Welcome to Hout of Money.
I'm Joel and I am Mat and today we're answering your listener questions.
Joe, you know, Monday episodes we might just be the best episodes because we get to listen. It's not just about us talking and for everybody out there to hear our voice. It's about us hearing from the people. That's what it's all about.
Most of the time people hate Mondays, but I like how you're reframing it.
It's a whole new spin on it. We are, in fact, we got a case of the Monday. It's not the Mondays today, can listener questions? During this episode, a listener is wondering where he should be stashing an extra one thousand dollars a month. Another listener is considering dropping full coverage in order to say she wants to know if that's something that's worth considering. And another listener, I guess,
not her specifically, but a family member. I think her son is considering getting loans in order to attend flight school. She wants to know if if she's got our blessing, Joel, So yeah, be sure to put on your best what's your cardinal hat? Like the the pope. Is that the word anything that describes the office of the pope is people? I think so, yeah, it's like people office.
You remember when those AI generated photos of him in some Balentiaga jacket.
We're going around of the pope with like the big, the big fluffy fluffy jacket.
Yeah, there have been a lot of other sense that went viral, but that was that was definitely one that kind of caught people by storm. But yeah, we got a lot of good questions to get to on this episode. But man, I just want to share one thing real quick. Uh, our four year old, we're starting to kind of teach him about money. We've got older, your four year old, not my four years I'm not teaching your four year old. Yeah, yeah, that's up to you.
Well, you just said it in such a way it made it sound like we share a four year old. You've got your own four.
Year old their best bunts, yes they are, but no, so I'm teaching my four year old. But and it's it's finally time to kind of start doing the beginning sort of steps. So much of what our kids pick up about personal finances is how we talk about it
and how we act. But then there's also like intentional discussion and intentional kind of show and tell sort of stuff that has to happen along the way too, Right, And the ten and eight year old they've got allowance, they've got chores, Like we've got a system set up for that.
But the four year old, do they do their chores? Yeah, and then they do.
Their laundry, They pick up the room every single week on the weekend, same day, every it's every it's Sunday.
So maybe we should tie it to more of the day to day stuff because when you say, like they do their jobs and they're getting their money, that's like that's the problem that we're running into is that like the kids, they don't really care, Like we make them do sort of the expected stuff around the house, but when it comes to getting them excited to earn money, they're just kind of like, eh, I guess there's no there's no like pot of gold in their mind at
the at the end of the rainbow, so they're like not pursuing the thing, like the extra stuff. I guess yeah.
I think with the youngest kid too, it can kind of be like, oh, well, they'll pick it up my osmosis and you forget to do that true kind of some of the teaching, you're you're hoping they see what they're what they're sis are up to. But we were like, okay, wait a second. We actually had this piggy bank, this digital piggybank that has like a counter on top, so when you put the money in, it's counting up how
much money is going in there. And he doesn't have any jobs, he's not making any he's not making any recurring income via allowance every single week. But I gave him this piggy bank, and we've scraunched up some coins and he loves popping them in there. And I feel like that's like literally the most basic thing I can do right is to kind of at least get him hands on with some money. Yeah, and watching the number go up, just kind of getting an idea of playing with it a little bit.
Number go up. Before you know, he's going to be investing in bitcoin and all the cryptocurrency. Yeah. No, I think that's that's true a what you're saying about being intentional, because I know that's the case for us man, Like I feel I know with our oldest we were so intentional and diligent and it's like, Okay, while we're going to teach you about how the money that you leave quote unquote invested with d that's going to earn interest
and in fact it's going to compound weekly. We like that of all these systems, and maybe we a little overboard for let's say a six year old, because I think that's when we started doing that. But I yeah, I think the temptation might be to just fall off the horse completely. And we haven't done much of that at all with our four year old. I mean, we've got it. We do have a piggy bank that he got for Christmas that sits up on the shelf, but he doesn't earn anything yet.
You always figure get what was the timeline like for the yeah, and so you just kind of I think the timeline just gets more and more delayed. And it's also the same thing where you're the youngest ends up watching like scarier movies at an earlier age their diet, like they're not restricted from sugar in the same way as like the firstborn was. You were so careful with the first one, and then the third one, everything just kind of goes to pot as he's he's already fan
of IPAs so true. Yeah, just kidding, don't don't call defects on me.
No, I think it's true, And I think for us it's a matter of I was thinking about this, actually does like coffee, does he?
Yeah?
So does my dude. Yeah we should. We'll share a picture of them both throwing down their little their little
kid coffees when we get coffee on Wednesdays. But I was thinking about the other day how I almost want to introduce consumption and advertising to the kids, maybe a little bit more so, in order for them to have something to that they want to chase after that they're excited about, because I almost feel like our quasi minimalist lifestyle has led to them just being like, Okay, we're good, We're fine with whatever, whatever, mom and d whatever you get us, as opposed to them being like like, don't
you want a Stanley cup or something? Maybe not that, maybe not have a pony. Let's go yeah, yeah, we'll go that way. But no, I think you being intentional finding a way to get the kids excited about personal finance. It's huge. It's important to do.
Those little digital piggy banks are like four or five bucks at the dollar store.
I mean, they're super cheap.
And as for a four year old, it's to go a way to begin maybe like one of those how do we haven't done any money books either, Like I've yet to find like a great money book for kids, but especially for like really little kids. If someone out there listening knows the one, please reach out, let us know, and maybe I'll jump in that direction too. But I feel like the tangible, hands on thing is always kind of the most fun and the most rewarding.
