These Financial Rules Were Made to Be Broken #416

a two thousand level class at your local university. We want to make sure that folks have truly like a foundation of a foundation of knowledge when it comes to personal finances. Because in this episode, we're going to talk about some concepts, uh, and we're gonna we're essentially we're gonna flip them on their head a little bit because we're making the argument that you can't take all the different financial rules that are out there at face value.

We're gonna ask you to dig a little bit deeper and we're gonna explain why it is that we feel that there are certain financial rules that we can break.

We're gonna talk about where you can place back and where we a little bit we can fight the man, you know, a little bit when it comes to the financial rules that we have all heard like these are These are common rules that you have probably heard a time or two or dozens of times, and and some of them, Um, there's there's certainly a kernel of truth that there's some good advice in there, but there are a lot of ways that you can break those rules

and actually benefit your personal financests. Right exactly before we get to that, dude, I wanted to share a quick little story with you. Kate and I were on a belated anniversary trip. We were driving back from North Carolina. We went hiking up in the North Carolina Mountains. You spotted a bear while you were there too. I did we should post two bears, a mama and a cub, and I'm the cub was cute, but we quickly realized that there was a mama bear that was closely following.

I was glad you didn't go like Leonardo in the revenues style thought my pocket knife. Uh No, Kate would not have let me do that. That would have been a bad ending to our anniversary of one of our anniversary hikes, but I was gonna share. Driving back from North Carolina, it was obvious there's a car up ahead of us that we're catching up to it was all decked out and the we just got married kind of look.

You know, when I'm talking about the cans hitting the roads, No cans, I think that's dangerous actually, but the cans hitting windshield behind them? No. They had the window pant and it said, you know, just married, you know Mr and Mrs whatever their names were. I forget. That's always a super fun thing to do, right, you know, you're I guess they're driving to their honeymoon. They looked all happy,

ready to get on with their their lives together. But something else that we noticed that was also written on the window was their Venmo handle, their their name. And I couldn't believe when I thought, I was like, wait what? And I realized that I guess they're hoping that folks driving down the interstate might see that, might want to congratulate them, might want to pass them some money, uh, in order to to help them celebrate a little bit. But before I share my thoughts, what do you think

is that frugal? Is that cheap? Is that a tasteful move or do you feel like that that lacks class. I'm gonna say it's clever. I don't know if it's frugal or cheap, but it's clever because I think there are a lot of people who are going to see that driving down the side of the road and they are going to remember their wedding day and they're gonna remember all the excitement and they're gonna be compelled to

drop bucks. Maybe maybe who I don't know. If some people would just be like, congrats, you guys made my day. That was pretty funny. I was because it's it's almost to me like when I'm walking through downtown Atlanta and I see, uh, someone like a homeless person who has a clever sign, like with a joke on it or something like that, it makes me more compelled to give. And I don't know what that is. But when they've kind of like just made me smile, you appreciate that creativity. Yeah,

I'm like, I like the creativity. And I'm like, all right, yeah, here's here's five bucks. You know. Um. So I don't know, it's not like everyone's doing it. It's kind of a one off thing. I'm like, oh yeah, that is Collogum I ten bucks. Okay, So I kind of revealed I guess how I feel about it, because I truly when

when I first saw I couldn't believe it. I was honestly, I was a little bit offended because I I have such uh like pull yourself up by your bootstraps, like self reliance kind of mentality that literally when I saw it, I just can't. I mean, I thought, you gotta be kidding me like that they're actually expecting people to give the money just because they got married? How dare they? That was like the old man side of me. But then I think it off my law on. Yeah, but

then I thought, well why not? You know, like I think it would be maybe lacking taste if they expected you to give them money, but like there's no like or else. Well yeah no, and they weren't doing that. It was just kind of written on there. It's like almost like an afterthought, and it was much smaller than than what else was written up there. And what's the worst that could happen? Right? I mean, somebody driving down the road like me might see them and like judge

them and never see them again. Who cares? But it never hurts to ask. It's like what we're talking about when it comes to asking for a discount, And like the downside, what's the downside. We're all so scared to make that ask. But really the person can only say no, they're not kind of like punch you in the face usually exactly. And so because of that, I was kind of like converted and right there on the spot, and

so I pushed him five bits. Ye see, give me a dap, dude, Okay, I like that, Like I probably would have done the same if I've seen it, because it took me a second, because my natural inclination was just like, you gotta be kidding me. You went through all the realm of y. Yeah, that was like the journey of me and uh seeing you know, some newly wids on the interstate. But but yeah, I thought that

was an interesting clever way. So if there are any new newly wids out there, that could be a way that you maybe pay for a nice dinner around on your honeymoon. Yeah. Make it fun, though, Make it fun, and people will I think probably be excited to drop you five bucks, like Matt finally got to the point of doing. Alright, let's mention the beer that we're having on this episode. This one is called Indefinite Staycation. It's by dog Fish Hed Brewing. Matt my buddy Ryan brought

this beer back from Delaware. He actually visited the brewery. He goes up there once a year and he's always like nice enough to bring me bring us a bottle back. So big thanks to Ryan for um jad dropping this one off. We actually share to be together. He gave it to me, um and so yeah, looking forward to drinking this is like a really nice looking sour beer. So yeah, it came corked and caged. Always a fancy

kind Yeah, one of those fancier beers. Looking forward to this and uh yeah, thank you Ryan for donating this one to Joel therefore to me. We'll give our thoughts on it at the end of the episode. But let's get on to the subject at hand, financial rules that were made to be broken. And Matt um, you know, speaking of going on a drive, seeing people you know on the interstate with they're just married signs up. I'm wondering if any how the money listeners out there are

