college education or if you have a niece, a nephew, a grandchild that you want to invest for their education. And by the way, 529s are not just for college any longer. You can also use it for K through 12 education. You can use this as a way to pay for college related expenses. Non traditional four year colleges. If you want to go to cosmetology school or go to a plumbing school or get a certification, it also counts. It can also be used for that too. The next question comes from Morgan and it's about reducing their living expenses in their lives. Her fiance. She and her fiance live in Charleston, South Carolina. Love Charleston. I was just there. Not just. I was there a few years ago for a bachelorette party. Beautiful city. And she said the rent there though has exploded in the last few years. Yeah, I can believe. And it's up 30, 40%. Morgan says we recently had the opportunity to move apartments, saving us approximately $600 a month. The new place is built in the 1970s, so it is older, and our current place was built in 2020. It's got a gym, it's got a pool. So we're working very hard to weigh the pros and cons of moving. My interest is to be more financially free. Saving $600 a month would help us save to buy a home one day could help us to invest. And that's what's drawing me to this other place. It's a hard line between bucking down before we start a family and our future and staying comfortable with what we've got. Of course, there are expenses with moving, and we'd have to pay a month of double rent. Overall savings for the first year would be about $1,000, but rent after that would be a savings of $7,000 a year. That's almost $15,000 after living there for three years. I know this is all emotional, but I'm wondering, what are your thoughts? How many chances does somebody get to reduce their living expenses in their lives when everything else seems to go up and up? We are a couple grossing over $200,000 in our late 20s, which is pretty high, considering where we live. All right, Morgan, thank you so much for your question. It's a fantastic question. I just want to start by saying something very clearly here. You have the right instincts. You're not overthinking this. You are embarking on a potential opportunity. And these don't often come along. And these don't come along too often. Especially right now, as you mentioned, cost of living is really high. They're rising faster than wages. So I'm going to help us break this down in a way that feels practical, that feels grounded, and that might help not just you, but a lot of people in the audience listening. Okay, so let's separate what we often conflate, which is lifestyle and leverage. We want to separate lifestyle from leverage and just name what this really is. This is not a question about whether you like the nicer apart more where you currently live. This is a question about whether you want leverage in your financial life right now. I was in this same place five years ago, six years ago, I had a very nice apartment in Brooklyn. I was very comfortable, three bedrooms, downtown Brooklyn, comfortable mortgage. But I had all this equity in my home. And so the question wasn't, do I want to move to a nicer home? Yeah, of course I want a nicer home. But really, the question was. And the question for me really boiled down to leverage. Do I want to be rich on paper, or do I want to actually leverage this equity? And Execute on it, do something with it, to actually advance my life. And I did. I chose the latter. I chose to cash out and move to the suburbs. For you right now, the reality is reducing fixed housing costs. And not just you, everybody listening. If you can reduce your fixed housing costs, this is one of the biggest impact financial moves, highest impact financial moves that most of us will ever have in our lives. And you are staring right now at a $600 a month lever. I know the first year you're saying $1,000 is the only savings because, yes, you've got moving costs and whatnot and other things, but in three years, 15 grand is not a little amount of money. Most people will never get that chance to shore up that kind of cash in their budget without major disruption or without a windfall. So do acknowledge that this is a great opportunity and not just a fluke. Do acknowledge that this is a rare opportunity. The second step is to run that three year test, which you've already begun to do. You've already zoomed out past year. One year one can be misleading. A lot of times we just focus on the immediate. You did a good thing, you took it out to three years. And so ask yourself, where would we rather be three years from now? Not just financially, but also emotionally, with this money, how will we feel? Scenario A, how would we feel staying put, financially and emotionally? Scenario B, what if we move and we save $7,000 a year starting in year two? Now attach some specific uses to that $15,000. What if we use this towards a down payment on our home in the future? What if we invested this money? What if we used it to go. What if we used it to give ourselves some cushion, to change jobs, to start a business? If you can assign. We interviewed Jesse Mecham this week, right? What did he tell us? Assign your dollars a job. If you can assign every dollar of that $600 you're saving every month a job before you move and you gain clarity around that, that might give you more excitement to make this shift and it might make it easier to do. And I think one reason this could feel scary, besides, of course, the uncertainty of it, is that it does feel like you're downgrading. You've got this nice apartment, pool, amenities, and you're going to this older place. So my recommendation is give it a defined time horizon. 