Yes, right, let's introduce our year is called Once Upon an Orchard. This is a sour red ale, and this one is by Aligash Brewing them already enjoying this one, but looking forward to sharing our thoughts at the end of the episode.
One of the great American breweries, that's for sure.
It's a good one. Yeah, we'll get our thoughts on.
This one just a bit. But Matt, let's take listener questions. And if you are listening and you have a money question you want Matt and I to tackle, maybe on the next Ask htm episode, we'll just record a voice memo real quick, state your name at the beginning, and then send it our way. If you want more specific directions and the email address and stuff, just kind of how money dot com slash ask. But Matt, let's get
to this first one. This question actually starts off with kind of a pitch for a saving strategy that you can find readily on YouTube, but does it actually work out in your favor?
Hi, Matt Joel, This is Jen from Ohio. Been loving listening to your podcast and going back pretty far because I'm just devouring all the content, which is great. I had a comment and a question. So the comment that I was going to make was I haven't heard you
guys talk about Velocity banking at all. So my husband and I we have three kids now, and we bought a van last year, and we actually opened a heelock for our house and we use the heelock to pay off the van loan, and then we dumped all of our income into the heelock and then pulled money out to like payer bills for the month, So essentially all of our overage for those months we're going to pay
down the heelock. So we paid that off pretty quickly and we now are enjoying a van that's totally paid off.
My second question is that my retirement is going to be a little bit different because my husband and I are both teachers, and my husband will have a pension plan, and with inflation and with him getting Masters plus forty five and all the things, and if he retires later, it would we think that the pension plan will be around one hundred to one hundred and fifty per year when we are retired, which is a lot of money. Our yearly senses are probably around sixty thousand right now.
So for me, I stay home with kids part time and I have a roth ira with twenty thousand dollars in it. My question is with our overage right now, you know, since he has a very solid retirement plan, should I put money into our roth iray my roth iray? Should I put money into our five twenty nine plans? Should we try to pay off our house sooner? What kind of advice would you guys have for that?
Thanks so much, all right, Jin, thank you so much for your question, and we are glad you kick things off with Velocity Banking. You know, there's a reason, Joe, that we don't talk about it very often, and the only times we do actually talk about it is in response to questions about it and that's because it's not what the influencers out there wants you to think it is. And so oftentimes, like you alluded to, Joel, you'll see it on YouTube, although I'm sure it's over on TikTok
as well. It isn't. But velocity banking is it doesn't really help you to get ahead with your finances more quickly, and for many folks, what it does, in fact, is it muddies the water. It gets them in trouble, and it can cause your money priorities to get out of whack.
It sounds like with Jen that maybe it was more of a one time thing where she used it to if you are using it in order in order to pay it on a debt or a loan that's got a much higher interest rate, So in this case, it sounds like a maybe it was a one time thing where she used the helock, she pay it off the car loan, and then then focused on paying off the helock. I can get behind that, like the principle behind that
is not all that unlike like a zero percent transfer. Well, let's take advantage of this small period of time, a limited window where we can eliminate the most egregious debt. But that's not typically how velocity banking is pitched. It's this continual sort of trap that you find yourself in
where you are continually paying interest. And that's why we are are not big big fans of velocity banking, because you're just constantly behind the eight ball, basically, like you are constantly on the back side of the wave, as opposed to in front of it, where you're just riding the interest and where you are accumulating the interest yourself. Instead, you're just constantly and basically by like a month or two, just constantly paying interest to somebody else, in this case
the bank that holds your he lock. Yeah.
Yeah, So if you're looking to basically swap one debt for another and take on a debt that has a lower interest rate in better terms so that you can pay off that debt more quickly, if you have that focus, then I think, like you said, Matt, that can be a good way to go. But that's not necessarily what velocity banking is kind of preaching. And some people use credit cards instead of helocks with velosity banking and they swear by that too. That's just seems even worse. That
can get you in real, real financial trouble. See, you've got to be massively careful. So yeah, that's why we don't talk about it. We actually want people, for the most part, to stay away from the velocity banking thing and onto the heart of your question, Jen, Let's get there. It's amazing that you're going to have such a large, guaranteed pension in retirement. Not many folks have that, Matt, especially younger listeners. They're like, wait, pension, can you define
that real quick? I'm not really I don't know what that is because I haven't been offered one. I think my grandma maybe had one. This is just one of those things that's going away. It's going the way of the Dodo bird. It's basically a fossil. It's a relic
at this point. But it is one of the main perks of being a teacher, right, some of the public service professions they have more access to pensions, even though those are going away for a lot of public service pros too, But you often deal with, obviously as a teacher, a bunch of years of stress and being underpaid. You know, you can earn more in the private sector for the promise of that.
Pot of gold at the end of the rainbow.
That's kind of what you're hoping for is like, listen, I'm going to be underpaid for decades. Hopefully I'm going to enjoy my job. But at the end of the day, once I do hit retirement, I've got this pension and that kind of makes up maybe for some of those years where you weren't getting as paid as much as
you could have. And I retire teachers I know who have saved and invested decently, well, they've got a lot of financial security because of the pension combined with what they've been able to sock away.
That's right, And so Jen, you've got a lot of different options here for these extra funds in your life. Like you said, that pension might mean that you don't have to be quite as diligent of an investor. Let's say, instead of investing fifteen to twenty percent like we typically encourage folks to do, maybe you're early socking away ten percent.
