Welcome to Out of Money. I'm Joel, I'm Matt.
Today we got a special ask kind of money episode for you. We're addressing tariff's volatility and their impact on you, you.
Know, a buddy. This is the Tariff's special edition. How it's going to impact investing, How it's going to impact your job, your income, what you're spending, whether or not you should buy or sell a house. Perhaps these are all topics that we're going to be getting to during today's episode. Yeah, a lot to cover, and it's therefore we don't have any short quick stories to share with them this week. We've got a lot to get to during today's episode.
As you and I have discussed multiple times to the constantly changing policy, that's got a factor to this discussion. Two, it's not like there's some set in stone let's plan on this. There are still like tariffs that are supposed to come into being in you know, less than three months. Will those are won't those happen? That's also part of the discussion here.
Yeah, that's so true, because so we're literally recording this episode just like a few days before, you are hearing this out there and even and certainly between us recording and you hearing this episode, things could have changed. But literally, like while we're talking, like things are so dynamic, and I don't know if there's ever been a time where we've seen so much change in such a short amount
of time. I heard specifically the terriffs I heard referred to recently as like the wax on wax off tariffs. It's the mister that Trump is the mister Miyagi of of international trade some truth for that which totally cracked me up. But the beer that you and I are going to enjoy during this episode is called a yellow Rose. This is a smash IPA. I did not know that was a category of Iba smash Burger's, but not smashed ipa smash I pa. I don't know Loane Pint Brewery.
They are the of this particular drink, but never called it a drink before, but as a beer that we're gonna enjoy, and we'll share our thoughts at the end of the episode. True story.
And by the way, if you have a money question, just go to how to money dot com slash ask for the simple directions on how to submit yours. If you've got one about the macroeconomy, how it impacts your personal finances. Please do send your questions our way, or you can just record your question on the voicemad Mo app of your phone email it over to us.
Matt.
Let's get to a question specifically about international investing in the age of tariffs.
Hey, guys, this is Bryant and I'm calling in from Cutzer. My wife and I are both originally from the United States, but we are currently living and working in Cutzer as professors, and we are worried about the kind of state of the US economy, and we recently decided to keep living here, so we just turned down job offers extra c m M in order to kind of stay here and work here. Sellers are higher cost or lower. There's there's some perks involved, and we are kind of wondering where to go from
here with our investments. We currently have most most of our investments are currently in the US stock market, mostly in the Vanguard et F v o O. But given kind of the decline of the dollar and the kind of fluctuation in the in the stock market currently and with everything else going on, we are considering investing internationally. So we've been looking at some European ETFs like the VGK and some other ones, And we were kind of just wondering if you have advice about that, what you
think about if there's any picks that you would suggest. Yeah, thanks, Yes.
Do you like how Bryant said, if we had any picks, We're here to dish out the stock tips.
He's not, at least he's not asking about individual stocks. He's talking about, Hey, should I diversify internationally? Which is and it's honestly, that's a question as old as time, since the beginning of stock market investing.
Yeah, Brian, he's a part of the VU family. He feels like a brother to me, Joel, because that's pretty much fully invested in VU.
Yeah, I'd be curious to know, by the way, what it feels like to be living internationally right now, reading about all this American news from overseas. It's it's like, right, we feel inundated by it. I wonder if, because he's in the Middle East, if it feels more or less impactful. Maybe it feels even a little less unclear because the coverage is a little more sparse. I I don't no, but it is. It would be interesting to have that kind of Bird's eye view in What is it actually
like living in what? How do you pronounce it Cutter? I've always had a tough time pronouncing that one.
But that's I think that's how you pronounce it if you are a local, like if you live are That's how I always said. Yeah, I mean that's as I think. As English speakers, I've always heard it referred to as Qatar. But folks who say cutter, you have to be a professor living in Cutter to be able to say it that way. Joe, Yeah, so you're not allowed to say it like that, Okay, I won't just so you know. Good, good,
Thanks for clarifying that ahead of the time. A whole lot of other words you're also not allowed to say either, right, because of who you are. But that's true, okay. But I also I get to worry that Bryant is experiencing here, right. I think.
I think a lot of the norms that we've grown accustomed to, they're being shaken up right now. You and I were always talking about how politics shouldn't impact how you invest. That's particularly true right when we're getting to election season and people like, oh, if the Democrat or the Republican gets selected that maybe I should shake things up because I don't know if they're going to handle
the economy as well. And that has always been based on the reality that both the R and the d's they kind of tend to hold a belief in the benefits of global free trade. And for the first time in a long time, Matt, the free trade bias that's essentially been held for generations, it's being upended. And so yeah, I do think the discussion of changing your investing strategy takes on a bit more weight in this environment. Like the question is different than what if an R or
D gets elected. It's like, well, what if the way we think of the global economy is shifting dramatically?
Yeah, and it does. I will say it appears like that sort of free trade approach to global trade is being upended. There's also a chance, of course, that it could just sort of be a blip on the radar in terms of stock market and investments. It could be just some of that short term volatility that has yet to be seen. And honestly, that kind of that's the filter I'm viewing all the questions we're going to kind
of get to today. We're gonna address and try to answer the questions as best we can given what we know at the moment. So Bryant's question should he be
investing internationally? There are gonna be valid arguments on both sides whether or not you should continue to invest solely in the in US companies or if you should expand that to international indexes as well, because many believe that US centric ETFs like VU offers enough overseas exposure that it just minimizes or it even completely eliminates the need to own funds that own foreign companies specifically, So basically you're getting enough diversification by owning a single index like
VU because McDonald's, Apple, Amazon, these are all companies who are doing a lot of business in countries around the world, which achieves a just like a good enough kind of result.
If you travel to Asia, man, you know how many kfs as you see a lot are there.
I don't know. It's been a long time I've been in Asia. So we have always felt this way, and honestly, despite the tariff induced market volatility, we still feel that most folks will do just fine investing in low cost total stock market index funds or s and P five hundred ETFs over the years.
