Stop Believing THESE Debt Myths (Before It's Too Late)

Hello, Hello, HelloWelcome to our live today. We're talking about 5 debt myths that you need to stop believing right now. As in aura at this moment as we are live, or if you're watching the recording at this moment when you're watching the recording, it's really sad. Debt is hitting all time highs here in America and we all kind of know why it's chaos out there. But here's the thing when you break it down. The average American is paying $8000 per year in interest alone. That's ridiculous. That's

$667 per month. Can you imagine if your cell phone bill was $667?You'd be looking for a new carrier, right?Like, let's get this interest out of our lives. And it's not necessarily the debts, but sometimes our beliefs about the debts that actually cost us even more than the interest on the debts. They cost us what we could be doing instead, the future we could be creating. And we're going to talk about all of that today with five

debt myths. And we're going to end the session with helping you identify good debt, avoid costly mistakes and potentially save you thousands of dollars or help you create thousands of dollars for your future as we go here. So as people are coming in to the live, want to say a little bit of what we're talking about today for those that are catching the recording. And you'll see

my esteemed guests here that are going to not guests, collaborators, amazing people that are going to help introduce themselves, share a little bit about who they are, why they're showing up today and what they're excited about before we jump into the the debt myth. So who wants to go first?I think I want to go first, Amanda, can I?Yeah. So as you guys see, we have new faces here. We are going to be doing some fun stuff here. We're growing our team here at

Wealth Wisdom Financial. So you see Christy and Stephanie, they are a part of our our team and we wanted to allow them space. It's not just the Amanda and Brandon show. I mean, you know I know you guys like us, but we really wanted to bring other people into the fold because you know, we we learn a lot. You know, we we always have Mark here, but this time we get to have Christy, Christy blank last name there and Stephanie now.

So. Alan, while you guys are here, don't forget, write comments, like post, do all the things, share this because we want to eliminate this, this craziness that's happening in

the debt world. We want to be able to help you build a stable financial future. Debt sometimes is OK, sometimes not. We're going to talk about that today. So with that, you guys introduce yourself and comment here. So I'm Stephanie Nelb. My company is Foundational Wealth Builders, but I work very closely with the team here, particularly Amanda and Brandon. And I am so excited about this topic today because I used to be really debt averse myself and have now realized there's a difference

between good debt and bad debt. So we'll get into some of that later, but I'm really excited to be here. Hey, I'm Kristy. I work with Brandon and Amanda in office. I'm. Got my master's in finance and then found this unique company that I it changed all of my views on everything I learned. It upturned everything that I thought I knew about finance. So I've been relearning all of that on this awesome journey with them and excited to talk about that and you know how you can

use it to your advantage. Yay. Love it. OK. I'm going to do a little screen share and we're going to talk a little bit about what everyone can expect today. Here we go. So we're going to talk about 5 debt myths. Really funny story. Just earlier I was reviewing the P&L for a business owner and saw their largest expense for 2024 was, you guessed it, interest, interest paid to others, bananas. So we're we want to stop that.

And part of why we need to stop, like part of what needs to happen to stop that is there's a big financial literacy gap in America. Fewer than 1/3 of Americans understand how interest even compounds the difference between simple interest and compound interest, what the calculations look like. Don't worry, we're not going to nerd out and show you a bunch of calculations today and in detail, but we're going to go over some big numbers that kind of hopefully will

help us all learn some things. And the problem is that the media financial institutions, they often oversimplify financial concepts. We're going to simplify without oversimplifying to give you kind of the the real math without having to go through all the details of the math, but also without being like and this applies to everyone all the time in all cases, which is often not true. The other thing is that those who do learn about debt often learn about it

from a family. And that often perpetuates myths rather than how, you know, counterbalancing myths and or people learn just through painful experience and then they react and kind of take the pendulum the other way. And all of these kinds of things we're talking about the media oversimplifying, inheriting myths from our parents and grandparents, painful experiences that kind of skew us in unhealthy directions. All of those cost us real money.

