Friday Flight - Rate Reductions, Rich Renters, & Costly Coffee #882

By the way, you got like one of these faincy automated coffee brewer things. Yes, I got a coffeemaker. There's this bran called the mocha Master, and it's trying to in drip coffee form mimic a pour over coffee effects, right, does it? Because it does the bloom and everything right?

many oils and too it takes too long. And I like being able to press a button and get my coffee, but I also don't want it to be like the ten dollars mister coffee thing, So fair enough. That's it's my middle ground that I'm willing to join. Yeah, we'll get to coffee the rest of our coffee talk a little bit later on. But we hope everyone is having a good week. We hope everyone. Hey, by the way, if you haven't listened to Wednesday's episode, man, that was

such a fun episode. I'm still thinking about that, digging into Megan Gorman's book a little bit more All the President's Money. It was a fun way for us to talk about politics without talking about the politics, because.

a nice little sampling. That way, you don't have to fully commit to one single beer. And that's what we try to do with the financial stories that we've come across this week and how they pertain to your personal finances. But let's talk about Jerome Powell Joel. Because the hotly demated moment, the anticipated FED rate cut, it finally happened. They cut rates for the first time in many years by half a point fifty basis points, which is more

than a lot of folks had anticipated. It's more than I was expecting in an attempt to prevent an economic slowdown. And this move it's going to negatively impact savers and positively impact folks who have credit card debt, for instance, although minimally. But as the journal put it, the era of earning easy five percent returns on your cash is

ending slowly. Is not going to happen overnight, folks. But this most recent FED move it could also be the start of continuing rate cuts, which would make the impact more significant over time, but that just remains to be seen. Historically, that's what happens when the first rate cut begins, the downward path continues. It's not one and done. That's just not how it works, at least historically. Again, we who knows so, especially with inflation, and we'll be paying attention

to those numbers. But you're right, you said in preventing an economic slowdown, Matt, and I think the Fed has this. They have this dual mandate right to pay attention to inflation but also to pay attention to the labor market. And they're seeing signs of softness in the labor market and that was I think a big part of the reason for this rate cut, and for a bigger rate cut than many had predicted in this rate cut. And future rate cuts are going to impact savers, are going

to impact borrowers, are going to impact investors. But I think you're right to say too that slowly and how much we don't quite know yet. But if you have a credit card debt, if you have a home equity line of credit, pretty soon you're going to likely see those rates start to tick down. If you're borrowing to buy a car, you've taken on an auto loan, you might see rates ticked down there too. When it comes

to mortgage rates, well, what's going to happen there? I wouldn't say that this is an excuse to take out more loads of That's not what you're say. No, no, no, no, I'm just saying like that that the reality on the ground is going to get cheaper to borrow, and sadly savers are going to get a small gut punch too. It's been like kind of nice for savers to earn reasonable returns and those returns might start to get less

reasonable in the near future. And basically, like your debt, still even an environment of declining rates is still worth paying off quickly. So if you've got credit card debt and you're like, ah, it's instead of twenty two percent, it's now twenty one and a half percent, that doesn't make it good. It's still awful and you still want to be rid of.

paying to the bank. Who is servicing your loan has a big impact on affordability, and they've already come down quite a bit, I think in anticipation of these rate cuts, honestly, to see if mortge rates continue to drop, because I feel like they started taking down because all the banks knew that this rate cut was coming. It had been widely expected, it was broadcasted. Yes, yes, yeah, and so because of that, mortgage rates don't follow exactly the Fed

Funds rate. There are a lot more factors involved in sending mortgage rates.

