Welcome to had to Money. I'm Joel, I'm not and this is your smart money guide for twenty twenty six.
You know what, buddy, is twenty twenty six. Let's go New Year, New you. Baby. It's the first real day of twenty twenty six. Well, it's not really the first real day. It's the fifth, but it is. Though it's your first real day. I think it's most people's first real day of twenty twenty sixth you can't have the you can't have New Year's Day be Thursday and expect everyone to be like, Yeah, it's the new year, let's
be productive tomorrow in the office. That makes almost as much sense as your kid's going back to school the last last last fall on a Thursday, right, and then we starting on a Friday, on a Friday, on an actual Friday, which made even less sense. So we skipt the first day of school. You're like, we're still going to be at the beach. No judge, that was ridiculous, I will say. Normally, so if folks haven't listened to the podcast normally on Monday episodes, we hear directly from you,
our listeners. You would normally take a voice memo that you can easily record on your phone and you email it over to us. You say your name, you say where you're from, because that's always fun. And I like to google where it is that people live. People know
that at this point, which is actually bizarre. Yeah, the last one she literally put her actual address so we could I don't know, I don't want to go there, but like the general town, if I haven't heard of a town, I like to click around and get a feel for it, see what they have to offer, see if I want to go visit there at some point, like if you know, if you're on a road trip and you've heard of a small town. Matt's paying house
visits to listeners now, so get in there. But normally, yeah, Monday episodes ask how to money episodes, we have the voice memos and we you know, we were able to directly answer listeners personal finance questions. But with this being the first real episode of twenty twenty six, we wanted to do something special.
You set the table a little bit for the coming year, and so yeah, we'll have kind of some general thoughts on getting your money together in twenty twenty six. Will cover a little bit of the money gears. We'll talk about maybe what to expect in twenty twenty six and kind of maybe a little bit of the current state of the economy will kind of yeah, hit a bunch
of things. Matt run through a bunch of things that we think are important for people to consider as they're thinking about their personal finances going into this year.
One. Does it Does it feel like there's too much pressure on this episode because it's like the first it's going to be the first perfect episode of the year. I don't think so. I'm okay, you know, I don't know. You were talking to me earlier like this is gonna be a good one. I'm like, I know what's going
to be a good one. But also, you know, you can't pack it all otherwise we'd be sitting here for like five hours, right if it's like and then we're gonna have on a guest who's gonna deliver some brilliant nugget, and then we're gonna answer some listener questions. You and I are going to crush two Kraft beers.
Because that's why I said. This is setting the table. It's like a nice tablecloth on top of the table. There's no food or anything. It's like, it's kind of going back to the basics in some ways.
We're bringing the food. There's going to be some actual sustenance here. This isn't just fluff, all right, No, that's not what you meant, not what I just that's not what I meant.
I think one of the things maybe I wanted to suggest starting off as we're entering into a new year, and one way to maybe at least start thinking effectively about your finances for twenty twenty six is to reflect on how things went last year.
Matt. I don't know.
About you, but like, yeah, what were your goals for last year? How did you do in comparison to what you'd set up to do? And then think about maybe like what were the hurdles that got maybe thrust into your path that frustrated you in your attempts to meet those goals?
What sticks did you shove into your own spokes?
There's that too, right, How are you your own worst enemy at times preventing you from being able to reach that goal? And I'm sure all of us if we do a little bit of thoughtful reflection, I think that is one of the first good places to begin, because it can help us then say, well, all right, now that I know myself a little bit better, I know how I did in comparison to what I want to do last year. Maybe you're one of those incredibly disciplined pace or you just got kind of lucky this year too.
Maybe your goal was like to grow your net worth and like the say, the stock market doing well in twenty twenty five really helps you to be able to do that.
And it's but like, what were your goals?
How did you do in comparison to what those goals were? I think is a really good, really good thing to think through.
Yeah, I don't think we do enough reflecting as a culture. Although with you know, with there being more attention being paid towards mental health, I think folks are or at least at least there's a whole lot of language around it though. Right, how often are people actually sitting down and reflecting and journaling and thinking about what happened? Not only what happened, but then how do you feel about that? Right? Because I think that that can have a larger impact
on your the steps that you take moving forward. It's not just literally what happened and what goals you were able to achieve and not achieve, but how are you actually interpreting those results good or bad? And I think that could have an impact on whether or not you see yourself as, Oh, actually I'm a good investor, Oh I'm a good saver, or I am a diligent worker. This is what we're able to accomplish. And if you're able to like internalize essentially some of those behaviors as
opposed to only fix, the results are good. Trust me, Like I'm a data's guy, like I've got the Excel spreadsheets going back. That is really important. But also to sort of internalize some of the behavior that you set out to achieve last year. I think that's really important, and you might even find that you're able to hit some of those goals and metrics that you wanted to hit. And as you reflect back, you're like, man, I was exhausted at the end of the year, and I needed
that break right like the fifth of January. I'm back to work, like I'm a little worried because I don't think I can keep up the pace and so maybe you overdid it. Like that's even worth considering too. I think for some people, especially people who listen to out of money, Matt. They are like go getters, and so, yeah, did you overdo it to the extent that maybe you actually need to dial back some of those goals so that you could live a little bit more of your life.
In the here and now. Totally, that's worth considering as well. So and really, like the truth is, twenty twenty six is going to be different than twenty twenty five. We're going to face different challenges, different opportunities, and there were a lot of both, Matt in twenty twenty five for investors and for people trying to get smart with their money.
And I think that the more you have your eyes on your money in a healthy way, the more you're going to be ready for whatever challenges come your way, and you're going to be able to take advantage of opportunity when it strikes. Think about even just the beginning of last year, and like it was tariffs, Man, they're going to destroy the economy, And there was a lot of.
You shouldn't have sold I was telling you you shouldn't sell out the bottom.
Joy See I didn't, And I was one of those people who were like, man, tariffs are going to have a massive impact. They had a more muted impact than even I thought they would. It felt like a COVID blip.
Yeah, it did. Like honestly, it's like a mini little COVID blip. When we look back, it's like similar actually a lot of similarities, like kind of towards the beginning of the year, just this false oh no, the world's ending. But then in reality, oh, we are actually more resilient
than we think. And I think for economy, a lot of investors, what the truth is, there are blips that you can take advantage of, or there are ways that maybe you might say, I don't know, man, that news is freaking me out, or that agnostication prediction is freaking me out, and so I'm going to invest less or something like that. And then if you had done that, if you had listened to those predictions, even then you you would have missed out on ind abundance of returns totally. Yeah.
