Ask HTM - Open Enrollment Entanglements, Worthwhile BNPL Scenarios, & Continuing to Investing with Outstanding Debt #1060

on our wallets healthcare fronts. That's what it feels like. Another listener, he's wondering if you and I if we could ever love buy now, pay later, so we'll share our thoughts there. Another listener is considering pausing her investing for some debt payoff goals. We'll get to those plus more during our episode today, Buddy. Okay, So, I don't know where this quote comes from, but I think it's a it's either a quote from an old economist, but then Forrest Gump, you might I don't think of us

the chocolates quote. No, not thinking about that one. No, I just so I was listening to UH that there aren't many politicians I appreciate these days. But I was listening to one politician that I actually like in a sea of awful ones. And I'm not even gonna mention his name. I'm just not. I'm just not because I don't want to. I'm just I don't want to get that feedback. You're like, have you heard of this guy

named Donald? I forget his last name? Yeah? Right right? So, uh, there's like literally two politicians I think make any sense right now. But he was talking on a very obscure podcast, so good luck, I want to find this. But he was talking about the high prices of beef in this country,

which we've all been confronted with. If you've tried to buy a steake recently, you wanted to punch yourself in the face it was that expensive, and you probably opted for chicken instead, unless you're just a baller like Matt. Was he talking please? Was he talking about Brazil? Evidently the Argentina? Oh is it he's talking about? Yes, talk about our beef import the desire to import beef right now. And he talked about how that's actually going to prolong

the problem. And one of the things that he said was, and I thought this was so true, it's one of those kind of destruction, creative destruction, elements of that happened in a free market society. He said, high prices are the cure for high prices, And that's just a really

classic like economist talk, yes again slogan. How often you hear smart stuff like that come out of the mouths of a politician, But it's really true in so many ways that when prices get too high, it's I think people, especially politicians, are often tempted towards a non free market solution or a way to stem the pain of their constituents in a quick manner. And what this guy was saying was actually what happens when prices get high is people either a make different choices, they demand less of

that item. So in the case of beef, like people start opting for chicken or veggies, whatever it is, and said, chicken super affordable these days, that's right, or especially with that five six dollars off per package a costco. Baby, When that happens when you stock up and throw a pack in the freezer too, heaven. Yeah. And then the other thing that happens is it attracts more suppliers, So yeah, farmers, the suppliers see that the prices are high, they say,

I want a piece of that action. Right, They get in start providing more supply, which then does what lowers the overall the problem with beef is is that it just takes a lot longer to go from raising cattle

to that being a steak in the supermarket. As long as it take, I think it's like multiple years, right, whereas like with chickens or pigs, like it's so much quicker turnaround months, right, yeah, chickens it's literally like like eight weeks or something, six weeks three months before the Yeah, you go from hatching to like these chickens are ready to go. So the pain is felt a lot longer, which makes people want to get involved in the system

to lower the prices. When ultimate, as that politician said, as a commists before them have said, high prices are the cure for prices, let it go. So he would see advocating for more of a free market. So he was, dude, I'm all about that, because what's true is also the opposite of that too, right, So low prices are also the cure for low prices. Yeah, right, So it's a self it's like an autocorrecting mechanism. This also makes me think through it's like okay, beef is it's kind of

a really long runway, like years. But it makes me think about other industries a that have really short lifespans or short cycles that allow for there to be a whole lot of adjustments where you see prices in a much more dynamic way, and then different industries where it's really stretched out. And when that comes to mind as far as it being really stretched out, is higher ED because ye like as opposed to eating a steak, which

is something you do in one sitting. When it comes to higher ED, it literally takes most people at least four years to consume that product, and then years, if not decades beyond that to decide was that purchase it's worth my money? Right, because a lot of it depends on job satisfaction, career, how much money they're able to make.

But it makes Yeah, it makes me think that like he's I guess he was talking about how painful it is during during those sort of down periods where you're trying to figure out the best decision, and I think that's where folks could be potentially when it comes to higher ED because they're saying, well, was that worth it? Ah, I don't know. It's tough to tell. It's not something you're gonna know, maybe even for a decade out because I think about like when I was right out of school,

I remember thinking, man, what a waste of time. It's even your perception. Your perception of it changes. But is the solution what you're saying then, is a solution for the government to get involved into distort prices? I would say no, and that's just not the solution. Let's just be honest that a lot of price distortment that currently happens, like let's say we're talking about prescription drugs or healthcare, there already is a lot of like it's not really

a free market system, and so, which is awesome. Why it's so broken. We have a ton of distortment, and so a lot of people are like, I prefer distortion. How the free market's working on that. It's like, yeah, it's it's not because it's not a free market really, and that is a problem too. So all right, sorry, random wonky economists. Not No, I think it's fun. All right,

should we mention the beer we're having? You and I are enjoying an athletic brewing company beer that happens to be called Upside Dawn, which is a golden And I wanted to have this one on specifically because I told you about our friend Jimmy who gave me a beer, and I think maybe he was thinking we would have it on the show, but then I just drank it, and then anyway, he cried himself to sleep. Then I know, I haven't talked to him about it, but I should soon.

