Ask HTM - Timing a Roth IRA Conversion, Attacking Debt or Saving for Retirement, and Budgeting for Housing Expenses #202

we'll see. And then we've got a question too about money to set aside for home repair, specifically for a rental property. And we're gonna get to all those plus two more within this episode. But first me, let's talk about some investing. Yeah, before we get to all the questions, I'm excited to get to them. I wanted to talk about micro investing apps, and we talked about those a

long time ago, back in episode twenty nine. But but I feel like some of the things that we talked about in that episode actually have come to pass right now in kind of how a lot of young people specifically are handling investing inside of micro investing apps. And I've just seen a lot of news about poor judgment in regards to what they're investing in. I think we talked about this just a little bit last week when

we were talking about investing in a vaultabule market. But I think micro investing apps in particular make people more prone to trade more frequently. And so if you're using an app like robin Hood or in one, you know, we like both of them. They've done a really good job at lowering the costs and making it easier for

investors to get on on board to start investing. But at the same time, I think a lot of young people just feel the need to trade more frequently and to trade when they don't need to, and it actually can lessen your returns over time. You can create a lot more stress, it can create an environment for poor investing. So yeah, I mean that's something we did talk about

back in episode twenty nine, that micro investing apps. They have all these great tools at your disposal, but then if you use them too much, it turns out to be a really bad idea. It's like they may get too easy to trade. The interface is so slick. I just want to hop on there and like spend some money or make some sales whatever. Well, specifically to some

of the bigger online brokerages as well. The end of last year, they started charging zero dollars for commissions, which means that you could buy and sell stocks for free. Before that, it was like what five bucks or six bucks depending on who you're with. Ye, and Robin Hood really really accelerated that change, that kind of started it, yes, exactly, and so folks got used to that, and so now

pretty much everyone is doing that. And the downside though, like you said, when it's so easy and when it doesn't cost you any money, and when these apps look so good on your phone, you kind of want to dive in there and see what's going on with the market, You're going to be more likely to sell. You're gonna be more likely to make speculative moves like short term moves, which goes against everything that we would recommend the date

trading kind of mindset. It just becomes a lot easier to become kind of enthralled and and have that sort of mindset. When it comes to investing. We're completely not about that. We're about investing for the long haul. We're about simple investing. And so, yeah, I just wanted to caution people as I'm seeing more and more stories pop

up about young people investing in a speculative way. By the way, I'm saying young people like we're really old or something like that, like our generation, our generation exactly. I hate seeing that because, like we've talked about again and again, investing for the long haul, investing simply low cost index funds in particular, and target date retirement funds, those are going to be the best way to invest. And I love some of these new apps we talked about in one it's a fantastic app. They do a

really good job. But if you're using it to do speculative or frequent trades, that is not a good idea. That's not a good use of a good APPA. And something else too, is, you know, with the lockdown and with so many folks working from home, folks who are used to maybe like checking their accounts like during lunch,

Well you can check it whenever you want. And so I think a lot of folks who might be sitting at home, you know, working on the laptop, sitting on the couch, They've got their you know e trade to TDA Merrior trade accounts open off to the side, and they're they're watching the market, thinking is now a good time to Is now a good time to sell? I don't know. Folks are trying to time the marketing a little too much, way too much. And you know, we

touched on this a little bit last week. I personally, you know, I kind of shared my long, kind of story about about how I go about making purchases. I think it's totally fine to take advantage of dips if you're going to purchase and hang onto that for the long haul. But that is not how a lot of

folks are approaching the market right now. One of those companies that I mentioned, they have seen the number of daily trades skyrocket since they started offering those trades commission free, and so they used to have one million daily trades at the end of last year and at this point now they're seeing three million trades every single day. So I guess there is a downside to free Yeah, exactly, it's increased threefold. So that's a bummer to see. Like

you said that, we don't like seeing that. That is not what we recommend. We want folks to buy low cost index funds and hang onto them forever, and we've always been able to do that with Vanguard, with Fidelity, blog intor accounts there, buy those funds and you're set. Yeah, And like I said, it's not necessarily the micro investing apps faults. Some of those micro investing apps are great. They do a really good job. It's our behavior that

it leads us to do. Yeah, exactly, all right, So Matt, let's get onto the beer that we're having on the show today. We're drinking dank Bot by Insight Brewing. Big thanks for listener Joe for sending this one in our way, and we'll give our thoughts on this beer at the end of the episode, but for now, onto the subject at hand. We're taking listener questions, and for folks that want to send us their voice question for consideration to be on a future episode, we'd love to hear it.