And we think most people like if we're paying 8000 in interest, we could probably save about half of that through just better debt management, not that you have to be totally out of debt immediately. So we're going to go through these five debts. Here's the debts on my screen that we're going to go through. We're going to talk a little bit about credit cards, parent plus loans like for college

mortgages. Reverse mortgages. If we have time, we're going to talk about 401K loans and then we're just going to talk about all debt and you know this all debt is bad debt belief that a lot of people have. And we're going to talk about why people believe each of these debts and why they're what they often believe is a myth, why it's not true. So before we jump in, anything else anybody wants to add at this point, I would add make sure as we as you're talking Amanda PNL, some people

don't know what that is. So what is the PNL?Yeah, it's a profit and loss statement for a business, what their profit was, what their, you know, or their income was, what their expenses were. And then it has profit at the bottom. We throw things on reverse with profit first, if you're familiar with that concept. So that's why I screwed up there. I'm thinking profit first rather than income minus expenses equals profit. But yeah, we looked at, here's their income, here's their

expenses. And the largest line item on that is expenses was interest payments to others. Just want to make sure sometimes people are like, oh wait, she's already talking over me. I don't know. I know what that means. Yeah, there we go. OK, we ready?Jump in. Everybody got their snorkel outfits on. And just so you guys know, comment. We want to hear from you. We might fear off if you have a big question. We want this interactive. So, OK, so here we go. Myth #1

revolves around credit cards. And here's the myth that a lot of people believe. If I pay my minimum, my credit card balance will go down quickly. If I just pay my minimum, I'll I'll get out of credit card debt quickly. The minimum will do that, right? Now with some debt, that's true, right? The minimum is calculated in a certain way that it goes down faster. You know, an amortized loan, like a mortgage, the greater and greater share of the payment goes to the principal with each passing

payment. But credit card companies, like we believe that they're on our side. So we believe that, you know, bigger is better, bigger is gonna be more trustworthy. I can trust the minimum payment. They're doing what's in my best interest, right?That's what we're, you know, it's a a a myth. I'm trying to, you know, why we believe all this, right?

Also, the credit card companies are really good at making it easy not to see what you're paying in interest or, you know, principal and interest, how much is going to principal, how much is going to interest, especially if you enroll in paperless and save money, right? They, you know, they tell you like, well, we'll lower your interest rate if you enroll in paperless, but then if you're you often don't even look at your

statement. And then if you do look at your statement, the interest is on like second, third or 4th pages at the end of the statement and you have to actually like open the PDF, find it. It's not really anywhere when you just first log into your account.

And the monthly statements will also, if you look carefully at them, they'll put the minimum payment in like bold, extra big font in color color while the rest, you know, the full balance, all those kind of things is much smaller, you know, less prominent, less transparent. Anything else you guys can think of a why people believe this myth that they pay their minimum, their credit card balance

will go down quickly. You know, I think people see this as a service for them and you have to remember at the end of the day that credit card companies do still need to make money and. Trying to entice you to just pay that minimum balance is one of those ways that they do so. And a lot of credit cards these days come with some sort of rewards points, which sounds really exciting. But again, you have to remember they're making that up in some way and this is one way they do that.

Yeah, it's really good and the convenience, right, the convenience charge that we don't realize we're paying and. At the same time, remember as as you look at at your reports and all that, it's always on the 6th or 7th or 8th line, making sure we understand that that whole math thing and what they want you to see those big letters blinking in blue or whatever to pay the minimum that that is for their benefit, not ours. And so really understanding. You know, you still use

credit cards. We have some, but but understanding that they're in the business to make money, the credit card companies and banks, as you guys have heard this many times, are the most profitable business in the world. They didn't get here by accident. Yeah, I think a big misconception I just want to highlight on that is that, you know, they have your best interest in mind and that they're, you know, they're. When you take out that debt, you know,

it's they're going to help you. But really, yeah, they're they're lining their pockets, they're finding a way to get, you know, their dollars. So it's it's not you just have to know, know who is for you and, you know, really take charge of your own wealth there and knowing what to do. Yeah. OK. So here's the big mindset shift. You ready for this real math, real story. So the way that. Credit card companies calculate minimum payments is it's typically 1 to 3% of the balance plus interest.