He's not talking to you anymore. Last time I was out I saw it. I was also athletic, and I thought, oh, I should get that mentioned Jimmy. So the one he gave me was an october Fest, which evidently you can't get where we are. You have to order it. And even still they don't you have to order it to a different state. Maybe I don't know if i'd recommend that there's somebody from to us at one point, maybe we should holler at them and see if they can send us some October but they would. I like the

way you're like, where your head's out? Good folks. Anyway, Free beers the best kind of beer to you, by the way. Yeah, so this is an NA we'll share our thoughts. Have we had an NA on the show before, I want to say we've had one or two? Really? Yeah, it might have been an athletic back in the day. Oh no way, Yeah, I just swear like the heat reached out and brought us some beers and we try them.

But yeah, But let's let's get onto money questions. Matt the if you're listening right now and you're like, I have a money question on the tip of my brain and I would love for Matt and Joel to tackle it in maybe next week on the show. Even well, you can go to have to money dot com, slash ask, or literally just record a voice memo on that voice recorder app on your phone. Email it over to us at how to money pot at gmail dot com. We look forward to hearing from you. Matt. Let's get to

man speaking of not real free markets. Well, let's get to a question now, specifically about open enrollment.

of the other major providers that's being offered. I'm interested in taking those savings, but I'm also weighing the cost of confirming that all of our doctors accept the other ensure, making sure that all of our prescriptions are covered for my whole family of five. So any advice about how to weigh the cost some benefits of switching from one insurer to another.

little less difficult. And yeah, I don't think Brian is the only person to find himself in this situation as well, because healthcare costs have risen significantly and they're yeah, obviously trying to find different ways to say so, here's some numbers.

The average annual cost now is twenty seven thousand dollars dollars for the average family in the US, and the average employer covers most of that twenty thousand dollars, But that still leaves a ton of money for you to cover as the employee, a little over six thousand dollars, and that's just the premiums like that, that doesn't include

the other costs. And so even with great workplace coverage here we're talking that man like you could easily spend over ten thousand, maybe closer to fifteen on healthcare costs in a given year between just like themistons and then just some of the other costs that go into it.

Paying those premiums gets you the coverage right in case of catastrophic some catastrophic happens to you, but it also gives you the ability to pay less to go see the doctor when we're talking about cope's and stuff like that. But just to think that that's how much it requires just to have health coverage in this country, even when your employer is putting a substantial amount of the bill,

it's it's harrowing. That's kind of hard to fathom. And I know that there are some employers who do even better on the healthcare coverage front, and they pay even more or all of your premiums. I think if you are an individual working for one of those employers just don't neglect to realize how great of a benefit that is,

because it really is substantial. And you see, you might have friends working down the street for another firm that's less generous and they are paying a lot more of They've got more skin in the game essentially when it comes to premiums than you do. So if you're in that case, be thankful, I'd say, and Matt, I think when it comes to this question, we want to compare the total annual cost. Right It's hard to do because

we're using predicted costs. There's no way to one hundred percent predict exactly what you're going to spend in healthcare in a given year. So much of healthcare is like ow I broke my ankle, I need to go see the doctor right now. You don't usually know exactly what you're going to spend in the coming year, understandably so, but you can come up with a solid estimate, I think, based on what you spent last year and whether or not there any procedures you already have planned that are

in the works. And some folks they even batch bigger health needs into a specific year while they're on let's say a lower deductible plan, and then they move to a higher deductible plan in years where they're less likely to need care, which is I think a solid planning option. If you're saying, listen, I know I've got this major surgery, and my spouse has this other thing going up, my

kid needs to get their tonsils removed. Let's go for the lower deductible plan in twenty twenty six, and then twenty twenty seven, hopefully most of our major surgeries are over with boom, Like, we're going to go back to the high deductible plan, try to save more money. But the total costs we're talking about here is premiums, it's your potential deductible, it's copays, and it's also really important to know what your out of pocket max is as well.

I think those are really kind of the crucial moving parts we've got a factor in, Yeah, the overall costs, because if you just go simply seeking lower premiums, well that's often going to mean higher deductibles. So also take into account how much cash, how much money you have in savings, whether or not you can go with a plan like that if you have some more healthcare expenses

next year, Joel, you mentioned copay costs as well. Those really can add up, so make sure you are aware of that if you do go and see the doctor regularly. And it's yeah, And Brian he mentioned specifically looking into the doctors that he has making sure that they accept the new health insurance as well. It may not be

worth it for you. So you get you're a family of five, right, If you have to go and find a new pediatrician, if you have to find a new doctor for you, if your wife or your partner, if they need to go find a new doctor as well, it might be a massive headache. But that being said, I don't know. Maybe extreme time situations call for extreme measures here and the ability to save an extreme amount

of money. Yeah, yeah, And so I don't want the default to be like, well, yeah, obviously make sure because that's just presupposing that he's not going to make a big change like that. And I actually want to introduce the idea that hey, maybe it's worth doing something completely different in order to save some money here. Yeah maybe, but you might with three kids, you're attached to the physician.