Yeah, And I think that's for multiple reasons, right, because despite this growing anti free trade sentiment, the US economy, it's still the most vibrant in existence, right, and our business environment is the envy of the world. Like when you think about the biggest companies in the world, it's not even close like the United States, especially when you're talking about the mag seven or whatever. Companies in other countries just can't hold a candle to the largest companies
that we have in the United States here. True, and also when it comes to the breath and the diversity of companies and industries that the United States participates in. It's all our belief too that there's no real stomach for significant tariffs to remain over the long term. Right. We've already seen tariffs paused, reduced, rolled back, and then exceptions created for specific companies and sectors specifically like computers, smartphones.
Right when you think of a company like Apple, they're lobbying hard to have tariffs reduced on smartphones in particular. And I think the administration is starting to understand how negative of an impact lasting tariffs could have. And it's obviously it's hard to predict when trade policy is kind of at the mercy of one man's whims right now. But the willingness to minimize tariffs and to shift when
tide's turn, I think that's at least somewhat positive. So one we can see that the US economy is incredibly resilient, and two, it looks like tariff policy can and will change right as the American economy reacts negatively yes to the imposition of those tariffs. I think those are two at least positive signs that being a US centric investor still seems like.
A reasonable idea, right But Bryant might feel differently. He might come down, you know, given the same information, he might make a totally different decision. And I think that's okay. There are a lot of really smart people out there who believe that international exposure is crucial for investors. And this is even before tariffs came on the scene. Even if international stocks have performed poorly versus US stocks over the past decade, that still doesn't mean that they will
over the next decade. You know, like things could turn around, particularly if US policy continues to march down this road. Brian, if you do feel that you need to change things, up. I would say, don't change things up like immediately, Like you don't need to slam on the e break and pull ui. I would just consider buying other low few funds that offer non US talk exposures with new investment
dollars over time. This isn't like a call to say just sell everything and you completely upend your financial or at least your investing life. Yeah.
I think if you're going to change your investing strategy, like, make sure you write it down, be thoughtful about it, and say no no, because of this, It's changed my happening in the world. It's changed my belief in this way, and put pen to paper so that you have an informed view of why you're making those changes, so you're not just making them emotionally and half past exactly. That's a bad idea and it.
Makes me think too. So at the beginning or in his question, he was talking about how they chose to stay there in Katar based on a couple of things, based on higher pay as well as lower lower cost of living. I think is what he said there that's great as opposed to thinking that, oh, it seems like
the US economies and shambles. I'm not totally sure. I mean, he did mention like the weekend US dollar, but hopefully he primarily made the decision based on some of these hard, tangible number crunching that he was able to do, as opposed to projecting into the future what might be happening
in a similar way. That's how I would want Bryant to approach his investing, like, yes, total, it's totally fine to say I want to maybe diversify a little bit more internationally, but make sure you're doing that with a plan while looking out the numbers as opposed to that sort of knee jerk emotional reaction.
In a proactive, not reactive way. And the proactive, I think is exactly what you mentioned, Matt, just kind of buying into other index funds internationally over time to increase your exposure there, instead of making some sort of whiplash sell by sort of thing in one of your tax advantage retirement accounts. Right, and Bryant, he mentioned VGK that's a good one for your specific investing. It's a Vanguard fund, and then there's there are funds like VXUS it's a
it's a broader international fund. They could do the trick as well.
Also low cost. Also cost also starts with the V so I'm pretty sure Brian's going to be into it, and I think ultimately what it comes down to, Matt, part of what makes a good portfolio for anybody out there listening is if it allows you to sleep at night, If you are a nervous nelly, right, if you believe that ramping up to let's say, twenty percent international stock exposure over the coming years, if that would help you rest a little more.
Easily, do it. If you have gone if you saw those those jaw dropping multiple five percent drops back to back and you were like, I can't handle this. I'm looking at my four one k and I'm freaking well, then it probably means you are too stock heavy and you need to have a more balanced investment approach, Like you don't do something, don't have so much exposure to stocks that if we do have a correction, like it's too emotionally difficult for you to stomach. I would also
just note don't sleep on target date fund either. There's still US centric, but part of the appeal is the inclusion of some foreign stocks and bonds, So target date funds could be another reasonable choice for Briant and for other people out there, And it's something that we mentioned kind of frequently, especially because it is one of those set it and forget it things where you invest in the target date fund and it changes as you get closer to your retirement date.
Yeah, but in a similar way, I feel like even VU is a set it and forget it kind of thing. You know, It's like, this isn't something that you really need to look at. It's it's a NIC and PFUF fund, an index fund. It automatically rebounces and take into account the different companies that are included in the troops.
But it's getting closer to tapping those retirements. Certain percent stock oriented, certainly if you are approaching retirement. But I mean it seems like Brian is just looking at how am I going to be able to maximize my returns moving forward. So I do think that there's a way to sort of steal man the international exposure case, and like this is an aspect of not terrorists, but just our current form, current White.
House's foreign policy. And hopefully this isn't venture too much in the politics. But like one of the things that we've heard recently is that the US isn't going to be like the world's police right like that, it's not going to be like the global cop on the beat, as evidenced by the Vice President's statement that got the signal gate whatever the thing this is a few weeks ago, it's just like, Oh, I hate that we're bailing out Europe again. And there seems to be this distancing from
other countries. I mean not only in funding that we're cutting to other countries from a soft diplomacy standpoint, but
also literally from a defense backing standpoint as well. So from a Steelman best case scenario for investing internationally, it almost seems like that there is an opportunity for all these countries who have previously been reliant specifically on US defense to have to get their books in order for companies to be like, oh, this is something that we're going to have to start doing, and I see potentially an opportunity for a lot of foreign countries to ramp
I mean they're talking about ramping up like Germany, right, I mean they're like, oh, we've already seen defense stocks in Europe going and as companies get more efficient, that's going to lead to higher profits and potentially higher returns of well, so I could see that being sort of a not a best case scenario argument, but like a Steelman case for international investing, specifically because of the US's stance towards other countries. But who knows.
All right, Matt, let's get some more questions we've got. Specifically, we're gonna get to a lot of questions that people pose in our Facebook group about tariffs and markets and how they should be reacting right now. This question comes from Justin. He says, in explaining tariffs, can you discuss if a tariff is a form of a regressive tax policy?