But if it's between the three options that you mentioned, the roth Ira it likely wins over the rest because that account offers just great future tax breaks, the ability to not have to pay any taxes on that money off in the future when you withdraw that money, and they're incredibly flexible as well. But on top of that,
what if your husband doesn't work. As long as you are predicting, there are different road bumps that that might arrive in your future, and so it's best to be saving up in other ways just in case, and the roth ira it's the ideal vehicle for those additional savings. It sounds like at some point in your life you wise up to the roth iray and you said, okay, yeah, let's go ahead and start putting some money in here. Definitely, assuming you're with a low cost provider, definitely fire that
thing back up and consider maxing nothing out. I think that's a good point too, Matt. Though.
If a teacher, let's say, has been teaching for seven, eight, nine years in the same district and they're like, all right, if I hit thirty, that's when I get this full pension, So I'm just not going to invest as much because I'm banking on that.
Well, what if you change your tune.
What if at year twelve you say this is kind of unsustainable, or man, I got this job offer down the street, it's going to pay me more. But you have been chronically undersaving, and now that pension is either going to be non existent or it's going to be
a fraction of what you assumed it would be. It's really important to save in a way that you're planning for that you're at least thinking about contingency plans and maybe not getting the full pension that you're hoping you're gonna get, because hey, life happens and that might not be the way it shakes out. And Jen mentioned five twenty nine plans. Let me mention a caveat about those plans.
I would say it's a good idea to put at least a little bit of money in those, largely because it kicks off this timeline thanks to new rules about rolling five twenty nine dollars into a roth ira for your kids in the future.
And while we still.
Want you to prioritize your own financial future in the form of your wroth ira, first opening up an account and putting in like one hundred bucks for each kid. Now it makes a whole lot of sense. And Jen lives in Ohio, Ohio matt has one of the best five to twenty nine plans in the country because the fees are ridiculously low. The investment options are really solid, so Jen, I would just got.
That state deduction yeah as well.
So definitely check out the Ohio five twenty nine plan. You can read up on about it on a site like Saving for College dot com. And if you have more money down the line right beyond the roth IRA, maybe then you opt to stick more money into those five twenty nine accounts for their future. But I think for the time being, maxing out the wrath for you and for your husband takes precedence over sticking money into
five twenty nine acounts beyond. Like I said, just that hundred bucks to get the timeline started, so open it up, but just don't prioritize funding it.
Yeah, and definitely do that before you pay more down on your house as well, because we've been saying that mortgages are pretty far down the list of financial priorities for most folks if they have a locked in low rate. But maybe you took out a mortgage at seven percent or even higher, and if so, well that's going to change the calculus. But we would rather see you funding flexible retirement accounts first, even with the reality of that future pension, because it's going to offer you the most
flexibility down the road. And these are all basically kind of like the smart, nerdy things to do with your money, assuming you don't have any additional debts. I think it's worth maybe zooming out a little bit, like looking at the big picture and what it is that you want to be doing, like in the more medium term, Like you are looking at all like long term goals, like
long term retirement goals for you and your family. But I think it's worth like brainstorming with your with your husband and thinking through like what do we want our life to look like? Do we want the kids to be in more activities in the coming years? Are they playing expensive sports that are going to require more of us? Do we want to take a vacation abroad every single year that's going to cost us a lot of money?
If so, these are all things that you want to start socking at least planning to set money aside for these things in the future. But if even after you go through all of that, let's say you're like, oh no, we don't want to do any of that, well that's fine. Just realize what you're prioritizing by doing that is you're prioritizing more flexibility and more options for yourself in the future, because you're not going to be as dependent on maintaining that job at the school or just continue to work
in the future. So just realize, in one way or the other, you are prioritizing something, whether you are prioritizing it intentionally or if it's just something that you know is generally good, and that it becomes sort of a default option for you.
And of course you want to prioritize your future, and you want to prioritize some of those investment accounts, but not going so hard in that direction that you you you're unable to use some of those dollars in the here and now to enjoy your life and to make sure you're funding the lifestyle you want for your family. So, Matt, we've got more questions to get to on this episode, including one about taking out a loan.
To go to flight school. How do you do that? We'll talk about that and more right after this. All right, Jill, we are back from the break, and it's now time to hear from a listener who's trying to figure out where he should stash that extra thousand dollars. A month.
Hey guys, what's going on? This is START Studio in San Antoonio, Texas. My question for today is I have about one thousand dollars a month extra that I want to pay forward to Pittsbell to the house, just to
try to get a paid off sooner. The idea I was having is what if instead of the twelve thousand dollars annually that I was being going towards the principal, I was to stick it into SMP account and then it accrued for let's say five to eight years and pull it out and then throw all of that towards the principle. Doing the math, and it's looking at it ten to fifteen thousand dollars. I don't know if I'm off on this or not. I mean, any guide it
will help. Love to hear your opinion. Thanks again, Love.
The show all right, Arsenio man, I love that you've got one thousand bucks extra, Matt.
That's you.
Look at the stats. Who can come up with a thousand bucks in case of an emergency? Like half of Americans? Right, And it almost doesn't even depend on your income. A lot of people making six figures still can't come up with a thousand bucks, that's right, Whereas Arsenio he's like, I got a thousand bucks extra every single month, So he's obviously living frugally. He's made a big, big space, a big gap between what he spends and what he
brings in, which is admirable. And I love that you want to use this money to make serious progress, our senior. You're not saying, like, how can I blow it on crazy stuff? You want to use this to further your financial future.
Ye, he's not looking at one thousand dollars a month and thinking, man, I could put that towards a payment on a motorcycle, which is like what typical broke America would be doing.