I mean, I remember Matt when we moved the one of the hardest parts about leaving where we lived was how much we loved the pediatrician where we were, and we just not to throw shade, but we haven't found a great pediatrician where we are now. It's just okay, yeah, and we miss the old and we're like, we even think about do we go back and just drive forty five minutes to go see a pediatrician. Maybe you can.

And so if you if you feel that attached and you're like, huh, well my pediatrician who we love, you know, doesn't take this new healthcare coverage, doesn't doesn't take this plan, well I get how that's going to help sway your decision, and you might be like, not worth the savings if

we can't see that person again. And yeah, you got a factor in prescriptions too, because if there are any regular prescriptions that you'd want to you know, that you take, you'd want to see how much those are going to cost underneath this new plan as well. Although depending on what you take, especially if it's an older generic, you might actually save a lot of money by not going through insurance and using a site that we've mentioned before like cost plus Drugs. Good Rx is another good place.

So don't necessarily think you have to go through insurance to save money on prescriptions. You might save more not going through insurance. We'd also love to see you on an HSA eligible high deductible health care plan if it

makes sense for your overall health care costs. Don't let the tail wag the dog here, but if a high deductible health care plan is ideal from that total cost perspective that we're discussing, it'll mean you can utilize an HSA two, which can just be another way to save money on healthcare because it reduces your taxes for the current year and it allows you to grow those dollars for your future too. Your employer they might be generous

enough to even offer an HSA match. We have heard from many listeners who have that as a benefit where they work. That sweetens the pot. We're seeing more of this and we love it. But just take that into consideration as well, because there are additional perks with the high deductible healthcare plan. You save on premiums, you have access to the HSA. Still, that doesn't mean it's always the best choice for everyone. Yeah. Yeah, And Brian, he's

talking about saving twelve hundred bucks here. But kind of piggybacking off of the taking more extreme measures. I've got to bring up health sharing plans because if you are interested in saving, what I would say is the most extreme amount of money trol. So I logged into our state's healthcare exchange, so healthcare dot gov, or if you live in a state where healthcare dot gov no longer works because the state exchanges took over, check that out. But I logged in there and guess what our family

of six monthly cost was going to be. I'm gonna guess for a bronze plan for the cheapest. Okay, I'm gonna guess like twenty three thousand monthly, So I'm me eight nineteen hundred, twenty five hundred dollars wow a month? Okay a month? Yeah, versus three hundred and seventy four dollars a month, which is what we're paying here. This is the difference between oh, paying over thirty thousand dollars

over the course of a year and versus six. And that's you're not talking about a gold plan, No, this was like prices you might be able to get a plan starting at and it said that I could not believe it, and by the way, when I said six thousand dollars, that's not only the quote unquote premium that I'm paying towards the health sharing but also that also includes our out of pocket costs. So we spent a

little over six thousand dollars total last year. Yeah, and you're probably thinking, all, yeah, I know how you are, with like not ever going to see the doctor last year was actually we had several doctor's visits out of which is yeah, you have to take that rational a few times kind of out of the ordinary for us. So I'm just highlighting that if you are looking to save the absolute most amount of money, you've got to

look into health sharing. And not all of them are are are religious, are faith based either Sidera, So you and I both both of us families are with Meta Share, but Sidara is a great option as well, where there's a whole lot of folks who are served well yea via that organization. The problem is, it's really hard when you're offered a Cadillac health insurance plan through your work, the premiums are highly subsidized. It's tough to think about saying none of the above and going getting your own

health sharing plan. I think it. They typically make the most sense for self employee people, right who don't have access to any sort of health coverage to work, or if you're if maybe you're employed by an employer who says, yeah, we don't you're kind of your own. Yeah, but like we don't really subsize the premiums very much, and you're feeling more of that healthcare dot Gov sort of slap in the face where you're faced with paying the bulk

of the premiums yourself exactly. But even assuming the average American where it's okay, say twenty seven thousand employers covering twenty, you're covering six. I paid six total last year, not just in the cost of health care, but also in out of pockets what I call in my excel sheet medical out of pocket costs. Yeah. Uh, and so you're still looking at saving a few thousand dollars right there,

assuming uh, you know, a healthier year. But that's something else you got to keep in mind too, because if you do use the doctor a whole lot, if you've got a whole lot of procedures lined up, if you've got different you know, regular visits that you need to go in and get things checked in on that's probably

not going to work out for you quite as well. Yeah, So I think what we're ultimately saying here to Brian is to, yeah, look at that over all out of pocket costs and say, is it word jumping through these hoops? And am I gonna have to give up too much in order to save the twelve hundred bucks? Or is man? I'm still getting everything that I really value. Maybe a couple things are gone, but I don't really care about

those things or use those things anyway. And yeah, it's really it's partly math, but it's partly kind of lifestyle and what you care about when it comes to your healthcare coverage. But twelve hundred bucks, that's not chump change. It's potentially worth jumping through some of those hoops in order to save that much money every year. All Right,

We've got more questions to get to. We'll get theoretical about buy now, pay later, and we'll also man that classic personal finance question of investing or paying down debt. We've got a good question on that front. We'll get to those and more right after this. All right, buddy, we are back from the break. Let's now hear from a listener who has a hypothetical discount question for.