By the way, I want to mention too, you might hear some leaf flowers in the background and Joel, Joel almost called you something different what you want to call me? I think that only speaks to kind of our like, uh down homeness. We're just two dudes, best friends. We record in this carriage house that we rent, and you know what, We're surrounded by honestly beautiful like one hundred year old oaks, but they drop a lot of leaves and dude, I gotta hate the leaf blowers. They get
under my skin. They like find their way into like my sinuses, like where the sound resonates rattles it around. Yeah.
No, And it's truly the bang of a podcast or existent.
Unless you live in the middle of some giant building where there's no windows. But that's that's the other thing. I mean. You can literally go to our website and see a picture of us here recording. But like, I love this space because we have windows to the outside
and the true real environment, the sunlight. Man, I don't know, would you trade off having a view to the outside world in order to have like perfect silence And no, I don't think when I don't care that much about it not sounding perfectly polished like a studio.
When I worked at a radio station, we had all of these pristine recording studios that had no windows to the outside world, and.
You come out of their pale and yeah, a lot more terrible attached from the outside world. You feel like a vampire. You feel like a vampire. How we roll here well?
And Matt like, when we're talking about what this show is. By the way, if you are new here, like, this show is all about removing jargon, keeping things simple. We want you to achieve financial independence. We talk about all facets of money, from saving and investing to debt payoff and intentional spending. We also touch a lot on the behavior and the mindset stuff too, because that really does matter.
Your emotions factor into your money, maybe more than you think they do, and we just we attempt to run the gamut so that you can make meaningful changes.
In your life.
Deal for you is that money would become a less painful endeavor, that you get more joy out of your life because you handle money so effectively. We want everyone listening to know that frugality does not equal deprivation.
Matt.
I think too often those two terms have become synonymous. So you're telling me to become frual. You're telling me that I need to hate my life. Not true. Frugality can be fun. And want to give you thoughtful ways to think about frugality and the truth is it can lead to meaningful results, but it's also not frugality all the way down.
That's not how we roll. It's not frugality on top of frugality all the way down. No, by the way, we didn't mention our beer, and I feel like we're kind of all over because this is because I'm used to like list our questions and just the structure that comes with us. So because of that, I feel like this is a little more free wheeling. But we do enjoy a beer during every episode, and we're enjoying if only to be thoughtless once more, which is an ipa
by burial. We're enjoying that and we're gonna share our thoughts at the end of the episode. Why do we drink beer on this podcast? Because we talk about our craft beer equivalent. This is something that we are splurge on in the here and here now, in the moment. Is it the best use of our money? There's an argument to be made that it is, because sure, we can forego all the pleasures of life today in order to invest in safe for larger amounts down the road.
But you got to find that balance for you as an individual, how are you going to enjoy and embrace and seize the day today while also preparing for the future, and for us, craft beer is one of the ways that we literally demonstrate that and enjoy it here on the podcast.
It's the balance that we're trying to strike right It is that like, let's be thoughtful and intentional about what we want to achieve five, ten, twenty years down the road, but not forget that we have a life to live
in the here and now. There's a lot of that, I think in parts of the personal finance space, where it's like nose to the grindstone, head down so that you can achieve this massive savings rate in this goal that you know it's at the end of the rainbow, and really what happens for a lot of those years it's a slog And I've met too many people who went so dang hard for a slew of years that it feels like they didn't even lift their head up
to enjoy their life. For like, for a lot of people, it's it's in those like twenties and thirties that are like years that you'll never get back when it comes to forming relationships or making memories. So, just in case you're wondering, we're not all about that lifestyle totally.
And you mentioned goals, Joe. So, Joel, why do I almost keep saying, Joe, I think that's what I'm saying. Am I speaking too quickly? Joel? My best buddy? I need to actually appreciate a new best buddy that's okay over the holidays. His name is Joseph. I was gonna say you mentioned goals, and I'm guessing that a lot of folks are already tired of hearing about people setting goals, sitting smart goals, setting you know whatever goal acronym, strategy,
approach to setting your goals. But still, and we're only going to spend a second on this, but I do think asking what it is that you want to achieve this year is just so important to hitting the mark. Joel. You mentioned like review and kind of looking at how you did last year, But it's equally important to maybe have a conversation with your spouse or your significant other, your part, or do this by yourself if that's where
you're at. But I just think writing those goals down to make them concrete, enacting some sort of plan is going to be so vital to you seeing progress and then just keeping those goals just front of mind, like like literally in front of your face. I think actually you can literally write it on a post a note stick on your mirror in order to help remind you
of that. But I think knowing what it is that you want to achieve and then just knowing that that is what is fueling you to get up every day, get up earlier in order to work a little bit harder to self deprivation a little bit. Right, Like you talked about frugality, not spending in a way that's going to allow you to sock away a little bit more.
Maybe you're trying to eliminate some debt and you know that every dollar that you're not spending on yourself is something that's buying you some of that financial peace of mind. And I said paying down debt, But it could be anything, right, Like the name of this episode is your smart money guide for twenty twenty six, but this could also be like your guide to being a first time home buyer. This episode could be your guide to paying down debt.
It could be your guide to juicing your four O and K. Guess what money is fungible and everything that we're gonna talk about here on the show. Certainly in this episode, but like for the rest of the year, you can apply to whatever specific goals that you might have in your life. And so keep that in mind.
We're not talking about money generically, but it is up to you to figure out what it is that you are that you're striving after, and hopefully, man, you really do need to think about this, because it's not just about increasing your net worth, right, Like, if you're somebody and you're just fueled by seeing bigger number, good, Like that's boring, you know, Like I hate to say it, but like I don't want to hang out with that kind of person, someone who is only interested in the stats.
Like I don't know. I'm sure you might know as statistician who's very interesting and fun to be around, but like getting invited to Matt's Super Bowl party, it's just well, actually, I don't know. If you're playing the odds and you're doing more betting, we won't get into that right now, but I'm just saying that the people who are striving after like audacious, really cool, fun things. That is interesting, and I think that's what It just makes you a
more well rounded person. And if you haven't done the work to identify what it is that you're making these sacrifices for man.
