Friday Flight - Open Enrollment, Creditors in your DMs, & Falling Rents #276

I was, I was gonna surprised we there there's a good amount that that that was going on this week. But yeah, I mean that means that there have been a ton of political news and they do have an impact here and there on our money. But dude, in the end, there is so much more that we can do ourselves. There are steps that we can take that that that have nothing to do with politics and policy.

We actually have like a lot of great stories that are going to actually help people with their personal finances this week on today's episode. So, and that's what we do every Friday, every Friday. We look at the news and figure out how this has to do with your money. Before you get to that real quick. I want to let you know that I we had a tropical storm come through Atlanta. I know it just over a week ago, and I had a limb fall down off a tree

and bust my rear window in the Nissan leaf. You're not sharing this with me, You're sharing this with the listeners because because I knew that sometimes we pretend that we don't know what the other ones about to say. But this is definitely an instance where you sent me that picture that morning and I was like, oh no, dude,

I'm so sorry. Who would have thought that a category to hurricane coming ashore in like New Orleans or wherever it landed was going to equal us losing power for I mean basically like multiple days around Halloween and when you when you rode around town, the trees that were down, it was just insane. Yeah, I don't know what happened, but the amount of wind man that that, Yeah, it took down trees in particular, like in our neighborhoods where we've got these hundred year old oaks and branches down

and yeah, all that action. But yeah, the funniest thing though about your your story, your windshield was the the insurance conversation that you had. Yeah, so with your wife. Well, like she asked me, why are you are we gonna file an insurance claim like most people probably think to do. I had multiple neighbors saying the same thing, Oh, I'm sorry about your window. Have you talked to insurance yet? Um?

And my response, you know, trying to be the super nice, not to preachy financial guy, like no, I'm not going to talk to insurance. Crazy, it's it's literally. I called up a mobile glass repair guy. He came out within a couple of days, had to order order the new windshield and it was four fifteen dollars was the total out the door price to get my car back up to ye for fifteen that's nothing, not too bad. Yeah.

So in a deductible, the minimum deductible on a car is typically either two fifty or five hundred, or it should be that much or should be more like you should have your deductible set even higher, which I'd be lower because some people have it set lower, right like a round a hunter bucks, because they think, well, I don't want to have to pay a you know, full

four bucks. But the main reason that we do encourage folks to raise those deductibles and pay out a pocket is to avoid making claims with your insurance company in order to keep your premiums low, because the more often you use it, you have a higher likelihood of seeing your premiums go up. Uh, and those increased rates due to maybe higher risk that the insurer proceeds for you sticks around four years and years years, way more than just a few hundred bucks. Now that's right, that's right.

So I would rather pay it out a pocket one because my deductible is higher than the cost of your replacing you got the windows. No, I think my inductible is at a thousand, So yeah, there you go. That's that's how you get that real saving. The highest amount that I can said in my deductible is that five thousand dollars. Sadly the interurance company won't let you go that high. Um, but but yeah, I just want to

let let everybody know that that those minor things. Don't even call your insurance company about something that's just a

minor accident. Get a quote first to see whether you can afford to replace it on your own, and at the same time, UH, call your insurer and see well if I do up my deductible, how much can I save over the next twelve months um and and then pocket that savings put it in a savings account so you can be prepared for the next possible accident to where you're essentially self insured and you can afford to take care of that, you know, busted window, um or

minor scratch on your own. Yeah. Luckily we didn't have any big limbs come down and around our house, but if they had been, I think we maybe, hopefully we would have avoided a branch because when in the fall, I tend to park the van out on the street

because all the leaves fall on top the car. Man, it gets so filthy, you know, like all the leaves that get down into like the air vents down into the little trim and you kind of hit it with a blower and then it like shoots it down further into it basically a part of the vehicle at that point. But yeah, man, sorry that that happened to you. But at the same time, I'm glad you're able to get that fixed pretty quickly and easily. Yeah, especially as you're

riding around town. I'm riding around my bike checking things out, and just so many trees down, cars damaged severely. Um, some people had had homes damaged, of course, and and so yeah, I a bad for those people who have like a lot of damage. To take care of a busted windshield really not that big a deal in the scheme of things, Yeah, not that big of a deal. Man. Let's let's continue to talk about some of the stories that we came across this week, and let's talk about rent.