the type that always obeyed the speed limits. I don't know, um, that I've necessarily met anybody in my life who can claim to never have ever gone over the speed limit. Um, but maybe some of those people exist and Uh, yeah, I guess, like, do you consistently try to drive under the speed limit of the sign that you're seeing? If so, I think you are an anomaly like that is not

your robot. That's the case exactly. So I'm of the belief and maybe some of our listeners will disagree, but speed limits were kind of made to be broken, and um, I'm just just trying to be honest here, and I'm not trying to insinuate that any of us should be reaching like formula level one s. Yeah that my oh six minivan, I'm gonna go like one tent only interstate or anything like that. Do you think Homer can reach those speeds? I think so. I think think so. Yeah,

you still got some fight left left in him. But yeah, even like in a fifty five mile per hour zone, I often find myself going sixty five. Um, And I don't think I've met a person yet who never breaks that rule. And it's not that rules aren't helpful, right, that the speed limit isn't helpful. We like rules, and

speed limits I think are overall a good thing. And these financial rules that we're gonna talk about, well, they can aid us on our financial journey, and there are sometimes when we need to rev the engine and blow past not just the you know sign that says fifty five an hour, but also we have to blow past some of the financial rules that we've heard our entire lives that are maybe cramping our style, um and not allowing us to make as much progress as we'd otherwise

like to make. Totally. Yeah, when we believe, you know, that the rules are just black and white, it can limit what we're able to get done. Uh, and not only in our day to day lives, but also with our money. So kind of going back to your example, if you're driving sixty five instead of fifty five, that just means that you'll be able to arrive at the mountains or maybe the beach a little bit sooner. And we'd also argue that you can break this rule while

still being responsible, still driving safely. Uh. And so similarly, there's a lot of financial advice out there. Some would even call them rules that are you know, etched into stone, as if they can never be broken. Where we believe a certain amount of liberty can be taken. So we're gonna cover some of those rules as well as why it's okay to be a conscientious objector to some of these financial rules. We're gonna give you the uh basically the ammunition that's going to inform you why it's okay

to break some of these rules. Yeah. Yeah, we want to give the why behind it, not just be like this one's crap, toss it out, but giving kind of the ideas for then how you proceed, creating maybe a new framework for how you think about it, so that you're not just living your life by rigid rules, but that you have a fuller picture and understanding of kind of how they should be implemented, implemented into your life. For maybe you know where they shouldn't be. And so

let's let's start with Matt. Matt, with some of the rules. Maybe they get a little judge. When it comes to how we live our personal lives, a few lifestyle rules are often cited, and then people begin to live their lives by these rules, often subconsciously, they get filtered in and then we just assume that we have to react

this way because that's what the rules say. And then those rules can cause us to put off important, meaningful things in our lives because we've been led to believe that we're not in the financial position to make those uh to make those decisions for ourselves. And I think, Matt, one of those rules that I have heard stated countless times is that you shouldn't get married or start a

family unless you are financially prepared to do so. And that sounds like a smart rule, doesn't It's like, Yeah, you don't want to have you know, negative net worth to your name by hundreds of thousands of dollars and then get married and attack yourself to someone else who has the same Like, I get why this rule is held out there as fact, But you don't have to have necessarily a fully funded emergency in order to get married to the love of your life, Like, there is

no actual rule stating this. There's no rule that you have to own a home or you can put that emergency fund together while you're driving down the interstate exactly after you got other people funded for you. Yeah, and there's also no rule that you must have started saving for retirement before you tie the knots getting married. You do so because you love somebody else. You love that person that you want to spend the rest of your

life with. And so we wouldn't say to not consider money at all when you're thinking about tying the knots uh. We're fans of pre marital counseling and getting what's called financially naked by like revealing kind of what's going on with your personal finances and your credit score before you actually do get married. You need to be honest and you need to share, you know, what your income is, if you have any debts. These are all things that don't need to be a surprise. You know, you don't

need to save those until after you get married. Do talk about these things ahead of time, but things just don't have to be perfect exactly. Yeah. They don't think that you have to continue to push that wedding date down the road until you've reached like the most stringent financial goals possible. And I think it's important to note that nobody actually feels financially ready for these things, like

you don't. You don't get to this point where you're like, ah, now I have enough money and we're going to live in what it bliss because we have we we've reached

the financial status that we were looking to achieve. This this is one of those things I feel like it's important to push back on um and not to be stupid when it comes to getting married and spending tons of money on a wedding when you are in massive amounts of debt, you want to be thoughtful, but it's also important not to continue to put it off because you don't feel like you're quite in the financial position

you want to be. There's always gonna be another problem, right because if you have say you say you've a massed a pretty decent net worth and you're looking to get married, well, then all sorts of other questions start coming up that you have to grapple with. As opposed to before when you're both broke right out of college. Things were a lot simpler back then, weren't they. And

so you know, Joel, you mentioned family. I think likewise, like bringing kids into the world, if you've got massive amounts of debt and maybe little to no income, that doesn't make much sense. It's going to be really hard to give them the care that they need if you can't afford diapers, whether you're talking about disposable or cloth diapers. And similar to getting married, it always feels like a

stretch to start having kids. Um. I think in many ways you're completely unprepared for it, and there's nothing that you could have actually done to fully prepare for having kids. It just takes it's like actually having kids. It's similarly similarly, you'd be like saying, you have to read all these parenting books before you begin having kids, and not I'm not against parenting books. I've brought a couple of myself, but even those like they don't really prepare you for