For simplicity's sake, if tariff's raise the cost of groceries by one hundred bucks equally for all consumers, that one hundred dollars is a much larger percentage for a person making two grand a month than for the person making ten grand a month.
Yep, yep. I mean, that's basically true. Terrafs are regressive in this way. And it's super fascinating because at least one of the major reasons offered for implementing teriffs was to help lower income Americans, so bringing back the manufacturing jobs that were lost to other countries, is one of the main goals, and I of course understand the thought process here. I just don't think that recreating a world where the US is a manufacturing powerhouse is likely or
even makes the most sense for our economy. It makes A few days ago or last week, we were talking about we were looking at the digital rendering or the flyover of the BID factory in China, which it's like larger than Manhattan, It's like almost as big as San Francisco or something like that. Mind blowing dorms for their workers, and I'm wanting it. It's crazy impressive and you're just like,
this is amazing that the singular private company. But then to think, wait, are we going to compete with that? Not from a do we have the ability to? But do we have the do we want to do that? Right? Like? Is that the kind of manufacturing powerhouse that we're looking for the US to become? Is that the kind of job? Do you want to be confined to whatever corporate dorm you know, because that's closest to the factory that you're now working in and you don't have a life outside
of that. Do you want that for your kids? You know? Like, and that's where I have a really tough time grappling with the fact that this is something that's an actual goal or aim of the current administration. It's one of those things to work at a Silicon Valley company where they have like professional chefs and massuses and stuff like that, and so you're kind of coerced into staying, but you're
not forced to be there. And I see that as yeah, person of the job, as opposed to be like, oh no, no, you have to live in It's like a modern day Hooverville, Right, That's what it looks like. It could turn into agreed, agreed where we did in that path.
Yeah, when it comes down to back to Justin's question, tariff policies are going to hurt the bottom half of income earners much harder than folks who have a lot more financial resources at their disposal. So, for example, avocados have been much talked about. Matt loves most of our
avocados come from Mexico. And if avocado goes from a buck twenty five apiece to two bucks apiece, well, the person with the higher salary and the greater savings they can more easily afford their avocado toast or their QUACAMOLEI habit because better than the person who's living paycheck to paycheck. Sure, that extra seventy five cents per avocado, it really does add.
And that's just like literally one example of potentially hundreds of items that we buy regularly that could go up in price, and people who have less money coming in are just going to feel the upticking prices more. The same thing happened with inflation over the past few years, right, it was lower income households who felt more pain because of inflation. So yeah, on average, richer households will pay more overall thanks to tariffs, but less as a percentage
of their income. And we haven't really seen massive price bumps yet, but as those come rolling in, I think the rock solid belief that tariffs are going to benefit economically disadvantaged folks in our society could dissipate quickly as public perception turns even more sour. And I think that's part of what's going to lead to the inability for substantial tariffs to remain in place over the long term.
Yeah, going back to manufacturing, guess what, It's hard to manufacture avocados or coffee.
For instance, Like you can't do that in the US. I guess you could try. There's like three countries that produce the vast majority of the world's coffee. Buteah, if we made a coffee in the US, it probably like the worst coffee in the world.
And that's not because like that is out the stuff.
I want an American stuck at making coffee, but I want to drink it because we don't have the climate to grow the bets, so we need to grow.
Right.
If we did have the climate, it'd be the best coffee in the world, right exactly, That's what Joel's saying.
All Right, we've got more of your questions to get to about tariffs and the markets. We'll get to a bunch of those right after this.
All right, man, we are back from the break. We're gonna take some more questions that listeners posted over there in the Facebook group. If you are not a member of the how to Money Facebook group, be sure to look it up. But let's see Becca, she asked about retaliation. She was talking asking about gold and crypto as well. Joel, one of your thoughts there, do you get any thoughts specifically about the trade war? That's that's the part that seems the most ominous.
Yeah, I feel like that's kind of freaking people off the host I agree, And I think I'm glad she asked about this, because retaliation is is real, right, you can you can punch somebody in the nose, but then I don't know if they punch you in the ear back, like you're both hurting, So you have to take that into account. You might say, great, we got the upper hand here in the beginning, but do you ultimately get kicked in the pants, right? Do you ultimately have the
upper hand, That's the question. And I think tariffs are a kind of a too complay at this game scenario. And we're already seeing other countries, a lot of our Canadian neighbors to the north canceling trips to the US, other countries too, just saying I'm not vacationing there because I'm so mad about the US trade policy. And that impacts the airlines, that impacts hotels, that impacts other travel
leisure industries. And so if the US continues to have an antagonistic approach to trading partners, particularly friendly ones are ones we've been friendly with over many, many decades, it could hurt the bottom line of US companies who sell some of their goods and services abroad. I'm just thinking of a company like McDonald's. I could see consumers in other countries saying, like boycotting, Yeah, yeah, I'm not evening,
I'm switching to my local fair instead. So not only will their cost rize US companies cost rizes, but demand could go down to internationally. And so I do think that erosion of faith in the US as a mutually beneficial training partner, it could potentially create some of the most harm.
Totally, And that's the part that doesn't make the like any sense at all. Like China, Okay, I totally understand that, Like if you start doing some research or reading reading about the amount of intellectual property theft that has taken place from China and like the billions of dollars annually that you could assign a dollar amount to. Okay, I kind of understand the argument there, But the argument is more of an adversarial relationship there. Yes, absolutely as the
other predominant world power. But when it comes to like Canada and even Mexico, I understood at the very beginning when border crossings were still a thing, and that's something that the Trump camp that they campaigned on like shutting the border, but that's like all but completely gone away, and so the and what gives with Canada. There's like
no hardly any illegal crossings. Oh my gosh. Like the fentanyl stats about the number of pounds that were crossing the Mexican border as opposed to the Canadian border was like laughable, Like, I don't these aren't real numbers. But it was something like every thirty days, like three thousand pounds of fentanyl from Mexico and it was something like seven from Canada, I believe. And so the adversarial relationship in particular to Canada makes very little sense to me.