That is your first step, and I think it's so easy. The further along you get into the personal finance sphere to you kind of start to understand how some of these accounts work. You start to actually realize the impact of compounding returns, and you're like, WHOA, that's really cool. My money is starting to work really hard for me. And at some point you even hit that place where maybe your money is working harder for you than you
can work for it, and it's kind of enthralling. But that is also we strive to recognize that's not the end goal, because if that were the end goal, You're right, Matt, that is a really boring end goal. The goal the goal is to use that money to create a life that you can enjoy, and part of that does take some sacrifice now so you can set yourself up for more options down the road. But it doesn't mean full on deprivation now, that's for sure.
Totally agree, And I don't know, Matt.
I like the idea of coming a person who enjoys saving or who sees the value in fugality instead of like that kind of forced mechanism of like, I guess I got a handcuff myself so I can make progress with my money. Maybe instead of could your goal be to become the kind of person who enjoys some of those things. Maybe like, man, I gotta go to thrift store to save money instead of buying it on my favorite clothing retailer.
Well, maybe you can turn turn it into.
The fun of the hunt, right to find something that's completely undervalue to the thrift store, like your favorite name brand sweater or something like that that's five dollars instead of fifty. Like, that's a cool perspective to take on going to the thrift store.
That's my identity is shifting this place. There's still a.
Feeling like you have to or can you make cooking at home more delightful because I think for a lot of people it can feel really painful. How can you set yourself up for success on that front? Because the truth is, and we all know this, that eating out has got become incredibly expensive. The more you do it,
the more money you are tossing down the drain. And it's okay to carve some money out for that in your budget, but maybe think of it as not just something you have to do to save money, but something that you can enjoy. Maybe whether it's like making the meal together with your spouse or something like that. I mean, whatever it is, I like the idea of becoming that kind of person. Like, one of my goals this past year was to run twelve hundred miles. And it wasn't
literally just to hit that number crazy. It was not I have a friends who ran a lot more than that. They're even crazier than I am.
But say, I feel like that's when there's like at a certain point it's too much, but I feel like you're not there yet.
Yeah, we'll see if I get there, I'll try to refrain. I'll try to refrain. But like part of that goal was yet to hit a numerical number at the end of the rainbow. That was pretty arbitrary. But the other goal for me, the main goal for me, was to become the person. It wasn't like, oh, I'm training for this one race that I want to do well in. It was like, I want to be the kind of
person who in twelve hundred miles. Literally I said one hundred miles a month because I wanted to be the kind of person who was consistent doing it regularly and and feeling you better because of it. You are a runner because this is who you are as opposed This is the kind of life that you're leading, as opposed
to some arbitrary goal, is what you're saying. So guess what, the likelihood of me running like two hundred miles this year is not high because I have become the kind of person even though I don't actually I don't really know what my running goal is yet for this year, but I know it's not gonna be two hundred miles because I'm just the kind of person who enjoys running now.
And I couldn't have said that four years ago. You've moved past that. Yeah, Like I think what I hear you saying is like it might be even worth considering like a theme for your year. So for some people, I think this could be the year of like, let's say you just are looking for some more financial clarity, right, like like you are someone who understands you've gained more insight about your financial mechanic, like where things are going,
like the nuts and the bolts. Right. For others, I think the thing could be like a year of more intentional spending, especially if you found that you spent way too much over Christmas and you need a bit of a financial detox. But I really like this idea because
it's less focusing on a specific numerical goal. It's less it's even less like, oh, I want to completely eliminate my student loans this year, or some folks are just like dudes, I'm so far away from being able to purchase my first home right like, So these are all the whole. These are all like the pot of gold
at the end of the rainbow kind of goals. And what we're talking about instead are habits, and these are behaviors that you can put into action now before you even know what it is that you're looking to move towards.
We talk about big savings goals for folks and having cash on hand in liquidity, and we always talk about how our tastes change and something new comes on the horizon and all of a sudden, I want a new car or whatever it is, right, And if you have worked towards building up just a savings bucket for something that you don't even know what it is that you want to spend on, yet, it's going to lead to
you being able to achieve that obviously much quicker. And so in a similar way, this is I think by lashing onto a theme of different behaviors or actions that you might take, even without an end goal, I think that that's going to get you closer to whatever end goal it is that you might end up identifying. Yeah, later this year or a couple of years from now, but you are going to be in such a better financial position because of, hopefully some of the things that you've done here.
From listening to the podcast, it makes me think of like families who come up with a motto, and I think we did that in a while back. I don't remember what it is now, Like I need to go back and revisit that, because I've seen other families who create one and they live by it right, And it's like in this family, we prioritize this, and then when you're trying to decide what you do with your time, your efforts, and your money, it's really easy to revisit that moto and be like, are we the kind of
family who does this thing? Yeah, because it's in our motto, Like our motto says that we care about fun and so of course we're going to get the season pass to six Flags or whatever it is.
But we're also the.
Family who cares about generosity, but we're not the family who cares about this. And so like, maybe a theme, Maybe it's not this overarching, lifelong theme, but just a theme.
For the year.
And the truth is we go through seasons things ebb and flow, So maybe this season is maybe this year is like the year of less, a year of minimalism, a year of decluttering. Maybe you know, maybe it is the year where you're like, debt payoff, I'm going so hard, like this is going to be the year where I get rid of credit card debt finally and I'm done with it for good. Like but I love that idea of having a theme so that you could always revert back and be like, does this jive this move that
I want to make with my money? Does this go along with what I'm trying to accomplish this year? And sometimes just a theme, a few words spoken over what you want to happen this year can make all the difference from a mindset perspective.
Totally agree. Let's keep this party going, though we're going to take a quick break. But when we come back from the break, we're going to talk about the money gears, which is what you should be doing with your money and when you should be taking those actions. We'll get to that and more right after this. All right, we're back and that in just a bit.
I want to talk let's talk about like the K shaped economy and specifically kind of where things are happening in what's happening in the economy right now, how people can identify where they are on that spectrum, and how we think that's like an informative way of thinking about things. But let's get to the money gears.
Matt. I feel like the money gears is. It's basically, if you go to.
The Ada money dot com you click start here, you'll see the money gears, and it's been our way of telling people an order of operations for your money so you can figure out, well, where am I along this spectrum in order to know what to do next. And we call it the money gears because you and I were fond of biking.