The pandemic has had a pretty meaningful impact on where people want to live. There have been a lot of stories about people fleeing cities like New York and San Francisco. Maybe you've seen podcast episodes out there saying like our city is dead. I don't know, it's a it's a question, it's a debate for us. But rents are falling in

many US cities right now because of this lack of demand. Uh, this makes sense, right, because you know, the things that people love about living in these cities has changed dramatically due to COVID. I don't know when there's been this kind of period of time where there weren't Broadway players

going on in New York, I don't think ever. And we saw in Bloomberg that They noted that the average rents in thirty core cities have dropped more than five percent, while average rents in the suburbs of those cities have inched up half a percentage point. Again, in cities like San Francisco and New York, it's even more. I think maybe you know it's it's down more like fifteen percent.

And these rent price dynamics have the big impact on on how you should proceed if you are a renter, in particular, if you're looking at maybe uh, resigning that lease, or maybe you're looking at a new place. Yeah, totally, if you're resigning a lease in the near future, chances are you should be paying a lot less and then you're paying last year, especially if you live in one

of these core cities. Knowing, for example, that like in Manhattan, Brooklyn or Queens that that rents have plummeted um and that the new normal for monthly rent is quite a bit less than last year. When you sign your lease, that gives you an edge when you're negotiating with your current landlord or you're looking around shopping around to find another place to live. Um Inventory is way up in

these locations, So just a couple of tips. Since rents are down, don't get married to a particular building or a unit. Don't get obsessed with one place and decide that you have to have it. The more flexible you can be about the place you're willing to live, the more you can potentially save. And also to be flexible

about the terms. If a landlord wants, you know, a six month or one year or maybe even like a two year lease right now, maybe they're worried about the potential for m rents to to drop you in further in the coming months. Well, the more you can be flexible, the higher likelihood that you'll be able to save money on your rent every every month. So obviously we're in an odd time. But yeah, you use these falling rent prices to your advantage as a renter. Yeah, definitely, man.

And it's also I think worth pointing out to kind of approach some of these stories with a level head, because I know when I see a story like this, it makes me think, oh, there's an opportunity here, like now is the time to live in New York City. But like the price, uh, you know, rent prices, it's it's only one factor, it's only one reason that you should consider moving if you are considered moving at all, and so it's it's again something you do want to

keep in mind. But at the same time, that shouldn't be your only reason to you know, one maybe uproot yourself or even your family to someplace totally new. Let's keep moving man. It's uh, it's enrollment season when it comes to healthcare, and we want to specifically talk about h s A s, which our health savings accounts. And we saw recently that only six percent of people that contribute to an h s A actually invest inside of it. And this is according to the Employee Benefits Research Institute.

That is not good, man. Yeah, I would much I would like to see a lot more people actually investing and not just having that money sitting there as cash. Because h A s are are pretty great as a vehicle for paying for current medical necessities while avoiding tax on that money. But hs A s are overwhelmingly excellent if you invest that money for decades instead. Back an episode one and five, we discussed hs A s in details, so check that out if you want all the details.