But becos also asking about gold and crypto, how that would be impacted, And so we'll start with gold because it's done quite well for investors as they've turned there during uncertain times. It's actually outperformed the SMP by a lot over this past year, given the volatility that we've seen. If you zoom out a little bit more, you see that it's essentially matched the SMP over the past five years.
But then beyond that it doesn't do so well, and especially if you look at the last even the last five to ten years, and you eliminate the past most recent four months, things start looking the whole lot more normal. It's the volatility that we've most recently experienced that's really throwing the average returns off.
Which is on average when people turn to goal, it's like a flight to safety exact. And so I think that's why beck is asked about this, well, should I be flying to safety? And part of that depends, I guess, on your view of where the world is headed.
Yees. But so still, if you have time on your side as an investor, look into the stock market, that's going to be a better choice from a long term historical perspective. As far as crypto goes, we still dislike crypto generally speaking, and we've got to carve out though for bitcoin. Bitcoin is not unlike the other cryptocurrencies, but inflation, tariffs, currency fluctuations as well currency inflation. This could lead to more investors moving into the bitcoin direction. Still highly volatile
and basically it's still acting like a security. It's acting like socks. You got to be aware of that, and we want you Becca as well as all how too many listeners out there to stay invested in the market, but I certainly think having some bitcoin might be wise, certainly dabbling a little bit, no more than five percent. I get that A thumbs up.
Yeah again, going back to kind of something we mentioned earlier, though, making huge shifts in how you're invested makes very little sense. But if you're making smart, calculated moves in different directions because you are being thoughtful about the future of Bitcoin, of money, of companies, of US based companies specifically, I get that. But you still you don't want to make knee jerk responses.
Yeah, in large part because I think we are optimistic and we're hopeful that things are going to go back to normal, like not too far future. Yeah, yeah, I did say that. Well, but you know what I mean.
Let's get to a question from listener Sarah. She says, I have a current college student. We used five twenty nine funds for freshman year, but it's now depleted. Student's father wants to keep adding to five two nine. I want to save in a HIGL savings account. What are your thoughts with the current volatility in investments right now.
I think Sarah and the student's father are both right to a certain extent. I'm not sure where Sarah lives, but much of the answer comes down to the state that she lives in, because if she gets a tax break for funneling those dollars through a five twenty nine, well, of course do that. If not, well, then the high yield savings account is the right answer we're gonna get. So why I said that, I think you're both right here. Let's say you do live in a state that gives
you a tax break. That still doesn't mean we want you to invest those dollars once you put those dollars into the five twenty nine. Notice I said to funnel those dollars through the five twenty nine as opposed to like parking it there in like a long term like airport parking. No, no, no, Like we're talking about like you doing the drop off, like at the at the gate or at the you know what, they got the
numbers there at the airport. We're not talking about like the long term parking where you're having a height.
It's almost like a legal form of money laundering, right where you're literally funneling it through this account passenger just to get a tax break, but you don't have to take much action with those that money beyond that it's totally and then you can, yeah, spend it at your
discretion for college needs. Yeah, In most five twenty nine plans, they offer fixed income choices that do resemble the returns that you're going to see with a high heeled savings account, albeit with slightly lower returns.
But put the money in the account. You get the tax break, but then keep the money in the most conservative choice, which is probably going to be like a money market equivalent kind of fun. So you're not actually investing those dollars it is. You are treating it a bit more like cash.
And that's essentially the advice we would give you tariffs or not, right, a market volatility or not. It is one of those things where if the money needs to be spent immediately or in the very near term, you don't want to invest those dollars, even if it's twenty twenty three, right and you're like, the market's roaring, this is great. Should I be investing? No, you shouldn't if
you need the money soon. Would We've always said, you know, for people with young kids, we're all about investing inside of those five twenty nine funds. If you're doing the other investments you need to make as an individual in your tax advantage retirement accounts first. But yes, we do want you putting money then in the five twenty nine fund and investing those dollars for their future. You want
that tax advantage money to grow. But when you're getting closer to needing to spend that money down, you got a d risk, right. You want to make sure your five twenty nine planned money is not invested in something that could cause you to see significant drops in the
balance in a short period of time. And so at this point you're investing in like a heavy stock based portfolio inside of the five twenty nine plan would be the furthest thing from smart Like it would be a terrible idea that the risks of losing a chunk of this money so close to needing it, it's just not worth the potential rewards. So exactly, you might say, oh, man, the fixed income fund is paying like two and a half three percent, and that seems like average return to DSP.
The guys cite that all the time on the show Man. That's like an average aal return of something like ten percent. This I should be invested in the stock market. Well, no, you don't want to take that risk when you need the money soon.
Yeah. Yeah. If it was me, if I if I had a freshman in high school, I would be willing to still be one hundred percent invested in security or in stocks. If I had a sophomore, I'm going to start taking some chips off the table. Is that a sophomore I think I would reduce that down by a third to like sixty six percent in stocks maybe the other third, you know, and more of a cash equivalent
junior year. I'm like, I'm pulling even more off. But by senior year, I would want to be you want to have a money liquid pretty much ready to go in cash where you are not going to experience the ups and downs of the market.
It'd be different too, right. I think if she had a freshman and she had plenty of money, some of it was actually even going to be for senior year or even beyond for college cost. But we're talking about the money going essentially directly to funding.
The college exactly. She said she's got a current college student. Yeah, let's keep moving though. Jessica asks, if I'm worried about a layoff, my husband works for the VA. Is there a way to look into what unemployment benefits we would qualify for. I'm a planner, and yes, I like to plan for the what ifs before they happen? Is unemployment state by state? We have emergency savings? Does that fact
into how much unemployment you qualify for? Also, I'd love an example copy of a bare bones budget for a family of four, for instance, how can you realistically go I'm sorry, how low can you realistically go on food? Oh? Yeah, that's good.
I want you specifically to address the food question in a second map because I feel like that's something you d have been attentive to.
That's the TLDR.
But even the challenge that you guys instituted for yourself a few years back, which you've talked about on the show. We'll give that in just a second, but.
You might have to remind me.