We love biking. We still bike all the time, but biked here today, Will Okay, Yeah, I'm gonna explain it. And the reason we call it the money gears is because everyone knows. When you are at a standstill and you need to get biking, do you start on the tallest, most hardest, fastest gear. No, absolutely not in my fastest gear. I mean also, I can't turn the pedals if you would hurt yourself or you might even like break your bike. I mean eventually, yes, you will get rolling, but it's
going to be like literally it could be painful. And in a similar way, you could start with more sophisticated investing. But you know what, if you don't have a basic emergency fund set aside, there are gonna be setbacks. You can essentially, when you're on a bike and you're on the proper gear, you can achieve your goal destination a lot more efficiently. You can, you can, I think, achieve it much quicker and in a similar way, that's what
we think about the money gears. By going in order, we think that you're going to be in a stronger financial position.
So you mentioned emergency fund. That is always, always has been, always will be money gear number one. We updated it this past year though, because of inflation. We updated the amount of money that you should be setting aside in your high yield save music account and I'll tell you why. I said hoig yield save us account just a second, But it used to be two four hundred and six
and fifty seven. That's Arler, and that was because of a survey by economists, and they said that most people would be able to be able to get through an everyday emergency with that kind of cash on hand for without having to resort to using credit cards. Well adjusted for inflation, that number is now three thousand and forty five dollars. So that is the number we're rolling with
right now, thirty forty five. Yeah, So if you can, if you haven't met this goal yet, that is going to be the first thing on your to do list is to find a way to slowly, surely get that money in a high old saves account. I say high old Saves account Matt too, because you and I were not fans of the big banks. They don't pay much on your money. They often have fees that are associated with your account that some of our favorite online banks do not. You could find those references to those our
favorite online banks up on our website. But this is this is the first money gear and it is literally like the easiest way to get going it's gonna save you a lot of potential headaches down the road, if you like, If you don't have liquid cash on hand, it just puts you in a plethora of uncomfortable situations.
That's right. So that's money gear number one. Money Gear two. The next most important thing to do is to get your company match if you have one available to you. If you are getting let's say, like a fifty percent or one hundred percent match in your four O one K, there is no greater return on your money. And jel do you know why I love money Gear number two in the fact that it's the second thing that most folks will pretty quickly be able to achieve. A side,
Why do you love this? Is it because plenty of reasons? I love it? But why do you think I'm choosing it right now asking I'm asking you to step into my brain.
That's the next one in line. But also, I think part of the reason you love this is because you've ever had access to one. You always wanted a match.
That is true. Although you know we once we started this company, we we technically have a solo four one K and we matched, but you never had like that's still us A third party. Yeah. Yeah, it's just me taking off my employer hat and put taking off my employee hat podcaster hat and sticking on the What am I the CFO slash co founder employeer hat? I'll call you the CEO. I don't know if that's one, so also co founder. No. The reason I love it so much is because it is I'll be the c CEO,
the chief creative officer. How does that sound? Oh, what's the CBA chief beer Officer. No. I really like it because it gives folks a taste early on of what it means to be an investor. Right. It gives you a taste early on of what it might feel like to have compounding returns work in your favor as opposed to against you, which a lot of folks that's that's how they experienced interest, Right. They experience having to pay more for less as opposed to as opposed to the opposite. Right.
And so let's say you sock away like five thousand bucks into your four to one K and you got a match on you know, like five percent of your salary or something like that, and you basically at the end of the year you get to see that grow from five thousand to ten thousand at least, that's assuming zero percent return in the market.
That's just the employer match. And then let's say there were returns.
On top of that. Let's say it might be even more than that. Yeah, but like that's incredible, because early on, I think it can be disheartening. I think it can be demoralizing because you're working and you're like, oh, I feel like I thought I was investing, and then you
look down. There's not a ton of money there. Man's it's fully purely one hundred percent dependent again, nine hundred percent dependent, Like there are some returns from the market, but your ability to grow your net worth by you sacrificing and you depositing that money into your account, Like, that's what it's predominantly dependent on. And you don't really get to experience those ways of compounding until much further down the road, right where your money starts working harder
for you than you are. This is like a nice little foretaste of things to come where you can say, oh, man, not like there is and just an aspect of this that I am able to appreciate now, knowing that it'll be amplified even more down the road.
I remember those first years being an investor. I had to trust what other people were saying to me that compounding returns were coming down the pike, because hard to believe it. It feels like, especially with like the low salary I was making shoving six or eight percent, then trying to grow it eventually into more. Putting that money into the four one k. Getting a little bit of a match, I was like, gosh, it still still feels paltry, Like how I'm never going to get like become wealthy this way?
Yeah, did you have much of a match?
I had a fifty percent match up to three percent? So if I put in six, they put in three, Okay, So I mean that's I would say that nothing. Actually, probably the average people are exactly expecting. And I've heard from more people actually this past year where their matt got cut. And that's a tough position to be in. But I think, give you know where things are with the economy, you might see more employers doing that. Then you have to like reassess how much I'm going to
put in and how much is it worth it? But I think money year number two taking advantage of the match.
You're right, it's you can't be the You can't be that return on that money, man.
It's the free money. It's the investor mentality after that money. Year number three is to work towards paying down high interest credit card debt. And that was I think one of the top stories of this past year, Matt, was that credit card interest rates got worse, which means if you have revolving credit card debt, it is doing more damage to your finances than ever before. Instead of seventeen percent, it's like twenty two percent right on your credit card.
It makes it harder to pay it off because you're accruing more interest. Our thing here is to make a plan to get it paid off quickly. And if you feel like you're in over your head, you might want to even turn to a nonprofit like Money Management International or something like that. Think about the website undebt dot. It is a good place to kind of create a plan plot up. That's a few and like DII Wyatt.
Yeah, if you want a DIY and you still have if you feel like it's not completely out of control, that's a great great resource for me.
Yeah, and you can kind of have them list the debts in order how much free cash do you have? List out those debts and how long is it going to take me to pay this debt off? I would think that actually AI would probably be a good tool for like in putting your debts and then saying, here's how much free cash I have? HUW should I attack this?