So the the way that this would work, we're we're going to be doing a this or that. So this is what the credit card companies do and then that is the way that you can maybe outsmart the credit card companies and reduce the interest that you pay to them. in your pocket. So here they're doing, we're doing a 2% minimum payment as your balance goes down, your minimum payment, the one that's in, you know, the bigger colorful letters on your statement

goes down as well. So if you've got an auto set, an auto payment set to always pay your minimum, you actually see your payment go down over time. Compare that to, let's say whatever your minimum payment is today, you add $50 to that and you set up an auto payment to pay that every month,Right. And always that on you know the day before your due date or something like that. So that you're you know budgeting for that, you know exactly what to to counter on it, but it's not going down, it's staying

flat. Well, if we can, if we apply those two to a $5000 credit card debt, you know balance that you have and if you're paying 18% interest, which a lot of people pay way more than that, we're just trying to get, you know use a

simple number here, 18%. If you pay the 2% minimum, remember the the payments going down until you get to about 25 bucks and they don't want you to send in five or $10, they keep it at 25, you would pay over $7,500 in interest alone, which means you'd pay back your 5000 plus another 7,500. So you pay back 12,500 if you never charge another dime, right?You're just paying that interest and it would take you 22 plus years to pay it. Not 22 months, 22 years to pay it off in full. I saw

somebody say this. I put it into an Excel sheet. I, you know, did the calculations. I confirmed that is legit. That is true. Compare that with if you're just paying, you know, 150 bucks a month, right?The minimum starts at 100. You add 50, you end up only paying a little less than 2000 in interest and you're done with in less than four years. It's like 30 some months. How cool is that?Like, why not?If you can pay 150 today, keep paying that 150 until the balance is gone

out of your life for good. And again, this is as if you never charge another dime of interest. So the minimum payment, I call this a trap. The minimum payment trap is that as your balance decreases, so does your minimum payment, which extends the payoff time and extends the amount of interest that goes to the credit card company. So always pay more than the minimum. Even if it's just 50 bucks a month, that reduces how much you pay dramatically and gets it paid off a

lot more quickly. And then even better, if you can set aside some intentional time, you just got a tax refund, just wipe out that balance, never go into it again, right?You know, get some kind of raise. You increase how much you're paying per month. Like have fun like that too. But at least you know now never just pay the minimum. Before we go into debt #2, anything y'all would say more about this. I mean, just what a massive difference that makes. It's so

wild. I might add, this is where, you know, the where Dave Ramsey gets some of this stuff, right, is understanding that that that snowball or interest, that's the one part of where where he yells at us. I like how he's yelling, at least in this regard sometimes, OK. That's debt myth #1. Now let's move on to debt myth #2. I'm going

to hand this one over to Stephanie, and she's going to go through this one. This one just blew my mind when I learned this before. Awesome. Yeah, so there are many different ways to pay for college out there for your kids, but one of the popular ones are Parent PLUS loans. So a lot of people think that Parent PLUS loans are the best way to pay for college. Now, that might not necessarily be the case if you are a parent. And you have not yet saved for college and your child's about to go

off for their first year. You know, this might seem like a great option on the surface, but really the problem with this is you are taking out the debt as the parent instead of your children starting their lives in debt. So you see it as a really valuable thing because you're helping to set your kids up for success by sending them to college and

then graduating debt-free. But the problem becomes that you personally are taking on this debt, which can have a lot of negative impacts if you're not careful with it. I'll open it up to everyone here. What what do you see as the biggest concerns with parent plus loans?I'm trying not to answer cause we're about to show it in the example. Fair enough. Yeah, the comments are open to from our audience. Since you don't know the answer yet, maybe you could react here even if

you're watching the recording. I mean it the. like, I don't know, if I just took out a parent plus loan and then I need a loan for something else, like I'm getting into real estate or I'm gonna apply for a mortgage, that can really impact my ability to actually use debt wisely if I decide to do it. Cause that parent plus loan shows up on my income to debt ratio, right?My credit scores impacted all those things as a parent as

well. I'd say a lot of reasons why people do it is because they didn't maybe plan for the college and they're like, Oh well, I'm going to help them and and they don't have a history, the kid. So guess who's guess who's co-signing mom and dad and the easiest way. Oh, parent plus loans. They sound amazing because they're has the word plus in it. So it sounds better. I guess it'll make more sense, but. Yeah, you're going to show the math. Sometimes not so good.