I mean, yeah, And when you look at even just the average car payment now for a new car in America, like something like yeah, close to twenty percent of people have a more than thousand dollars monthly payment on that vehicle, and Arsenio likely isn't one of them, is my guess, because he's actually using that money to further his future.
Like these dollars they can make a big debt in whatever financial goals you have, Our senio, your head's in the right place because you want the best of both worlds. You want to juice returns on the extra money that you're saving, but you also want to be rid of your debt sooner than later. I really like Matt kind of where Arsenio's head is at here that he's kind
of taking the both and approach. Lots of people it's either the oh, I'm super debt diverse and I even want to get rid of this low interest rate debt just because it's it scares me, or maybe they get a little too cozy with debt and they're not thinking enough about paying it off. And Arcenio's like, ah, I'm.
Both yeah, yeah, he's doing the smart thing by looking to pay off that debt, but then he's also to like take it up to like another level. I like the scrappiness, Like I feel like he's the kind of guy that's gonna like cut open the tube of toothpaste and like use the tooth, like wipe out the inside of the tooth, Like no little bit is gonna be left. He's gonna like squeeze every last drop out of it. But our Cinio, obviously we want you to consider your
interest rate on that mortgage. If then we kind of touch on this with Jim. But if you're in the three percent range, then there is no rush to eliminate this mortgage. I would just invest and pay the mortgage off as agreed, because even if you can pay it off sooner, you just might not want to. The only other caveat, though, is if you're the kind of person who's just gonna sleep better at night just knowing that you own your home free and clear, and we want
you to keep debt levels reasonable. Of course we're not fans of debt, but if your money can be put to more productive uses, then why not take that route instead? Which is at least partially what you're proposing here, But
we wanted to hammer that point home. Paying off your low interest rate mortgage, especially in today's environment, would just know that it would be done for personal reasons, like your own personal psychological reasons and for your emotional state, not because it's the best way to optimize your dollars, not because the math makes sense.
Yeah, and the thing is, you don't even have to get super risky in order to out earn what your mortgage rate is. Right, So just a random OL savings account and a place like c I T or even places that don't pay quite as high a rate of ci t, you're still out pacing for a whole lot of Americans. You're outpacing your your mortgage interest rate, and so there's just no rush, like you said, Matt, to
pay it off quickly. But let's say you are in that position and you do want to get rid of that mortgage, that mortgage debt as soon as possible, even if it has a low interest rate attached, because that is your prerogative.
You certainly can do that.
It's personal finance, and this is your money. If you're incredibly debtiverse, your timeline sounds like it's long enough to where investing makes sense. You said five to eight years. That is a length of time at which I'd feel comfortable investing instead of just saving. If our say you had said, Matt, two years, we'd be far less inclined to sign off on this plane, like, oh, I'm gonna
hope that my investments outperform over over a two year period. Well, then it feels like more of a gamble than making decision based on historical returns. Right, And I think the other thing that works in his favor. The good news is that he can also be flexible, right, because once you start investing those dollars, you're still not pod committed to paying off that mortgage early. That's true, and you can let the circumstances on the ground inform how you proceed.
So let's say you're seven years into this process and the market's in a really tough spot. You still don't have the need to sell in order to pay off that mortgage. Fully, you can wait until things recover. Your flexible timeline, I think is clutch to your ability to decide to and opt to invest instead of just paying off that debt more quickly every single month as you have that money coming in.
Yeah, and that's assuming that you want to continue to do that, say five, six, seven years down the line, because I think what you might find is that after having invested that money and seeing perhaps and this is there's no guarantee here, but seeing what your returns are on that thinking well, why would I take this money out and use that to pay down this lower rate mortgage debt that I have when instead I could leave that invested, continue to see a compound, and you are
likely to see that money grow because it's he said five to eight years I think the five year rolling returns in the stock market, the market is likely to see positive returns something like over eighty eight percent of the time, But if you bump it up to eight years, it jumps up significantly. It's something like ninety five percent of the time. For a rolling eight year period of time,
you're going to see a positive return. Odds are in your favorite man that this money is going to be well served being invested as opposed to paying down that debt. But think long and hard about what accounts that you're going to opt to use, because of course taxable brokerage accounts they're great for some shorter term investing goals like a quicker mortgage payoff. But don't forget about the rath Ira.
This is like a roth Ira episode We're going to talk about all the day different ways that it is just wonderful because if you great account are not already maxing out a wroth Ira, well do that, and then you can actually use this awesome account to help you to fulfill this mission while still keeping those additional dollars
locked away for the future. And the way that you're able to do that is because you pay tax on the money going into a roth IRA now, and then that means that you can take out those contributions at any time in the future, tax and penalty free, if you so choose to withdraw those contributions to pay down
some of your mortgage. So why not max out that account for the next eight or so years and then you can just pull the contributions, which in eight years you're looking at fifty six thousand dollars in total at that point, assuming that we maintain the seven thousand dollars contribution limit, and then you can use that to help pay off the mortgage and also keep the earnings in there to continue growing. Yeah, So that's one of the
amazing things that the Wrath offers is flexibility. But and even beyond that, I would say continuing to prioritize four flexibilities is key because I think there's a chance you might we all have to diferent priorities, and I think if there's anything I've learned is that I changed my mind, or that my wife changes her mind, or that collectively we decide that our family has different priorities that we're looking to pursue, and even just looking to beef up
your emergency fund. Right, So, let's say, because you Joel, you mentioned the like a savings account earning five percent, I would first be looking to just really pad that thing out, have it nice and a nice thick emergency fund, and give that a couple of years before I would even be willing to invest that money, because dude, imagine what you might be thinking in two years, what you
want to be doing with your money. I bet there's a decent chance that it's gonna there might be something on the horizon that's completely different than what it is that you're thinking about now. We all have dynamic interests and the things that we're interested in, and so I just want our Senia to just take and take that into account.