Fascinating? I haven't done that yet. I've actually used it for some other things where I'm like trying to figure out Yeah some time. Doesn't that seem like that would be a perfect agains awesome? Yeah, I would like to think that, it would say, but depends on how you see the world. Yeah, what's the kind of nuance that you would expect to find here on how to money? Eachol? Right? Guaranteed human? Well, you know that's.
Us I we I did episode six twenty back in the day, the full Proof Plan to ditch that. You can go back and listen to that, especially especially if you're new here. But that credit card debt, in particularly the high interest rate debt, is the kind of stuff that if you don't make a plan to stop the bleeding, it's triage, it's going to continue to be a massive
problem for you. You have to have, Like I think that needs to be a square focus after the first two money gears, getting rid of that high intratrate debt.
Yeah, it doesn't matter how much broccoli you're eating and if you're getting enough sleep and taking your vitamins and drinking enough water. If you're like bleeding out, you need to fix that first. And that's like, that's the same thing when it comes to cutting out some of these just the worst debts, and we'll get to some of the less worst debts, some of the lesser damaging debts.
But it makes me think of like folks will talk about toxic relationships like that's something that's really bad, right, They're like, oh, yeah, I toxic relationships. And I don't know if this is this feels like counseling relational advice, but like imagine you got somebody in your life and you're like, man, every time I hang out with them, they just want to tear me down or they're discouraging blah blah blah, and you're like, I want to go
find some new friends. I would venture to say that maybe you have to like be proactive about not hanging out with that some of those toxic relationships before you even have room in your mind, like before you have like the mental bandwidth to get out there and to meet some new folks. Or maybe it's you know, like a partner who wasn't that great for you, If that's somebody that needs to be completely cut out as opposed to like keeping it around and being like no, no, I
can incorporate that relationship with these other relationships. I don't think that's how it works. I think that really bad relationship might end up like poisoning some of these other relationships. There are certain things that we have to completely remove in order to make some of the four progress. And I think this is an instance where like you're kind
of streamlining too. It's like less is more, so like in this way, you know, because like again you're freeing up some of this mental bandwidth that you have in your mind is not just like running circles around itself trying to figure out how to just you know, make minimum payments on some of this credit card debt?
Yees, so did your toxic relationships and your toxic debt in twenty twenty six debt? Yeah, Matt, I think you just inspired people in multiple fronts. Congratulations the relational event.
Yeah, don't come to me for your relations advice.
Money gear number four, so we'll move on. Then GOAT is really going back to the emergency fund. So money gear one, the basic emergency fund. Next, get the company match. Next is to pay down high interest debt and then go back and fully fund your emergence fund. And so much of how much money you need to save, there is no number, there's no patented stock number for this, like we did having money g you're number one because
it depends on the specifics of your household income. Right three to six months should worth of expenses should suffice for most people. And the truth is three thousand and forty five dollars just isn't enough to get you through
bigger emergencies that can come along. It does not allow for enough flexibility if you decide you want to make a big pivot in your life, or if some like yeah, let's say job loss or something like that, or you know, hits you, or some sort of terrible medical diagnosis comes along, the forty five dollars isn't going to be enough for you to have the flexibility you need if you're compatied with a larger emergency that three thousand dollars, that's like
for basic stuff right, like, hey, my transmission just went out, and even that, I don't know, three thousand dollars quite competent.
Oh yeah, transmission is the number one. I'm pretty sure, Agil. As I look at my twenty twelve into odyssey, that is the repair that might total the van for a big risk for you, It's like, yeah, it's just I've just as it shifts, I'm like, oh, is it starting to is it starting to slip a little bit. It's something that I'm trying to stay on top of it. If we get to that stage, I'm like, oh my gosh, we have to get a new ride.
I recently changed the transmission fluid and helped make it shift a lot better.
We talked about that. Yeah, privately, have you done it? My next goal change? I'm one percent okay because I don't. I was like, oh, dang, when's the last time I had a fluid flesh And I don't know if I've ever done that. Okay, it's time. There's some maintenance that we've stayed on top of, like clockwork, but then there's other things. When you bounce between different mechanics, it almost like resets the clock on some of these other also very important things that you need to do that are
going to maintain the longevity of your car. But yeah, I think I've been a bit negligent. But let's keep moving money gear number five. You just mentioned your number four the fully funded emergency fund, oh, by the way, which you're totally going to keep where in your high deal savings account. This is not money that you invest because you need it to be there, liquid, ready to go in case case stuff hits the fan about money year five tax sheltered retirement accounts, that is what's next.
You might be tempted to continue to hoard that cash because for the first time you're like, oh my gosh, this is what margin feels like. I can breathe. I am not living paycheck to paycheck. And you might think, oh, more of a good thing is just a good thing, right, And no, because investing is going to be key to outpacing inflation, it's going to be key to growing money
for your future for retirement. And there are a whole slew of different accounts available and depending on where you work, you know, you might have access to a four to one K, you might have access to a TSP thrift Savings Plan four fifty seven B. If you're a teacher working for a nonprofit, you can also invest in an IR. We're big fans of the roth IRA never having to be taxed on those dollars ever. Again, but more than that, I think prioritizing low costs and versification. What you're not
gonna hear us talk about are buying individual stocks. Occasionally we'll say because less than five percent, we're okay with that. For you to invest that much of your overall net worth in individual stocks just for fun, But like that should be I can't even believe I said that, because like that should just not even be an issue. If you are investing in tax deferred retirement accounts for the first time, you need to be looking at total stock index funds or the S and P five hundred and
specifically paying attention to the expense ratios on that. Anything that's less than zero point two percent is okay. I would prefer to see folks, though, closer to like point zero three percent, because that's all it takes. Yeah, or if not free with Fidelity, you got the FC rocks.
And there are a lot of personal finance folks out there who will talk a lot about a bunch of different investing tactics you can take. And the truth is, man, there's some really good content creators who are really smart out there in space. We've even had some of them on the podcast, even like Ben Felix, who we had on at the end of last year, talks a ton
about investing. He's so smart. Loved talking to him. But it's also possible, especially for a show like this, to really over complicate things to actually the detriment I think of listeners, and so if you feel like you're at that place and you're like, man, I'm ready to create my own like twelve fun portfolio, there are awesome folks out there who you can listen to to figure that out.
But I think for the vast majority of folks, Matt, they want just like simple and effective, low cost and diversified. And so that's really what we talk about here on the show.