But move on, okay or keep moving So let's specifically talk about the layoff fears first. That was Jessica's first question. I get that insecurity, you know, government workers, they used to have some of the most secure positions around. That's no longer the case. If I were in your shoes, Jessica, I'd be hoping for the best. But I'd at least
be planning for the worst, planning for a potential job loss. Yeah, that means some things for your finances, but it also means networking right and looking for other work just in case, because you want to be prepared and you want to have kind of irons in the fire going because you're not sure kind of where things are headed.
Yeah.
And then when it comes to unemployment benefits, yes, it is a state by state thing. And no, your emergency fund has no impact on how much money you receive from those unemployment benefits.
Yes, not like family assets and FASTA and applying for color. Not like wait a second, she's you've got plenty of moneys is loaded. We're not going to give you any of those unemployment benefits. That's not how it works exactly. That's something that you are paying into. You will receive those benefits, and each state has its own for the employer pays into it. Yeah, yeah, exactly. The formula is based usually on a percentage of your recent wages, with
a fairly low cap. In our state, I believe the weekly max is something like three hundred and sixty five dollars, and it goes a lot lower than that. If you make less too. Yeah, my guess is that your husband actually makes more than that at the VA. So, but also know how long those benefits might last. And so
we're typically talking anywhere between three and six months. So your liquid savings, your emergency fund is going to be crucial, even though unemployment benefits are certainly going to be helpful. And then when we're talking about the bare bones budget, Joey, you're saying, what challenge are you talking about?
As far as you were trying to do two dollars per person per meal for many years. Oh and you were able to achieve that. Well back in the day, we're doing one dollar per meal per person. Yeah that's one.
Dollar, dude.
You're making me think of the commercials to support families in countries that are economically challenged.
Man. Granted, this is when the kids were really little, so it's not like they're eating a ton. Things are different now as they've gotten bigger. I mean literally, man, it's crazy how I don't want to get all sentimental, but because they grow fast, they eat a lot of food. And when it comes to your grocery budget specifically, it comes down to how dialed in your current grocery spending is because let's say you're a baller like Joel, and you get your groceries delivered from Whole food and then
everything else lies. Well, you don't do Whole Foods, but you've done that.
I've been getting the liver room. I've talked about why the discount is to card gift cards.
But and then let's say all the rest of your groceries you buy at the local farmers market on Saturday mornings, and it's super fresh and organic, and you can't get any groceries that are any more extensive than that because that's kind of like as expensive as they get there. Well, you're gonna be able to I mean, oh my gosh, you just by going to limit. Yes, I mean, you could cut back in such a significant way if that's
what you're used to. However, if you already got your groceries dialed in, let's say you are you've been an Aldi shopper, you are very intentional about your spending there, man, it's really difficult to cut back on your spending, specifically on groceries. So that's what I mean. I think that's one that can vary pretty wildly. But I will say
the way our family is implemented. A bear bones budget is all other discretionary spending I've essentially slashed by two thirds, and so it's literally hit with a multiplier jowl of zero point three to three. Because what I know is that even if things aren't doing, like aren't so great for our family, we're still gonna want to celebrate Christmas, Like, We're still gonna go on vacation, Kate and I are still going to want to go on date nights. They're
just not going to be as nice. Yeah, the presents are going to be quite as big, the case is not going to be quite as long or exotic, perhaps, but there are still certain aspects the kids' activities. They may not be doing quite as many of them, but there are still certain things that like, the reason they're
on our budget currently is because we've prioritized them. But we're just gonna have to find a way to prioritize them to a lesser extent, not necessarily eliminate them completely, though I know if a push comes to shove that that's something that we can do. So that's how we approach the bare bones budget. It's tougher when it comes to groceries because there's sort of a floor as to
what it is that you can get by on. But true, all other dis same thing with your housing, like housing, transportation, and food. Man, those are really tough to make adjustments on, hard to turn on a time. Yeah, like you can plan to change those, but it's really hard to be like I'm gonna sell a car tomorrow because of a lot of life job life upheopal.
Yeah, you might be able to do, but you might not. Also, I would say one of the biggest food line items in people's budget is and sometimes they don't think about it like this, but it's.
Eating out craft Okay, yeah, you keep the craft beer budget and then you cut eating it. You can't elimit.
Take that that's your craft beer equivalent, of course, But it's eating out, and people under assume how much they spend eating out at restaurants and when you lately, man, when you look at the data over the past five plus years, we the amount of money we spend eating out versust grocery stores, it's increased significantly as a culture. And so that's the biggest thing I think to combat is some of the eating out. Yeah, you might be
able to save a little bit more by switching. If you don't shop at all, to yet going there, you could probably you know, cut some of the more expensive items from your grocery list. The same things are going to be smaller there than they're going to be.
Once you underestimate all, even going from Kroger, which is like an affordable grocery store, even going from Cross I mean this, I've got the records, I got the receipts man literally going back, you know, decade and decades, but years and years and years. Switch it from Kroger to all these straight up getting item for item, we cut our grocery budget by thirty percent. I totally three percent overnight. I totally believe.
I couldn't believe it. So I do think that's an important tip. But I also just want to highlight that there are other ways that people are not really thinking that they're spending money, or they're spending thoughtlessly, especially eating out. It's just something that and the average meal eating out costs four times with the meal at home costs.
So remember that.
And if you want to get I think inspired to make cheaper meals that are still tasty at home, check out our friend Frankie Celenza. He used to struggle meals.
He came on.
Episode eight forty six to talk about that, and he's like, all about making good food that's good for you for not much money at all, which I love. So yeah, definitely check out that episode and hopefully that'll be inspirational.
If you really do want to cut that grocery budget totally. And he was into mountain biking, which is something of that I remember staying that's right, I feel like I like it even more. All right, let's geme. Even Pascal asks, is this the ridiculous time to put my house up for sale and move? Oh? What do you think, y'all?
