Transcription

• Speaker #0

  Welcome to another episode of Millennial Money Matters with Kelly Turner and Derek Mazzarella.

• Speaker #1

  And Kelly, do you know what? What? We have a very special guest today.

• Speaker #0

  Who is our special guest?

• Speaker #1

  Our producer, Justin. Justin, say hi.

• Speaker #2

  Hi, how's it going?

• Speaker #1

  So I'm sure you're all wondering why Justin is here. And the answer is we are doing a Q&A. For those that don't know, it's a question and answer one. So we heard from the peoples.

• Speaker #0

  The peoples.

• Speaker #1

  And we're going to actually answer your question. So this is a podcast for you guys.

• Speaker #0

  Yeah. And this is, we thought it was a good, this is the final episode of season two. So if you, you know, one of the 20 people downloading every time, we appreciate you and love you. Thanks,

• Speaker #1

  mom.

• Speaker #0

  Right. We are taking a little break for the summer.

• Speaker #1

  Yep. One should.

• Speaker #0

  One should. And then we'll be back in September for season three. But we thought we'd end it with like a, hey, we've done a lot of episodes at this point and the people have questions.

• Speaker #1

  Yeah. So I think we're ready to see what they have. Justin, what's our first question? Sure.

• Speaker #2

  All right. So question one, is it true that if you invest $100 a month at age 25, you'll have over $1 million at 65? Okay.

• Speaker #1

  So this is a 40-year time horizon. See that math?

• Speaker #0

  Great math. Great math. Great job.

• Speaker #1

  All right. So I had to look this up because... No. Well, actually, I'm going to say it's possible. You have to earn about 13% per year.

• Speaker #0

  Which is... possible in some years.

• Speaker #1

  Yeah, in some years. Well, some years you'll blow that by, but not an average. So essentially, if you wanted to have, like, let's say, a safer, quote-unquote, like, return, like of 7%, you need to earn about, you need to save about $350 or so dollars a month to hit a million dollars by the time you're 65. Or the trade-off is you have to just take insane risk and really, you know, go crazy. I would say probably... based on inflation, all the other stuff, $100 a month, even a million dollars 40 years from now is not going to be like a million dollars like it is today. I don't think even a million dollars today is like what we feel it is, right?

• Speaker #0

  When we were kids, if you had a million dollars, you were rich,

• Speaker #1

  rich.

• Speaker #0

  Now we're like, oh, I might be able to retire.

• Speaker #1

  Like if you lived in a million dollar house, it was like a mansion with two pools and probably a butler.

• Speaker #0

  And now it's like a four bedroom colonial.

• Speaker #1

  Yeah, right.

• Speaker #0

  So I need some work.

• Speaker #1

  So the answer is sort of, but no, I would just recommend saving more.

• Speaker #0

  Yeah. And I think the other piece of that is everybody's financial circumstances are different and where your money's going is different and how you're getting taxed on it. And that's where you speak to your financial professional.

• Speaker #1

  Right. Right. Good.

• Speaker #0

  Just saying, I'm looking out for you, Derek. Yeah,

• Speaker #1

  no problem.

• Speaker #2

  There we go. Okay. Question two, how long do you think the Time to Own program will be funded?

• Speaker #0

  Ooh, that's a great question. Okay.

• Speaker #1

  That's for me, obviously, right?

• Speaker #0

  That's obviously for you. I would like to tell you, Derek has a slight advantage here because he is the one who compiled these questions. So these for me are like a little surprise, each one. Like, oh, okay. So what is Time to Own? Time to Own is a Connecticut Housing and Finance Authority bond program. It is a $25,000 forgivable mortgage. Lots of people keep calling it a grant. It's not a grant. It's a forgivable loan. um that is forgiven in 10 increments over 10 years it is for first-time home buyers living in their primary residence so there's my first disclaimer what is this okay is it forgivable stuff taxed like do you have to pay taxes on the amount that's forgiven you do not oh so it's a great program um there is income limits for it uh i don't want to say it's hard to qualify for but not everybody can qualify for it even though everybody would love to so that's my little chaffa story um How long do we think it's going to be around for? So we're a couple of years into this program already. The state has really committed to it. So the initial batch of time to own funds actually was structured very different. You could get up to $50,000, but it depended on what town you were purchasing in. It was actually very complicated. They have simplified it a little bit, but they've really made a commitment to continue funding this. So we don't have a timeline. What I do warn people though, is we don't always have money in the fund. So the state bond commission essentially puts money in the fund. We see the money. The money depletes. Sometimes they refill it before the money's gone. But we have had circumstances where we have had a gap. There was a gap last summer where we went like a month with no funds.

• Speaker #1

  Does that mean you just put the loan on hold then for that?

• Speaker #0

  Or like they started right back? Yeah, it depends on the client. If you're just shopping, right, we would tell you like, hey, there's no funds in here right now. If you need these funds in order to make the transaction happen, you got to take a break. There were borrowers that work. caught going under contract as the money went away. That was a little bit more complicated. Some of them obviously terminated contracts because they need it and the seller needed to move. Some of them did just get extended while we waited for the money. The hard thing is we did not know when the money was returning. And that's the really hard part for people is when the money's gone, we're like, hey, Chaffa, can we get our money back? And they're like, hey, we don't always have control over that. So it can be a little bit tricky. But I would say for the foreseeable future, some version of this program will continue. I do think they are going to continue to make it harder to qualify for, which is what has happened thus far. It's going to get stricter and stricter as the money kind of gets used up. They're going to keep. honing it in because they really are looking to help a specific buyer with this. This is very heavily for first-generation homebuyers who are trying to get into houses and are lower income and really need the funds.