It's corn syrup, caffeine, caramel, color. Those things have an impact on the overall coke as well. It's not just the carbonated water. But speaking of buying, renting, it might be better no matter how much money you have. The Journal they actually had an article about really wealthy folks who could easily afford to buy a home but who are instead opting to rent, and the reason is because

there aren't enough homes on the market that they're interested in. Granted, a big part of this article is focusing on some ultra rich folks like this one guy's paying nineteen thousand dollars a month for his super swinky apartment in Manhattan. That sounds reasonable, seems totally relatable, But the truth is renting is cheaper in today's housing environment in almost every single one of the top fifty metro areas. It's not

always an easy choice. And I think the rent versus by decision it's going to look different for everyone, but certainly something to consider. Yeah, and I do think that with rates coming down, it is going to cause some of those folks Matt who are on the sidelines. They're like, I want to buy a house, but seven and a half plus percent interest rates and plus the what's going on with housing prices, that's got to be priced out. But if we're talking about more six percent interest rates.

That might cause some more sellers to join in, and that might cause more buyers to have their interest peak too.

so fast, Kiplinger. But what they note in this article is that you're going to be able to pay off your home sooner duh, fifteen or fifteen years sooner. We agree with that assessment, and that you're going to pay less and overall interest, which is also true, but that much larger mortgage payment could prevent you from attacking some other really important financial goals. So we're not completely against

fifteen year home loans. And actually, when you look at the spread on fifteen year mortgages Matt versus what you pay interest right wise getting out taking out a thirty year mortgage, the gap has grown, and fifteen year mortgages have looked better in recent months in comparison to their thirty year counterparts. And if you hate home dat, I guess and you can afford it, I would consider going this route. At least for some folks it might make the most sense because it forces them to do the

right thing. But you can always choose to pay more on a thirty year mortgage. And it's also important to mention that if you if taking out a shorter mortgage means foregoing let's say, contributing to or maxing out your roth IRA, if it means not having a solid emergency fund, if it means not investing for your future in ways

you otherwise would, it's not worth the trade off. But if it prevents you, I guess, from doing sillier things or not as intentional things with your money, then maybe the fifteen year mortgage is the right thing for you. That's right, Okay. We talked last week about rapidly growing four to one K accounts, which we.

so people are too origid. I just don't know if I want to lock my money up into that, And that was completely understandable, totally yeah, and Kiplinger they also noted another reason too, they think was because of the fact there's a new grandparent loophole that was put into place for the twenty four twenty twenty four twenty twenty five school year, which is pretty stink and cool. Maybe some listener will hear this and send in a listener question.

We can talk about this in depth a little bit more, but it basically makes it to where you don't have to report that on the FAFSA. So that being said, it seems like this is only a good thing, right, But on the other side of the coin five point nine accounts, they really only make sense for folks who are completely crushing it when it comes to their own

retirement accounts. First, if you are not doing that, we want to make sure that folks are focusing on that before you start to invest for your child's future education needs. It's almost as if, like imagine a world where something there is a new tweak, a modification to the roth

IRA and it just made it more attractive. I think we would see a similar impact on the amount of money going into roth IRA's, Yeah, because it just makes the headlines, and anytime something is featured, I think it draws more eyeballs, it draws more money into those accounts, and we kind of see them swell a little bit. Yeah, and we're not anti five twenty nine, but what we're saying I guess is I got four of them set up for my kids. Same, except I only have three kids.

But yeah, you don't want to get the cart before the horse. And the truth is, like it's it's a solid cart, like it's well built, but if you put it before the horse, you're not going to get the movement that you want. And so yeah, make sure that you're looking after your own retirement accounts first, hopefully getting closer to the point of maximos things out before you really delve into that amount of just seen too many folks barely getting the match from their employer nothing else.

Five to twenty nine plan is next on the agenda, and that's too soon, Like you want to wait till you've got a better game plan with your own retirement accounts before you jump into that the five twenty nine investing. Okay, speaking of kids, should you pay your kids to read? I found this really interesting story in the New York Times match. I don't know, are you paying your kids money to read books? No? They do it of their own volition. Yeah, all right, let's because you have really

great kids. And in my oldest she's like Belle and Beauty and the Beasts, like walking around with a book interface all the time, which I think is amazing. This probably could have been the ludicrous headline of the week, but the New York Times had an article and it was written my parent who was saying that she paid her kid one hundred bucks to read a book. That's a lot of money. It is a lot of money.