having kids. And so yeah, it's probably helpful advice to say read a parenting book or two, but it's also like you don't. You don't have to before you have kids exactly. And when it comes to the money, like it's important maybe to talk to another friend who is maybe has a kid who's a year old or two years old and be like, hey, how much did it cost you? How much do you now spend going to the doctor. These are all good things to be aware of, and that's something you can figure out in a fifteen

minute conversation. You don't have to spend you know, an entire semester going through your own child reading class. Uh, you know, based on reading books and so having some of your financial ducks in a row before you start trying to bring it as into the world is smart, don't you know, get us wrong, Like we we do think that it is worth preparing for a little bit. But don't let this rule cause you to to over prepare and wait too long when you really maybe you

want to get that family started now. Uh, And by kicking that down the road, you're maybe sacrificing years of enjoyments, you know, years of us satisfied life that you would be able to enjoy were you to have those kids sooner, no doubt. Yeah. And I think another one in the lifestock category. The another matra or rule that has become ingrained is that you should retire when you reach retirement age. Makes sense, I guess because like it's in the name

retirements called that's what do you do it. That's when we were tired. Kind of like speed limit Joel, you shouldn't go faster than with the speed limits. Say, I know, I'm an idiot, But when you reach full retirement age in your mid sixties and then you can start taking social Security funds. That that's why people really have started to equate that date that time in their lives with

not working any or like they go together hand in hand. Right. Well, it's also when you have access to your own retirement accounts penalty free. But that rule overlooks the fact that we all have different goals. You know, Warren Buffett Man, he's still working at the age of ninety one. He did not take that retirement date up on its promise. He's like required minimum distributions. I laugh in the face of those. But he's working because he gets a kick

out of it, like he enjoys it. It's it's obviously not because he needs more money, right, um, And so yeah, there's there's no need to stop working. If you love what you do, you can keep working as long as

you want. Others find that retiring a whole lot sooner works best for them, right, Some of our friends in the Fire movement, they have found that not working past the age of thirty five or forty has been great for them, and they've gotten to pursue other things that they love just as much, and they haven't had to worry about providing an income for themselves, you know, for

decades where most people do have to work. We would say, just don't let that arbitrary date define like when you decided to take extended breaks from work, or ultimately when you decide to hang it up, Like, there's no magical rule that says that at fifty nine and a half

or at sixty six, like either of those dates. They are magical from the fact that you can take money from your retirement accounts or that you have reached full Social Security age, but they're not magical from the standpoint that it's a rule that you have to follow and you should really stop working at that point, right. I mean, basically, we want folks just to be intentional with what it

is that they're doing. It's a good number to be aware of because yeah, there are laws that govern the with you know, the withdrawal of funds from your retirement accounts, but that doesn't mean that you personally aren't necessarily ready for retirement. There are a lot of other things that you also want to keep in mind, and so Joel. There are also a lot of rules in the area

of debt paying off debt. I feel like it's fraught with the different things that you're supposed to do, things you that you should do, things you shouldn't do, rules to obey. Yeah, some of those rules are helpful, others aren't. Uh,

And one of these things. Just generally speaking, in regards to debt, there's just a whole group of folks out there who feel that, you know, being debt free, like that's the way to be, or they kind of take the mantra that like debt is dumb and that's the rule, like don't take on debt or you're an idiot no matter what. And you know, we would ask the question like, is that actually a good goal to have? You know,

is this a decent rule to live by? We do feel that there are um what we would call worse rules out there for sure, because we're not fans of debt. We'd love to see how the money listeners paying off their debts quickly. Lots of folks, for instance, prize having that paid off mortgage. Uh. There's nothing inherently wrong with not having any debt, but we believe that the responsible use of debt in your life can be an approach that makes a ton of sense for a lot of folks.

If you have your eyes open and you know what you're doing. Often times it comes down to what you are planning to do with that money instead of paying

it down, you know, towards that mortgage payment. Uh, and so we just wanted to mention that there are times when you know, debt makes sense, and we talked about that back in episode one, and again it comes down to being intentional with that money, right, Because if you want to say I want to get rid of all of debt in my life because I am really going to benefit from the psychological piece that's gonna be able to bring me, well, that's great. Do it for that reason.

Or if you're like, well I don't really care if I have debt, well, what can I do instead with that money? Well, if you're gonna take that money and then invest it, well, then you're utilizing leverage in order to see a higher return on your investment versus that money that's going towards that mortgage, which can burn you depending on what sort of leverage you're taking on. You know,

totally you don't want to over leverage. Yeah, and that's the reason why Matt, like, if we're talking about credit cards, that's one thing, but if we're talking about mortgage that that's another. Right. And so like paying off your mortgage, there's a reason why it's number seven. It's on the seventh money year out of seven money years. Like there are all these other things you want to do before that that really takes like last precedence doing a really

low interest rate debt like a mortgage. There are a lot of smart people holding on to that mortgage so that they can do better things with that money. Right, And speaking of credit cards, I think that's another rule that we should bring up when it comes to debt, is that credit cards or the devil. And uh, I can just imagine you remember the Waterboy. I can imagine Fool's ball, Fool's the devil, Bobby Boucher, I can imagine

his mom saying the same thing about credit cards. But yeah, you know, we're all for moderated intelligent usage of credit cards, right, utilizing the benefits that they offer and never paying the credit card company's interest on purchases that you're making. But avoiding credit cards altogether, well, that's a rule that isn't worth following unless you know yourself that it's not gonna

end up well for you. Like if you know your own behavioral tendencies and it's like, you know, if I got a credit card in my life, I wouldn't be able to handle it, then it's probably a rule that you should never break. But for most Town of Money listeners, um, they can break that rule and break it frequently because they're paying their balances off in full, on time at

the end of the building cycle. Honestly, I guess we just trust our listeners more, right, because essentially we're trusting you to be in an adults and to make the wise informed decisions based on what you know about yourself. Um. I think that's a big reason why these rules we

feel can be bent a little bit. And again in our case, I mean, the reason we talk about credit cards so much is because, first of all, I mean, the benefits are real, right when we're talking about serious cash back, we're talking about serious sign up bonuses that you get, serious protections that that you get as a

consumer when you use those cards. But secondly, and you touched on the show, but I mean I have not paid a single sense and interest ever to a credit card company, like I know myself in same with you. And so because of that, these are benefits that we have a little more flexibility, a little more freedom around.