Just go to how to money dot com slash ask. There are simple instructions there for you to see how to record your voice questions. Send it on over to us, and hopefully we can take it on an upcoming episode. I mean, I wanted to mention real quick that if you had a guess how many listener questions have we answered on our podcast, Because I was moving some files around on my computer and I saw how many we have in that folder. I'm gonna guess that we've answered

a hundred and eighty listener questions so far. Well, you overshot it, so now it feels like that the number I'm going to share isn't nearly worthy of praise. But one fifty. We we've answered exactly a hundred and fifty questions between the ask episode it is on Mondays as well as some of those questions sprinkled in on Friday episodes on my part because I know, like when my wife's like, guess how much I spent on this, I got a guess under. I even think she might have

gotten because I ruined it if I guess over. So yeah, wet blanket Joel, that's your new nickname. But I mean the reason I mentioned that, though, is because that's a lot of questions, you know, And that's also a lot of answers that we've provided. That's a lot of folks who have maybe trusted our advice. And so we appreciate all of our listeners out there who are listening to our show, and if you've never submitted a question, we would love to hear from you and and hopefully we

can take it on an upcoming episode. Yeah, alright, Matt, we were just talking about micro investing apps. Well, we have a listener here with a question about investing, but specifically doing a ROTH conversion, So let's get to that one first. Hey man, Joel, this is Jonathan in Ohio. Thanks a lot for taking my question today. I'm trying to make some predictions about US tax rates in the year twenties sixties, so I thought, hey, who better task

than Matt and Joel. So here goes m My wife and I are in our early thirties and we expect ROSS to be our main retirement nest egg. But I have twenty five tho dollars from an old traditional four one K that I now have in a Vanguard traditional I RA, and if I use a nine percent rate of return as an estimate, this will grow to almost eight hundred thousand dollars by that time I reached seventy

and I'm required to take r m DS. So my dilema is should I convert this to a ROTH now and pay taxes in a tax bracket, or should I wait until we were retired if we don't have any other ordinary income when we get to retirement, which obviously, I don't know is the case. I wonder if we'd be avoiding taxes on in anyway, because that eight hundred thousand dollars is still under thirty thousand dollars each year,

and distributions. Obviously, I know that tax slaws will change in many times between then and now, but I just want to get a second opinion. Thanks well, Jonathan, you know that that's an impossible question to I love the impossible questions. Yeah, it's still fun to attempt to predict the unpredictable. Though. In a quick note as well, you don't have to take your R M D s. Those require are minimum distributions until you are seventy two. Now. That was the result of the Secure Act, which became

law at the end of last year. But honestly, Joel, if you're seventy seventy two, what difference does two years make a big difference if you're seventy if you don't have to take the R and D. But when you're that old, like two years, it's just like a blink of an eye, Like the older I get now, like time almost means nothing to me. It goes by so quickly. Makes you think of that picture of you and I from the face app when we're like, we look like two seven year old guys. It's not gonna be that

long until we actually get there. Yeah, that's so true. Now I understand that, but that but that is actually a big deal for a lot of people who are trying to play in their retirement with draws, and especially as people are living longer, that extra two years to not have to take with draws is a big deal for people. That two years of compound growth, especially on that back end, like that is massive. I don't want

to discount that. But at the same time, I'm also like, when you're seventy what's seventy two, we'll be there before,

you know. Bunny, all right, well, let's talk about Jonathan's question Roth conversions and Jonathan, I think the first thing we need to address is predicting future tax rates, and it's pretty impossible to do that kind of like Matt said, it's hard to imagine them going lower though, because if you look at kind of a history of tax rates in this country, we're at a pretty low point ultimately, and as federal deficits increase in the national debt expands,

taxes will likely have to rise to meet our increasing obligations. And Matt, there's a recent two trillion dollar stimulus bill is likely going to cost all of us some money in increased taxes over the coming years. I don't think that the federal government should operate like a household and should have to have like the balanced budget. But at the same time, I do think the increased federal spending the increased deficit will lead to higher tax rates for

us in the coming years. But again, it's impossible to predict.