I was like, one hundred dollars, that's crazy. She admits that it was like this ploy of last resort and that the conversation, yes, it's incredibly high, but that her plan has actually worked. It's open the floodgates, causing her her twelve year old daughter to start reading more regularly.

We had this thing called accelerated reader, and I can't remember if it was after every book that you read, or maybe when you accumulated a certain number of points or something like that.

This is less money and more like social issues or whatever. But there's just other flashier things that they're drawn to, like video games, movies, TV, social media, right, like, there are all these other things as opposed to finding ways to elevate reading. And I mean our kids, they really do love reading. And I think it's in part because we have pursued it as a family. Like I mean I try to read, like at dinner every night, like

ten to twenty minutes. I eat faster than the kids do and they're still eating and Kate and I are just like looking at each other, so like we've been doing this for years now, but we read as a family. Right now, we're doing Wing feather Saga is like the series that we're going through right now. But the kids love it. I have literally said to them before, Hey, if you disobey mommy again, we're gonna take away your new library books. Yeah, like as a punishment, because that's

something that they enjoy doing so much. But I think there are ways that we can elevate it throughout their lives, as opposed to just having the expensive sort of carrot at the end of the stick, you know. Yeah, and if you're trying to do that with every book, that get expensive real real quick. Sure, But I think that the one time thing and trying to incentivize something to try to build a habit that's one piece of the

puzzle maybe, and trying to help build that habit. It makes me think, though, I like, I bribe my daughter. I give her a free book, I'll buy her book. It's a use book if she gets a hundred on her spelling test. And so we work our butts off to try to get a hundred on the spelling test every week. And so that is a bribe of sorts, but it's a bribe.

was like, that seems weird. At first, You're being judgmental. Yeah, the more I thought about it, I was like, actually that might make sense fair enough, Yeah, and kids respond to those incentives or We've got more to get to on this episode. And clear we're we're talking about expensive mental health. We'll get to that and more right after this, Right, Joel, we are back from the break and guess what it is? Time now for the ludicrous headline of the week. This

one is from WBZ. This is a local more of a local story, I guess WBZ in Boston. Listener Gary sent this one our away. Thank you, Gary, and the headline reads, fight over seventy thousand dollars engagement ring heads to State Supreme Court. Sounds like there's some drama involved in this one. Yeah, some relational drama. First of all, that's one heck of an expensive engagement ring. Is it still three months salary? Joel, you and I have said, I don't know that we've demnked that a little bit.

But if that's what you're assuming, this guy's doing quite well. He's a baller if that's the case. But the crux of this issue of the story is whether an engagement ring is a conditional or unconditional gift? Is it a nice present? That the recipient gets to keep no matter what, or is it more along the lines of, Hey, if we don't get married, I'm expecting that ring back. Personally, Joel,

I'm kind of that thinking. It's called an engagement ring, right, and so plus I can like picture that in movies, right, like if you call off the engagement, she like takes off the ring, hands it back. It's sometimes throws it at his face, depending on what he's depending on what movie that you're watching. But uh, yeah, what do you think.

I think if yeah, if you got someone an engagement present, like a Oh I get you a purse because I love you, or I got you a suit jacket because I love you, whatever it is, that's that's cool, keep that thing. But the engagement ring does feel a little different. Although state laws around the country, as I looked into this, they're all different. He didn't do this, yeah, they Oh, they have different takes on whether or not it's considered

conditional or unconditional. Oh shut up, And sometimes it depends on the behavior of the parties involved. And so I think part of the reason that that this this dude is essentially saying give him a ring back because it's really expensive. But two, because he's he's insinuating that she did things that were untoward and she's like, no, I didn't.

even for like a couple of years. I would say, all right, she probably gets to keep it, like you actually got married, Like that was the intent behind the engagement ring, is the signal that, like, we are going to get married. But there's a difference there between just being engaged, I think and actually getting married.