We're not as concerned about the temptation to spend. For us, it's just not something we have to wrestle with and when you have a bunch of debt, how you go about paying that debt off is another rule that you often hear. For instance, the debt snowball method is the most effective way to pay down debt. Well, not necessarily right, That's a rule that you often hear. And we actually did an episode about the debt snowball approach versus going the avalanche route, and we kind of came down somewhere

in the middle. The avalanche route is best for paying the least overall amount in interest, but it doesn't have the helpful psychological component of picking off your smallest debts quickly, which gives you momentum. And so we kind of prefer

the both and approach, you know. And so if the interest rates are similar, go with the smallest balance, because then you'll, you know, realize some of that psychological momentum, and you clear a hurdle by knocking off a balance that's really small, and it's like, exactly gives you the

fortitude to keep pressing on. Sure, Yeah, but if you've got a car loan, say maybe just at four percent, but then you also have credit card debt, say at nineteen, you'd be crazy to pay off that car Loan first, and so that's an instance where you need to actually look at what you've got going on. There is no clear black or white answer when it comes to a lot of things in life, including when it comes to

paying down your debt. And so those are a few rules that effect not only our lifestyle, but how does that we go about paying uh and interacting with our debts? And so, Joe, we've got a few other areas, a few other ways that we handle our money, and we're gonna talk about some of the rules that pertain to those aspects of our personal finances. And we'll get to those right after this break. All right, we are back, and Matt, let's keep talking about some of the crappier

personal finance rules and how we can break them. I'm trying to think of have you done the milk crate challenge? I've seen that going around. We want to break them. I haven't in the milk crates? Well, first of all, where do people find all these milks? Either? I don't know where do you get? Like? First, I mean, I didn't think those were what am I thinking of? I'm

thinking of like the old post office mail crates? Remember I used to work an be safer, I think than well, no, those were made of like this kind of plastic thing. But even still your hang like they're like this is a government property. Like where do these people get all these milk crates? I guess a lot of folks working at all they or something. Yeah maybe, but uh they got that hook up from from leetle. We want to

smash them. These personal finance rules, the way people are specting their bodies as they fall off this car pile of milk rates. But yeah, we just talked about some of the rules that shape our lifestyle, how we pursue the meaningful events in our lives, and how sometimes those hold us back from doing the things that we want because there are these ingrained rules that we listen to, and the same when it comes to debt and debt payoff.

We believe these things without questioning them, and if we were to question them, we would be able to maybe proceed in a different way that would be better for our lives. Um. Now, let'shift to like saving an investing mat and some of the rules that define those areas that we think are off base, and let's specifically talk about emergency funds for seconds. There are quite a fuel rules that we think have some been to them in

this arena. You know, you and I we've done our fair share of talking about emergency funds and the priority that they should take in your financial life. We really, we think they're important. They provide a lot of stability for people. It's nice to know that if the crap hits the fan, that you've got money in the bank

account to back you up. But there are more ways than just one to skin a cats And the rule that many financial experts give is that you should have six months of savings on hand to combat a potential emergency. Some go further and they make their rule twelve months of cash on hand, which, honestly, I feel like it's actually kind of demoralizing for most people because are like, how in the world am I ever going to get to that? I mean, I remember thinking that in my

early twenties, like, that's a lot of money. That feels impossible. I've got all these other things to do. What you're saying is going to take me eight years to achieve. But but yeah, there are other ways that you can have access to emergency cash without running up the credit cards, right, and maybe we should consider some of these other avenues as opposed to just having ridiculous amount of money in

savings totally. Yeah, So having a helock a home equity line of credit as a backup, that's one way to make this rule more of a helpful recommendation that you can do without if you so choose. Helocks are great backup emergency funds because they usually cost zero dollars to set up and you don't pay interest on that money unless you make a withdrawal. So this is only available for homeowners obviously, but it could be worthwhile to have a helock backup in case just kind of sitting there

in the wings. That way you can retain a smaller emergency fund. But now that this is only something that we would recommend if you're trying to invest more of your money. Basically want you to do smart things with your money, not have less cash on hand so that you can blow that money, so that so that you can spend it in an absorb it into your life trying to go to the heat. So I'm gonna blow

my emergency fund and have the helock is the backup. Yeah, And and even with that, we still think that a good minimum emergency fund goal of three months worth of expenses on hand uh is important, But even still, it's worth mentioning that he locks. And we saw this with a pandemic last spring, but some banks actually stopped offering those products because their risk here. Uh. And so it's important to keep that in mind that they may not

always be available. If you're like, you know what, I'm just gonna get myself a new helock, because it's important to keep in mind too that sometimes they only are available to you for like five or ten years, at which point they basically expire, so they kind of have a shelf life. And if you'd been counting on that helock as your emergency fund and it kind of disappeared and all of a sudden, you might be sitting without that money in the bank, uh and without a product