• Speaker #1

  Gotcha. Okay, cool.

• Speaker #0

  Okay. Sorry, everybody. If you noticed in the video or the audio, there was a quick cut there. I got a call from my kid's school. We had a little injury. We're okay. Everything's fine, but welcome to Millennial Parent Life. Yeah. Yeah. When you see. the name of your kid's school on your phone, it is a slight moment of terror.

• Speaker #1

  I got yelled at by my wife a while back because I didn't actually have the school's number saved in my phone. I was like, fault. She's like, you didn't pick up.

• Speaker #0

  So yeah. No, it is saved in mine. So she's right though.

• Speaker #1

  She's right. I should have it saved.

• Speaker #0

  You should have it saved. So we're back. So Justin, what is the next question?

• Speaker #2

  Yeah, sure. So next question, question three, what's one splurge you'll never apologize for?

• Speaker #0

  Oh, why don't you go first and I'll go second.

• Speaker #1

  Oh, I was not really ready for that one. Let's see. Honestly, it's, I like things to do for me are like, I won't regret that. Like any time with friends, I could say like that is time well spent. So if I had to spend anything on like a trip or something like that, I never regret that.

• Speaker #0

  Yeah. Mine is 100% travel. So it's one that's like time you don't get back. It's stuff that as you get older, you can't always do. So you gotta do it while you're young. I will also say for all of you, Gen Zers and millennials who are listening, don't have kids like travel a lot.

• Speaker #1

  um pre-kids because it's much more expensive when you have children but i know i'm gonna throw another one out there because i love going to concerts so if i can go to a concert uh i spent way too much money last year to go see pearl jam uh but i also experienced uh i went to tom petty like three months before he died so you never know especially with artists uh how long they're gonna be around for so if you have a chance to go see someone that you really want to go see go do it i love it so we're

• Speaker #0

  pretty similar i think experiences experiences are more important than things. Yeah.

• Speaker #1

  Has there been a thing that you bought like, wow, I spent way too much money on, but I'm really glad I bought this.

• Speaker #0

  No, because I don't spend a lot of money on anything. I'm cheap. Mine is the small stuff from like, as we've discussed the Amazon and I'm like, I love this thing. I love this thing. So I have, it's called a snack box. It was $20. It's a box that holds snacks on all different little sections. And that was one of my best purchases of the year. We use it all the time. What's yours?

• Speaker #1

  I guess maybe my recent one, maybe it's recently biased, but I just bought myself a guitar. Finally, that was a really nice, I had like a starter guitar for like 12 years. So I actually bought a really nice one. I was like, wow, this sounds so much better. So yeah, I'd say that.

• Speaker #0

  See things that bring you joy. Yeah. All right, Justin, what's next? Cool.

• Speaker #2

  Love that. Next question. Roth IRA as a tool to invest in a home.

• Speaker #1

  All right. So we can probably both answer this one.

• Speaker #0

  Well, you're going to start.

• Speaker #1

  Okay. Well, for those that need a reminder, Roth IRA is traditionally a retirement tool. you You put money in there after tax, it grows tax-free, you take it out tax-free for retirement. The one benefit that a Roth IRA has compared to, like I say, a traditional IRA is you can actually, any money you put in, you can take back out. So it has some liquidity there compared to some of the other investment options. With that said, I don't love it as a home buying vehicle. I think it should be more for retirement. To me, it's like, oh, I need an extra five, 10 grand to close on this house. It could be a good backstop, but I wouldn't have it as the primary tool for saving from.

• Speaker #0

  Yeah. And I would agree with that just on the accessibility of the funds too, that we do sometimes struggle with people who like have money saved in something outside of a bank account because a Roth is not a bank account and we need those funds. And a lot of people think like, oh, I need the funds when I close, but we often need them. We always need them ahead of time because we have to see them move into your accounts. And for some accounts, some companies, it could take up to a week. to get those funds out into a vehicle that you can then write me a check from um and you have to source it too right we have to source so i need i need your roth count then you have to have them cut the check a lot of them still mail checks so they will mail paper check um which drives me crazy and then you have to wait for it and then you have to deposit it and then it has a clear account and you just added like a lot of unnecessary steps so if buying a home is in your one year plan um a high yield savings account is a better spot for your money

• Speaker #1

  Totally agree. Well, I mean, to that point, you're going to have alignment with your investment, whereas your investment in the Roth may be really aggressive. And then we may have, let's say you were buying a house last April. Yeah. Like last month, right? How does that look?

• Speaker #0

  Yeah. You're missing some of your down payment money. So yeah. You've talked a lot about like buckets, having your money somewhere to do its job. Money in a Roth, its job is not. your down payment on your house. That's not what his job is.

• Speaker #1

  And I know like they could, you know, there's some instances where you can take it out for first time home buyer and all that stuff. But yeah, I think we're both in agreement. I would, I think your priority should be a high yield savings account and then as a backup if you need it.

• Speaker #0

  If it's an emergency, if the house was a little bit more than you thought, you know, yeah, we can talk about it, but it's just not super, it doesn't really make sense.

• Speaker #1

  No, most people don't have like a seven year time horizon to buy a house. It's like, I'm going to buy it now two years or so

• Speaker #0

  Cool. All right.

• Speaker #2

  All right. So somewhat on the same topic, is it smarter to buy a starter home now or wait and save my forever home?