How can I actually know that it does influence at least a little bit of how we answer this question, though, Yeah, for sure, man, And so another consideration is where the market is currently right, making a roth conversion in a down market makes a whole lot of sense if you're in a lower tax bracket, and in particular, if you do it right now while the market is down, as stock prices have fallen, your tax bill on that conversion is going to be lower than it would have been

just a few months ago. It's especially ideal if you can make that conversion in a year in which your income doesn't exceed the marginal twelve percent tax bracket. Yeah, Basically, the lowerer a GI, the lower your taxable income, the more it actually makes sense to do a Roth conversion. Now, Jonathan, don't wait ten years when your tax rate's gonna be twice is what it is now. That's me predicting the future, which is impossible. Yeah, that's a bad move, Matt, don't

do that, and I think too. It's important to note for Jonathan that in order for this to even be on the table, you really have to make sure that you have the cash on hand to pay the tax on the conversion and at the same time make sure you aren't depleting your emergency fund in order to make this move. Especially with rampant job insecurity of contracting economy, it makes sense to hold on to that emergency fund.

And if you don't have enough money on hand to keep that intact as well as paying the tax bill that you're going to incur next year, then don't do it because that puts you it undue risk. So, while we love the idea of making a Roth conversion, you have to be able to pay the taxes that you're gonna incur in order to make it. Is still us mark move and Jonathan, another advantage of making that conversion is you have the potential to spread out your tax liability.

You didn't really mention this, but if you do have happen to have a four O win K through maybe a current employer, converting to a rath with that old money, like that makes sense to go ahead and do that now, because it's helpful to have both pre tax and post tax buckets in retirement. Essentially you're diversifying your tax liability when the time does come for you to retire. Yeah,

at those different tax buckets so helpful. Having both pre tax and post tax just gives you even more flexibility in retirement to basically dictate what your income is gonna look like and dictate what your tax rate is going to be because you don't know what the actual tax rate is going to be in the future. Yeah, so that's kind of a good way. I think a lot of answers that we give on the show sometimes are split it down the middle. That's a way to split it down the middle to have some pre tax some

post tax money. You're you're splitting the difference and you're giving yourself more flexibility in the future while ensuring some tax breaks now. Right, And it really comes down to ultimately us not knowing the future. Like I said at the beginning of your question, Jonathan, we are in a

pretty historically low tax environment. I'm kind of keen to take the burden the hand on this one and make the conversion, especially if most of your retirement account exposure is in those accounts that have already offered you at tax benefit. I would jump at the chance to have some of my money in a post tax rath account because it does add to some of the flexibility you're

gonna be able to have. Of course, it's hard to know whether you'll actually be in a lower tax bracket in retirement, so just do your best and either way, keep investing for the long haul. That's really what it comes down to you. I mean, these sorts of decisions about whether to convert to a roth ira from a traditional ira, they're good questions to have. But more than anything, growing that nest egg, putting more into it and making sure you're going to have enough in retirement, that is

the bigger part of the equation. All Right, man, We've got a couple more questions that we're gonna get to, but first let's take a quick break. All right, That we're back to the break. We're you get to a question about employees stacked purchase plans in just a second, but before that, let's get to a question that's on a lot of listeners minds. Do I pay off debt or do I invest with the extra money that I've got? Hi, Joel and Matt. My name is Kate and I currently

live in Pittsburgh, Pennsylvania. UM. I love the show and I found it to be a very valuable motivational tool for me. UM, I'm coming a bit late to the game. I'm thirty five with married with two kids twelve ages twelve and four. We're a single income family, and I unfortunately haven't given much thought to my finances until recently. I pretty much let life get carried away, assuming I

would take care of things later. So now is later, and I'm working on making sure that I'm in more control of my finances and making better decisions for the future. We have a large amount of debt, including consumer debt, student loans, a personal loan, and a mortgage. I am a teacher and contribute twelve percent of my income to my four oh one k annually. Currently my four oh one k, though is it in terms of my savings