to rely on if you needed it. Yeah, And and that another question that we get when it comes to emergency funds. People want to know if they can invest it, and usually you know, we're saying no, no, no no no. For in particular or three months worth of expenses, that money needs to stay in your same news account. For us, that is a hard and fast rule. But when it comes to that six to twelve month realm that a

lot of other people talk about. We think that you can invest some of that emergency fund and and and in particular, it needs to be in a wrath I RA that allows um it can act as another buffer, which can let you roll with that smaller bucket of savings as opposed to feeling like you have to have

this fully funded, enormous emergency fund. And if you've been maxing out a wrath over let's say the last five years, then this should provide you with a really nice backstop, allowing you to feel a whole lot more comfortable having less cash in your account. It's still ideal, of course, to not take money out if you're off like, uh, you want to tap your savings money in the case of an emergency first, not the money you have invested

in the wrath. In a perfect world, you put money in the wrath and you never touch it until you reach retirement age. UM. You know when you're whether you're still working or not. Uh. And and then yeah, if you need to tap those those roth funds, it's important to only take out the contributions, not the earnings, because that's what you have access to tax and penalty free. But a wrath that you have been consistently funding, uh, and it's been growing across the years can allow you

to skirt that hefty fun rule unspent HSA dollars. That's uh. That's another place math that people can look to. I think that those that money that's been growing consistently over the years can provide similar peace of mind, allowing you to have less money in savings. And you've got the receipts for some of those healthcare procedures that you've had done, yet you've left that money growing in the hs A. Well, when an emergency comes along, you can grab that money

from the hs A and pull it out. Um. They're just like this really flexible account that, if used well, can act as a helpful fund backup. So yeah, the six to twelve month figure, Like I get why people say that it's really hard for most people to achieve. And using some of these other ways to kind of use as a backstop for a smaller e fund I think can make a lot of sense. That's right. And so when it comes to so that's saving, right, we're

talking about emergency funds. When it comes to investing, a rule that we often hear is you should be saving, you should be investing of your paycheck. And this is actually a rule that you've heard on this show before. Because we're gonnareak own rules. We we kind of are

here like the height of anarchy. I appreciate that about us. Uh, you know, we believe that this is a great goal for most folks to aim for, because only putting a side ten percent of your income over your entire working life, that probably isn't going to be quite enough to provide the financial security that we think most folks should be aiming for. But yeah, we're gonna break our own rule here.

Let's say that you're one of those overachieving coast firefolks who's been maxing out the retirement accounts for a decade or longer, maybe even you know, maybe potentially you've been saving and investing, say fifty percent of your salary. Uh So now you might be asking, can you cut back save only five to ten percent of maybe what you're

bringing in? Sure, you've already done the hard work of putting aside massive amounts of earnings earlier in your life, and so putting aside fifteen percent of what you make each year is a great goal, but doing a little more or less to sending on your specific near term goals is okay as well. And again I don't want to kind of gloss over the saving more side of it. Percent is great, but if you can save five percent

of your income, that's even better. We don't want you to think that just because there's this rule of oh, you should be shooting for, that doesn't mean you can't save more. You should be, you know, shooting for at least fifteen percent. Yeah, we don't want to set the bar too low for how the money listeners who are energized to save more and the ultimately what happens Matt. The more you're able to save at younger ages, the more options you open up for yourself later on down

the line. And for many of us, we don't know what the future holds like. We don't know what it's gonna look like family wise, we don't know how our goals are going to change. A job that we like now might be a job that we don't like a few years from now, And so the more we save, the more flexibility we really are setting ourselves up for

later on down the line. Another rule when it comes to investing is don't buy single stocks and don't speculate, and in particular, UH, I think people are saying don't speculate on cryptocurrency right now, and you'll you'll hear this rule a lot, and it's a rule that we mostly

like and also follow. But breaking this rule in small ways is fine and actually potentially a smart move because if you keep those investments, the super speculative or single stock investments, to five percent of your portfolio or less, you know, blowing off some steam by doing small amounts

of trading UH. In that way, that can be smart if it allows you to stay the course with the massive chunk of your money and sticking to index funds, which is our favorite approach to investing with of your long term dough Sometimes just dabbling with with that can actually provide the mental fortuity to kind of stick to it with the other stuff, do the boring stuff. If you have just like a little bit that that exposure to the investing excitement that usually actually leads to regret

for most people. UM. But it is one of those ways I think which you can learn a lesson if if you're doing too much of it. UM. But doing it in small amounts, I think, really isn't that big of a deal. And so that's a rule that it can be broken, at least, you know, in a small way, that's right. Another rule that we've often heard is that if you love your kids, you'll start saving for their college. Now that's why I tell my kids that I don't

love them, because I'm not saving for your college. You know. Uh no, this rule was definitely made to be broken because there are so many ways to pay for college, but there are only a couple of ways when it comes to funding your retirement, and so this should be a much lower priority for most parents. You know. All that to say, we're not anti five accounts, but we do think that you should only open one if you're in money gear number seven and you're already crushing it

with your own personal money goals. And remember that not funding their college costs from the day that they're you know, that they're born. That does not mean that you love them any less. So I can start telling my kids contrary to what you love, saying yeah, yeah, you can look good. Okay, all right, I'll tell him what I get home, tell him tonight. They'll be so glad to hear it. Uh and yeah, so I but I agree, Matt.