indulge me in it. What if to attract more people to use buy now and pay later services and to get them used to using them in general, they started offering large discounts on the items that you were purchasing. Figure something along the lines of ten twenty thirty percent off. Would something like that move the needle on how you felt about buy now pay later services? If your answer is no, I would be curious if there's anything these buy now now, pay later services could do to interest

you in using them. For instance, even a larger discount, let's say eighty percent off just to be ridiculous, or perhaps some other kind of bonus that I can't think of. Is there anything that would get you interested in doing this, and I promise I don't work for these companies and I'm trying to trick you into using the services and or becoming an advertiser for them by now pay later services. Can they be made into something that the how the money guys would approve of? What do you say, man,

Jil can you fix it? As always? Best? Wayne out?

to the particulars. So I mean, I'm glad that Wayne's avoided them so far, but I think the shortening it truly is yes, like not even goin to my head sort of situation. And I think what Wayne is really putting his finger on the heart of why we're not fans of buy now, Pay later if there were discounts involved for using buy now pay Later, I'd be more than happy to consider using them. I actually did, and

I think I talked about this on the show. I used by Now Pay Later one time, and it was because I got a meaningful discount on some running shoes. I don't I don't remember if it was like, do you buy anything else other than running shoes? No, not really. I just ripped through on so fast, though, but it was I was like, I'll just go buy these shoes are a good price here, And then there was I think it was like fifty bucks off one hundred and fifty bucks for using Clara, and I was like, I'll

just get another pair of shoes. I stick them on the top of my closet mat in a row, and then I just like pull down the next pair when I need it. But yeah, I was like, well, if they're gonna offer me fifty bucks off, then I'm happy. I'm happy to use by Now pay Later. And then I just didn't use it, Like by Now Pay Later.

I immediately paid off the loan or whatever they call it in order to avoid the behavioral trap because I just don't want to be caught in that sort of like I've got how many outstanding loans do I have? And am I being tempted to buy things I wouldn't otherwise buy? But yeah, if there was like a ten or twenty percent off perk for using buy now, Pay later, I'd probably use it a lot more. Yeah, you know.

Like so occasionally folks will reach out to us to say that, well, credit cards, they're not much better than buy not pay later, Like you are still using debt to purchase something that you don't have the money for

at the time, And that's that's kind of true. But I think I would say that if that is how you are actually using your credit cards, and if that is how you are using your buy now, pay later, well then that's not something I'm happy with, right, that's not happy with you, I'm not because if that if you don't have the cash on like you need to have the cash on hand if you are going to use these methods of payment, it doesn't matter if it's a credit card or if it's a buy now, Pay later,

like that is the like you must have that ticket in order to ride Like that is like we're trying to raise the standard here, We're trying to raise the bar, like the cash on hand that is your license to be able to play this game. Otherwise then it's too slippery of a slope. Otherwise we don't once you messing with it at all. And so if okay, then if they are the same, You got the cash on hand, why would you then go with a credit card over

the buy not pay later? And it does come down to the perks, going back to what you're saying as far as getting the discount, you were saying, like, maybe get like ten or twenty percent off, like truly, if like I would do it for like five percent off? Yeah, because because that's roughly what a credit card. Yeah, because I'm getting anywhere between two percent and six percent off with my credit cards. If there is a buy not

Pay later. And this is me maybe wishing this out into existence, but if there was a a buy now, Pay later that was willing to offer five percent off just across the board in order to use their products, guess what I would do it. I would get in there, I'd figure out how to incorporate that into my financial system, into my Excel spreadsheets to spread that out over the four months. But actually probably wouldn't do that. I'll probably

just like i'd do with a credit card. I would pay it off at the end of the month, snag the discount, and I would probably stop using credit cards. Although that being said, there are other perks as well that the credit cards offered, right, not just the discount, but I think I would consider it like the buyer protections and how if someone steals your credit card. Wouldn't rent a card, I'm sorry, I wouldn't rent a vehicle

with buy not pay later. Yeah, and some of these other flight and some of these other perks that maybe we can touch on. But as far as just general spending, I think I do it even for five percent, not even you don't even need a tune me with eighty percent, because you're so What you're really getting at the heart at is that credit cards offer meaningful protections and benefits when you use them. The only thing that buy now,

pay later offers. The only perk you get is you get to pay that item off over a longer period of time. And so what that leads to for so many people, What that has led to for so many is poor behavioral and financial results, which have been well documented.

People spend more on average when they have the ability to use buy now, pay later Klarna or afterpay or whatever at checkout, and it's it's just one of the reasons to be wary when you see those statistics that that's why retailers want to do business with buy now, pay later companies because they know that when they make that available at checkout, people will buy more stuff, they will add more things to their card, it will juice

their sales. And you could, you know, argue that tapping your credit card to pay insulates you from maybe some of the pain and friction of buying too. And yes that I think that can be true for lots of folks. But the goal of using a credit card it's not just to mitigate the pain of purchases. That's but that is the whole essential use case and reason for existence

to buy now, pay later companies to mitigate friction. And you know, there are important consumer protections alongside these rewards that I think and boosting your credit score by now pay later doesn't do that. Credit cards do help do that. I think there's so many Even though credit cards have their downsides, there are so many potential positives for using

them if you use them effectively. There just really aren't any for buy not pay later yeah, thinking about the friction lists, I'm assuming are there apps on your phone or can you put Klarna or the different buy now

pay later companies in your wallet? Right, because I like, I've been thinking about it recently and the fact that I can double click and pay and then the little transaction device, the clover or the square pay or whatever like when they has it, when it's got the little when it's got the little ding like the little chime.