2 years, 3 years maximum. This is not forever. Get that in your heads. This is a strategic move. Like when we sold our home in Brooklyn. What did we do next? We didn't go right into our next forever home. We rented as a strategic move into a smaller apartment. It was cramped, it was not a great layout. We didn't love it. We wouldn't have preferred to live there, but we needed to move and live somewhere so that we could buy ourselves some time to then properly assess the buying market to buy something and move and cash out and then rent and then buy again. Like we didn't have endless money to just buy and to just sell and buy simultaneously. So think about yourselves as strategists and then as far as this new apartment, although I know it's not as fancy as where you're currently living, it's important to remember what your non negotiables are actually. When you are thinking about your living space, where you live. This is where people go wrong. They assume that all comfort is essential. It's not. You want to make a list of the absolute non negotiables that you need, right? You need maybe commute. You need something that's close to a commute. You need something that's going to make commuting easy. Maybe you need something that is low on noise, big on light because you're working from home. The nice to haves like the gym, the pool, the finishes, those are great for comfort, but not necessities. And if the older apartment meets your non negotiables, then the rest is preference. It's not necessity. So just keep that in mind too. And again, it's not forever. So it's your call in the end. But I would just say, but I hope that this thought process can help to crystallize what you're gonna do. If the older apartment at the end of the day feels safe, is functional, it's livable. I mean, those are compelling reasons to potentially move. But do it intentionally. Do it with a plan to save. Do it with a defined timeline. Do it with an agreement with your fiance on why you're doing this. Like a shared goal. Because this could be life changing. It could really give you a leg up. It could really advance your financial goals, accelerate your financial life. It's a strategy that you're implementing. You look back on it and be like, we're really glad we did this strategic thing. We got a little uncomfortable, we got a little scrappy for a few years, but the reward was worth it. All right, next up, Trish on Instagram, who says that she's 45, she just quit her job to go back to school. Get this, her local college has free tuition for those over the age of 25. Can you believe this, Trish? Where do you live? I would take classes once, you know, I find more time to do that. But that's something I would definitely, definitely leverage. She says, I'm not taking out any debt to do this, and I've a good emergency fund in place. I plan on taking the next year off to focus on school and family. What should I do with my 401k in the meantime? I'd love to do some socially responsible investing with it. There's currently about $130,000 in my 401k. All right, Trish. Well, if you'd like to continue contributing to your 401k, the only way you can do this now because you don't work for your company anymore, is you must transfer this 401k into a traditional IRA, which you can do at your existing benefits manager. If you're. Wherever your 401k is parked, whether that's Fidelity, van Charles Schwab, you can just speak with them and ask about your transfer options. I would like to open up a traditional ira. Let's do this direct transfer. Then you can start contributing to your fund. And if you'd like to do more socially responsible investing, a lot of these major investment firms that I just mentioned have options. You just let them know that this is a category of investing that you want to integrate into your existing portfolio. Talk to the specialist there. They should be able to guide you. Trish says, P.S. i'm taking business classes, and all the years of listening to you is already helping me get those A's. Well, I'm just amazing. Kidding. Trish, congratulations. This sounds so great. What an opportunity. I am truly envious of you. Next question from Jeff. All right, next question is from Jeff, our friend in the audience. He asks Farnooch, how do you think about building generosity into a business model without undermining the financial foundation, especially in the first year? Right now, we're debating whether community work should be time boxed, revenue gated, or treated like a fixed operating expense. Are there guardrails, pacing strategies, or mental frameworks that you recommend so that the mission survives long enough to matter? All right, this is a really thoughtful question, Jeff. It's one of the most thoughtful business questions I think I've gotten in a very long time. And the fact that you're. The fact that you're thinking about this in the first year of your business is really admirable. A business that doesn't survive cannot serve anyone, though. Let me just say that. So while I think it's very. But I just want to start with a core principle and very basic here. A business needs money to grow, right? A business that doesn't survive financially, it cannot serve anyone. So your generosity does need to be baked in and designed. It cannot just be something that you do. It does need to be designed. So your generosity does need to be part of the business plan. It needs to be designed and thought out. The first step is probably to separate the mission from the mechanics and get clear on the why. You know, you have the why for your business and have so have a why for why you want to give back. And so you need to define. And then from there, define the how without putting the business at risk. And in year one, I don't know a lot of businesses that have a lot of money to go around. I know a lot of founders who don't even pay themselves. And if you're not paying yourself in year one, I don't think it's selfish to not donate to charity. Also in that first year, I think that you're, you're doing what you gotta do to build a business. You can still, as you said, give your time. You can donate equipment, you can donate your services. I don't know what kind of business you're in, but I think the how could change right year after year. But thinking about that ahead of time is important to bake it into the business model and also to design the why and also to figure out the why as a component of your financials. So treat your generosity as an operational decision, not an emotional one. And that's going to mean having rules, having limits, if