And that is literally how we invest as well. Yeah, exactly, ninety seven, ninety eight percent of my net worth is invested in either the total stock market index funds offered by Vanguard or Fidelity YEP, or S ANDP with Fidelity.
And so until you're investing fifteen percent of your income, you're in money gear five. Don't beat yourself up if it's taking while I think we're talking about these money gears, Matt, like you just kind of moved through them like clockwork. The truth is, especially think about money gear number one might take somebody hopefully no longer than six months, but it just depends on a whole lot of what's going
on in your financial scenario. Money gear number two that hopefully doesn't take too too long to get the full match. But like, the further you get along these money gears, the longer it's gonna take to build up like let's say, six months worth of expenses in a save these account. That can take a really, really long time. So yeah, be generous with yourself, be gracious. The same thing is true with money year number five. Until you're really investing
fifteen percent, you're gonna be in money gear five. So money gear number five all about getting more money than into your investment accounts and just growing the amount of overall amount of your income that you're able to stash away for your future.
That's right. Next, money gear number six, that's when you can start paying off low interest debt with vigor. And that could be if you've got one, that could be a car loan. It could mean paying more on your student loans than just the minimum. It could mean paying off a heelock home equity line of credit more quickly
if you've if that's something that you've utilized. But in money Gear number six, we've got savings, we've become good investors, and now we are just eliminating some of the less offensive, some of the less nefarious kinds of debt. That being said, your mortgage. If you have a low rate interest rate home loan, mortgage, hold off, don't do that just yet. Yeah, that feels that's more like a money gear number seven.
Action item, right, Although I will say in money Gear number six, if you were the kind of person if you bought a house that's say, in the last two years, and your interest rate is in that seven percent range, boom, that fits in money Gear number six, you might want to then be paying more towards your mortgage. Yeah, because it's you're not able to earn more legit just in a savings account than you are paying an interest right towards towards your home lender.
Yeah, and you said seven percent because that's what's that's where it's If it's any more than that, absolutely slam dunk. Any less than that, that's when it's like it's tough, like that seven percent mark, it does not make it easy. Yep.
So money gear number six is really about paying off a lot of those other kinds of debt, with the exception of the mortgage, or if you have some other kind of debt like I don't know, Matt from people who have student loans from twenty years ago, it might still be at a really low interest rate, Like maybe you can pump those off a little bit further, maybe I can make those a top priority. And it's been fun this year. Matter of fact, I feel like we've
seen a lot more money. How the money listeners reach money gear number seven. Once you get here, yeah, you can go in a million different directions, Like you can go back to school to pursue another career. You can pay for it with savings that you've been able to ramp up, or you can increase your investment percentage so
you can reach financial independence sooner. So instead of stopping at that fifteen percent of your income, now you're like, boom, let me see if I can hit twenty or thirty percent of my income just in money that I'm putting into my investment accounts every month. That's a cool goal, and it just allows you a lot more flexibility, sooner you can take a sabbatical. We've got episodes on that
we took a sabbatical this summer. That was one of those things where like we're buying more of our time back. The truth is, once you're hitting those later money gears, you're kind of cruising downhill. And a lot of folks never achieve this. But I think a whole lot of people in the how to Money community mat are going to And it's not even because they make six salaries. It's not like we've got everyone who lives in Silicon Valley listening to this podcast. But it's because the people
who listen to this podcast are living intentionally. They're watching, they're spending their prioritizing investing over consumption they could be doing in the here and now, and they value the lifestyle that you can't buy on Amazon right as the Grinch would have said a few weeks ago, like it
came without packages, boxes or bags like that. We realize, as how to money people that the truth is, the best things in life are not consumables, and consumables can be good, but they're not the end all be all.
That's right, But we've got more to get to. Man. We are going to cover some additional steps that you can take to help your money to go further for you to reach your financial goals. We'll get to all that right after this.
All right, Matt, We're back talked about the money gears, which I think is just such a helpful framework for most people just who are new to personal finance to figure out. And even if you've been listening for a while, you're like, oh, man, that's a good refresher. I forgot where am I at? Oh I'm on money gear number four. Okay,
that's what I need to do next. It's a good idea, and we'll link to it in the show notes, but it's also on the start here button of our homepage if you're like, I need to do more digging into those and how they function. We just kind of gave a brief overview. We actually have individual articles for every money gear so that you can dig in and see exactly how to attack it. But let's get a little
more current here. For the last section, Matt, and maybe we'll even share our own priorities for twenty twenty six, our financial priorities here at the end of this episode. But I want to talk about the K shaped economy for just a second. We've talked about like where you are in the money gears, but it's also important to think about what trajectory you're on. And we just hear so much in the media about the extremes, like the richest folks in the world, the people with multiple yachts,
and then folks living in impoverished situations. But I was talking to my friend Pam recently Matt about this, and we agreed that the K shaped visual is more accurate and more representative, more helpful. I think that we exist along a spectrum typically, and sometimes we're moving up that spectrum, sometimes we're moving down it, or maybe we feel like
we're staying static. We're just kind of in the middle of the K. And that K is like really just like, hey, who's making improvements, doing better whether it comes to income and lifestyle and the downward part of the K where people feel like they're not doing as well as they used to do. And I think people are increasingly worried about the possibility of moving down rather than up. I do think that's something that's on the top of people's minds,
especially higher prices and stuff like that. But instead of thinking about the average or the extremes, I think the visual can help you think more about your specific situation, how you're doing right now, and where you feel like you're headed, because I think that has so much to do with how we feel about our money in our lives.
Yeah, yeah, I agree, but yeah, hopefully folks are when they see, like you say, K shaped economy and everyone pictures the K and you're like, well, hopefully, like I want to be on the K part that's going up. And I mean, I do think that there are a lot of listeners that is where they are. I do think that there are a lot of folks and they're
they're encouraged by what's ahead. Like I always get frustrated when folks talk about how gen Z, how they're just so poor, But I'm like, these are this is the generation that just finished college, Like, this is the generation that's in their first job where they are making How much did you make, Joel in your first job?
I mean, I was part time in my literal first job out and then my first time job. I want to say I made like twenty four thousand dollars adjusted for inflation.