for the future. I know I need to emphast up, but my debt is absolutely crushing currently and we're working on a plan to pay it off as soon as possible. But if you have no if you have debt, you have no money, and that includes money for savings. But if I only focus on the debt, it will be years before I can begin saving for the future beyond my four o one k. My concern is that that would be years of not being able to benefit from

compounding interests with investments. So I'm not sure what to do. Focus only on the debt and put off savings until at least most of my desk taken care of, or take some amount of money, even if it's small, and begin investing into another retirement account such as a rath I array while working at the same time to pay off the debt. I would appreciate any advice you may have to help me figure out of solid path going forward. Thank you so much for the help and for all

of your work on the podcast. Cheers. Kate thinks so much for listening to the podcast, and we are glad that it's been motivational for you. Honestly though, like you're not getting started all that late at age thirty five. Yeah, thirty five is not that late in the game. I think Kate's giving herself a little bit of a hard time here, and I think we all understand the realities of like pushing something off a little bit further down the road. You know, she was kind of mentioning how

she's like, I'm gonna say that for later. We've all been there, like we don't want to do the harder, difficult things in life, but you know you're there now. We understand that you're ready to make some decisions. So that makes me happy though that we can kind of guide you along in the stage of life. And didn't Kate say too that her investment rate, her savings rate was twelve. I think that's pretty good. That's that's solid. Again,

Kate raking herself over the coals and when it's unnecessary. Kate, you're doing a great job. Keep it up. I want to say that you didn't mention whether or not you're getting an employer match. If you do, then you should at a minimum keep investing up until that match amount, no matter what. When it comes to investing more or

paying down debt. For instance, if your employers putting in three percent, if you put in six, if they're essentially matching fifty cents on the dollar, well, then stop at six percent of your money and start funneling that extra money towards your high interest rate debts. Then you're able to, like we're talking about earlier, Matt, kind of splitting the difference. You're doing both simultaneously, and I think that's always a good place to be, especially if you do have high

interest rate debts that you want to get rid of. Yeah, and on that note, we've we've talked before about the debt snowball and the avalanche. Student loans and mortgages aren't typically the highest priority for us to don't want to pay off, especially your mortgage, But you should funnel all your extra money towards getting rid of that personal loan, a SAP any of that consumer spending. And then once that is taken care of, you can increase your four

O n K contribution amounts. Yeah, once you've been able to make good progress on the debt, you can start investing again. But super high interest rate debt does take

priority over investing typically at least after that match amount. Yeah, So tackling the high interest rate debt like that's more along the lines of taking the that avalanche approach, right because you're gonna start with the higher interest rates, but because you're already saving within your four own k and you already have a plan to knock out your debt. I think the decision really comes down to taking the route that will be the most effective for motivating you.

If the snowball appeals to you, then maybe, like that laser like focus on purely paying off debt is the way to go. Like, maybe you just want to focus on one item at a time and then once you've eliminated that completely, then focus on investing. But you know, if you are going to look at the numbers and take more of a mathematical approach, then that's when the

debt avalanche might be for you. Yeah, Matt. So much of our personal finance lives are emotionally based and trying to split the difference, which sometimes really does work and it can be the best way to go, it doesn't always work for our mindset. Our brains have such an easier time handling a singular goal, and if that singular goal is going all in and investing as much as we can or funneling as much money as we can

towards HIE interest rate debts. Well, having just one goal makes it so much easier to accomplish, and so if at is what works best for Kate, then I think she should do that, because, Yeah, we like talking about the numbers, we like talking about what makes the most sense and how take advantage of the match and then putting everything else towards high interest rate. That that's probably the best way to go, but it's not the best way to go if it's not a plan you can

stick to. So whatever it is, the Cake can stick to and can continue to feel in control of that, I would, says her best bet nice man. Alright, our next listener question is about an employee stock purchase plan. Let's here. Hello guys, my name is Adish, I'm from Philadelphia. I hope you and your families are safe and doing with thanks not for your podcast and especially for the Friday episodes. They're helping me to keep up with all the covidnant and related updates. I have a question related

to employee share purchase plan. I have enrolled in the SPP program with my employer and I was going to sell some of the acquired stocks around February as market crashed afterwards, I'm holding the stocks right now. I might need the cash in next one or two years for a real estate investment. So my first question is should I continue to hold my employer stocks or should I sell them at loss? And my second question is should