But yeah, especially since we are in the open enrollment season. You know, if your health is in good condition. If you're enrolling in an hs A eligible healthcare plan. Uh. And if you want to invest more for the future, go the hs A route. And you know, don't just actually stick money, stick cash inside that HUSA where it sits there as cash. Make sure that you are actually

investing the money within that account. That's right. And two of our favorite companies, by the way for opening an hs A with our fidelity and Lively, because of the low fees that they offer and the awesome access to investment options. So we'll link to both of those in our show notes. Last week, we actually talked about changing tax brackets Matt, and then a minor increase in the amount that people can save in a set bi A I think an additional thousand bucks uh coming up the

next year the new I R S guidelines. Yeah, exactly. And you know what, the h s A actually got a little bit of a bump up to an extra fifty bucks I think it was so Yeah, and maybe in a hundred bucks for families. So the new hs A contribution limits are thirty six hundred for individuals and families and a little extra note two people over fifty five,

but they can save an extra thousand dollars a year. Yeah, so don't neglect the h s A. You know, Matt and I, we really do think it's one of the best retirement plans out there if you use it correctly, because you're never ever taxed on any of that money, which is why it's so important to not be with the of people who aren't investing inside of it. Be like those six percent of people and start investing inside of your hs A because it's just one of the

best ways to long term invest for your future. Yeah, that's right. Pay for those medical expenses out of pocket, and try not to touch that HSA money. Treat it more like a retirement account, all right. So there's an awful new debt collector rule jol via the Consumer Financial Protection Bureau also known as the CFPB. They just finalized a rule this week that will allow debt collectors to contact consumers by email, texts, and by social media like Facebook, Twitter,

and Instagram. Like, seriously, what is up with that? This is? This is such bad news. Consumer reports that they say that each creditor will be able to have the ability to send an unlimited number of texts, emails, in social media messages to you. So that's where the sliding into the d m S title came from. That we mentioned like I'm not already getting enough spam like on social

media and in my text message in box. It's it's terrible considering you know that this is an industry that is like already willing to stoop to some really low levels in order to get paid. This is bad news for those who owe money. Yeah, and Matt, As it turns out a lot of Americans do owe money right According to the National Consumer Law Center, one in four adults have a bill that is in collections at any given time, So this is going to have an impact

on a whole lot of Americans. And the CFPV did say that consumers can opt out of these updated electronic communication methods, but they haven't explained how that's going to be implemented. So you know, hopefully we'll get an update on that and be able to relay that to everyone how to to avoid at debt collectors in your d

m S because it sounds terrible. But even though this is the Consumer Financial Protection Bureau who issued this new rule, it certainly doesn't seem like this is a federal bureau that has at least currently the interests of Americans as a whole in mind, Matt, back in the day, you and I we get to interview Richard Cordray, who helped

start and found the CFP was the first director. Yeah, and and his mission was a good one, and he actually did a great job at reining in some of the excesses of the financial services industry and protecting Americans. And right now the CFPV has lost sight of some of that mission and allowing debt collectors to contact you, you know, via d m s on Twitter or through Facebook Messenger or texting you at all hours of the day.

That's just bad news for all of us. Yeah, Like, I understand the need to update communication methods right like because before this, like they could only make those phone calls. But at the same time, the fact that they have outlined how often, uh, you can be contacted via these

you know, social media platforms, which is unlimited. The fact that they have that outline and they don't have outlined how it is that you can opt out of you know, some less electronic communication just kind of tells you where their priorities are. In my opinion, So the next steps, you know, for if you have debt in collections. First of all, luckily this rule doesn't go into effect for another year, so there's a chance maybe it can be

changed before then. But regardless, if you're being contacted by a creditor today, you know, by the phone, or if it's by Instagram next year, you always want to make sure that you verify that the debt is actually yours.

Because of the Fair Debt Collections Practices Act of nineteen seventy seven, you have the right to ask for the debt collector to provide you with details of how they calculated and arrived at the total debt uh that they're they're trying to collect from you, you know, as well as the name of the original creditor who you owed. And so this is an important step since collection agencies

incompetence you know, or sometimes they just don't care. Uh. That means that they might be seeking a debt from someone maybe just with a similar name as as yours, or maybe they have the wrong person altogether, they're marking up the wrong tree. Yeah, And I just want to mention too that obviously debt collectors have a job to do and there's a lot of people that do ohe