I think that's another money year number seven thing. You know, we talked about paying off the mortgage, saving for your kids college, like those are decent uh olds to have, But there are goals that you have once you reach an immense amount of financial stability, not earlier on in the process. Um. And it's not a hard and fast rule either. You're more than welcome once you get to money your seven to do all sorts of other things instead of saving for your kids college if you want,

or saving and investing at all. I mean, if you're larger, money goals have to do with spending a lot more money. That's up to you. You know, as long as you've taken care of those other steps, you're essentially you're kind of free to do whatever you want exactly. Yeah, and uh yeah, there's some financial rules that feel like they're

a bit more rigid than others. Like earlier we were talking about the roth IRA and uh you might know that in one a single tax filer needs to have a modified adjusted gross income of a hundred forty dollars or less in order to be able to contribute to one and married filing jointly, You're Maggie needs to be less than two eight thousand dollars, right, But even when it comes to the I R s, there are ways

that you can bend and actually break these rules. Make sure you kind of know the tax rules are around the backdoor wrath, but there are no income limits when it comes to doing these conversions. Um, and yeah, so this is what people refer to commonly as the backdoor wrath. And uh, yeah, this is how you would go about

allowing your contributions and earnings to grow tax free. So there's this rule that we've all heard, Matt that says if you make up a certain amount of money, you can't contribute to the roth ira, which is an account that you and I we love and we've sung the

praises of over the years. But it turns out that that rule can be broken, um, if you're doing a backdoor rath, which is not nearly as publicized and not many people know about it, but it allows you access to putting money into a wrath account, which can be really really helpful from a tax planning perspective. You're just gonna want to make sure you know all the details before you jump in. So hopefully we just smashed a few investing rules maybe that you had in your mind

that aren't as helpful as maybe previously thoughts. We've got more restricting preventing you from doing something that you should be doing with your money when you've really wanted to. But you're like the rule series, and yeah, we want to give you the freedom to kind of to fight back against some of those limiting rules. But yeah, let's get to some more rules map in particular about spending and earning. We'll get to some rules that are maybe

holding us back in those realms right after this. All right, we're back from the break. We're talking about some of the different financial rules that we come across and why it is that we think you should be breaking these rules and jel you know, I was thinking about why it is that we're drawn to rules, and it's because it's easy. It's easy to point to something that you know you are allowed to do. It's either yes or no. It's binary rights, yes or no, black or white, correct

or incorrect. Uh, And folks don't like landing in that in between no man's land, the shades of the land of nuance and that's what we try to do honestly with our show overall, but specifically with this episode where we're kind of diving into the additional questions that should come after you hear one of these rule is where it's just like, well, maybe like you should also consider this in this there are other ways to accomplish these

goals that we're trained to achieve. Yeah, and let's be honest to the people that the voices they get amplified the most in our culture are the black and white lest they are the most extremes. Um. Really in the world of politics, in the world of money, like you're gonna take it, there they are. And so the people that we hear from you you feel you're almost like

forced into one of these two camps. Um. But really, when you look at even like political statistics, most Americans identify as independents, Like they don't identify as being fully with one party or the other. They don't identify on the extremes. And I think in money it's the same. It's the same way. There are a lot of people who hear maybe the more stringent types are the really incredibly loose liberal types with money, and they're like, I don't.

I don't know, man, Neither of those really fits me. And so while we might not be the most amplified voices, like we're going to use our platforms to say no, no, no no, there is a gray area here. Some of these rules are made to be broken, but you still need to be smart with your money. That's right. We're bringing that moderate, nuanced conversation to personal finance to money. Hopefully we'll see a trickle down effect. That's another political reference,

like the Rossbaro of personal finance. Alright, let's talk about some classic spending rules that you offer for our gen Z listeners. I don't think they know what. Maybe link to like his Wikipedia page in our show notes. Uh, but we wanted to talk about some different spending rules that we often hear about and the personal finance realm, and we're gonna bust up some of these rules. The first one we're gonna tackle is that you must have

a budget. Now, of course, I specifically I am a huge fan of budgets, but that doesn't mean that everyone must have one. Most folks, I know what pains you even to say that. Okay, so it really does pain me to say that because I kind of feel that anybody would benefit from a budget because someone who's maybe an oversaver, they're incredibly frugal, Well, it could free them up to spend a little bit more, a little more freely,

with a little more intention. And somebody who is an overspender they don't have, you know, they've got a lot more month than they do money. I think if they were to budget, then they're going to be able to maybe achieve some of those financial goals. And I think that's for the overwhelming majority of folks, But I do think that there are some naturally frugal folks who don't

necessarily have to be beholden to a budget. Uh. And so if there's someone out there who's investing a healthy, good chunk of money in their retirement accounts automatically, maybe you've got a healthy savings account, maybe you're naturally averse to spending uh an overwhelming amount of money, well you might fit into that category of a person who can

stop budgeting. Especially I think if you find it to be a painful process and instead you're able to just naturally achieve the goals that you're trying to achieve, your naturally able to spend with a plan without a written plan, then I think that's the kind of person who doesn't have to have a budget. But again that being said, I I do think that I think most folks could

benefit one way or the other from having a written budget. Yeah, and it is a rule that can be broken, but it's I agree, Matt, I think it is a helpful tool for most people. I was listening to Front of the Show Daniel Crosby talking about budget re cently, and he's one of those guys who's like, I can't do it, and it just I hate it, and so I'm not

going to. And he can afford not to because he's done really good things with his money over a long enough period of time that he doesn't he doesn't have to pigeonhold himself into the classic budgeting trope that he has to has to have one of those in his life.