Yeah, well that's why I like your suggestion of the roth iray and I think that makes sense. Like a lot of people would assume, oh, taxable brokera's account is the way to go in this case, Well, maybe it is if it's additional dollars on top of the roth ira money that our Senio was already made out or
something like that. But if not, if he's neglected the roth iray up until this point, that is the go to account that makes the most sense, and then you're getting kind of the best of both worlds, like he's aiming for. You're able to force save fifty six thousand bucks over that timeline, but you're also by by the time you would draw those contributions, you've got a lot of money left over in that roth iraty that's growing
for your future. So you've got a mortgage that you're getting closer to paying off, You've got significantly more saved and invested for retirement. So I really like that as a plan for Oseneo.
Yep. Yeah. The only downside though is if he changes his mind in two years, because the chances of that being a positive outcome could be significantly lower then of course, where.
He just to sock it away and saving timeline step clutch if.
You're exactly Yeah, And that's the part where I just want our Seny for you to keep that in mind because you mentioned the five to eight year timeline, but just think about even like two years down the road, what it is that you might have pivoted to is.
What I'm saying, Yeah, our Senior, I hope that helps. I feel like there's a few different directions you can go. A lot of it based on kind of your own personal desire hosts, goals and dreams, and there's a few different accounts that you can use.
To help get you there.
Just make sure you're making those decisions with intentionality, right, knowing the trade offs of each.
And it's a good problem to have. Like basically what we're doing here, like what artist Sun was asking us to do, is to solve the problem of having too much money on hand. And that's a yeah, a great problem to be solving.
Yeah, exactly. And he's got the again, the right mindset. He wants to make progress and not like go in reverse which or continue to like, I don't know, spin your wheels. All right, speaking of spinning your wheels, man, let's talk to you or let's get a question from a listener here by going to flight school propellers, that's right, Yeah, you're right, So all right, let's get to that one.
Now. Hi, my name is Lindsay and I'm from San Diego. My son wants to attend a flight school, a commercial flight school. We paid for his pilot's license on the side to save on cost, but we don't have extra money to pay for the actual school and it's going to need to take out a loan, and the cost for the school is about ninety thousand dollars. The school recommends that we go through Sally May for the loan,
but the interest is crazy high. We've checked with our credit Union and some other banks and they don't give out what's considered a certificate. It's not a diploma that he would get it, it's a certificate. So I don't know where else to turn. Is there anywhere else where I can go to get a loan with better interest rates for a certificate? Thank you?
All right, lindsay, first oftngrats to your son who's considering flight school here. I think this could be a great career that he's embarking on. But having said it is not cheap to get the education that she said ninety thousand dollars and it seems like that is right there, smack dab in the middle of what flight school typically costs. But the light at the end of the tunnel is a very in demand career that pays pretty dang well.
We can link to the Bureau of Labor Statistics and you can see kind of what the average or the mean salaries are for different pilots. Oh, do you know it off the top of your head. Matt. It's in the six figures. I know that much. Yeah, so when even I think, for like a commercial pilot, Okay, let alone some of the additional income, and I don't know bonuses you earn bonuses as a pilot. I don't know personally some of those.
You know, the major airlines, the new contracts they've made with pilots, the pilot's got significant pay increases. So it's a it's a good position to be in, and it meets our threshold Matt, of you want your first year salary to be more, in all likelihood than what you're going to fork over in education costs. Right, So I think that even though it seems incredibly expensive, and it is expensive, ninety thousand dollars spent a lot of money,
flight school is not is not cheap. But it's still important to note that this that doesn't make make it a bone headed financial decision. So, yeah, we would love for you to find ways to minimize the debt that
you take on. Those still, right, we don't want you to just to be comfortable taking on a ridiculous amount of debt because even though this debt is going to you know fuel his earning potential and if this is the line of work he wants to be in for decades, that that that debt is of course going to pay off in a major way. And let's talk about flight school, Matt. Like, most flight schools are considered trade schools, so this is a different ballgame than going to a four year state
school or private school. This means that you often can't take out traditional federal student loans in order to get that degree. It puts you in this second tier system of trying to finance this getting this certificate. And yeah, I'm glad that your school says that you can snag Sally May loans. Lindsay said Matt that the interest rate was crazy high. I would be curious to know how high and what she meant by that.
And it's true because she didn't give us a hard number, so.
Much is in the eye of the beholder. And are we talking about a seven percent fixed rate? Because that's actually not awful these days. It seems awful compared to an era of three or four years ago. But given kind of the options that you have at your disposals today, that would actually be a reasonable choice. There's a site
called College Avenue. That's another option. They apparently have interest rates that start in the five percent range, but then again, depending on credit and other circumstances, the loan rate could go up to eighteen percent. You could also check out a website called Zootify. They make flight school loans. We'll link to all these in the show notes. But you might not be able to secure a better rate than
what you're going to get through Sally May. I just I just want to put that out there, like, there are potentially other options, but sally May actually could be the best option you have.
Yeah. On one hand, like it's kind of terrible news because there aren't a whole lot of options to shop around.