I'm reading into the question, and what I'm going to say is that if if you're looking to move to like a different country again, going to like m I'm kind of going back to the whole emotional response, the guitar answer that we gave earlier. If you feel like that the worst, like that the future of the US isn't bright, I don't know that Like that feels more like a like a knee jerk sort of reactionary response as opposed to maybe you're moving for another job, opportunity
to get be closer to family. Maybe you're moving because you need you're downsizing, or you're upsizing. Maybe your family's growing and you need a bigger house. See, that was my These are all good reasons yes to move. That was my assumption in the question, was that Pascal was asking based on, Hey, is it just a terrible time to list my house because of what's going on with the market. And my answer to that is actually, no,
not really. I think if you're right, though, Matt, if you're like, I'm thinking about moving to a completely different country because I'm worried about the future of the United States, I would say that's that's probably overblown. Like yet, there's a lot of folks out there who who feel though I don't harbor the same fears. But I will say, it's not that the housing market is immune from trade
policy changes. It's just that other factors influence your decision whether or not to move a whole lot more like, I'd love to know how long you've owned the home, why you're moving, Are you moving to a lower cost of living location. Are you hoping to rent for a while after you sell this house? That would be helpful information to have. Ultimately, No, it's not a ridiculous time
to sell your home. Home prices are high, even though mortgage rates remain steep, and so you got to make sure you price the home right and you market it well because homes are staying on the market longer these days. But you can still do quite well as a seller in this market, especially when you think about where home prices were a few years ago. Matt, think about Pascal, if even if he's only on the home for four or five years, just the appreciation on the home in
that amount of time could be significant. Yep. But the question is what are you going to do after you sell them? Yeah, exactly. You got to take factors into account, like financing, because if you've got three percent mortgage and you're looking at something, you know rates are closer to seven percent now, So financing is a huge factor as well, if it so much of it I think comes down to flexibility and how much flexibility you have to move or to not move right now, because if you got
to move, you gotta move right. Like, if it's for a job, can maybe consider be becoming a first time landlord if that's something that you've never thought of it you're like wait a minute, Oh, that sounds totally awesome. This this is a three too, This would make a killer rental. Plus I got that.
You know, my mortgage is a thousand and this will run for two grand. Sure, it's a great time to start being landlord. That's a consideration. But for a lot of folks who are thinking, uh, okay, I just I got to sell this house. We need the equity from the zune to buy the new family home because we're moving for jobs. It's not a dumb move. That being said, if you have flexibility though as to when you might
list this house. If it was me personally. Because of the uncertainty in the market, I think a lot I mean countries. There are entire countries that are hitting the pause button on certain things. There are certain industries that are like, yep, we're we're just gonna we're gonna ride this thing out and see where things land. Because of that, we're seeing employers and it's all trickling down to consumers.
There. The level of uncertainty is leading folks to not want to take risks, which means that you I think that you may not be able to get the most for your house where you to sell it like right now, as opposed to letting things shake out and see where things land in thirty to ninety days. Perhaps if it was me that that's that's what I would do.
Yeah, but you just still have to remember, like where what was the home valued at a few years ago? And are you going to do pretty good? And if it's time to go, is it time to go? If you have flexibility though, Matt, Yeah, Pascal might be able to do better by waiting to sell, but also it's brings selling time and as well, you could do a
whole lot worse than selling right now. Yeah, what if tears lead to sky high prices, inflation starts going up, and the Feds like, oh, guess what we're not gonna do at all this year?
Yeah, you know we talked about those two rate cuts. Yeah, not happening. That's not going to be great for the market and mortgage and finance costs. Yeah, But then again, if the costs of building those homes goes up. Yeah, there's like so many nothing on effects that are any different effects that it's truly hard to take them all into account. So you got to do it for personal reasons. Then people buying some homes all the time because they were at the stage of life where they needed to
do that, no doubt. All right, man, we've got more listener questions. We'll get to some more good ones, including how you can benefit from a market downturn. We'll do that right after this. I know y'all watch the Super Mario Brothers. Moody. I always decided to bring this back with terrorists, terrorists, terrors, Terris har Riffs. See I haven't seen it. You haven't. Now my son's watched Spitches Peach. It's a it's a good jack vaccine. Now I'll have
to you'll have to. Let's keep moving. We've got listener questions to answer. This one is from Alex who wrote how to Determine whether it's worthwhile to take any early retirement offer. I know folks who are working for the federal government and are like five to nine years away from retirement, but some of them have been receiving offers to retire early and still get their pension benefits. Still, it kind of sounds like a scenario where folks are getting to have their cake and eat it too.
Potentially, right, Potentially depends on the individual, for sure. I mean I like this, especially for people who are financially independence minded, like they've been working towards that. It's kind of like arranging your own layoff. It's one of those things that doesn't it doesn't come around for everybody, some sort of.
Early retirement offer.
And we talked about something akin to that, like with Sam Dogan back in the day, the dude who runs the website Financial Samurai, And it can be a brilliant move if calculated correctly. And he was just talking about when layoffs are happening at the workplace, if you kind of volunteer and you get a sweet severance package to walk away. I think he got like two years worth of pay or something like that.
Something insane.
Most people don't give that much. Nope, it's like six months at the max. But that can be if you are in a good financial position, like something that only increases and benefits your financial standing while allowing you more flexibility. But so much depends right on your likely job stability,
your overall financial situation. Because if you've got a big chunk of savings you've been investing for years, well, you can totally use an early retirement offer to allow you to vacate your position earlier than you thought you might
be able to. But if not, like, if you're in more tenuous financial circumstances, you have to be really careful before taking an early retirement offer because you might find that you don't have gainful employment lined up sure, and you're in a much worse financial position.
Yeah, but taking alex as he or she wrote this early retirement, So like, if we're taking a retirement in the traditional sense of the word, and you are going to be totally set, this totally changes this conversation from a financial conversation to a life fulfillment conversation, right, Like this is on Maslow's hierarchy of needs, where you've just graduated to the next level talking about you know, these are more like self actualization needs as opposed to do
I have enough money to pay the bills? Do I have enough money to be able to afford some of the more you know, some of the luxuries in life, some of the things that I want to do, And so much of that comes down to how it is
that you want to spend your time. And so I think that's if you are closer, closer to retirement, I think you might be more in that camp, which leads to less number crunching and more uh self searching, Yeah, soul searching and writing and you know, like journaling and trying to figure out, like what do I want my
days to look like? And if that's the case, Alex, I would highly recommend for you to literally do something like that, like go on a silent retreat, spend some time just completely away from what it is that you are doing in the day to day to shake things up, to help you to maybe almost stumble upon whatever it is that you might want to spend the next.