And so, you know, I appreciate that I used to roll without a budget until I got married and then it was like, actually it's a necessary communication tool for my wife and I. But it is one of those things where I agree it is a rule that people feel like, even if they're really really good with money, that they have to do and we think there are ways that you can make budgeting less miserable to We've talked about that before and we will continue to talk

about why budgeting does not have to be an awful thing in your life. But also know that it is not a requirement to be a part of the personal finance And another spending role that that constantly gets thrust at people is that they should always beginning a deal. This used to be me too, write like I've talked about this on the show, that paying full price was

kind of anathema to who I was. Like it was, I was like, there's there's no way I could ever pay full price for anything, And yeah, I took deal hunting to the extreme. I still personally prefer not to pay full price for something, Like I I hear some people in the personal financi world say I only pay full price for things because it helps me not fall

prey to this lifestyle of like deal hunting. Um, and I get that, I understand it, But I feel like I've been able to realize the error of my deal obsessed ways and like not not do as much deal hunting and I actually keeping it to a minimum because yeah, really the best deal isn't off. It is getting something in a hundred percent off by not getting that thing at all, if I'm by avoiding it altogether. And like,

you only get that when you stop shopping. When you shop lass, buying fewer, nicer things also can lead to more enjoyment of those things. I've realized that too, is that I just had more things, too many things, and clutter. Uh. And yeah, so if you're you're living by the rule the big discounts are king, then you will likely need to kick that one to the curb because it's probably

hurting more than it's helping you. If you want, we can set up some sort of accountability and I can see how often you're actually visiting slick deals or or deal news. Let's do it. If you want me to really hold you accountable. Uh, let's talk about splurges. Man. Uh. There's this rule out there that if you're in debt, you have to stop spending on anything that you enjoy. And again, let's let's go ahead and side with that

rule here for a second. Debt is not ideal. We do encourage how the money listeners to create a plan to attempt to pay down their debt quickly. You know, whether it's the snowball or the avalanche approach, we want you to the middle of the road approach that we love, oh yeah, both and approach. We want you to choose just the approach that's gonna help you to get there faster. Uh. And one of the reasons for that is because debt

actually makes us dumber. We've talked about the studies that show that the stress that debt causes to our bodies has an impact on our i Q. It's something like twelve by que points that you lose when you're you know, overwhelmed with that exactly. So the quicker that you're done with that, the better off that you're going to be from a mental health perspective. And so that means getting rid of it QUI. That should be a top priority.

But if it took you years to get into that debt conundrum in the first place, it will likely take you years to get out of it. And it is hard to live an austere monastic existence for years and years.

And so make sure that you still include a few important spending items within your budget so that you don't get burned out while you're pursuing debt elimination, you still want to have those craft beer equivalents in your life, uh, to kind of carry you over from day to day, from week to week, whatever it is that you're gonna splurge on just a little bit. Uh. And you can

even kind of set those up as little rewards. Maybe as you're chiseling away or as you're chipping away at your debt, you can have these little rewards that spur you on to achieve your goal even faster, no doubt, man. All right, yeah, and there are also some uh you talked about spending rules. Let's talk about some well defined rules in the arena of earning more money and that we that we really kind of take as stock or standard.

But there's room for pushback on these rules too. And I think, Matt, one of the biggest rule was out there is that you need to go to college in order to get a high paying job. And pretty classic rule. And that is a classic rule, right, parents told me definitely fed me that rule like my entire I mean, I think ever since I was a kid, I don't think I knew there were alternatives to go into college. No, it was I mean basically, Okay, so I will say

my dad. We did have a conversation I think when I was like a sophomore or something like that in high school, and he's just like, you know, you don't have to go to college. But mom would be devastated. She would stop loving it. And You're like, I guess I'll do. You totally put that out there, and I was just like, okay, well, I mean college sounds school. You know, you see movies about college. I was kind of I think more into it, like more into it

from like a lifestyle standpoint. It's just like, yeah, that's just what all my friends are doing. I didn't have a whole lot of drive. I would say that's the high school. I'm like, everybody else is doing it. I'll do it too. You're the fault of the crowd kind

of guy. What definitely was then, Well, yeah, like that the last decade though, really, since we went to college, we've kind of seen this rule disintegrate before our very eyes, like the reality that getting a college degree automatically equates to a high paying job. It's not the case like it used to be. And it's not like getting an advanced degree doesn't still work out for lots of folks, but it's just the value proposition has changed in a

big way. It's not a slam dunk um like it was when we were younger, and in particular our parents. Generation to right and COVID has likely hurt that value proposition even more. Like you might not be getting the same experience on a college campus these days, and in

all likelihood you're not. And so yeah, it's more important than ever to do the math yourself and to run the numbers with your kids before blindly believing that college is the essential move and that it of course it makes sense, um, And it's core the decision to go

to college or not is an investment decision. And not that there aren't lifestyle benefits right to going um, But if it means inundating your kids or yourself with copious amounts of debt that you can never pay off, then it's not worth even that social experience that you were able to gather. You can get that in other ways. Uh. And it's also important to remember that blue collar jobs

are seeing a revival right now. They're seeing higher amounts of pay and rightly so, because we haven't incentivized people to go in that direction. We talked about more about that in episode two seventy seven with Ken Rusk, and so, yeah, if you kind of feel inclined towards working with your hands anyway or being entrepreneurial, don't assume that you have to go to college. I mean, we still think it's a great idea for a lot of people. And even

in that decision, you would be really smart. So you're getting a degree that's gonna pay off for you and so that you're not taking on more death than you're gonna be able to handle. But yeah, that rule that says college equals great job just doesn't hold water the

way it used to. That's right, man. It'll be really interesting to see where things are when our oldest kids start going to college, to see if it's see if things shift honestly between now and then, or if they kind of continue um at the rate that they've been. We're talking about earning money and so what kind of While we're on that note, let's talk about replacement of income.