• Speaker #0

  Ooh, this is a great question. And I will say one of the problems with answering it is that starter homes were much more popular 30, 40 years ago when people were purchasing their first home in their 20s. Okay. Because you were getting married and having children in your 20s. The average first time home buyer today, the last I looked was like 38 years old. So we sort of have missed the boat on your starter home. Your starter home was the apartment that you paid too much rent for. That was your starter home. And that's where the funds for your starter home went. So what should you do? In reality, the hardest thing for people right now is because they're skipping the starter home, they're missing the equity that they gained from that home to then put into the forever home. So buying the forever home is significantly more difficult because 20% on $500,000. is a whole lot more than 20% on $200,000. But if you have lived in your $200,000 condo for 10 years as your starter home, you've paid the mortgage down by $100,000 while you've also, which is your living expense, right? So you've paid for both your housing and you've gained your equity. So when you go to buy the next house, you now have say $100,000 to put down that you didn't have to save outside of it. Where when you were renting, you are paying for your living expense and you have to save outside of that. Right? Yeah.

• Speaker #1

  Yeah.

• Speaker #0

  So it's a little bit tough to answer. I get why people are skipping starter homes, because when you're 38, you're like, I don't want a two bedroom condo. I have a family. But in the long term, is it a great idea to skip the starter home? No.

• Speaker #1

  I'm probably the weird person with this, because I think I'm the only person on the planet that probably... paid more for a starter home than my home.

• Speaker #0

  Well, you went from city to suburb. You went from city to suburb, which is a very different life.

• Speaker #1

  Yeah. I will say a lot of this is timing though too, because let's say you're going to stay in your starter home for like two years, right? Like, no, don't do that. Cause you're going to have all these closing costs, there's realty fees, like all this stuff. So if it's like a two-step plan that you're saying, Hey, like I'm going to get a smaller condo, let's say, or get a starter home first, then move. Like you want to have a longer timeframe where you're going to be in that starter home. Some instances where I've seen it work are if you're going to do hey, I'm going to do a live-in flip kind of deal. Like I had a buddy that renovated his whole house over like four or five years and then sold it for a bigger home. Or the other thing is like, hey, I'm going to do my starter home and then rent it out. Like that's some instances where it can make some sense as well. But to Kelly's point, like we're just not buying houses at 20 years old anymore. It's just challenging. But it's, once again, it's like not an answer, but it's like, you got to be personal. The market matters too. Like I'm from a city to a suburbs, like moving, you know, staying in the same market matters. Like our starter homes. cheaper or more expensive. There's a lot of factors that go into it. I kind of wish we still had a lot more starter homes. The problem is they're just not building a lot of new starter homes either.

• Speaker #0

  Well, and that is probably the other piece to it is that way back in the day, whole developments of small affordable houses were being built. When was the last time you saw a development of small affordable houses being built? The starter home is now a condo, full stop. That's what a starter home is. It is a condominium. All new builds... especially around us are $700,000 to a million dollars because it makes more sense for the builder. Well,

• Speaker #1

  if they don't have the word luxury in it, does it even count as a new home anymore?

• Speaker #0

  It doesn't count as a new home. The other thing too is I think a lot of millennials really leveled up their expectations because we lived in really nice apartments. And that's a struggle for people is when you move into your first apartment at 23 and it has granite countertops and tray ceilings and a pool and a gym. You want that in your real house. You don't want to move into a 1940s cape with like a janky kitchen and white appliances and linoleum and shag carpet. You don't want that. You want the next thing because that's what you're used to.

• Speaker #1

  I also don't know if it was as handy as previous generations either.

• Speaker #0

  Also probably accurate. So what should you do? Starter home versus forever home. If you're looking to buy a forever home, you just really need to spend your starter home years saving every dollar that you can.

• Speaker #1

  Yeah. you can do it either way i don't think there's a right or wrong answer though yeah it depends on you yeah cool all right next question how does derek make podcasting look so effortless and cool so that was a ron burgundy question i want to see if jess would read anything and he clearly just did he will read anything how do you make it look so effortless and cool uh you know just all this practice actually i don't know this kelly but i come in here and do a fake podcast by myself without you here so i've been practicing my butt off i wonder why i look dumb

• Speaker #0

  on these and you look Great. Look at that. That was a good one. And Justin, I'm proud of you for reading it out loud. You're a great producer.

• Speaker #2

  Am I showing my age there?

• Speaker #1

  Do you not know who Ron Burgundy is?

• Speaker #2

  I know the name.

• Speaker #0

  Oh, man. all right stop this podcast right now and go watch income man oh can we just point out just for the audience that um while derek and i are are old older millennials i'm the oldest millennial um justin is not a millennial gen z over here the gen z here but

• Speaker #2

  we appreciate you yeah if it wasn't on tick tock it doesn't exist doesn't exist yeah basically all right um what percentage of income do you need to retire successfully all right so this is i got a i know somebody who wrote a book about.

• Speaker #1

  Oh. Who? Who might that be? Who could that be? Whom? All right. So this is a question actually from my buddy, Rob, who's an avid listener to the podcast. So shout out to you, Rob. Thanks for the question. So the general answer is usually about like 70% to 75%. I mean, this is like, once again, it's very hard to give specific advice because a lot of it depends on how much you're spending and what you're saving going into retirement. So, I mean, theoretically, you're saving about 15. or so hopefully percent of your income going into retirement so when you're in retirement you don't have to save that so it's already 50 right there um i i found it's actually usually like in real life probably closer like 85 90. like most people tend to spend money in retirement especially early on like there's like kind of two things that happen a they're a lot more free time so usually doing your hobbies or traveling or doing something because every day is a saturday yep uh saturday i like it yeah and then the other thing i noticed is that uh you're spending a lot more time in your house remember cover times you're just like looking around like i got to change everything like the amount of retirees that i have that like retire with us like three years that have redone their kitchen it's like 90 percent wow so you're looking for money that you maybe wouldn't have spent pre-retirement yeah so it's like there's just trade-offs right because you know if you have kids like the kids kind of thing goes away and all that stuff but most people don't like really drastically change their lifestyle so um i would say like the 70 number you hear online is probably too low i'd probably you know expect like 80 to 85 to be a be a little bit more accurate.