I want it. So my back of the napkin advice here again. I don't know the kind of business that you have. I don't know your. I don't know what kind of financials you've got in the first year. But if you're like a typical startup, who is that is scrappy in the first year? Year one, I would say make the generosity time boxed, because time is the one resource that you can cap without threatening your cash flow. So you could choose one day per quarter, you could define the number of hours, define the scope of work, and you can put on the calendar. Now, you don't have to make a spontaneous commitment, no exceptions. You don't have to be spontaneous about it. And this way you can stick to something, you can be consistent, you can plan for it, and you won't burn out financially or emotionally. And then I would just. And then as far as actually giving money to a charity, being generous with money. I would. I would wait to do that until you have actual data. Revenue gated generosity is fantastic, but only once revenue is predictable, like in year one. You don't really know your true margins or your client acquisition costs. So avoid tying your generosity to projected income. I'd say revisit your revenue based giving at the end of this year once you have the real numbers. And then for everybody who's interested in this, I think it's a good time to at the beginning of the year if you're interested in giving back as a business owner and building that into your business model to define what community impact means to you as a founder. And it's not just the impact that you're giving the community outside of your business, but also the community that you're building inside your business, right? Paying yourselves, your workers fairly and ethically, providing reliable and professional services to your customers. Something we can all and then Jeff, one thing you can do today if you and then Jeff, one thing you could do just today after this call and Jeff, one thing you could just do now after this podcast is just write down your giving policy and draft that you know you can. Things like what you want to support, how often you want to support it. What are the conditions if you're going to do it in year one and it's going to be time based again? What are the parameters around that? I think that's the probably the safest, the most risk averse way to do it in year one and then eventually you can step it up and give with your financial resources. Again. Great question. Awesome question. And next is an anonymous friend in the audience who is 37 and at long last she says I am one job away from hitting the six figure mark for a salary. I currently make 85,000 a year, but I think I can hit the 100,000 mark if I were to job hunt. I have also amassed a net worth of $250,000. No debt. Together, these are huge milestones for me. Well, I'll say so. Quarter of a million dollars by 37. I would give you a big hug if you were here. The downside? Our audience member says I want to now be a stay at home mom to my 17 month old. It is so hard to drop out of the workforce as it has taken me so long to get to this place of financial security. My husband earns more than I do and says he can support us if I were to make this jump to becoming a stay at home mom. I feel like you've discussed this in previous episodes but now that I'm trying to make this decision for myself, I'm all sorts of confused. Looking forward to any of your thoughts. All right, well, I just want to say first, congratulations on all of your financial accomplishments. Again, like I said, so incredible that by your age you have saved a net worth of $250,000 and that you are close to hitting the six figure earning mark. I know what it's like to be a mom and have a career and feel like you're at a crossroads. Now, personally, for me, it was never a question. I was always going to work. But I know even with that in mind, becoming a mom, becoming a parent, there's so many emotions, so many feelings in those first few weeks, few months. You definitely feel sad when you leave your child. That is totally normal. And so this is an extremely personal choice. But I will say that if you were my best friend and we were talking, I'll be extremely candid with you and I would not encourage you to give up your career, not to undermine stay at home parents out there. I think that they have incredibly difficult jobs, jobs that we don't appreciate enough. But you have to understand where I'm coming from, right? I'm a woman who is the breadwinner in her marriage. As a kid, two things, financial independence and a driver's license. When I was a kid, I thought if I have my own money, if I have my own car with gas in it, I can do anything and I can go anywhere on my own terms. Agency is extremely important to me. I grew up not seeing a lot of that represented in the women in my community. And so I became a child who grew up to be a woman who was very hungry for financial independence and also wanted to be a mom. You can do both. And this, this topic is like a whole podcast on its own. Like, it's a whole show on its own, you know, with several episodes. One of my favorite posters on this topic is Sarah Dean, who launched the Shameless Mom Academy. It's a podcast, it's a whole platform, and she tackles this topic a lot. I've actually been on her podcast to talk about my views on stay at home parenting. She's been on my show and I'll tell you, you're not going to be able to finish this conversation with somebody without hurt feelings, without someone getting upset. This is, again, so personal. So I'm going to stick to the financials. I'm going to give you some numbers maybe to hold on to and to consider as you make this personal decision. The first is that in your lifetime, in your career lifetime, when you opt out of the workforce, your average earnings will fall. Sheryl Sandberg wrote in her book Lean in that women's average annual Earnings drop by 20% if they're out of the workforce for just one year. 30% drop after two or three years, which is the average amount of time that professional women off ramp from the workforce. And you don't just lose your salary when you're not