I continue to enroll in the esp program? Take care and stasive my Adash, thank you so much for your question. We're doing great. We're staying pretty safe, I think, right, Matt. Yeah, Man, I only do safe things. I've got kids, exactly. We've got to make sure we keep our kids away from other people more than more than even ourselves. Yeah, actually that is true. Yeah, but hope you're doing well to Dash. And this is a great question because e s p

p s are awesome if used correctly. And Matt, we went into some detail on ESPPS, in particular on episode one fifty six inside of a nask HTM episode. But a Dash's question gets into even some more ESPP nuance, So let's get into it. Yeah, there's so much of your decision to sell, and when the cell comes down to like really a couple of things, A like what you will be doing with that money down the road,

and be the tax consequences of selling it sooner. If you held your es PP shares for more than two years from the offering date and one year from your purchase date, it's called a qualifying position, and you're able to report more of your profit as capital gains rather than as earned income. And capital gains tax rates right now are pretty favorable. They are, so to avoid poor tax treatment, make sure that you reach those thresholds before selling,

and then make that sell happen at that point. But either way, you don't want to sell those stocks right now, especially at a loss so much the answer comes down to not what the stock is worth right now, but what's the tax treatment, because that is just as big of a consideration, if if not an even bigger consideration to make when you're buying and selling shares. So, just what Matt said, if you can hit those timetables to give yourself preferred tax treatment, that's gonna be a big

reason to actually hold onto these shares for now. And we would say to you asked about continuing to participate in your ESPP, well, yeah, if you have the money to invest in your ESPP as well as making meaningful contribution to your four oh one K and H s A if you have access to one, and if your employer stock discount is really really generous, that we would say, yeah, you should totally be participating because it is a major benefit that an employer offers that you should be taking

advantage of. Just be sure that the amount of employer stock that you have doesn't exceed five percent of your investment holdings. Investing through your e s P P should be a tiny amount of your overall portfolio. So while it is this awesome perk, you can purchase company stock at a super sweet discount, hold onto it for that

minimum time period, sell and get great tax treatment. Will make sure that you're widely diversified and that most of your investments are an index funds inside of your four O one K or an I RA A or an H s A, and that this e s PP is just a tiny percentage of the overall investing that you're doing. Yeah, man. And the reason for that is because of the inherent risk involved with investing in a specific company single stock investing. It's why we do not recommend that. And on the

note of diversification dust. You know, he mentioned his upcoming real estate endeavors as well. Best of luck. They're uh until speaking of real estate, our next question is about budget for a rental property, and so we'll get to that one right after the break. All right, Matt, we'll back from break. We've got more listener questions to get to and just a second, we're gonna get to a question about going to medical school. Is that a good idea? But first let's get to our next question, which is

about budgeting to buy a rental property. Hi. There, my name is Hannah. I live in Montana. I know it's very funny. I was hoping you could give a quick recap about budgeting for a good rental property. I think in that episode you might have said something like you should set aside the equivalent of ten of your mortgage for maintenance expenses, another ten percent for capital expenses like

a roof, and maybe another ten percent for vacancy. I had questions about that because it's seems like the amount you would then set aside could vary based on the term of your loan. My other question was when can you stop saving for vacancy? Do you have any advice on that if we don't anticipate a very high vacancy rate, maybe is there a number of months we should shoot for having saved up? Thanks? Oh, Matt, it must be

tough to live in Montana and have that name. At this point in time, I knew you were going to bring that up. She brought it about your nature. Speaking of Miley Cyrus, did you happen to see her performance on SNL at home? You know, they've still been doing SNL, but like an at home version version. I haven't watched SNL in like five years. I mean, yeah, we're recording this at a time. But she did a cover of