a legitimate debt and they should pay that debt. It's just that this is an industry that sometimes goes to excess when it comes to collecting debts, and sometimes they violate the law. Yeah, we're not against people paying their debts, but we're maybe against the harassment of individuals in particular. Yeah,

when the laws being broken. Yeah, exactly that. I wanted to mention that, and and hopefully we get a little more information on how you can protect yourself from a social media harassment campaign from from debt collectors if you actually do owe a debt, all right, Matt. One other things, speaking of folks reaching out to you via text, there

have been some reports of new stimulus check text message scams. Obviously, there isn't a new round of stimulus checks, not yet at least, And so if you receive a text or email saying otherwise, don't click on that link, it might be tempting because you're like, wait, money and coming towards coming my way. That sounds great, I can use it, right, but it's not legit. And and it just reminds me of our recent conversation with Carol Tario recently on cybersecurity.

Listen back to that one if you haven't already, for some great tips to keep you and your money safe, because you know, these sorts of scams, this sort of this sort of intrusion into your email inbox and into where you hang out in social media, it's just becoming more of the norm. And she had some great thoughts on how you can protect yourself and your money. All Right, Matt, we got more to get to, including a new interesting survey on who owes the most when it comes to

student loans. We'll get to that and more right after this break. Alright, we are back. We have a whole slew of additional stories that we're gonna get to. Joel, let's talk about working from home. We want to make sure the individuals out there that you're being careful, that you're not working too much. If you're one of the millions of folks who are now working from home. I don't worry about me, Matt, I'm not. I've got no

worries at all that you're working too much. Talking to other people, they could fall prey to working too much, but some folks I know have somewhere between two and even three hours back in their day. Thanks to not having to get ready for work thanks to not having to commute. Yeah, and we live in the great city of Atlanta. Work commutes are off the wall, crazy real thing. Uh. And so for most folks it's you know, it's more

like probably under an hour of found time. Even that's nice, but many workers are are now using a lot of that time that is now there's that they've reclaimed, right, but they're taking that and they're dedicating it to their employer blame. They're working more. Uh. The University of Chicago did a study recently to see where people's extra hours are going, and it looks like more than one third of the hours that people aren't spending on their commute

or being spent working. And so this is something we want to point out because I think in some situations, if you want to work more, that's fine, right. I mean, in particular, if you build hourly like that means you're probably getting paid more, or if you want to maybe get ahead at work, working more is you know, that's a good thing to do. But it's about being aware of the fact that this might be happening to you and you may not even realize it, right, Like like

it used to leave for work at seven. Uh. And maybe you didn't start working though until like seven, five or eight, but now you're still used to you know, leaving the house quote unquote leaving the house at seven, and so you start working at seven, and then you take that, you multiply that times too. That's a lot of time, a lot of additional time that's going towards work. Yeah. Yeah, And that same University of Chicago study revealed that childcare

obviously makes that list as well. For a lot of people, they're spending a lot of time with their kids facilitating in home learning, or some of the kids maybe haven't been able to go back to daycare. And so yeah, you're you are spending a lot more time with your kids and it's become harder to work. But a lot of people are working more um and I think it made sense to Matt, particularly in the beginning of the lockdown,

that people were working more. Right, We're all trying to kind of get our barings and figure out how working from home would actually work out in our lives. But most of us at this point have developed a bit of a rhythm. So it's important to make sure that you create some barriers between you and your work so that you're not overworking yourself just because your laptop is

right there in your house. And I think that's what people can easily and have easily fallen prey to and Matt in episode one eighty two, we talked about you know, some tips to help people work from home effectively, and a couple of things we mentioned was having a dedicated workspace, which means not working from your bed right um, and and not working from the kitchen table and all likelihood. Either having a called out space in your house where you get work done and then having hard work hours.