working, you also lose the ability to pay into Social Security. You also lose the access to a workplace 401k and, and all that compounding right at 401k. So there are many financial losses when you become a stay at home parent. I'm talking to men, I'm talking to women. So that's one thing. There are also studies that find that dual income are more secure. Couples are less likely to split than those in marriages with just one working spouse. According to the book Getting to 5050 How Working Parents can have it all. And that may be a resource for you. Marriages in which there is a SOL breadwinner get divorced at a rate 14% above average. And why is this? The authors of that book say it's got a lot to do with the fact that dual income marriages have more financial stability. Being a sole breadwinner, a sole breadwinner, like you're the only, like if your husband were to take on the sole job of providing financially for your family, that comes with a lot of stress. And if you have a partner who's also working to share the weight of that financial stress, that can lead, the authors argue, to more harmony, more compatibility and vice versa. If you are the sole caregiver at home full time, you may find that it's hard to connect with your partner and find common ground and relate to your partner. So it's hard for both partners when you're each doing isolated work and you're not really overlapping, right? You're not really understanding the constraints of working out of the home and vice versa. Again, some of you could be listening to this and being like, that's bs. I'm a stay at home parent, wouldn't have it any other way. So this is not the end all. But I'm just, just telling you, you asked for resources, you asked for facts, some studies and I'm just sharing this with you so that you can make your decision, you can listen to all of this and at the end of the day still decide that personally it's important for you to stay at home with your child. Because that is where you source a lot of your sense of self worth. And that's what I want to end on here. That the reason that I work and I've always worked and I have, and I have children and I won't stop working is because I source a tremendous amount of my sense of self worth. Feeling like a contribut to my, not just my family, but to society when I work outside the home. And of course I'm working right now inside the home. But you know what I mean, that I have something else to hang my hat on. In addition to being supermom, I am super career woman, Arnouche. And that's important to me. Again, it's personal. And I do agree with all of these stats. I do think that. And I, because I've seen it, you know, anecdotally in my life, other people's marriages falling apart because it's just one person working. And that's a lot to shoulder. Now that doesn't mean that you can't take time off and then go back into the workforce. A lot of people do that successfully. So my advice, if you were my girlfriend again, if we were sitting around having coffee, I wouldn't say drop out of the workforce entirely. You've already told me that you are a value in the workplace. You're making good money, you've built up all this wealth. You don't stop, don't kill the momentum. Maybe take a pause, right? Be with your child. When your child goes off to school full time, you probably will have more time and you might want to go back to work. And by the way, I'll end on this as far as like the whole stay at home parent debate. Because one of the things that often comes up is whether or not it's better for the kids to have a consistent caregiver home. You know, whether that's mom or dad, there are schools of thought that then that child grows up to be more like adjusted and more successful. So if that's what's part of what's like gnawing at you, like you're worried that your child's not going to have the quote, unquote, stability growing up, that being there for him day in and day out is what he needs to be set up for success later in life, I would say that consistency is important. Stability helps, but that doesn't have to be entirely sourced from you. You know, it's really about creating an environment for your child where they can feel safe and they can feel loved and they can feel like they can go to you or the other parent or a caregiver or someone in the community like that they have people they can go to reliably that you don't have to sacrifice your career to set your child up for success. The most important thing that children need to see is that you are happy, that you are happy with your choices. So if going to work every day is going to make you miserable and you're coming home miserable and your kid sees a frown on your face at suppertime every night, that's not good. That doesn't mean you gotta abandon your career. Maybe it means you need to get a new job that lights you up. So just be happy with your choices. And then when you're ready to get back into the workplace, I want you to circle back with me because I have a lot of advice for how to re ramp, how to ramp back onto the career highway after having taken some time off. And we have a lot of podcasts of parents who've done just that on the show. But thank you so much for your question. It's been a while since I've tackled this and I know it's always very sensitive. I'm open to everybody's opinions. This is just, just my take. It doesn't have to be everybody's take, but I do want to promote at the end of the day, female financial independence. And you can't do that if you're not earning money. You can take breaks. But I like to encourage women and everybody, but especially women to keep an eye on their finances throughout their lives. So, so important. And that's our show, everybody. Thanks so much for tuning in. I'll see you back here on Monday. We've got Tiffany, Alice, Mr. Money Mustache Blast from the past. Don't miss out. Be sure to hit that subscribe button. And I hope your weekend is so money.
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Progressive Insurance Announcer
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Farnoosh Torabi
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