• Speaker #0

  So millennials get saving.

• Speaker #1

  Yeah. Safe. Or just, you know, because most people are going to change their lifestyle.

• Speaker #0

  Yeah. Well, who wants to? You're like, I'm a grown up and I finally don't have to work anymore. I'm not giving up the things that I like. No,

• Speaker #1

  nor would you. Yeah. And then my favorite thing is when people, you know, quote unquote downsize. Like, yeah, the house may be smaller, but it's more expensive because it's nicer because they want all the things that they didn't get in there.

• Speaker #0

  So we see that a lot on our side. And I will tell you that is the 55 and older community scenario is that I have people that downsize from the 4,000 square foot house. to the adorable 2000 square foot, 55 and older community that it costs more than the house that they just sold. And it's got an HOA and it's got all this stuff. So I totally agree. We see that a lot of people downsizing for higher payments.

• Speaker #1

  Yeah. The size is down, but the payments are up. Yeah.

• Speaker #2

  Cool. All right. Next question. Is an investment property worth it?

• Speaker #0

  Ooh, that is a great question. I think we can probably both answer that. You from the like financial standpoint and me from the practical standpoint. An investment property is an amazing tool to build wealth, full stop. It's an amazing tool to build wealth. However, there's many different types of investment properties. There are homes, there is commercial investment properties, there are multifamily investment properties, there are single family condos, vacation investment properties. We did the Airbnb episode a few episodes ago. So what an investment property looks like to you? is an important part of this question. Are you talking a vacation home that you'll rent out sometimes? Are you talking about, I'm buying a three-family home and I'm going to put tenants in it and make money off of them? Are you talking about, I'm going to buy a commercial building to put my business in? All of these look different. Yes, an investment property is, if you can afford it and it makes sense for your lifestyle, again, great tool to build wealth. Flip side of it is, all of these different types of investment properties have work to be done. Okay, if you are going to buy a multifamily house and you are going to have three sets of tenants, first off, you're going to put 25% down on that property. You're going to have a fairly high interest rate. The mortgage payment is going to be high. You are going to have to make sure that you're making enough on rent in all of those. And then you also need to be prepared that either you or a property manager that you pay is prepared to unclog toilets at three o'clock in the morning, to replace air conditioning units, to put a new fridge in when it dies, to clean trashed apartments when people move out, to replace carpet. You just took on a job. Okay. An investment property is a job. If you are looking at an Airbnb, we talked all about that a couple episodes ago, right? That's its own whole host of work. So all of these are work where some investments, which Derek talks about, really don't take you work as the person, right? They're there. They're just doing it. An investment property can make you more money than some of those investments, but you are paying for that money with your time. That's sort of my opinion on it. What's your thoughts?

• Speaker #1

  I I totally agree with everything you said. You know, I think, I think that makes a misnomer with, you know, real estate investing is like the passive part of it. Cause there's. There's no passive piece of it unless you're doing like the REIT, which has its own challenges, which I don't want to get into, or you're like buying one of those syndications or any of this stuff. And all of those have different pros and cons. You're usually giving up some upside or tax treatment to reduce the amount of work you're doing. So a lot of it's really dependent on what you do. I think they can be great investments. They can be great diversifiers away from just doing everything in a 401k, for example. And they could, you know, the nice thing is, unlike most other investments, you can leverage them. more effectively or less risky because you can leverage stocks, but that can get very risky. Yeah. So I think, you know, I have a real estate investment property, so I would recommend them to most folks that can handle them and have the time and have the, you know, financial ability to do it. But it's still going to be a personal thing. So I mean, I think overall, they can be worth it. But like, I don't get a lot of toilet calls at 3am, thankfully, knock on wood. But, you know, you do have things that come up. And it's not like you just set a button and set and forget it. Even managing a property manager is like a part-time job. You're not managing the property, but you're managing the property manager. So there are things that you have to consider and fit in your lifestyle. Do I have time to do this stuff? Can I do it effectively? Do I know the market right? Because you can lose a lot of money too by buying the wrong house at the wrong time, not doing the research, thinking, I saw this flipping show. What a great investment, blah, blah, blah.

• Speaker #0

  Tiki-taki.

• Speaker #1

  Yeah, right. And then you buy this absolute dump and you don't know the codes. You can't have any contract because you have no relationships with anyone. So yeah, it can be good, but there's a lot of ways you can go wrong too. And you need to be aware of that.

• Speaker #0

  And I would say, just as the quick aside, the two easiest places to get started in investment properties are if you are young and purchasing your first home, a multifamily property can be a great toe dip into having investment property. You buy a duplex, a two unit, you're going to live in one, which means you can put a much lower down payment down. You have a tenant in the other side. Maybe your tenant is your friend. Maybe it's your family member, right? You're there. You are property managing because you're active. It is still work for you, right? employee theoretically, right? Is living next door. But it's an easy way to get into investing and it is a lower cost way of getting into investing. And it's a pretty, I don't want to say risk-free because everything is risk, but this is your primary residence. So at the end of the day, if the poop hits the fan, you're also living there and this is paying, you're paying your mortgage, which is also your housing costs, your shelter. So that is like toe dip number one. Toe dip number two, we talked about two episodes with Airbnbs in the second home is buying yourself a vacation home somewhere where you would like to use it, where the main use of that property is vacation, but you will also utilize it to leverage it to make a little bit of money when it makes sense for you. That is a toe dip. Your expectation on that property should be that we make no money. If you do, it's a great bonus, but that is a great toe dip into what would it look like to own actual investment properties.