Wish You Were Here, that Pink Floyd song. That's pretty cool. Nice. Yeah, it's a cool way for them to continue the show even though they're not really live, so you kind of miss out on some of that audience interaction a little bit. Personally, it's more like a podcast. I'm sure Hannah struggled with that throughout the years, depending on how long she's lived in Montana, which is a wonderful state. But yeah, let's

try to offer a couple of rules with them. And I know it can be overwhelming for new landlords to to start to think about the costs they are gonna incur when they are buying our rental property. That not to mention the hassle of buying, renovating, and finding tenants to live in the property that you're buying. That's why a lot of people choose to forego real estate investing, or at least mom and popular estate investing. But but but we're big fans of it because we do think it

can have outsized returns over the years. Man. I think on that episode we said that one percent of the original purchase price was what you should budget for annual maintenance of a rental property, and I think that's still a pretty helpful number to consider. Right an average two dollar house will likely incur roughly two thousand dollars in

repairs every single year when averaged out over time. And granted, there's a lot of advice we can share with Hannah on this, but when it comes down to it, so much of the answer when it comes to this question is based in the kind of properties that you're buying, is based in where you're buying, the condition that the property is in. There are so many variables that it's hard to give a precise answer to this question. But but we're gonna do our best and je so you know,

like we're getting at here. Most beginner real estate investors severely underestimate the cost that it takes to own a rental property. So do take into account the fixed expenses that you will incur every month, like insurance and trash. Likely some of those expenses are already built into your mortgage payment, but like we said, these costs tend to level out over a longer period of time. But just make sure that you have the cash on hand to be able to make these important repairs from month one.

And I'm not sure exactly where you are on your real estate journey, but if you are sitting aside ten percent for each of those things you mentioned repairs, you mentioned, capital expenses, and vacancies, you might even be setting aside too much money. So maybe you're kind of on the other end of the spectrum. However, for most folks that that's not the case. Most folks underestimate, uh, the amount of money that is going to need to go into

the home just to keep it up and running. Yeah, man, I think in particular with real estate investing, I'm okay with overestimating the costs you're gonna incur, because what happens when you own a property and you have tenants in it and you don't have the money to cover a necessary expense. That's how you sell it and you make

it somebody else's problem. Yeah. I like that, That's that's one option, but really it stinks if you don't have the cash on hand to repair a broken water heater or an h fact that goes bad in the summer. Those are repairs that you have to make in order to keep your tenant happy and in order to keep the property in good shape. But let's keep talking about rules of thumb, because especially when we're talking about real estate investing, I think other rules of thumb can be helpful.

And again, these are rules of thumb because they're good general things to think about. They don't apply to every specific situation, right. But another decent one is that fifty of your rental profits will likely go to repairs on the home, and I think that can be a helpful gauge when you're thinking about how much money to stock away. So the biggest takeaway from that is, don't take all the profit that you're taking all the monthly rent that's

above the mortgage. Don't take that and spend it. Save a good bit of that, at least fifty of it for upkeep of the property. Real estate investing is something that you're doing for for the long haul to continue to attract good tenants and to continue to keep the good tenants that you already have. You really do need to maintain the property well, and so putting that money back into the property for repair costs and upkeep is

really crucial throughout the whole process. Then, Hannah, you're the last bit of your question there had to do with when you can stop saving for for vacancy. Once you have that full ten percent amount in the savings account for vacancy, you can stop saving for that potential vacancy. Obviously, you don't need to continue to say for that. By

the way, you said you don't anticipate a high vacancy rate. Luckily, I've been pretty fortunate to avoid vacancies, but only due to a lot of hard work to get a new tenant in on a short and tight timeline. And additionally, in a contracting economy, it's even more important to plan for some of those potential vacancies and to be maybe a little more conservative with the budget numbers for this property.