So on one hand, I think that's terrible. On the other hand, I kind of like there's part of me that's just like, man, I don't want it to be super accessible, Like I don't want it to be like this default place where you go and you can take massive loans up to a hundred thousand dollars without hardly even thinking about it, because that's I think one of the problems we've run into with higher education is the fact that students have been able to take out boat
loads of debt without really considering where this is gonna spit them out at the end of this four year for your career.
And unadvertising interest rates should hopefully help you and your family get a little more creative about ways to reduce the cost of that.
Education too, because we don't want you, lindsay, to take out a loan just for the full price of admission. If you can help it, could your son maybe even work at the flight school to maybe receive a tuition reduction, Like basically, we want you and your your son to be on like a first name basis because and I think by doing that you're gonna have more of an
ability to possibly get a discount. This isn't like some popular state school that just won some football championship or they're letting in like thousands and thousands of students in every single class, Like this is a flight school. I'm guessing there's like twenty kids, twenty students like in the actual classroom like on the ground for classroom instruction. But then beyond that, it's like you're you're with an instructor. It's like one on one, like you're in the air
with a flight instructor. So like it costs more, Yes, But I guess what I'm saying is I picture you having the ability to be the squeaky wheel and to stand out and to find ways to reduce the cost of admission or cost of tuition that maybe otherwise would not be available by going to some giant school where you're just one of hundreds or thousands of cogs. I think you do have the ability to figure something out, a solution that just might see them a little non conventional. Yeah.
They seem say necessity is the mother of invention, and I'm hoping that's the case for Lindsay and for her son, Like put the ball on his cart, make him make some of these emails like yes.
Yeah, yeah, Like think about that, this isn't all just on you. How badly does your son want to be a pilot? That's right?
And can he makes me? Matt? I did work study, I was an ra I did all sorts of things on campus to reduce the costs of my college and reduce the amount of loans I was taking on. And granted that's at a traditional four year school, but there are I would imagine there are similar sorts of avenues
to reduce the cost out of flight school. But it takes, like you said, being the squeaky wheel asking those questions being and him in particular being the person because it shows some gumption on his part, and I think the instructors of that school might say, oh, well, yeah, we can fitch you in here and then we can get you a little discount by doing this, this and this. So I just wouldn't take that face value price tag and think that there's nothing you can do about it.
Yeah.
I like the idea of having buy in from the sun as well, because if he has to show up and he's like in the hang I'm picturing i don't know, like a classic romantic view of what it looks like to be a pilot, and so I just picture him in this leather hat and then he's there having to
like sweep. Yeah, And if there's an option to do something like that and he's just like, oh, may that sucks, Like I don't want to have to do that, I think then at that point a larger conversation is warranted because I guess when Lindsay mentioned that they were able to buy the or pay for the pilot's license, the
initial pilot's license on the side. I'm starting to realize that maybe this Sun is a little bit younger, in which case Lindsay's assuming that she that she's going to be footing the bill, but finding a way to get buy in by from the Sun without having him completely saddled with ninety thousand dollars in debt. I think finding some sort of solution there is what we're seeking here. Yeah.
Yeah, And I think both of your powers combined can kind of help figure this out. It's not all on your shoulders, Lindsey. And Okay, on that note, man, I think there's one other thing, one other arena in which you could potentially save money on this higher education and that scholarships. They're not as widely available as they are for let's say, going to get an undergrad degree or
even a graduate degree. Maybe, But the best thing about scholarships is that's free money that doesn't have to be repaid. So I would get serious about applying applying for those in order to reduce the financial burden of flight school. And then on top of that, look into airlines right that offer tuition reimbursement for flight training school. Boeing is one of those companies, Matt that offers that I think for a lot of young pilots, you know, you might
have to take loans on the front end. But if you're willing to commit to a specific airline, right or a specific company that offers that tuition reimbursement, they offer that perk for a number of years, you might be able to get paid at that company in that job and see that get eradicated completely by the largest essentially of your new employer. That's also worth looking into.
Yeah, we didn't even touch on joining the Armed services, and maybe is it considered the armed services if you're a pilot, Oh yeah, joining the military. You yourself aren't armed, but your vehicle is, right, But I don't know what your views on joining the military. But like joining the Air Force or joining the Navy, and I mean hello, like, here's a way to not only not have to pay a ton of money in order to get your probus pilot's license and learn how to fly, but they teach
you how to do this. You are earning a significant income, you are starting your career, all while avoiding some potentially massive amounts of loans that could potentially be close to the twenty percent. Joel, like you and I We've got a friend of ours who was in the Air Force and for a period of time was instead flying for FedEx because he had stepped out of the Armed Services. And so there are just a lot of different ways to skin this cat than just taking the ninety thousand loans path.
Yeah, and I'm pretty sure the GI Bill actually allows you to pay for the cost of flight school up to a certain amount as well. So if you've served, Yeah, if you've started the Armed Forces for a number of years and you get you qualify for the GI Bill, that's another way to massively reduce the cost peak And I love it. It's on the US government shoulders instead of your own, right, So again that's a very personal decision, but it's at.
Least worth throwing out there.
All right, Right, we got a couple more questions to get to, including one about tapping retirement accounts to pay for high in your stead.
We'll talk about that and more right after this. All right, man, let's get back at it before we get to the four oh one k loan question. Let's talk about Hyundais. This is our Facebook question of the week.
Are you just talking about Hondai's because I mentioned how good.
The new Santa Fe.
Looks it does look good. It does look pretty sweet. All these new SUVs look they just have this new sharper edge here.
Look to them.
The new Toyota land Cruiser looks so good. The new Santa Fe.