• Speaker #1

  Yeah, I think that's the thing that's well said.

• Speaker #0

  All right, what's next?

• Speaker #2

  Cool. All right, next question. Let's see. Let's go with, I just got a raise. How do I not blow it and actually make progress with my money?

• Speaker #1

  Cancel your TikTok,

• Speaker #0

  right? Cancel your TikTok and your Amazon account.

• Speaker #1

  You want me to jump on this one, I guess? Yeah. I think the biggest thing is you're like, okay, especially if you get a raise where you're making no money, now you're making some money. That's probably... the biggest challenge or the biggest jump to get through. Cause you're like, I've been waiting so long to buy these things that I've been holding off for forever. And I just want to get them. You know, I think a lot of just, just deal with percentages on things like, okay, if my, let's say my raises a thousand dollars a month, 20% more is going to go to just buying fun stuff. 40% more is going to go into saving this account. You know, 30% more is going to go to doing this. So just like chunk it out and create a system around it. Cause I think the, the clients that I have that are successful when these things happen. They already have the systems in place before you get the raise. And then it's just like, you're just using bigger numbers. The challenge is when you're doing nothing and then going into that and say, okay, I'm just going to do this, or I'm just going to buy this stuff for a little while, or I'm just going to go to this house now because then I'll get my next raise. Then you're kind of always in that cycle of chasing your tail. You really like want to see it as like, look, I'm used to living my life on this level. How long can I steep it? Or like, what if I just increase it a little bit and then use the excess to save and stuff like that? So you really, really want to have systems in place prior to.

• Speaker #0

  uh that revenue jump yeah what my suggestion for people especially if you are on more of the gen z or young millennial phase right derek sort of mentioned the like i have these things i want to buy if it's a big enough raise pick one pick one of the things buy it get your satisfaction say i did the thing um the second piece to it is i had a client and i thought it was really smart she got actually a fairly significant raise she was not ready to buy a house yet that was in her one-year plan. So what she did was open up another savings account that was not attached to her current checking and savings account. She could not move money. And she had that raised direct deposited in that account. And she had that for an entire year and she saved an entire down payment on that because she knew my rent is the same, my current, nothing else has changed but me.

• Speaker #1

  Right.

• Speaker #0

  I want to do this thing. Why don't I? And she knew that like if the money was accessible and just in her savings account, she could grab it. She could move it. She made it like hard for her to get this money and it went away before she ever saw it. So I thought that was like a great kind of option.

• Speaker #1

  Yeah, automation is big for that stuff.

• Speaker #0

  All right. What else we got?

• Speaker #2

  Cool. What's the biggest thing you've learned while doing this podcast, both as podcasters and also as professionals in your own industry?

• Speaker #0

  Who's answering this one?

• Speaker #1

  Well, I think we would have to both answer it, right?

• Speaker #0

  Right. Okay. Okay.

• Speaker #1

  I mean, I learned a lot about credit scores from Stephen.

• Speaker #0

  I would. I, even though I listen to Stephen all the time, I think I wrote this on social media, like one of my favorite episodes because there's just so much information to learn.

• Speaker #1

  Yeah. Like I thought I had a pretty good handle on it and understanding like all the little things that go into understanding your credit score. Even like the little tricks like. you know, don't wait till the end of the month to pay stuff off. Especially if you're like in line to buy a house or a car or something like that. Like, I'm like, well, I mean, I'm like, I paid off every month. Like what's the difference. Right. Like, so like just those things I thought were pretty interesting going through. Um,

• Speaker #0

  I would agree. I think my thing would probably be all of the financial advising terms, like Roth backdoor, Roth, a double secret probation, Roth. I don't even know

• Speaker #1

  401k tell people about the double double probation,

• Speaker #0

  Roth, um, crypto, like All of these different things that you hear about, but to like actually have them defined, I think it's been really helpful for me. So that's probably for me, again, different industry, right? I work in finances, but not financial. I think that's been really interesting. I think from the podcast standpoint is recording a podcast is easy. Okay. Having a conversation with somebody is easy. All of the other stuff, putting it on the internet. advertising it, publishing it, summarizing it, making transcripts, making episode titles. That stuff is hard. It is a lot of work. And I think we've done a good job at like, sort of figuring out like, I'm good at these things and you're better at those things. But like, we still have a lot of work to do.

• Speaker #1

  Yeah. Yeah. I would, I would a hundred percent echo that. This is like my favorite part about doing the podcast about all I had to do was come in here, record with Kelly. That'd be like,

• Speaker #0

  yeah, we have a great time. We chat,

• Speaker #1

  we learn later. Yeah. But then it's like putting on all the work at the back end to make sure it's like, effectively out there. It's, you know, sounds good. Justin helps us edit it and goes through compliance. Yeah. Fun, fun thing.

• Speaker #0

  Well, and the other thing that people, I don't know if people realize, like if you're not friends with Derek and I, um, Derek and I don't work together. So like, we don't, we don't see each other weekly. Yeah. We talk maybe once a week. And so like, we're not, it's not like two people who are like every day, like, what do we do about this? What do we do about that? We like sort of come together and do this podcast. And then we like go back to our real lives and like do our jobs. And it's like the momentum, I think that's sometimes hard. Yeah,

• Speaker #1

  that's true too. It's just, you know, kids getting in the way, like in school in the middle of the-

• Speaker #0

  Well, yeah, college or school. I canceled in the last month. I don't even know how many recording sessions with Derek because I had like a kid sick. It was like every, we would have like one every other week. And on that one day I had a sick kid. And like, that stuff's like hard, man. It's hard. Yeah.