Yeah. And I think the other thing to be aware of here too is who is paying off this loan. The parent PLUS loan is in the parent's name, so it's the parents that are responsible for paying it off. However, I have also seen cases out there where parents might take out the loan in their name, but then expect their kids to pay it off once they get a job after

college. And so just being really clear on who it is that's actually going to pay that back so that parent and child are both crystal clear on the plan that avoids any potential confusion later on if you are going to go down this road. But even with that in mind, keep in mind that these parent PLUS loans, they don't wait until the child graduates college. You have to start paying these back typically pretty immediately. Yes. And so it's not like we get out of

paying for college for four years. We have to start paying for it the minute we take the first loan, in addition to whatever we have to pay otherwise that we didn't weren't able to take a loan for. I mean, I've had so many clients that, you know, like they. They talk to us, they're they have this loan for their kid. Their kids now making plenty of money, but the parents still paying the bill because they never actually had that conversation with, hey, this is I'm going to help you

help me, you know. So, so I've told some people as we're helping our kids, we want to like that's the point. However, you're going to be. Sleeping on their couch, maybe because of those parent PLUS loans and not have a retirement account. And so we have to think about what's that really costing us and them in the long run. Yeah, absolutely. Well, should we jump into an example?Yeah, go for it. Yeah. Let's talk about why this myth is false. Let's do

it. Awesome. So there are a couple things to be aware of with this. So if you look at a parent PLUS loan versus an alternative type, let's. Let's take a look at a HELOC or a home equity line, for example. So you can have the same interest rate with the parent plus loan and the home equity loan. But what you might not be aware of is these parent plus loans come with an added origination fee. Right now

that tends to be about 4%. So that's another 4% on top of the interest rate that you're already being charged for this loan. Pretty wild, yeah. And that can catch a lot of people by surprise. And you'll see in this example how that can really add up with a lot more interest than you would otherwise need to pay. But yeah, so walk us through this. But but the kids need college. Well,

we're still paying for college. In this example, it's 30,000 as a parent plus loan versus 30,000 taken out as a home equity loan. So Stephanie, walk us through this. Here's the parent plus loan. 30,000 for college, we're taking that loan out as a parent plus loan. This is a loan at a 9% interest rate. Again, with that added 4.2% origination fee, the term is going to be 120 months and that's

going to start immediately. So unlike a student loan where if they take out debt for to pay for college, they'll be able to delay that payment until after they graduate. It's not the case for a parent plus loan, so that payment is going to start regularly immediately. And you'll see in this example, you'll with a payment of 397 a month, you'll end up paying almost or a little over $16,000 in interest alone over the course of paying back this loan. Yeah, so that year of college,

right?If it's 30,000 a year, didn't cost 30,000, it cost how much?Yeah, so now you're paying 46,000 in total. For just one year or maybe even one semester, depending on the college. Yeah. So then on the flip side of things, if we look at doing this with a home equity loan, so taking out a loan of that same amount, let's assume same interest rate for the scenario, but no origination fee. So that's going to make a big

difference here. And then the term is going to be a bit longer, but let's just assume that you're going to have the same monthly payment as you would with the parent plus loan. So if you allocate that same amount to this home equity loan and paying that down over time, the total interest charge is going to be 12,000. So in total you're paying about 42,000 for this loan, but that's a lot better than the parent plus alternative. Pretty wild. What did everyone else think of this?

Well, and then we've got the asterisks next to the payment. I forgot to bring this up here too. Yeah, so that's I believe because there's. It's not the the minimum, right?So you could pay less, but again, looking at apples to apples here, parent plus loan having to pay 397 a month. If we look at putting that same amount towards this home equity loan, that's where you get to pay this down a bit faster and end up paying less

interest. And I I also like to Fast forward, let's say you're six years into this, hopefully your kid's done with college. If you needed another loan, they're not going to give you another parent PLUS loan. Your kid's done with college, right?Like that's for education. But I could theoretically tap back into the home, the equity of my home and take out another home equity loan, right?And I've have experience with that. I've built a relationship with a lender. The more I pay on it, the more

I'll be able to use again. Not true for the parent PLUS loans. I never thought about that until I just looked at these side by side here. Yeah, definitely. So if your child needs a little bit of extra help getting. Prepared for the real world, maybe getting their footing with that first apartment, you're able to help them out with that. Whereas you couldn't with that parent plus loan. Yeah. Or if I need to buy a new car or all kinds of things. Yeah. Pay off my credit cards

like we're talking about before. I I think again is maybe we just see one side and we're like, oh, this is gonna solve one thing, right. And we aren't very aware. And so we wesay, well, I'm going to get this, my son's going to go to be a doctor, so that's going to make make up for it. And And we don't realize the true cost. And so in this episode here, as you guys are watching, true cost, have you guys ever experienced that?