just not how to keep it. There's a disconnect here. Yeah, and it's like, Okay, well cool, insurance is going to pay for therapy, but nobody wants to accept it, and then you're you're kind of stuck between a rock and a hard place, right Like sometimes like oftentimes is it I feel like the going rate. We've talked about the sum with Emily being in school to be a counselor, like one fifty a session does not see safeties like table stakes. Now, man, oh, is it really Yeah? So

it's even more so. Yeah, and especially if you're a couple going to Marrorg's therapy, we're definitely talking two bills or more, maybe closer to two fifty. And so there was this recent survey man, I found that something like a third of people were going to therapy. Theyre felt like they were being helped by it, but they felt like they had to actually stop going to therapy in

order to save money because it adds up. I mean like, really, you go three times a month, that's a that's a car payment, the average car payment in the United States. It really, it really can be quite expensive. And I want to say this too because I think initially when I when Emily and I were talking and I was like, oh, you can get that much per hour, You're going to

be rolling in the dough. And she was like, well, well, one, there's the time that it takes to go to school, There's the money that it takes to go to school, There's the facility that you have to rent in order to see people. Although there's more zoom therapy now, but there's like all there's the insurance you have to have as a therapist. It's not like they're just pocketing one hundred and eighty bucks an hour. And it's not like

you're working eight hour. It's not like a plumber, right or I don't know, it's not like a lot we have to drive to and from their jobs.

how crazy expensive it is. Well, one check and see if there are nonprofits in your area that offer discounted access to talk therapy. Those exist, and those can make a big difference. Check and see if your employer offers access to mental health services or will pay for some therapy, especially if you had a traumatic event. Oftentimes there's like money from employers Matt that will help pay for some

of that. Some therapists, like I said, do accept insurance, and others will charge on a sliding scale depending on your income. So it's worth asking about that too. Maybe you find out, hey, my insurance does cover some mental health help, and I'm gonna do my darkness to find a practitioner who accepts that insurance. And I think this is maybe under sold too, But How'm I gonna talk with a friend going for a hike or a walk

or something like that. I know they're not trained in the same way, but that can actually be a free way to unburden some of those things that you've got on your mind, get you thinking about certain events in a healthier way. Perhaps, what do you think.

why are you talking down the industry, Joals. I'm just saying like that, if we have had more people in our communities and in our neighbors that we're more connected to, we might find that we needed to professionalize that just a little less. I totally agree on the note of mental health. Put down your phone after work hours, folks. This isn't going to be shocking, but a recent survey found that responding to work emails after hours, it's going

to lead the burnout. Yet the majority of Americans are doing this very thing because they feel like they have to. And so is that actually true though, Like do they have to get back.

consider it as well. More CEOs are migrating back to dumb phones basically in order to reduce interruptions within their within their workday. There is a bit of, uh, sort of like an anti tech movement that's happening, Joel, and I think embracing it, at least in moderation could help your personal as well as your professional life. That being said, I don't want people to think that they have to spend more money on these new gadgets that are going

to cost you money. That are dumb. I saw that the you know what I'm saying, the new light phones coming out and the version three. What's what's the price of the eight hundred bucks? Oh, it's the same prices as my phone.

looking to achieve. But don't forget about self discipline and the fact that it's takes Like you can buy that stupid phone, it's been eight hundred bucks on a light phone, but if you don't use it, and if you still go back to the one that's pinging you from work, turn off your notifications. First of all, I think that's a super easy way to minimize some of the distractions

and minimize interruptions in your personal life. But in another room, to put it in the room, set like draw a line in the sand and set some rules around so when you try off notifications, like the badge notifications will go away as well, like the little red number down there on your email. I don't want to be notified. I don't want there to be a banner that pops up on my phone every single time that I receive

an email. And I know that we're maybe speaking from a position of luxury jeel like, this is the ability for us to be our own boss. Some folks out there might be saying, well, good for you, guys, I can't actually do.