• Speaker #2

  Cool. All right, next question. Are emerging market investments still considered a risky option?

• Speaker #1

  Kelly?

• Speaker #0

  Yeah, I'm not answering that one. Call that a definition. I don't know. All right. Let's talk about emerging markets. Yeah,

• Speaker #1

  emerging markets. Those are like, you know, companies in countries that are still developing, like Brazil and, you know, India. And even I think China is still somehow considered a developing country or emerging market. I mean, they're pretty emerged. So do you want the technical answer to that, Justin? So if you look at the standard deviation of the S&P, it's 16.99. But the standard deviation of the no, I'm just kidding.

• Speaker #0

  Oh, God. That's the glazed overlook we talked about last episode.

• Speaker #1

  At the end of the day, they're always going to be a little riskier because if you like, you got to think the government as much as messed up as the US government can be, and you may feel it is that way. A lot of emerging market companies are. much worse, right? We have a nice rule of law here. Things do happen. But like we have, you know, attorneys and all the other stuff that will actually, you know, vote on things. And if you have a contract, they have to honor the contracts. Like that is not always the case in other countries. So yes, they can be riskier. I will say this, like it's usually worth having some exposure in your portfolio to it because they do go in cycles. Like they're outpacing the S&P 500 this year. So like, yeah, I mean, have a small percentage of it if you do. But they're definitely gonna be riskier, but like this is where... maybe having even a more of an active manager that knows and picks companies within these countries that knows these markets better than you just picking a blanket index fund can actually be a little bit more useful because you're not just picking every single emerging market company you're picking hopefully the better ones not guaranteed um but

• Speaker #0

  that's probably the way i would go about it if you want to want to invest in that i i agree sure sounds good to me yeah all right

• Speaker #2

  Let's switch it up a little bit. Let's go with what's your biggest money pet peeve?

• Speaker #0

  Ooh. Like for myself or for other people?

• Speaker #1

  I don't just say and like in the world itself, like what do you see most often that kind of drives you nuts that other people do?

• Speaker #0

  Okay, I'll answer this one because we already talked about credit. It is that credit is a scam. That is probably my biggest financial pet peeve is that we are locked into a system that we don't have control over that is vague and opaque that gives you very little feedback and that system controls. your finances, your financial future. It controls your interest rate. It controls so much of your life. But nobody teaches it to you. Nobody explains it to you. You can't just go on a website and say, what's the formula for having great credit? Because it's vague. It's very vague. And not having credit is just as bad as not paying your bills on time. And how is that fair? And that I know why we have it, right? You are proving your ability to spend other people's money responsibly. That's the point of credit. But it is also the point of credit, credit bureaus and credit agencies to get you to take out credit to make other people money. Full stop. That's my TED talk. Welcome to my TED talk on credit. It's garbage. That's my biggest pet peeve is just credit is very difficult. And I see people, great people struggle in a system that they don't understand.

• Speaker #2

  Well, yeah, they make it hard to understand. I have a couple. I don't know if I should pick one or just start with one.

• Speaker #0

  We can go back and forth. I got other ones.

• Speaker #2

  All right. This is gonna be a whole episode.

• Speaker #0

  Great question.

• Speaker #2

  I think my first one is having way too much cash than you need. You know, like people like, oh, cash is king. I gotta have cash, blah, blah, blah. Like you only need to have a certain amount of cash to cover your expenses and do some other stuff with if you need it for buying a home. That's a different story. But like you telling me I don't want to invest in the market because it's gambling and you said, I'm just gonna have cash. because cash is king. I can't stand that. I think it's such a wasted opportunity. And it's the thing that I have the hardest time getting people over to the hurdle with to depart with that, quote unquote, safe cash to get something that's, quote unquote, risky. That's probably my biggest pet peeve. I think my other slight one is like the amount of influence politics has in your investment decisions. It really annoys me when we have to make every decision through the lens of who you voted for. Because honestly, it's generally going to, your perspective is not, your perception is not the perspective, if that makes any sense.

• Speaker #0

  That was profound.

• Speaker #2

  Thanks.

• Speaker #0

  I liked it. So I would say my other one would probably be, and again, I'm like so broad, I'm like so general with these, but it's just the lack of financial education in our educational system. We teach kids how to. do advanced algebra and we teach them how to square dance, but nobody tells them how. And it used to be like, we don't teach them how to balance a checkbook. Nobody balances a checkbook anymore. It's not about that. It really is about the broader spectrum of where is your money going? What are you doing with it? How do you manage it responsibly? How do you make a choice between, you know, you're a new college graduate and you have two job offers and one is a higher salary and one is better benefits. How do you compare these? I mean, there's just so little education on finances. And I honestly feel like it's getting worse instead of better because finances are getting more complicated and the people who are teaching it to you are your parents who were operating in a system that's different than the one that you're operating in now.

• Speaker #2

  Yeah. It's very fair.

• Speaker #0

  So those are my pet peeves.

• Speaker #2

  And they usually have their own blemishes and things too.

• Speaker #0

  Yeah. And then my last one is credit card companies that prey on college students at college orientation.

• Speaker #2

  I get the free shirt.

• Speaker #0

  Get a free shirt. Get a free poster. Hate them. Hate them. You're terrible people.

• Speaker #2

  Yeah.

• Speaker #1

  Those are great. I love all those. Let's go back. Let's do... How do I balance investing for retirement and saving for a down payment, especially when everything feels so expensive?