There's something about that that makes it so satisfying. And I think I've mentioned this before, but I've since that, since I've mentioned it previously, I've been thinking about that because it used to be what with a chip You stick it in there and it would make this terrible sound like that, Yeah, and it made what does that reinforce? It makes it seem like you did something wrong, as opposed to they completely change the user interface of it.

Now it's like this nice little congratulations you have been approved. You did it. I think I was half the reason they invented. It's a nice technology. It's a nice pat

on the back. And I think that's the friction. Whereas honestly, I think credit cards feel a little more dangerous because of the fact that we can use them in Apple Pay or the Google Pay and the wallets as opposed to because when you're sitting down at a computer clicking the uh, the four easy installments, the four that doesn't seem any more difficult to me than the fact that you've got a credit card auto saved in there, right, But the in personness of that sort of physical response

that a device does to you when you purchase something that to me almost puts credit cards back on my radar. As far as the payment method, that might be a bit more nefarious right now. Yeah, yeah, Well we talked about this with Jason Gorski a while back, right when he professor who writes about the power of cash, And I do think they're again like kind of what you're getting at is the insertion took a few seconds, was

kind of annoying. The tapping makes it then the awful buzz, Yeah, it makes it super easy and you feel like you're breezing through the line. And I think that is actually a downside making it really easy to use credit cardslet physically parting with the cash that's right hand, that's right. So we have to be careful about how we're paying what we're getting used to, how we're reconciling our books and looking at our spending at the end of the month.

And if by now pay later works for you, you're using it in a really intentional manner and you're not overspending using those services, then by all means like you do you. But I just think the whole way they're designed is essentially to get people to spend in ways the otherwise wouldn't, to become even more of a consumer. And I think those incentives have really gotten the best of a lot of people. Speaking of paying with cash, did you notice the old lady who was paying for

her coffee with cash this morning? No, And she was a little confused about the price, and he's like, oh, no, we actually round down when you pay with cash, so he didn't say the precise amount. But I was like, oh my gosh, that's right. Yeah, because when you pay with card, they charge you that service feed That's true. Yeah, but yeah, fascinating how that has an impact on how it is we consume, though, Joel, let's hear from a listener who is trying to right her former wrongs.

IRA as well. I was young and naive and strut for money, took out some loans trying to pay those off, still in there about eighteen percent wracked up credit card debt. Have since been paying those off, but just curious your thoughts on whether I continue putting into my four one K and roth first, maybe pausing those for a little bit, just so that I can get my auto and other

signature loans paid off for contacts. I have about ninety thousand dollars in my roth IRA, about eight thousand dollars in savings, but have about twenty five thousand dollars in debt. So just trying to figure out how I can navigate this thought I was doing the right thing, but now in a little bit of a financial picko, which ironically feels like it came from investing so much so any

insight is super helpful. Looking to buy a house within the next two years or so, and just wanting to make sure I'm handling my money here on out in the right way. Love your podcast, Love what you guys are doing.

Despite the credit card debt and the loans that Kelsey has taken out, which aren't our fave, I think we should also just say congrats to her for all she's been able to do saving for her future. She's got ninety thousand dollars in a roth iray. Yeah, that in particular, that's pretty solid. That's solid, man, And that's going to grow to be a much larger amount over time thanks

to compounding returns. And those are that they'll never be taxed, which is one of our favorite things about the roth Ira that's all your money tax free in the future, which is a beautiful thing. Also, Matt, do you want to highlight how you did something Oh, very similar to what Kelsey did by investing. I heard I heard too early. I heard in Kelsey's voice, She's just like, then this happened. Don't feel bad about it. I mean, I don't know. Is it like a rite of passage that there are

there's a certain subset of us make this mistake. But like you, I heard the glories of compounding. I had some friends who were a little bit older, and I was like, oh man, they're already investing. I need I got to get investing as well. You were O old twenty three okay, yeah, which is or twenty two very young, because the average person doesn't start investing till like what like like thirty times. I don't even know. But I

just knew that I wanted to invest. I hadn't been, and so I had I had ground to makeup drill. That's basically where I saw myself. And but what I didn't do was have money in the bank, and so