Decade or two do it. Yeah, I mean I love the idea for lots of people. If this means, hey, I wasn't. I was still planning on working to get that pension because that was a huge part of kind of my retirement income plan. But because that comes along with this early retirement offer, why don't I just ride off into the sunset now I.
Am fully financially prepared.
If that's the case and you have other things you'd rather be doing with your life, kind of like you're talking about, Matt, I think it's great. I think this can be the perfect accelerator to get going in retirement earlier than you had planned, maybe enjoy some more of those early retirement years that you were going to be working instead. So yeah, I think that's I think that's great advice. All right, let's get to a question from Pam. She says, I'm a middle aged investor in forty six.
I'm looking for advice on how to help protect what I've already saved while still remaining.
Agile and aggressive.
I recently increased my income after years of struggling to save money, so I will be actively trying to catch up on my retirement over the next ten plus years. I'd love to hear how this market will help or hinder my ability to catch up on saving.
Yeah. Wait to go, Pam on increasing your income, it totally. I'm sure it feels good. She said that she was struggling when it came to being able to save and invest, which means she's actually able to do it now because she's got more money flowing in. It's going to allow her to ramp up these contributions. And in her words, she's looking to protect what she's saved while being aggressive as well. And I think there's only one way to do that, and that is to invest like an optimist
and then save like a pessimist. So keeping your savings such Morgan House Yeah, yeah, yeah, I did not coin that phrase. Those savings, those dollars, the money that you've got there in the emergency fund needs to be secure and liquid in a highield savings where you have enough on hand to give you that peace of mind, you know, given to meaningful financial downturn. And then just keep investing
in low cost index funds as well, like clockwork. And the goal is to have enough cash so that you don't have to ever touch those investments at an inopportune time, like right now. That's something you want to avoid at all costs. And right now specifically, given the fact that you're talking about having not made a whole lot of progress perhaps up until now, just realize that some of the volatility that you're seeing it doesn't really impact you
nearly as much. This is something that when you've been saving and investing for decades and decades and you've built up a fat, you know, nice sized nest egg, that's when this volatility can really take a bite out of your overall network. The number can change quite a bit. Yeah, and obviously, let's say you've been investing for a few years, it still sucks to see your investments go down by
a three grand. It's different though, when it's thirty grand or one hundred grand or one fifty And that's the kind of swing that some folks out there who have been investing for twenty thirty years, that's what they're experiencing
right now. I will say, I do think, no matter to the size of the drop, the people who have more cash on hand, who feel comfortable that they can cover bills if something unexpected does happen to their job or to whatever like, if they feel more financially prepared from a liquid cash standpoint, my guess is they don't feel the loop de loop in their stomach when they look at their retirement account balance nearly as much your weather the storm. Exactly, it's much easier to weather the storm.
That's why that.
Hey, if I've got the cash on hand in savings to back me up, and I'm still doing the investing thing like clockwork, well then you don't have to. That should reduce worries significantly. And as we said before, right dollar costs averaging into those tax advantage accounts, that's where
it's at. Do that through thick and through thin, and then you know, once you reach the age of fifty, PAM, you're a few years away you'll have the ability to contribute even more to those accounts as those contributions limits rise. You say you're making trying to catch up on retirement account contributions. Well, guess what at fifty you get to contribute more, which is pretty cool.
Another one thousand bucks. Yeah, so into the iras and then even more into like four to one case four h three b's. And so if you're getting to the point where you're maxing any of these accounts, just note that in a few short years you're gonna be able to funnel even more into those accounts, which is which is awesome, super sweet and yeah, and that kind of goes to the volatility sort of point I was making
thus her save your savings rate PAM. The amount that you're able to set aside right now into those accounts actively as opposed to seeing the returns on that money, that is going to have the biggest, uh impact on your retirement.
That's that's so underrated. Is there a super savings rate? People don't talk about it enough. The more the higher your savings rate. The more, the less you have to worry, essentially about the machinations of the market.
An he asks, during times of market volatility, is having your money in something like betterment that does automatic tax loss harvesting better than having all your investments in VU, which I love that so many folks are going back to the voo joel. But uh, yeah, I think some of this, some of the answer here depends on what your definition of better yes is, And.
They're not mutually exclusive, like you can do tax loss harvesting into WU. Right, So but I get what Annie is getting at, and the short answer is yes, Like, you know, we're always hoping that our investments go up, but tax loss harvesting is a tool that you're able to utilize. You're able to sell investments when they're down. The thing is, you don't want to sell them permanently, like we don't want you locking in those losses moving
into cash because you're fearful. But you can sell those investments and then rebuy a very similar fund, let's say, going from VU, let's say into VTI, like Vanguard's S and P five hundred fund into the Vanguard Total Stock Market Index fund. Right, And when you do when you sell and then rebuy an incredibly similar fund immediately. This allows you to show a paper loss. We'll changing your holdings minimally. And this is an awesome move for people
to make for tax purposes. When it comes down to it, brass tax you can only claim three grand a year and investing losses. And if you experienced more losses than that, Let's say you have a ten thousand dollars crop, right, and you sell and then you buy another very similar fund that's not the exact same, Well, you can roll those losses into future tax years. That's kind of cool. So tax loss harvesting, Yes, in market volatility, it's a
way too. It's a silver lining I guess of sorts to the downturn in your portfolio that you're seeing.
Yeah, so Joe said, yes that it is better, But it just depends on what you're willing to pay for. That's like. So that's that's why I feel like it kind of depends on what your definition is because someone would say, well, is whole food's better than all d and it's like, well, depends on what you like to pay for, because if you don't want to pay for tax loss harvesting. You want the organic chicken or just whatever.
If you don't want to pay for it, then if you don't want to pay it, it's like, so it's point two five percent, Like that's the fee that you're going to pay. If you're fine paying that fee, then yeah, it is better because they do it automatically. But if you don't want to pay that fee, that's something that one would say is not better. Uh, because you can dihy that tax loss harvesting yourself, do your research, know how it works. But it's certainly possible to manually do
this on your own. If you're not wanting to do that, then betterment is totally the way to go, especially there within your brokerage account. Jennifer asks, I have a first time college student heading off to school in the fall. I'm wondering what if any federal student aid or loans will still be available. Also wondering with all the federal cuts to universities, impunitive cuts for diversity, will you universities have to raise tuition?