Yeah, I think you can think the cyber truck for that. No, they don't look like that. It'll look like that. But again we've had this discussion before. However, even if you don't like what it is that Tesla is doing that what Elon Musk is doing, when you push design and when you push certain technologies, it allows anything up until
that point to almost seem normal. And so when you have somebody that's something that's the bleeding edge, the leading edge of technology, I think it does allow for other kinds of innovation. Yeah, it's funny.
It's all so kind of a throwback though, to a lot of the ways that some of the like the old Broncos and stuff used to load.
Yeah, that's true. That's the kind of like nineteen seventies. Vibe is hot again. I like it, Okay. The Facebook question of the week, this one is from Rebecca and she says, I have a twenty sixteen hun day paid off, and Kelly Blue Book says it's worth five to seven thousand dollars. I'm currently paying full coverage for car insurance, and I'm thinking about switching to liability. Only work from home and only drive it about seven thousand miles per year.
My plan is to keep the car until it's well and dead. With my car's current value, should I switch or keep it at full coverage? What are some other things to consider when making this decision which you think, Joel Rebecca.
I would totally go in this direction if I were you, but only if you have the money set aside to replace the car, because I'll say you get in a wreck next week after you've dropped full coverage and it's your fault. Terrible timing, bad timing, yes, for sure, and if you have the cash on hand to cover it. It's not ideal, it's not what you would have wished, but at least you have the money to cover yourself
replace that car in the event of that accident. So basically, collision is the coverage you need to replace your own car if you were at fault. If I was in your situation, I'd be very comfortable dropping that additional coverage. But only if I had the money set aside in a car savings bucket. You said it's worth five to
seven grand. Well, sometimes it's worth more to you. Unless I had something like three to six months worth of living expenses on hand, plus that additional car fund bucket set aside of seven grand or something like that, then I probably would hold on to it. But ultimately it's probably gonna save you a bunch of money.
Matt.
We just got an email from listener Benjamin out in California. He saved so much by I think his car, he said, was worth thirty five hundred to four grand, and he saved a ton of money, something to the tune of like four figures annually by reducing his coverage.
That's a big savings for most of locality.
And oftentimes by dropping your coverage you might be able to save an insurance cost the full amount of the value of the vehicle in like four or five six years time.
Totally. Yeah, I like what you said about having special funds designated for this car replacement where the situation to arise. That being said, is as much as I like to shy away from risk like this, I would also feel comfortable not having I guess a full amount of money set aside on top of the emergency fund, Like I might even be willing to split the difference a little bit, Like I wouldn't want to fully deplete my emergency fund, like I wouldn't want it to, say, knockout a month
or two's worth of living expenses. But I think I would be comfortable like splitting and splitting the difference a little bit, Like, all right, it's gonna cost seven thousand dollars to replace that car. What maybe let's pad this thing out in an extra a thirty five hundred, maybe extra four grand, Yeah, because that way, it's like, well, it's not like you're expecting to wreck this car, right, It's not like it's not like replacing the tires in your car, where you know, at some point, I'm gonna
have to pay for some new tires. Like Rebecca said, hopefully this is something she's going to be able to like drive off into the sunset, and she's got many more years of use ahead. But at some point, yeah, I could see you going from like four thousand dollars right now, it's like next oh it's still kicking, all right, Maybe you'll throw another five hundred bucks in there. Oh, another year, you like slowly kind of expand that that bucket because you know that you are getting closer to the end.
Of that Well, let's be honest to you, that vehicle, you're gonna be able to throw that extra money in there because you're going to pay a whole lot less on insurance.
You'll be able to do it very quickly.
Throw that difference into the savings bucket, earning interest all the while. Yeah, and that money's going to work for you. Granted, it's also acting as a form of self insurance, but it's working for you, and instead of going to pay the insurance company totally. Yeah.
I think one of the thing that she could do is ask her agent as to whether or not she qualifies for a discount based on how few miles she drives, because Rebecca, like motions, insurance companies will reduce the premiums if you drive fewer than like seventy five hundred miles in the average year.
That's like the for some reason, the magical amount.
So whatever reason. Yeah, yeah, So not only might you say by switching your policy to liability only, but you could get another helpful discount because of how little you drive and stacking those discounts like that can add up in a pretty significant way.
Yeah, we'll link to an article we talked about. There's a bunch of other ways you can try to try to snag some discounts on auto insurance. Given how expensive auto insurance has become, specifically over the last twelve months for so many people, it's worth looking under every single rock that you can to try to find every additional discount that you possibly can, because the savings can be significant.
But I'm not aware of any.
More significant savings that you're going to get that rivals ditching full coverage and opting for liability only. That is the number one way to save if you can self insure, like we said, And I love that you're wanting to keep that car for years to come as well. It's just twenty sixteen and you drive so little. It sounds like you take good care of it, like this is a car you should be able to own and enjoy for years and years and years to come, and all's
really gonna do is save you money. Right, Let's take one more question from the Facebook group Real Quick. This one came from anonymous and it said, my husband and I have some credit card debt. We're considering a loan from our four to one K because the interest we pay is going back to us to our accounts. We're about eight years from retirement and on track with savings and investments. Are there any concerns with this?
All right? Well, Anonymous, First off, we're glad that you are on track with your retirement savings. But this credit card debt, it's a top priority for you right now. It's actually easier for you to tap your four one K for cash than it's ever been before, and that's because of the Secure Act two point zero that made hardship withdrawals of one thousand dollars as easy as stealing candy from a baby, which is actually really easy. I do it all the time, very easy, especially at Halloween
Daddy tacks. It's right, But because it's easy doesn't mean that this is something that you shouldn't necessarily do. It's not the worst thing that you could do, but we want you to be very careful before you take the plunge. And the reason for that is if you lose your job before you're done paying back those funds, you've got to pay back the full amount of the loan immediately, and then on top of that, the money that you're borrowing is not working in the market for you, which sucks.