Making sure you know when you're on and off the clock and not deviating from that can really help you to create oppera barriers and avoid overworking just because your work is essentially in your house. Now, having a dedicated time to work as well as a dedicated space to work is ideal. Yeah, and take a couple of breaks

too during the day. I think when people work from home sometimes they forget the rhythms of a normal work day, um when they were in the office and there were break times built in there too, right, A walk down the hall, uh, a visit to see a coworker and so take that break, step outside, whatever it takes to get yourself clear headed and refreshed to kind of get back at it. You miss that walk down to the break room where you're reaching there and grab grab yourself

a Coca Cola every afternoon always. So we've talked about authorized user status before. Write with credit cards, how this can be a good way to to help lift your credit score. So, for example, maybe handled credit cards poorly in college, but now you're on the right track. Uh. In a family member add you to their card in

order to extend their good credit to you. Well, we've never talked about this before, but you can add your very young children as authorized users in order to give them, you know, a bit of a jump starts on establishing great adit and by very young, I mean even babies. I just added our one year old to to one of my credit cards. Actually, like I added all four of the kids to that card in order to to kind of get them set up for you know, a

nice long history of of good credit. Yeah, and I think if you handle credit incredibly well, you can set your kids up for you know, at least a good start in the credit realm. And that can be a

good way to go. And obviously you're not planning on your kids, especially your one year old, using that card every time soon, right, But because they'll have that solid and long history of on time payments and low utilization when they are old enough to get a card in their own name as an adult, that means they'll be in a super solid position. And speaking of being old enough to Matt, different credit card issuers have different age requirements in order to be added as an authorized user.

Some cards like the Blue Cash Preferred, which you've talked about a bunch, they've got a minimum age of thirteen, so you're one year old not going to qualify, but but obviously used a different card. Which one did you use so that your kids, who are all under thirteen were able to qualify? The Yes, so my Capital one Quick Sliver card, which is a card to use for all of my online purchases that happened on a recurring basis.

So I've got one specific card that used for subscription online subscriptions basically, and that's all I use that card for. So they don't have any age limits, so you're good. Literally added a one through a seven year old got them added and those cards are on their way. But obviously, yeah, like those aren't cards that they're going to use, but they're gonna be able to kind of piggyback off of my proper usage of credit in order to get them

set up. Can you imagine the thank you that you're going to receive in twenty years when they find out how you've set them up? Honestly, just how much you and I talk about money, They're just they're going to roll their eye. Of course you did that, don't currently malone, But yeah, I mean if you have younger kids, that's definitely something to consider, you know, if if you are going to handle your credit, well, that's something that you can extend to them as early as one year old.

Yeah for sure. Alright, let's talk about planes too, ye, speaking of kids, let's keep the ball rolling, Let's do it. And yeah, planes are a great way to invest for were your child's future, for their schooling in a particular, five twenty nine plans are typically used for paying for college expenses, and morning Star recently made changes to their five nine plan ratings. Morning Stars this fantastic site that provides awesome financial reporting and content. They also rape funds

that you can invest in. Also, they rate five nine plans from each state, and some are better than others. Right. Uh, the disparity in fees and investment choices vary from state to state, and it can be a meaningful difference between each one. And for this year, Morning Star has rated Utah, Illinois, and Michigan as having the top plans out there. Will link directly to those top rated plans in our show

notes along with the full morning Star ratings. But we wanted you to know that because where you investor your kids, which states plan that you decide to partake in when you're saving for their college future, it matters. It's gonna have a big difference in the ultimate outcome of how much you're able to put away from them. Yeah, there's the states that do really well are or must be states that Sufi and Steven's likes. Not you, oh, I guess, but Illinois, Michigan. If you created a Utah, I would

listen to it. Yeah, And most people interested in signing up for a five plan don't know a couple of important things right. First of all, you don't have to sign up with your state's plan with the state you know where you live. If the state you know you live and has a poorly rated plan, you can invest through one of the top rated ones instead. Also, how does that you go about signing up for one of