It's better to be safe than sorry. I think traditionally we would have said that, like, oh, that that sounds really conservative, just to have your money sitting around like that in cash, But especially given the current crisis that we're in, is are such thing to have too much cash on hand? And I think the answer to that is cash is keen. You know, it's important to have enough cash on hand to handle some of these storms because there are a lot of unforeseen circumstances that we're

gonna be faced with. Yeah, Matt, I think if I were to calculate the vacancy rate for all five properties that I own, it's probably something like two percent. It almost never happens. I'm really really good about getting people in there to do the painting, to do the necessary repairs in between tenants in like a day or two to keep it looking good, to get somebody else in there. But at the same time, when COVID hit, I had a couple of tenants reach out saying they wouldn't be

able to pay rent for the month of May. And so, no matter how proactive you are, there are certain things that are unforeseen when it comes to being a landlord. So having that vacancy built in to your savings, having money set aside for the times when your property will potentially be unoccupied is really smart because even if you're a go getter, you're proactive, you're making sure that the repairs are done in the right amount of time in order to keep tenants in that property. That still doesn't

necessarily mean that it's going to be occupied all the time. So, Hannah, it sounds like you're asking the right questions. I don't mean to sound too conservative, but I think the more money you can have set aside for potential vacancies and repairs, the better off you'll be, and the less dress you'll have as a landlord altogether. Nice man. All right, we've got another question, and after this question, we're gonna dispense some medical school advice. I'm Andel, my name is Rick,

and I currently live in Ancona, Iowa. I graduated with my bachelor's last man and have spent the time since then taking a gap here working in a hospital setting, gaining healthcare experience, and trying to learn how to do this whole adulting thing, which is actually how I ended

up Finding your Guys podcast. Come in August, I will be starting medical school and I was looking for some advice on how to navigate the financials of this massive life life change I will be undergoing from taking on massive loans to readjusting my budget and whatever else you guys think would be helpful for me to know. I welcome all the advice I can get. Thanks a munch, keep giving out great advice and have a wonderful day. Rick, First,

congrats getting into medical school. Also, what a great idea to take a gap here some of that real life experience working in a hospital setting. That makes a whole lot of sense. And I think that the first question that we would typically ask that we typically have for folks about the commit years of additional schooling and the massive costs associated with that learning is are you sure

is that what you want to do? Not to dissuade you from from something that you're passionate about or something that you really do want to pursue, because because if it is something that you've completely got your heart set on,

then you should definitely go for it. But it is an important question to ask before you actually do make the decision and start taking on debt because of that decision, but because of your experience working in healthcare this past year, it certainly seems like you shouldn't have any doubts because because if you're still ready to proceed after that, then go ahead, man, make it happen, especially given what we've

gone through over the past several months. Right. Uh, Yeah, there so much we don't know until we've actually experienced it, And it sounds like Rick is doing that experience things. I love that, Uh and Rick. Most medical students may not be thinking of scholarships, but there are lots of

them available for medical students. There's gonna be some specific schools that will offer a full merit scholarship, but then they're going to be groups like the American Medical Association Foundation that has the Physicians of Tomorrow Award, which gives students in their final year of medical school ten thousand dollars.

There are a lot of traditional resources on the web that you would typically associate with undergrad scholarships, but be sure to check out Scholey, fastweb Scholarships dot Com like these are all going to be great sites for you to check out and to see what offerings there are for medical students. Yeah, pinching your budget is definitely an important thing to do as a college student, but finding

scholarships is even better. Right, Don't cut your Netflix membership and then not search for scholarships, because that one additional scholarship can have such a huge impact, can massively outweigh just those little cuts that you can make to your budget. But at the same time, right, it is important to think about your budget. Getting an advanced degree is often

a lean financial time in people's lives. There's not much money coming in and you're living in kind of austere quarters typically, and at the same time you're taking on a good bit of debt, so you're forced to live pretty cheaply. So I would say that the key is

to continue to live that way as your increases. Right, as someone who is getting a medical degree, once you hit residency, you'll start to see an increased income, and once you start making an even bigger income as a doctor, living like a resident is key to being able to pay off those student debts and as quick a time frame as possible. And Matt, there's a great website out there,

the White Coat Investor. Pretty sure his name is Jim Dolly, but he has a site and a podcast, Like, dude is smart, and he has helped so many physicians save money, and his website and his podcaster particularly towards people in the medical space. So I think he's got a lot of great advice to offer. I would say that if you're becoming a doctor, if you're in medical school, if you're working towards that, his site in his podcast are are great ones to follow because they're gonna be able