how responsive you've been. And so maybe that's part of the heart to heart is saying, listen, I have been responsive, but I'm trying to like detox some of the tech that's happening in my life in the evening times. And so you know, if you say I need to check my email one time, I at nine pm before I like hit the hay or whatever, maybe that's the one thing you give on. But I'm not going to be responding at all hours of the evening because I want

to enjoy that time. And you're right, I think what is Australia that basically made it illegal for bosses now to contact.

to Prime. Sorry, that's not gonna that's not going to make up for the fact that you got to go back to the office. I did see that part. I was like, they I should have free access to Amazon. Yeah, they didn't have it already. Come on, it was like way too cheap. So it's not just Amazon. The percentage of time the average American is working from home has dropped actually quite a bit since twenty twenty, when of course, that was the way a lot of business had to

be conducted. We just weren't doing anything in person. And I think we're going to see more of this. I think this Amazon putting the foot down five days a week, you're coming back into the office or you're out of here. Those sorts of ultimatums are ramping up. And then when a company as big as Amazon does it that, we're going to see more employers follow suits. It's true, and the less competitive the labor market becomes, the more employees are going to be forced to take it on the chin.

And we know that in office work leads to more advancement and pay hikes, especially.

has changed my life. I have more time for hobbies. I don't feel like I'm run ragged at the end of the day, and I think a lot of people feel that way, and understandably so. So if that's of crucial importance to you, pushback. But if you're still in the I'm trying to advance my career, ramp up my earnings phase, going back in could be the best thing for you. I am surprised to see that though, Like so before it was only they only needed to be in like three days, three out of five days of

the week. Yeah, now they're adding those additional two days. Gosh, it really does Like guys, I thought we hybrid we worked, was working well. I thought it was going to work out, but that no longer seems to be the case. Another Amazon related story, they're actually trying to compete with my favorite grocery storeageol Aldi. Amazon's unrolling their new Amazon Saver line.

It's the snow frills extremely affordable sort of line, which sounds exactly like all these value proposition Yeah, it's still a relatively small lineup of food products, but everything costs less than five dollars. And Amazon they've already got some of their own proprietory brands, but none of them have minimized the price to this extent, that's for sure. Yeah, they haven't really targeted the super cheap store brand thing. They've had kind of their more high falutint semi fancy

organice brands and stuff like that. And now they're like no, no, all the and llegal laser eyes on you, focused on you.

they used to be. That being said, there's still a healthy amount of competition across the grocery store spectrum and where you choose to shop, which specific brands that you choose to buy, they will be a determining factor in your overall grocery budget. Personally, though, I will say I'm not super impressed with what I'm seeing when it comes to the Amazon stadth, I haven't ordered something, okay, being I would love to see you trying totally just Canp's

look delicious? I'm totally judging a book by its cover. It just looks super generic and discounted. Whereas like when I go to All the like all the and Costco feel value driven to me, and especially Costco right like, because you're getting like they have some nicer brands.

It's it's more of a kind of what you were saying, highlighting the fact that they're having to compete with grocery stores that have cut costs significantly, that are saving consumers money regularly, and Amazon's like, well, we don't want to get it left out completely, get left in the dust by the Aldis and the leadals of this world. Right, speaking of hiking grocery prices, though Matt new Data finds it the coffee prices have been going up significantly. All Right,

I guess I'm just gonna pay more. Yeah, I get so, are you?

retire ten years earlier, which of course it's not. But drink your coffee at home, because it's the more you do that, the more it will save you money. Jill's like, I'm saying, I'm not going to say the thing, but then I'm going to say the thing. It is just if you can play if you're paying five bucks a pop for coffee, and how you complain about the price of coffee and you do that five six days a week, expected does that?

dot com. That's where you can find our show notes for this episode and the different stories that we discussed. But buddy, that's going to be it for this episode. So until next time, Best Friends Out, Best Friends Out.