I don't know what that would be same. So in preparation for the New year thirties, Kate and I, well, then I made less than you because my take home
was less than twenty one thousand dollars. Wow. In two thousand and seven, and Kate, we were looking over our budget for the year as we're just kind of seeing how we did in twenty twenty five things together, Like literally, at the beginning of two thousand and seven, I had eight hundred and sixty eight dollars to my name, Like that's how much money I had in my savings account. And guess what if you would have were to have taken a snapshot right then they'd be like, guess what
millennials are so broke? Well, and they wrote those headlines and they did, but like I'm just saying that those headlines do not define you who are listening to this and you are feeling like, oh my gosh, these guys are talking about setting aside six months of living expenses, Like I don't even have it enough to hardly pay rent this this month to a certain extent, like we've all been there, but I think that you've got what it takes to be able to climb out of that.
And I want to see folks just identifying with that k part that's going up as opposed to being like, yeah, like the slow, lazy part of the downward kave that's just like, yeah, it's going to peter out here for a little bit and then things aren't going to be looking up for me anymore. Well, I think that we've got a lot of listeners who are going to be optimistic about what liza ahead.
And I also I get frustrated with the people who crap on the small ways that you can claw back money and you're life. Like we talked about frugality earlier and how much of an impact that can have, because I do think every dollar, especially in those early years as you're trying to get that like Garner your first ten thousand dollars in investments and then moving on up that curve, like it's if every dollar matters, feels like it matters more in those early years. And the reason
is that's true. Like when we talked with Brian Preston the money guy, like he talks about how his koozy. It's like this one dollar beer cost me eighty eight dollars. And it's because a dollar invested really early on in your life, let's say, when you're like twenty, can really
turn into eighty eight dollars later. A dollar invested at the age fifty guess what it's it's it's not gonna be worth eighty eight dollars unless you live to like one forty or something like that, right, which is not going to happen unless our AI overlords say that it will.
But like if they allow it, if if they hook you up to some sort of power generating machine and you've got a plug into your Spinengel rather the matrix, which nobody even knows that reference anymore.
But probably right, So, my gosh, that's still worth watching. I went back to watch it like a year ago, did you great?
Classic? Yeah?
Well, and I think like this also just say hey where are you? We'll also have some say over like what you do next with your money and how much Let's say, go back to money gear number four fully funding your emergency fund. Well, let's say you are a two parent household but you've got one income and that income feels really precarious right now, you might want to ramp up your savings beyond six months, like you might even say, actually I need nine to twelve because.
Depends on your level of risk.
Yeah, I work in an industry and my job, by career is a little more at risk. These are all things to take in mind, and like with economic fluctuations, it's just crucial to build more resilience into your financial plan.
That's right. You know this makes me think too, how it's just so important to not do this alone. I think it's so important to find friends who are down to talk about money, and I would point folks to join the how to Money Facebook group. If you spend any time at all on Facebook, the only time I do spend on time, The only time I do spend on Facebook deal is if I'm like, you'll reference something that's going on in the Facebook group and I'm like, oh, let me let me go check it out. Or Facebook
Marketplace actually those area, it's the groups in Marketplace. The only two good things about Facebook.
And I actually plug for the Facebook feed eradicator plug in so that even when I go to Facebook on my desktop. I'm not confronted with any posts, and so it's just like you literally get sucked into that hole. No, it's like a Buddhist quote or something like that. Usually that sits there where the feed would be, and so I just go directly to the groups or directly to marketplace. I don't have to see any of that nonsense.
Yeah, but I mean one of the goals of the show is for us to talk about personal finance, to talk about money, to talk about what you're spending, how much you're investing, and that's not typically something that happens in real life. It's why we have the show. It's why we encourage folks to head over to the Facebook group, because they do do that, but we also want you to get out there and touch grass and work to
talk about these types of topics in real life. And Joel, this is something that you and I that we literally were doing before we started the podcast. Like literally, the original show is called Poor not Poor mm hmm, and
maybe you can imagine why we called it that. Originally, it's still the name of our LLC, which I love, but we changed the name of the show to how to Money because it's more searchable But we were talking about these things before we started the stupid podcast because we enjoyed it and we saw that, oh my gosh, by challenging each other, we are ending up in better places. I know I am in a better position because of
our friendship, my friend same money winds in another way. Yes, it's not just about the money, but it is how to money, after all. But to have these conversations with your spouse, with your partner, with your friends and man the I know that this is life changing. I know that the trajectory like where my family is right now, Jill, it would not be it probably it would probably be pretty close had we never met. But I know I
am in a better position because of our friendship. It's a bunch of little things over time, yeah, stretched out over the years. Those returns they compound. And we hear from listeners too, like a little I was getting back to an emailer, a listener this morning on email, and she was talking about how I think she said it was like life changing information is what she called it.
It's just a short little sentence. But what that told me was that she is not only listening, but she is putting into action some of the stuff that we talk about and year after year, decade after dec I mean, I've been the stuff that we talk about like this, the quote unquote plan, Like I've effectively been doing that for over twenty years now, and it's no surprise that you see your net worth grow and you see how it is that you view consumption and how it is
that you perceive enjoyment in the here versus enjoyment and then now like, these are things that you think about and it takes time, but I want to encourage folks to have these conversations not only with your friends, your partners, but also online.
Yeah, I mean, you're making me think too about One of the one of the trends that we covered maybe early in twenty twenty five was loud budgeting, where people were just like on social media, like yelling out the ways that they were trying to save money and people and just kind of making frugality normalizing it a little bit. And I think there is this really important thing about putting your hopes, your dreams, your goals out there in front of the people who love and care about you
so they can ask about it. Like one of my friends at the end of last year, he wants to start a podcast. He wants to launch his first episode in the next week or so he was, and so he reached out to me in early December and he was like, hey, man, can you stay on me? Can you text me about this? And there's something about when you say he told me this is what I want to do, and then he was like, can you help me? And man, bringing a friend into that alongside with you
is such a beautiful thing. So yeah, you better believe I pestered him and I texted him, hasn't going, man, like, how you making progress?
So that's the topic.
So it's actually he's worked for like a radio music station, and so it's about like celebrity encounters.
Oh yeah, super cool.
Yeah, like a down to or a celebrity account of podcast. So I'm curious to hear the first episode, which should be coming out shortly. I'll text him again after we finished recording here. Yeah, but that's the kind of thing where when you say it out loud and when you involve others in your plan, the plan is just so much more likely to succeed than just keeping it locked in your head.