• Speaker #0

  It's a duel, Derek. It's a duel.

• Speaker #2

  It's a duel. Duel. Should I challenge you to a duel here?

• Speaker #0

  Challenge me to a duel here.

• Speaker #2

  I would say this may sound counterintuitive coming from a financial advisor, but for some people in some instances, it's okay to scale back a little bit on the retirement savings to get the short-term thing. Because if you really want to position yourself to get a house and not overpay for it or have a lot of, you know. other issues. It may be okay to say, I'm saving 10%, maybe dial it back to five for the next year so I can get the house. And then you always go back up to the 10% later. Generally, you're going to have, if you do it early enough and you're not overdoing on the house, you have some time to make it up on the retirement end. That may be surprising advice, but...

• Speaker #0

  No, it's advice that I really agree with. And I always go back to this with people is that you, 95% of people are paying... And I always talk about housing as too, right? There's buying a house and then there is shelter. Okay. Shelter is the place in which you live. Your belongings are stored and you are safe. 95% of people are paying for the shelter that they live in of adults. They're paying for the shelter that they live in. So you have to make this payment pretty much no matter what. And there are two choices. You can either pay someone else's mortgage, which is renting, or you can pay your own. And when you pay your own, are you going to get every dollar that you paid in your mortgage back again in equity? No, you are not. You're paying taxes as a part of it. You're paying insurance. The market goes up and down. But you are going to get a portion of it back again. So renting for five years, you could pay $3,000 a month for five years. You leave and you get nothing, right? You actually might get your security deposit kept because you didn't leave the apartment in broom-swept condition. Um, if you own a home for five years, when it's time to sell it in the majority of cases, you will get something. Yeah. Okay. Maybe it's not a ton of money. It could be $10,000. It could be a hundred thousand dollars. You got to make smart choices, but you'll get something back again. Um, and, and just like investing time is important in real estate, right? And there's like this cheesy quote that the best time to buy real estate is yesterday. And that's the truth. It really is right. The longer you have it, the longer you hold it, the more it's worth. The longer you have, the more hold it, more equity you have. So waiting on that, and I think that's, again, part of the millennial trap that we're in is we're not buying houses until we're 38. We are losing so much time to build equity in our properties.

• Speaker #2

  Yeah, and I think waiting for the proverbial, oh, the market's going to crash. Like housing markets so rarely crash. Yeah. And when you look back at the last like 100 years, I think it's only happened like three or four times. Correct. Like really, really rare. So I think the big thing is just don't buy a house that's overextending yourself. That's like the big key. But if you have to scale back on retirement for a year or two to do that.

• Speaker #1

  go ahead agreed wholeheartedly all right we only got a couple more let's do what's the real deal with student loans right now should i refinance consolidate or just keep making payments they're trash this is this controversial i'm feeling controversial today i feel like a little saucy i'm a little saucy today um

• Speaker #0

  i think we probably have both similar answers but i'll answer mine um for those of you who don't know i worked in higher education part mortgages i think i've mentioned it on the podcast before i worked in higher ed for many years I have a lot of really strong feelings on student loans. There are two types of student loans. There are good student loans and there's predatory student loans. So it really depends on what type of loan you're talking about. Was this a subsidized government loan? Was this an unsub loan? Was this a private student loan? You have to look at each loan individually to decide what you're going to do with it and what the best course of action is. The worst thing that you can do is ignore them, defer them, or go on income-based repayment plans if you don't have to. Those are the worst things you can do. Why is that? income-based repayment plan does not care about amortization. It does not care if you will ever pay this loan off. So all you're doing is paying a little bit of interest and extending and extending.

• Speaker #2

  The only thing I would throw into that is if you were in track to get your loan forgiven, that's when that can make sense.

• Speaker #0

  Okay, true. But that's like, you got to know what kind of loan you got. You got to know not all loans can be forgiven. Your goal should be to pay these off, man. Get rid of them. And I know that for a lot of people, You have a student loan that you didn't even really understand when you agreed to it. Okay. You didn't get it. You agreed to something that you're like, yeah, I got to go to college. Everybody gets student loans. That's what we're sold, right? You got to have them. And every year you sign up for more of them. No one is paying attention to the quantity. You graduate and you're like, oh crap, I have $100,000 in student loans. I'll pay it back eventually because everybody has this. We've like normalized it. Everybody has it. And then you go on an income-based payment plan or you go into deferral and it just keeps growing and it keeps growing. And now it's $150,000 and now it's $200,000 and you just can't get rid of it. So what you're going to do with your student loans, should you refi them? Should you pay them off? It really depends on how much you have, the type of student loans. And truthfully, you should be sitting down as part of a discussion with your financial advisor, right? Your student loans are part of your full financial package. It's part of all of the money that you need because if you make it to 65 and you still have student loans, it doesn't matter what you've saved in retirement.

• Speaker #2

  Yeah, I'm a big balance person. So I think you need to weigh it against like the trade-offs of not saving anything for retirement just to pay it. Because I think in general, like these streams of life are like not where you want to be. Right, so if you're just doing everything you can to just pay down your student loans and then like then I'll save for retirement, that's generally not where you want to be. So you want to make sure you have, you are still saving for retirement. You are finding a way to pay down loans. Like the refinancing is such an individual thing. Like I had a client that like, Like before I got her as a client, she refinanced her loans. Could she get a better rate? Great. She was on track for forgiveness. Like not great. Not great. You know, so now she took something that was going to be forgiven. I think it was over almost $100,000.

• Speaker #0

  And now she's got to pay back.