I was investing. Again. I didn't have nearly as much as Kelsey, but I found myself in a tight spot, and instead of relying on debt, I actually pulled those contributions out, which probably ended up costing me more money because the market was down a little bit and I was investing in mutual funds that were very expensive, and so it was like a double waymy I learned that

lesson there early on. Next to learn it early though, Yeah, yeah, oh yeah, you learned the lessons with like one or two zeros at the end of it, as opposed to like three or four. Yeah. But we're gonna talk about the money gears here, Kelsey, because when you go through the money gears, which by the way, you can find up on the website it had to money dot com forward slash start here. But you will see that paying off high interest debt that is gear number three. It's

just after getting your four one K match. It's just after saving up the basic emergency fund. But then after that credit card debt or other debts with double digit interest rates, that should be your top focus. And that is because you are unlikely to see higher returns from the market were you to invest those dollars. And so the thinking goes like, why not get the guaranteed return along with the peace of mind of not having that debt in your life anymore. Yeah, yeah, yeah, and I'm

with you on that. I mean, I think for a little while, probably the best way for Kelsey to proceed is to suspend any contributions she might be making to her wroth IRA. Yeah. And normally, Matt, we're not telling people, don't contribute to your wroth IRA, but the truth is, if you're doing it out of order, Yeah, for a little while, you do need to stop that. We say, keep getting them four one K match at work if

you have one, but don't contribute beyond that either. And this, if you do both of those things, stop contribute to your roth. Contribute less to your four one k only up to the match that allows you to claw back more cash flow to work towards debt, payoff a heck of a lot more quickly. Every other dollar basically that you can afford to part with each month it should be funneled then towards the credit card debt and the

eighteen percent loan that you mentioned. You know, hopefully, hopefully that hyper focus is going to allow you to eradicate those debts more quickly, get them completely out of your life, because after that, that's when you can resume investing for your future and you'll have even more money for that

purpose with less debt lingering in your life. But sometimes Matt, like, trying to do all those things at once feels like spinning a bunch of plates, and it can feel like it's so easy to lose one, and then you lose them all. They all come crashing down to the ground. Drop them. Plant's. Yeah, that's where the hyper focus comes in, especially when you have higher interest rate debt. It's like, just let's go all in on that. Put the other stuff to the side for now. You can get back

to it soon. Yeah. Well, aside from like that eighteen percent loan that she mentioned, which so she mentioned her car loan, and I'm guess seeing that that car loan is not as offensive as maybe some of her credit card debt or that eight percent loan that she took out, So I hope. So, I imagine you're right, medium or even low interest rate debt is worth addressing here, and

that is money gear number six. It is further on down the line, and that's because there are just more productive things that you can be doing with your money. You don't have to forsake investing until you are completely debt free. We ideally want all the how to money listeners out there to not have a car loan. But if you've already got one in your life and you're making this a binary choice, I would love to see you paying off a bit more slowly while also investing.

Like I think about too over the most recent years, like this isn't the best decision right for her to be investing aggressively while keeping some of the really high rate debt around like the credit cards as as well. But it's also not the worst outcome because of what the market has done over the past few years. But

the thing is is that is not guaranteed to continue. Yeah, you looked to last year and you're looking at twenty five percent returns, but in the year before that too, But you go one more year Joel to twenty twenty two, and things weren't looking so great, sure, and so you can't count on that continuing, even though you're not in the most terrible position given what you have done over the past few years. But what you are playing with fire right when you yes it is to keep it

is risky, you know. Eighteen twenty something percent interest rate debt around in your life for longer than you need to. Man, I always I hear people sometimes talk to me about credit card debt as though it's not a big deal. I've got six eight, ten thousand dollars hanging out and yeah, I have the cash to pay it off. But you know, I'm just I'll get around to it, and like, nothing bothers me more than that. I you know, I don't like to give unsolicited advice. We give advice here because

it's solicited. People are asking questions, but it's not financial advice, by the way, This is just for fun. But when those people like come up and say that to me, I mean, it bothers me so much, even though I don't want to offer my advice. But like, but what you want to say is what are you doing with your life right? Exactly? What do you think? It is a big problem and there aren't many better things you could be doing with your money than paying that debt

down as quickly as possible. Is it just interesting though, too, that Kelsey did invest so aggressively though, because that's the thing. I think most folks who are kind of like I don't know, I'll take care of that at some point. They're also I'm guessing not typically the folks who are funneling dollars like it's their like it's their job into the wroth, which it sounds like Kelsey has. Yeah, she's got way more in her wrath, by the way, than I did when I had to tap my tap my contributions.

When when I found myself in that cash pinch, we should we should out for it. Maybe a last little piece of advice here for Kelsey, and I just want to note that she's got money in savings, she's also gotten money in WROTH contributions that are accessible, and she could use either one of those or both to pay down her debt more quickly. But I would say, in

all likelihood she shouldn't. And that's because you know, while WROTH contributions they are accessible without paying tax or penalty, you can never get those dollars back into the wroth right because of annual contribution limits, and you're interrupting the

compounding of those dollars. But it can also, I think, create this unhealthy relationship with your retirement accounts that we want to prevent where we're seeing more and more Americans feeling like they can take money out of their retirement account because of changes to the law and just wanting it to make it easy and not pinch their lifestyle. They're taking money from their four to one case, and

that to me is a red flag. We see people going back to the well multiple times to their retirement accounts when they shouldn't. It would also be much better to invest less, to be more frugal, and to pay down those debts quickly with cash flow that you have. I think that's the proper relationship. You want to this debt, like get rid of it quickly, but don't necessarily pull