I love it. Do you wanna do you want to do? You have any financial goals, Like we talked about goals in the first you want to share any that you've got for twenty twenty six.
Okay, So I don't have any audacious money goals for twenty twenty six.
I think like I want to keep on, keep it on.
It's sort of like and I think that's okay, right. There were a lot of years I had really really big goals, and I think my goal right now is actually to use more of the freedom that I've gained using it well yeah, boy, right, Like speaking my language, part of that is like, hey, supporting my wife and her new and budding career, like that's a big part of it, while still like building how the money and having fun doing the work that we enjoy doing doing
it together. I think maybe if I was to call out one big account that I care about this year that like three years ago, if you'd ask me if it mattered to me, I would have been like, not really, the five twenty nine account. I'm putting more money into the five twenty nines for my kids.
But also you've been doing this for twenty years, right, and so like that's a priority that it's a money Gear seven priority that's a money gear seven kind of priority, and a lot of folks will start putting the cart before the horse, and like, ma, man, like, there's a lot of different ways that you can pay for college, assuming your kid even goes to college. And I know everyone's like, well, of course my kid is going to
go to college. You don't know, like there's a good chance they will, but at least some room for their own decision making in autonomy. Well, which is why you it's less of a priority, but not it's still super important. And I'm glad you're doing that well.
And like we've talked about, the changes to make five twenty nine plans more flexible has made them at least more interesting, Like from a parental perspective. Part of that is too, because you can now pay for K through twelve education with five twenty nine dollars. And so I did not think our family would be a private school family until this last year in our oldest of three. It was the right move for her, for us to
do for her. And so the five twenty nine dollars, it's like, hey, boom, if I stick more money in there, I get a tax break at least on the money I'm working over and yeah, I will say it kills me, but it doesn't like it actually makes me really happy to spend that money, even though I was like, we're public school people.
I was a public school shild it should and like you're you're personal financing it by calling it. You know, we're going to talk more money into the five twenty nine, But what you're paying for is your values and your and your priorities today, right, Like if you're using a lot of those dollars to go towards that, and that's okay, that's my craft beer equivalent that costs a lot more than this IRPA. There you go, and that's I think
that's totally fine. In a similar way, like I don't have again, like we've been at this for so long that you look up and you're like, wait a minute, how much money do we have set aside? Like not only in retirement accounts but other investment accounts. And it's just impressive what you can do by doing the hard,
fiscally responsible thing year after year. And I have very few like serious financial goals like my I mean, we talked about this years ago, how we're like Coast five, but like I mean Kate and I were financially independent to what extent it varies on what we choose to spend our money on, right, Like, you can't you know, we can't. I can't pick up some expensive hobby if you develop those caveard tastes. Maybe no, maybe I'll work
for another year. But like, but that speaks to just a different approach towards retirement as well, Like we're not I'm not interested in kicking back and doing nothing and just relaxing and going and playing golf. If I pick up golf, I do have to work for another two years because that's a really expensive sport, no shade, It takes a lot of time too.
If you like to play golf, everybody plays every Friday, and I'm like, go for you.
Yeahhh, no hate there. But similarly to you, like I think about lifestyle and some of the different things I want to achieve in my life, being able to pour into relationships, and I feel like I've done that really well with my wife. I mean, we've done a whole lot this past year where we've instituted regular things that grow and where we feel more connected than ever And
it's honestly, it's amazing. Same with the kids, but even beyond that other friends, and I think that's not something I've done as good of a job on over time. And you look at the Harvard Happiness Study, all right, it's like it's the longest standing longitudinal study on happiness, and the number one thing the quality of close relationships.
And oftentimes we don't have time for relationships, because why what do we spend two thirds of our life doing half of our waking hours doing Joel, working oftentimes to pay for the things that we've chosen to purchase or that we have financed, and we're not putting our efforts in our time towards the things that are going to actually bring us true happiness. And so for me, that's something, honestly, like that's more of a priority for me. It's less
the financial We're pretty comfortable. I'm still going to continue to work because I love doing this podcast with you. Don't you folks worry about the feed going cold? Even if I let it go cold. I don't think you would let it go cold, Joel. I think to say, Matt, me too, me too, as as evidenced by this rant. But more than anything, we have a community that like we care about Yes, we care. We want folks to make some like some of the things that we've been
able to experience over the years. I want so I want everybody listening to also be able to experience that and share the joy of the optionality that you've purchased for yourself. Yeah.
I feel like this is the perfect way to end an episode for the new year. I feel like there's so many other things we could toss in here, but we're not. We're gonna stop it there, and we'll say that for Wednesday.
Yes, that's right. For next Monday's episode, we will you.
Stick with of money? Hit subscribe and just yeah, please do ride with us. And if you have money questions, especially after listening to this episode, you're like, I think I'm in this gear?
What do I do now?
Like, please toss them our way. We'd love to take them. Next week we'll be back to regular programming and answering your listener questions. But that's that's one of my favorite parts of this show. And look forward to riding.
With you this year. Let's do it. Man. Should we get back to the beer real quick? We should make it quick. I just noticed that we are over or we're like right out an hour, which I can't believe we went that long, I know, but when you've.
Got stuff to say and when you're having fun, yeah, i'd say this ipa from Burial it was like classic. It was like a low key ipa from one of the goats. It was. It was not like overly ridiculous. Some of the Burial IPAs are just like so happy that makes your brain melt. I would say this one did not quite hit that level. But yeah, this one
kind of had like the juicy hotness going on. Like this reminded me of a classic New England hazy ipa, Like it had the happiness going on, but it was more like a like an earthy happiness mixed with some of that some of that juice. And I part of me wonders if we let this one sit too long in the fridge from last year, like it it almost tastes does it taste a little bit old to you?
I pas, you want to drink as fresh as possible, And this is one that almost had some almost like metallocky kind of flavor, you know, like canned fruit juices, like the giant can of dull pineapple juice, like it's kind of metallocky, it's kind of tinny.
I love that flavor. For some reason, you should be sitting on all your classes. I should burial I. I feel like it had a little bit of that, but honestly it didn't detract too much at all from the overall enjoyment. Yeah, we'll keep drinking good beer kee. I got to enjoy it. Yeah, all right, that's gonna do it.
For this episode, we'll have links to some of the resources we mentioned up on the site. I had the money dot com.
You know it. And until next time, best Friends Out, Best Friends Out.