these five twenty nine plans? That matters as well. Right, you could open that account up, you know, through your local bank, uh, but chances are that's gonna be a bad move because they typically have a lot of fees associated with those accounts. Instead, we would recommend for you to open up your plan online directly through the state's link, and that's gonna be the best way that you can make sure to avoid any of those additional fees that

could easily be avoided. Also, too, you know, if your state has a state tax benefit, there's a good chance that you'll want to invest in your states plan maybe instead of the plans that you know ranked the highest. So, for example, our Georgia plan is rated new troll, which isn't super great. It's like gold, silver, and bronze, and then it's just kind of like the category. It's not

negative at least, but it's just kind of neutral. But we've got some state tax benefits that they offer, and so that will more than make up for some of its minor inadequacies, you know, like we may not have the best investing options available through the Georgia Plan, but those additional state tax benefits are are going to easily be able to make up for that, you know, their shortcomings. Yeah,

for sure. So again we'll link to all the stuff in the show notes, the morning Star ratings, and it's just helpful if you're thinking about starting to to save and invest for your kids future. Um, a five point nine plane is a great way to do this. You just want to make sure you're doing it the right way, and I think that God can be helpful. All right, Matt, let's talk about student loans on the note of paying for college. Who owes the most in student loans and

doctors probably not? Yeah, that's a good point. They do, and they probably are not laughing while we're laughing. Is that what you're asking or are you specifically talking about like demographic demographics? So so Fidelity actually just came out with with the new survey. You might be surprised, but it's baby boomers that actually owe the most when it

comes to student loans. So this new report gives that insight and this is primarily due to parent plus loans and parents of college age kids taking on a large chunk of their kids debt burden for them. This is bad news, I think, Matt, for so many reasons. One, many boomers can't afford the debt that they're taking on, especially as they get nearer to retirement. It's like this albatross, so they can't get out from under as their nearing

their retirement years. And the average interest rate on these parent plus loans is higher too. So parents, whatever you do, if you've got kids going to college or nearing college, we suggest avoiding parent plus loans at all costs. They're bad, bad news, and there are other ways around it, in particular trying to help your kid find a cheaper place to go to school. If parent plus loans have to

be part of the equation, it's just not worth it. Yeah, there are other alternatives as well, making sure that you apply for as many scholarships as possible, maybe scoring some grants, uh and even working through college or or all things that we would recommend over just signing on the dotted line, you know, and and saddling yourself you know your kids, but then also you're you know you as parents with sometimes some overwhelming debts and student loan debt. You know, like,

this is obviously an issue in our country. Estimates are are that work nearing one point seven trillion dollars in overall debt for higher education, and everyone should be way more careful before they take out this kind of debt. Enjoy. Actually on Monday, we're publishing an episode that is going to be making an argument for avoiding higher education altogether and how instead a lot of folks should consider maybe

the skilled trades. Uh, for a lot of individuals, I think college has kind of become the default option, but instead there are some legitimate alternate routes that people can take. I'm actually really excited about the interview that we've got slotted for Monday, So yeah, look forward to that. Yeah. I read the book. It's called Blue Collar Cash by

Ken Rusk. Awesome book, so much good formation, and look forward to having that conversation with him because I do think it's something that people should think about more, especially when you look at the overall student loan debt burden of Americans as a whole, and then as you look to see that it's impacting just the baby boomer generation, the most people who are who just can least afford

to bear these student loans. Taking on that kind of debt as you're looking to wind down your working career is just is a bad recipe. Um. Yeah, and I think that conversation is gonna be super enlightening. All right, Matt, Well, that's gonna be it for this episode. Then we'll have a link to the articles and the resources we mentioned in our show notes up on our website at how

to money dot com. Yeah, and if you're listening and you found this episode, if you found this show overall very helpful to you and your money, we would be incredibly thankful if you head over to Apple podcasts uh and if you left us a solid review over there, and if you've already done that, you know what, let a friend know about our show, help us to get the word out and help others to start making smarter moves with their money. So Joel, that's gonna be it, buddy.

Until next time, Best friends Out, Best Friends Out. M