money from your investments to do so well. And she also doesn't want to completely deplete her liquid savings on hand in case she finds herself again cash strapped off in the future to where she feels forced to draw on retirement contributions. And specifically she said eight thousand dollars is what she has on hand in cash, and that's

not a ton. I mean it's great, it's a great start, but after you pay off that high interest rate debt again just heading cruising down down those money gears, I'd be looking to beef that up to three to six months worth of living expenses, and I'm guessing that's probably for you. It sounds like she might be single. She didn't mention a family, but I'm guessing for her that's

probably like a couple months worth of living expenses. But then beyond that, I would even want to want to see something even a bit more robust than what she's currently got. Agreed, But Kelsey, you got this one step at a time. We know you get rid of that debt and you'll get back to investing in no time. All right, mat we got more questions to get to. Let's talk about how closing a credit card impacts your credit. We'll get to that more right after this. All right, buddy,

we are back from the break. It is now time for the Facebook question of the Week, which is from an anonymous poster who writes the guys that would be You'd me Jeal. The guys have mentioned multiple times how closing a credit card can cause a dip in your credit score, especially if that is your longest active credit line. I have an opportunity to pay off my mortgage only current outstanding debts, and I use my credit card more

like a debit card and pay it off weekly. With paying off my mortgage and essentially closing out that line of credit hurt my credit score, particularly if I am looking at investing in other real estate in the next two years. Yeah, which you think, jo'l. That's a great question. Help this poster to understand. And this is one of those non basic personal finance questions where you're getting a little bit further into the weeds about how your credit

score is constructed. But I'm glad people are asking this question because all this stuff matters, right, And Yeah, paying that close of attention to your credit score, how the credit scoring system works, shows a high level of personal finance acuity. And it's typically, by the way, why we don't recommend people close a credit card accounts, because if you can avoid it, it's actually going to help boost your credit scord if you keep that credit card active

in your credit mix. If it doesn't have an annual fee, just use it less. And if it does have an annual fee, maybe ask your credit card company if you can downgrade to a card that doesn't have one. That way you kind of get the best of both worlds. But I just want to maybe highlight the credit card thing map before we get to this mortgaging, because that's a question that gets asked even more frequently, and it's why we typically recommend people, Hey, we want you to

keep your credit score robust. Closing the card could do the opposite, it's a more more typical example. But you can't do that with your mortgage. And so if your mortgage is winding down, which is a great thing, you can't really stop that process, no, nor would you want to, right, And so, yeah, paying off your mortgage it will ding your credit score, which sounds kind of ridiculous, but it's true. The fact that you now completely outright own this home. Yeah,

that's actually gonna hurt your credit score. That's one of those counterintuitive realities of the credit scoring system that people are just like, I what in the world you pay off debt and it takes your score down a peg like that. It's so counterintuitive, and it's kind of frustrating

as an individual consumer, to be honest. Yeah, And in part not only because this is the longest line essentially a line of credit where you've you know, you have a history here of making payments, but also because of the type. Right, So this is an installment loan that you're paying off, and I'm guessing based on the way this person is posting that they don't have any other

installment loans. Well they said, they said they don't have any other debt, so it's not like they have student loans, or it's not like they have a car payment where they're paying that on a regular basis, which, by the way, are great things from a personal finance standpoint, but from a perfect credit score standpoint, not the best, not ideal. I do want to highlight here though, that they wrote I have an opportunity to pay off my mortgage, which

tells me that it's optional. Like I wonder if they came in they got a bonus at work, or maybe they inherited some money and they're thinking, oh, I want to do something smart with this money. I'm going to pay off the house. I have the opportunity to pay this thing off ten years early. I should be jumping

at this opportunity. And I would say, let an opportunity continue knock and don't answer that door, because I'm as if you've had this loan for this mortgage for a while, or if you like, let's see you refinanced ten fifteen years ago, you've got this thing locked in. I'm guessing at a really low rate. And again, there are just better things, more optimal things that you can do with

those dollars than eliminate a three percent mortgage. Yeah, agreed, saving and investing and you used to saving would not outpace your mortgage rate. But it still does right now. Until the Fed lowers interstrates even more and savers get dinged even harder. The chances are, if you're in a high held savings account with one of our favorite online banks,

that you're outpacing your mortgage rate. By the way, if you do decide to pay off this mortgage, it shouldn't negatively impact your ability to invest in more in real estate and to get the best rates in the coming years. Typically that yeah, getting rid of that line of credit from your credit mix not ideal from a credit score perspective.

But if you have a great score, yeah, you'll see a ding for a while, maybe for a few months, but without the primary mortgage, you're gonna have tons of cash flow to save up for a down payment for those investment properties, and your credit score is going to have more of like a short lived impact, negative impact, and I think it'll bounce back pretty quickly. I doubt it'll still be dinged after a couple of years. Yeah, agreed.