Let's talk about life insurance. Uh, And the rule that you'll often hear when you're shopping around for life insurance is that you need to have a policy that can cover ten time is your income which you know, that's not a bad rule, but it certainly is not one that you have to follow. Joe and I, we actually both just got new policies, new life insurance policies. H And many insurance salespeople they're gonna kind of frown when you don't have a policy that's ten x your annual income. Yeah,

they will try to convince you. Yeah, they will. I mean it's in their best interest to kind of upsell you a little bit. But there are other factors that you can take into accounts, things like other sources of income. That's real estate for you and me, Joe. Also, how

close are you are to actually achieving financial independence? Uh, some of the different responsibilities that you have, depending on the number of kids you have, the different liabilities, these are all things that you want to keep in mind. Not You don't just want to blindly follow the rule of oh, you must have ten x your current income. And so if you're further along that road, say towards financial independence, you know there's no necessity to stick hard

to this ten next income rule. And also just remember to having some life insurance coverage is better than just not having anything at all. Yeah, And when I think sometimes people hear the ten X and they get the price quotes and they're like, oh, that's it's gonna be a bigger chunk of my monthly budget than I wanted it to be, and so they settle for, you know,

a smaller policy. And I think having something, you can always get another policy down the road, and you can do what's called laddering, right, And so if you're turned away by the price, although term life insurance incredibly cheap, like, hopefully you're not turned away by the price because because

it really shouldn't be too terribly expensive. But but you might say, you know what, I'm gonna get half as much as the life insurance industry says I should get, and I will have some coverage at least, because you're right, something is better than nothing. But yeah, it rules, Matt, infummation. Rules can be great and and you're right, they often help point us in the right direction. Without rules, we can be lost and breaking rules without giving any thought

as to why you're doing so. Uh, it's really it's more of a recipe for some catastrophic mistakes. And uh, yeah, but I think there's like the letter of the law, and then there's the spirit of the law, Matt Right. For instance, going back to that speed limit example, most policemen are not supposed to pull you over unless you're going ten miles over the speed limit. Right. Uh, it is this limit that you're supposed to adhere to, But

there's a grace range for you even in that. Uh. And yeah, and also there's something to be said for driving with the flow of traffic. And as you grow in your financial education, you're likely going to find other points in time where you can bend or break a rule that you've heard because your specific situation really it

needs a different tactic. And so it's important to know the fundamentals before you start improvising, right, Like a like a jazz musician, before they can get crazy with with their music, they have to know their scales and they have to know them really well. But knowing that it's okay to break some of these rules, I think it can be freeing to And so yeah, our advice to you guys just to go break some of these rules,

like don't don't go haywire. But but some of these rules really, um, they're helpful to know, but then they're they're not meant to be followed blindly. That's right, man, Let's go ahead and get back to the beer that you and I enjoyed on this episode, which was called Indefinite Staycation, and this was a barrel aged fruited sour ale by dog fish Head. Before we talk about the beer, hold this bottle. Did you realize how heavy this thing is?

That is not a normal weighted glass bottle? And I guess it's because since this was one that was I assume bottle conditioned. Uh, and it was corked and caged. There may be worried about the pressure. I don't know, but it is like twice as thick as a normal bottle. It's just a little guy, but he's got weight that's at least twice the size of what it looks like it should be. I just kind of caught me off guard here when I picked it up. But what were

your thoughts on this actual beer? First? I like the name, except for it feels like indefinite stacation, feels like our lives That is not right now. Yeah, I want indefinite vacation now. But yeah, I think this this beer was worth the two year white that it took to make

this beer. This beer was aged for over two years in French oak and the it had I don't think we mentioned it had blackberries and wild main blueberries in this beer, and so it had just delicious levels of fruitiness, delicious levels of like oak presents a little bit of funkiness. I love fruited sours, and this one goes in like the pantheon of the greats of great fruited hours. I think it's it was really delicious. It was really good, dude.

I agree. It was incredibly acidic. I feel like that's the first thing I noticed when I took a took my first sip, Like I noticed the acid, and then kind of and then right after that, I noticed like the wood notes you kind of have, like those like the sharp sour, and then it fades into the kind of the fruit sweetness going on. That sweetness really kind of broke through there, I feel like on the end um. And you know, earlier I was telling you the story

about how Kit and I went we went hiking. Well, during one of our hikes, we actually like near you know, at the top of like near Mount Mitchell, we came across a bunch of wild blueberries and blackberries. I'm not even kidding, actually have a maybe I'll post another photo make your own beer. But well, here's the thing, Mount Mitchell. It's the highest peak east of the Mississippi. And so Kate was saying that she's pretty sure that these are the same kind of blueberries that grow wild in Maine.

Uh and because it was at such a high elevation. Normally you don't see these blueberries in North Carolina, but where we were hiking, you do. And so I I feel like it came full circle. But yeah, this is a really great beer. And thanks again to Ryan for donating this one to the show. Yeah, thanks Ryan, appreciate your man, and we appreciate doctors shed Man. They've been doing making good beer for decades now. So all right,

that's gonna do it for this episode. For folks who want the show notes with any links, including that Ross Pero Wikipedia pagell we'll put that on there. For all you gen zeers who don't remember who he was, you can find those up on our website at how to money dot com. That's right, And if you have not subscribed to the show yet, we would love it if you mashed subscribe so you don't miss any future episodes. If you haven't left us a review yet, we would

greatly appreciate that, especially over at Apple Podcast. And you can also take your grandma's phone and mash subscribe to she wants to hear us talk about craft beer. She does at the end of the episode. Joel, that's gonna be it for this episode until next time. Best Friends Out, Best Friends Out,