to help you along the way. But if you can continue to live like a resident all the way through, if you can get those additional scholarships and also cut your costs at the same time, you'll be in a much different place than a lot of people that graduate medical school. And we gotta reach out to him and see if we can have him on the show. Sometimes

he would be a great guest. He would be. Let's kind of back it up to to to actually, you know, you're assuming that we're gonna get student loans, but you know, Rick, we would recommend for you to try to take out as few student loans as you possibly can, if you can bootstrap your way through medical school as much as possible, Like that's you know what we would recommend. But when the time does come for you to take out some loans,

be sure and start by filling out the FAFSA. UH. It's not just for undergrad as medical schools do use this to determine how much aid that you're going to be eligible for. UH. And the good news is that you're interest rate for your first year loans are going to be much lower because borrowing rates have gone down a good bit. Yeah, that's one silver lining to kind of the difficult times that we're experiencing right now. Lower

borrowing rates for students. And another thing I think it's important for Rick to consider is where he's gonna work post graduation. You can get medical school loan forgiveness by taking a number of potential job choices once you're done. For example, the National Health Service Core offers health providers and professionals the opportunity to receive up the fifty dollars

in tactually for loan repayment for a two year commitment. Also, medical students in their final year of school can get up to a hundred and twenty thousand dollars in loan repayment for a three year service commitment at an nh SC site. Also, if you've ever been interested in a military career, there are great benefits for those who choose

to serve. So depending on how much student loan debt you have to take on, depending on that overall debt load level, finding the jobs that are going to actually help pay your student loans off, that's a big thing to consider once you're done. And in particular, there are so many needs for doctors rurally across the United States of America. Looking for jobs in rural areas is actually gonna be one of the best ways to be able

to get relief for some of those student loans. And at the same time you're probably going to be serving people who who need access to good physicians, so it can be rewarding too. So Rick, best of luck to you as you get through medical school. I'm sure it's a long slog. Keep that budget under control, apply for those scholarships, and then make sure you're looking to those bigger opportunities that can pay off once you've actually got

your degree in hand. All right, Matt, let's get back to the beer that we had on the show today. We shared an i PA called dank Bot by Insight Brewing Big thanks to listener Joe for sending this one our way. What were your thoughts on this beer? Man? Hey man, this was a solid beer. I'll describe how it poured first, which was a nice golden orange. This is definitely more of a traditional style I PA because

you could see through it. That's how you can tell the difference between the New England style and more traditional I p A. And I'm much into this one is from Minnesota, and that's where Joe, who sent this one to us, that's where he's from, so I think this must be a local brewery there for him. I hate saying this, but this beer is called dank Bot. I'm want to describe it as dank way to take the easy descriptor. It did have that piney kind of resid

the earthy flavor to it. Obviously it had some of the hop edge to it, but at the same time it was pretty multi as well, so due to that, it did remind me more of maybe some of the more traditional I p A s from yesteryear. But I enjoyed it just as much reminded me when you and I first started having beers together. But but yeah, I mean, what were your thoughts on this one? Yeah. I think the first thing that came to my mind was that it had some abrasively happy notes. And I don't mean

that negatively. I think abrasive typically is a word that we used to describe things that we don't like. But no, abrasively brasive personality, right exactly. But abrasively happy is good because I like hops. But yeah, I did have some of those old school bitter pine notes. And while piney i p a S aren't typically what you find on store shelves these days, I still really enjoy getting to have one every now and again. And I feel like this was a really good representation of one of the

I pas of yesteryear. I think, as you just put so, Yeah, thank a really really good beer. And again, this is a beer by Insight Brewing, sent to us by a friend of the show, Joe up there in Minnesota. Thanks Joe. All right, buddy, that's gonna be it for this episode. Listeners can find our show notes up on our website

at how the Money dot com. We'll include some of those links to some of those different sites that include all of that scholarship information, whether you're looking at undergrad or education even beyond that, Yeah, and for anybody who's been listening for a while, we would appreciate a five star review on Apple Podcast. If you have a minute, head over there, hit the five stars and leave a nice little note. We'd really appreciate it, all right, man,

Well that's gonna be it until next time. Best friends Out, Best Friends Out.