And even if it, even if it is still down ten to fifteen points, if you have a really high credit score to begin with, it doesn't matter. You're still going to be able to qualify for the best rates in terms. All right, you know what, Let's do another one here real quick. Another anonymous poster. Hi trying to learn here. I keep seeing that people should be investing at least fifteen percent of their earnings. I think this

is the last money wheel. Does this include or not include money you already put into your four oh one k money wheel? Obviously we a man man, we're doing a bad branding job. Money gear. It's the money gears money years. And the reason we call it the money years is because we like biking and we're like just thinking about oh seven gears on the bike. When you're first getting started, you start off on year one and then before you got to gain some speed before you

ramp it up. That's right before you shift gears. So, yeah, does this include four one K dollars? Though? Joel the fifteen percent? Well, the answer the answer is simple here, we're all about your savings rate being a minimum of fifteen percent of your gross income. But gross income includes your four one K right, so yes, yes, and so we count investing and we count debt payoff in your

savings rate. So whether you're paying off credit card debt or you are putting more money towards four on and K roth I right, those are all included, we would say in your your savings rate, what's known as your savings rate. Part of the reason is because you're not spending that money the others because if you had to go into liquid savings at some point in the not so distant future, you'd have way too much allocated to cash. You'd be really imbalanced, right if like all of your

savings rate went straight into to a savings account. But isn't that that's an investing question though, right, Well, versus a percentage savings rate should go to saving, investing, paying down debt, that's another question. And it's highly specific. But you like diving into these details more than I do. Like some of this. I like it makes me think about like when you weigh yourself, Like some people are like, no, no,

you gotta weigh yourself first thing in the morning. And some folks were like, no, I like to do it at night before I get before I jump in the shower. Or some folks they strip down and they're totally naked, and some folks are like, ah, I just war my clothes. Joel always wears his cutof geen shorts, though he never

takes those off. Yeah, like Cobias Chunky. I mean the way I think about it, as long as you are consistent with like however it is you're you are calculating your savings rate over time, As long as you stick with that, I think that's the biggest thing, especially if early retirement is a goal of yours, to you know,

slowly but surely ratchet that thing up. I guess I just worry that some of the basic personal finance advice to the years has really told people, yeah, save ten percent of your income, and we've and we set the bar so low. Granted a lot of Americans not even hitting that savings rate. And yeah, but if you set the bar so low and you don't really help people understand how much a higher savings rate can impact their ability to attain financial freedom, then maybe we're letting people.

We're not helping people realize what they can build for themselves, the piece out money they can amass, and the optionality they're able to find in the not so distant future if we say, you know, if we keep the savings right ideal too low, or we make it sound like it's not as important. So yeah, I guess that's where I think it is important. But I think you're probably

right to Matt. People obsessed over it kind of as far as the semantics way, they find Yeah, I'm less interested in that, And I think maybe what they're saying too is like, hey, my gross income and with that's what you address there, right, Does it include the four win k dollars? It's not just your take home pay and you investing on your own within an IRA and within a brokerage account. The four one k totally counts.

There are going to be so many four one k millionaires in the next ten twenty thirty years because of the fact that folks have been auto enrolled. They're going to be doing that like clockwork. The behavioral aspect of it is just firing on all cylinders, and yeah, they're going to be hopefully set up quite well for retirement. I think this poster will too, if they maintain it at least fifteen percent savings, right, which I think is

the floor that most people should be striving for. All right, matt, Le's get back to the beer we had on this episode. This was an athletic brewing company upside down, Golden Ale upside don. An athletic, of course, is the heavy hitter in the ina beer space or your thoughts on this one the non alcoholic beer space. Yeah, you know what I thought of. So we're not vegan, but it makes me think of the fact that it's harder to cook. I think vegan meals that taste really good.

a vegan beer. But I think if you think of this less as a beer and more as a different type of drink or a different type of beverage, then I can get behind it. Right. If I think of this as like a multi multi hopwater, then I'm like, oh, yeah, that was that was pretty good multi hop water. That's a really good way to describe it, as opposed to thinking of it as an actual beer. All that craft beer.

All I can think while drinking this for the first half of the show was so watery but barely beer flavored. And then I had Yeah, I just had to reorient my mind to be like, this is this isn't craft beer. Yeah, so if you think of it as a craft in a beer, which is not really the same thing, Yeah, it's a different category. So if I put this more in the category of seltzer, oh okay, I could totally see myself opting for this over a lime seltzer from Aldi. Ah.

Thought that would be a whole lot more affordable. Go with the seltzer. But that being said, it's still got those flavor profiles and I still really enjoyed it. Still really liked to notice here on the can that Athletic they restore They give up to two million every year to help restore local trails. Okay, that's something you can get behind right. Sure, yeah, I like that makes me. I don't think I ever had an Oduel's like your

uncles in a beer. This has got to be better, I'm pretty sure I've I don't know something would be so long. I know that this is better. This has to be way better. I'm not even going to mention the fact that this has reminds me of lot Duels back when I was twenty years old, and it doesn't because I never had it, but my goodness, this has to supersed it by a long, a long way. Yeah, either way, glad that you and I got to share

it today. You can find show notes up on the website at Howdymoney dot com and that's gonna be get money. So until next time, best friends Out, Best Friends Out,