All right, that's a good question. So federal student loan availability, Matt, from what I've seen, it has not changed at this point, and so Jennifer, your student should still have access to federal student loans per normal. What's been in flux is student loan repayment plans and so like the Safe Plan that was launched by the Biden administration, that has been axed by the courts. So like those more generous repayment plans, they're not as generous and there's still a lot of flux.
We're going to actually tackle that on the show with an expert soon, so stay tuned for that episode. But make sure, Jennifer that you fell out the FASA by the end of June, and ideally sooner rather than later, because that can help your student qualify for need based aid. On top of that, don't forget to apply for scholarships and to look for other ways to minimize debt, like
getting a campus job. That was something I did when I was at school mat I became a resident assistant and that reduced my room and board fees dramatically, and so I was able to go to a private school out of state and take on very little student loans
because of those moves. Those are the kind of things, Jennifer, I would just tell you to at least consider and if you're looking for more tips about scholarship hunting and the like, go back and listen to episode eight sixty that we did with Joscelyn Pearson, who that's all she does. She eats, breathes, and sleeps scholarships. So there are a lot of ways to get free money to pay for that education in hopes to avoid those student loans, or at least just minimize them.
Yeah, and your other question about federal cuts and the potential raising of tuition, that only applies to a couple of elite universities, and then those tend to have pretty large endowments. Harvard, for instance, if I think they got like over fifty billion dollars in their endowment, is that right? Yeah, that's pretty crazy billion with a B. So while it's not benign, I wouldn't worry about it actually increasing the
cost of tuition across the board. And interestingly enough, while the sticker price of college continues to go up, the MSRP the advertised price, the actual net price that students pay has been going down. Particularly in recent years. There are fewer high school grads who are opting to go to college post COVID, which has also led to price reductions so that I wouldn't worry too much about that.
There's a supply and demand element here, and when fewer kids are choosing to go get a higher education, it makes shopping around even more important because colleges they can't. I think people just assumed they can just raise the price to whatever they want and people are gonna have to pay, and that is not the case. Students have choice, and that's where kind of the dream school thing comes in.
We talk about how don't settle on one school and assume that's where I have to go, no matter the cost.
No, no, no. Cast your net wide and find schools that will offer more significant financial aid to you and your family so that you can reduce the cost because ultimately the institution that's on the diploma isn't as important, I don't think, as the education that you receive. So keep those student loans to a minimum, please, all right, Matt, Let's leave everyone in this episode with some advice that a listener left on the how to Money Facebook post. That's the opposite of a question, is it is?
And listener Pamela said, I think the best way to deal with with all this is to stop buying stuff frivolously time for the minimalist life.
Oh for it.
Yeah, this is something that we've been preaching for a long time, and it's true, like terrists are like essentially terrists are like a sales tax, and uh, it depends on where you want to go with this, because like
our is sales tax badtel. It depends on what the alternatives are, you know, like because it makes me, you know what, it makes me think of our states that don't have income tax and they only have sales tax, and those are states that we have seen a whole lot of people flocking to, Like I'm thinking of specifically Texas and Florida, though I see Tennessee as well, uh and and even some of the other states that have that.
They do actually have uh an income tax, but it's actually a lot lower those like they take the other top slots.
And some of those states have been reducing their income tax because they have to compete with states they don't have.
They're competing and so some of it, so much of it comes down to what the alternatives are. And so this isn't like some sort of universal defense of international terrorists, but it is interesting to see that when given the choice between states with income tax versus taxes that are more associated with spending. That Hey, here's something that I am willing to give a little on when it comes to what I'm willing you know, the number of dollars I'm spending, so I don't know.
I like that.
It puts a lot more control. It gives you the power to almost dictate the amount that this is going to impact you, and for a lot of folks out there to decide, hey, I'm going to really pair back my spending. This is something I've been wanting to do anyway. It's almost like a kick in the pants push up,
you know. Not I say kick on the pants because I said getting kicked in the pants earlier when we're talking about fighting, and that's not the kind of kick in the pants I'm talking about here, A little a nice, pleasant breeze at your back as you are encouraged perhaps to spend less, I'm not. Yeah, well, okay makes I don't want to make the argument though, that like, you don't need to have a new iPhone, right, Hey, if you want a new iPhone, get you a new iPhone.
That's right. But there's just that those arguments, especially from officials in power, so stupid, those are degrading exactly, want to hear that exactly. It's not okay.
But from us, it's different because we're trying to incentivize you to have more financial flexibility and power in your life. We're not trying to tell you you don't need that thing. We're just trying to say, hey, there's better opportunities than the best things that money can give you is freedom and flexibility, not more new stuff. And I will say, when prices go up, buying less and buying secondhand is
going to save you more money. It always has, but the stakes could be going up if tariffs remain, so you know, we're all likely going to face increased prices in more form or another. But I think more minimalism is almost always good advice.
So totally all right, we've gone long. This is the Yellow Rose smash IPA. What did you think? I dug it taste super tasting, dude.
Texas beer seems to be somewhere Texas ipa seem to be somewhere in between West coast and East coast. It's like they found this middle ground and I'm here for it.
I like this one totally, like when you pour it, it's got the haziness going on, but it Yeah, I kind of had some of those West Coasts greape fruit bitterness, like bitter edge bitter notes to it. Yeah, that's what I'm trying to say. With kind of old school looking label to boot, Doesn't it kind of just like look like it's been sitting on the shelf fading like a decade. It does. There's some canes that you see and it looks like it came straight out of some AI generated
computer with vivid colors and whatnot. And this looks like, I don't know, it looks like it's been sitting on the shelf since the eighties. But it did not taste that way. No, it's just it's the vibe that they're going for. But that's gonna be it for this episode. Leave us a review if you haven't, and of course you can head over to the website for more personal finance goodies. That's howimoney dot com buddy. That's going to
be it for this one until next time. Best Friends Out, Best Friends Out, Yah,