That's the whole point of your four one K is to be able to fund your retirement opportunity costs, not to pay for life in the here. Now, that's right.
Yeah, if you run some scenarios of someone, let's say, taking out money to do something frivolous, to buy a new car or and I know this isn't for that reason. This is to pay off debt, so it seems like
it's a more noble ambition. But still, if you look at the numbers that you're going to have in retirement, if you had a four one K loan for let's say four or five years, taking that money out, not letting it grow and paying it back over time, you're going to end up in a significantly worse financial position come your retirement age. And it's not that a four to one K loan can't make sense in a worst case scenario. It's just that there are likely better options
for you. And so you can call your credit card company, you can ask for an interest rate reduction. That is something you can do in about ten minutes, and they might do it just because you asked. It is worth at least asking the question. A balance transfer card could make more sense, too, depends on your credit score and how disciplined you're going to be. That also depends on your timeline for getting that credit card debt paid off.
If it's going to take you four or five years, then a balance transfer card might not make the most sense. But the City Simplicity card, for example, We'll give you twenty one months a zero percent interest, But again, can you get the full debt paid off in this timeframe? If so, that might be a better direction than taking money out of your four one k, But it's crucial to take stock also at the same time of what got you into this credit card debt in the first place.
If you go to the ballance transfer route, but you don't have the discipline to pay off your debt, you're going to wind up in a worse financial position. And that's kind of what's problematic too, Matt about the four one k loan you mentioned, Hey, if you've got a long timeline to pay it off but you lose your job, well, you're over a barrel financially. Where you going to come up with that money. Now you've got to find another place to get money from.
It supposed to you to more risk, but it doesn't address the underlying cause that got you to this point in the first place. Like the four one k lon just feels like a band aid and it doesn't like address the root cause, which might be like, did you find yourself in a crunch because you didn't have any cash on hand and therefore you had to rely on
your credit cards. Well, if that's the case, you need to address the fact that you need to have more cash on hand, you need to have a fatter emergency fund. If it's because in this credit card debt, So maybe there's spending that was involved that was not very intentional. Well, if that's the case, it's worth thinking through how can
we be more proactive and intentional with our spending. Yeah, and maybe it's even like just like not being organized because you're like, whoa, we don't, oh, shoot, forgot about this account? And if that's the case, it sounds like this couple might be a little bit older. But I would say that like a budget is the solution here, like to which I don't think I've ever said this but hey, you might want to check out copilot as
you're getting closer to retirement age. I don't think we've ever told a couple who's considering retirement to get on a budget. But that being said, it can help to figure out how much it takes to live on every single year. It can actually give you the confidence needed to enter into those retirement years. And so what I'm getting out here though, is addressing what the underlying root cause might be before just pulling the trigger on something like a for Win k Lom.
Yeah, And I think there's like there's like an insidious thing that happens mentally when you when you actually take money out of your retirement account before you reach retirement age, you start to think, oh, this is a place I can take money from and and maybe you end up taking more money from it down down the line in the future. Like it's like once you cross that barrier,
you start to you have like an inappropriate relationship. Then with that foural one K and so I just want you to maybe keep it above board, not touch that money, find another place to get it, and then, like you said, Matt, be disciplined about kind of getting rid of that credit card.
Debt as soon as.
Possible, keeping that money growing in your retirement account be he goaes, Hey, guess what, you're getting closer to retirement age and you don't want to unduly interrupt that compounding process.
That's all right, especially those last few years, or the compounding has the largest impact on your overall net worth in those those final few years. But Joe, let's get back to the beer you and I enjoyed Once upon an Orchard by Aligash. What were your thoughts?
So this one was more tart than I thought it was going to be, but I loved it. I was a big fan. Sometimes the fruity ones can be a little more, a little more fruit forward and a little less of whatever that base beer is that's got like the sour notes going on. This one was like the best of both worlds. It was fruity, but it was also really tart, really sour. I love everything Alligash does and this is a big win for me.
Yeah, it was, dude. It was like super jammy, like because I feel like the fruit and I was afraid of that this because a lot of times I think one of the reasons I don't like raspberries is they have sort of like that fruity tartness but without much depth or body. And I feel like it's funny because at the beginning, before we hit record, You're like, what's
in this? Is there strawberry in this? It smell almost like strawberries, And I feel like what strawberry has that raspberry doesn't is like backbone like depth, Like just imagine having like strawberry jam as versus like raspberry jam. Like I don't know, in my mind, there's just more flavor with strawberry. Obviously, I think it has to do with
the fact that they blended this with blueberries. But yeah, man, it's just it had this depth and like this umame where I felt like my mouth was still sort of chewing on it, still enjoying it even after I had after I had swallowed it.
Yeah, I had a nice viscosity. It wasn't too thin, and yeah, it lingered. The fruit really came forward in this one, and it's kind of what we've come to expect at this point from Aligash. They just make again phenomenal beers.
This one was a corked and cage too, so it always feels a little bit fancier too. When you end up making that pop, yeah, that popping sound as a versus just popping a cap off true story. Well, that's going to do it for this episode.
We'll have show notes up on our website at howtomodey dot com with links for some of the resources that we mentioned during this episode today, But Matt, that's going to do it for this one. Until next time, Best Friends Out, Best Friends Out,