• Speaker #2

  She's got to pay. Yeah. Cool. She got a better rate. That's the problem. So you really want to look at your individual situation. There's a lot of resources out there where you can call numbers and say, hey, like, what if I had this plan? What about this plan? You know, when would I pay it off? Like you really want to do your research and really figure out like where you are with it because they're just anchors. Honestly, at the end of the day, like. Great, you got the education. Unfortunately, most jobs don't, you know, out of college give you that enough money to just pay stuff off right away compared to what you loan or borrowed. for better English. But yeah, that's what I would do. It's just individual situation all day.

• Speaker #0

  Yeah. And my last piece of advice for this one is as millennials and Gen Zers, it is our job to look at the system, know that it's broken, okay, and educate our children. And really, like the elder millennials and the Gen Xers, you may have kids going to college and have honest discussions with them about the college choice that they're making, what their options are, how much this is going to cost them. Are you getting a a job in underwater basket weaving with a $200,000 loan. Can you ever pay this back? Okay, maybe you're going to go to law school. So having higher loans might make sense. You have to weigh this out with your kids. It cannot just be about, I want to go to X college because I like their football team. I want to go to X college because it looks like fun. You really have to educate them about what are you anchoring yourself with for the rest of your life. Right.

• Speaker #2

  Well said.

• Speaker #1

  All right. There's two questions left, but they're similar, so I'm going to combine them. What's one financial habit you wish you started when you were in your 20s? And what's one financial habit you're glad you started when you were in your 20s that you're thankful for now?

• Speaker #2

  What's one you wish you started? Was that the first one?

• Speaker #1

  Yeah. So there's which one do you wish you had started in your 20s? And which one are you glad that you started when you were young?

• Speaker #2

  Another one I'm glad I started with. I was even like I was super poor when I first started. like a lot of people like your financial advisor like no one's talking to 25 year old be like oh here's all my money here's yeah right so like i was so poor when i first started um but i still we had a three percent match under 401k so i still committed a three percent match i'm very glad i did that the other thing i was glad i did is i bought life insurance at a young age um so i locked in a really low rate uh for a really long time uh one of the things i wish i did i really wish i bought real estate like to the real estate i mean So I graduated, we graduate, I graduated 07. I had, once again, I wish I had money. I'd had no money, but then 08 happened, 09 happened, all the houses were so cheap. If I bought like a triple decker in Boston when I was living up there, I would have been so, so much better off.

• Speaker #0

  You would be rolling in the dough.

• Speaker #2

  Yeah. So there's, there's, there's that. I'd say that's probably my, it's not like, I can't really say it's a regret because I didn't really have any means to do it. So I might have to think about the regret piece of it, but that's.

• Speaker #0

  I have a direct regret that I had the means to do and I didn't do. Much to your like, Oh, I did my 401k match. I didn't. So I worked at a job where I had a stupendous 401k match. It was incredibly high. I have still never heard of any other institution that had one as high as the one that I had the opportunity to take. At the time I was 25 and my salary was very, very low. And that $50 a month or $50 a paycheck I needed in my brain. Now, did I really need it? No, because some of it went to like the bar. But I felt like I needed that money. And I was like, eh, retirement is a long way away. And if I could go back in time, I did not take that 401k out for eight years. I lost eight years of it. Yeah, I lost eight years of it. And honestly, at this point, that was a couple hundred thousand dollars that I flushed down the toilet. So that's my biggest regret. And it's actually a conversation I have with young adults all the time that like in your first job, if they give you an option, you take it right now. It doesn't matter what it is. It doesn't matter if it's. $20, do something. Well,

• Speaker #2

  the thing is you can just get used to it. It's like you get your paycheck after all the FICA taxes and all the other stuff. You wouldn't know the difference if you threw an extra $20 in there for your own retirement.

• Speaker #0

  And especially if there's a match because that is free money. It is free money towards your retirement. So that is my biggest regret. The best thing that I did is I do think I always inherently did understand credit to a degree. And I was always very careful with my credit in my 20s. I was very limited with the cards I took out. I never fell for the college campus poster t-shirt people. I was very responsible. My parents were always very responsible with credit and did have discussions with us. And so I went into my 20s and 30s with a great credit score, sometimes like surprising to myself. I'm like, look at how great my credit is. But that has afforded me things as an older adult that I wouldn't have had otherwise. I've never had YouTube. proactively work to fix my credit. And I work with clients all the time that have had to do that and it is painful and it's expensive and I feel bad for them. So I'm super glad that I was always responsible with my credit.

• Speaker #2

  That's good.

• Speaker #0

  That's good. What else we got?

• Speaker #2

  That's it. That is it. Well, thank you everyone for your questions and thank you, Justin, for helping us do this today. You listeners have to give us your feedback on producer Justin.

• Speaker #0

  Yeah. When we want to know, should we fire him?

• Speaker #1

  Only if it's nice.

• Speaker #2

  No, yeah. Only nice things. What else can they say negative, Justin?

• Speaker #0

  Yeah. Right. They're not going to see Justin on the video either. Justin is hiding. So when this gets up on YouTube.

• Speaker #2

  Yeah.

• Speaker #0

  Yeah. You won't see Justin, but maybe we'll, maybe we'll take a selfie with Justin to put on the Gram. Yeah. Let's do that. But yeah, we'll be back for.

• Speaker #2

  See you in the fall, right?

• Speaker #0

  Yeah. And if you have ideas for anything you want to learn about, we'd love to hear it.

• Speaker #2

  Yeah. Yeah. Don't be strangers.

• Speaker #0

  Sounds good.

• Speaker #3

  The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to affect some of the strategies. Investing involves risks, including possible loss of principal.