Has this happened to you?Or have you gone back five years later and said, oh, wait, I didn't realize, I'd love to hear that in the comments. We want this interactive, so not just the Brandon and the girl team. And as we wait for those comments to come in, I just want to highlight again something that Brandon mentioned earlier,

but I think is really important here. So if you are a parent and you're taking out a parent plus loan for your child so that they can go to college, you might be putting your retirement at risk or minimizing the amount of money that you have for your retirement because you now have these loans that you have to pay back. And on top of that, that's assuming that you have good enough credit that you can get a parent plus loan in

the 1st place. So that's something else that parents really need to be aware of when they're looking at options to pay for college. Yeah, that's a really good point. And we should also emphasize these aren't the only two options. We just want to kind of show these as common options that people look into. Most common the parent plus loan because everybody's promoting those including this financial

aid office at the university. And then it kind of that maybe the second most common are these home equity loans because where a lot of people have their wealth is in their homes. People will also use loans from retirement accounts which it absolutely puts their retirement in jeopardy and so on and so forth. So it's not like these are the only two options and I'm I'm glad you brought up that's a

good. Whatever way you're thinking about paying for college to think about how it'll impact your eventual retirement is a very good point to consider. Again, I I think about like some of the people I'm talking to are like 72 or 73 and they still have parent plus loans. I'm like, how do you still have a parent plus loan and it doesn't look very small either. And it is crazy bananas for some of these things we

see. Yeah, there's deferrals and income-based repayment similar to student loans for parent PLUS loans too. That can get people in even worse trouble. Yeah. OK. I think we beat this myth pretty hard. Are we ready to move on to #3?Myth #3?Yeah, I'm ready. I'm ready for that one. OK, Brandon's lead in this one. Go

ahead, Brandon. Yeah. So now we have the paying off my house early. I got an amazing rate on my mortgage. And or other things, maybe they don't pay off because they have an raising rate on their mortgage. I shouldn't touch my home equity, couldn't shouldn't use it because I got it in 2022. It was 2.99. Now I mean interest rates, I don't know, have you guys looked how much interest rates on a house is right now?6-7, is that good now?I don't know. Compared

to what?I don't know. So I've heard this, I've got an amazing rate on my mortgage. This is another reason that we also have relationship with mortgage people that can help us think because not everything is the same, right. So go ahead and move to the next slide there. Yeah, just talk about like more about why people believe this is a myth, right?Not just the change in interest rates, but also like getting a mortgage is complicated and stressful. I'm done. I don't want to go through that process

again if I don't have to. But I do. Yeah, I think that there's sometimes we've been told that because, you know, back in our grandpa, and This is why it was grandma's. Wealth wisdom back in the day, it was like lower interest rates or different things that we would we would think through, right?Sometimes we're scared of of pulling that. Out. We want to have that paid off house. I've had so many people are like, well, I don't care if it's 2.5, I want to pay off

that house. And so they want to be mortgage free, so they don't want to touch it, even though they know if they use that equity in a smart, systematic way that they can make more money. They they don't in that regard, they're not business owners, right. And so they don't understand the the true cost or or opportunity cost. And why would they touch their interest rate if it's it was in the greatest time of all of all time at post COVID to buy a house?

Why would they touch it now, right?That would be ridiculous cause it's 7% versus 2, right? Yeah, I pause for a second, Brandon. We've got a comment from D I'm gonna show it on the screen. It was about the last myth. So we're gonna before we move on to talking about why this one on the screen is a myth here. One thing you'll notice D is. She's asking if is there a better alternative to parent PLUS loans outside of just saving?So we talked about home equity loan. If you own a home, that is an

option that people use. People also use options like they can take penalty for withdrawals from some retirement accounts but not others. They can take loans from some retirement accounts but not others. Some tap into family. There's lots of different ways to pay for college. If you want to learn more, we have some great colleagues and friends that are college

funding specialists. That help people figure this out and we'd love to chat with you about it, but that the home equity loan is one of those common alternatives other than just saving. Savings is really great too, if you can do that. And having your kids save from that college or from the summer job or if they work through high school, those are really great options too. There's probably more than we could cover at this time, but I'm really appreciate you asking that. OK, now let's go back to

I just got an amazing interest rate. Why would I?Touch my equity. Yeah. So, so I again, I've heard this many times and usually they're they're they've been in the house for a while.

They got this great house in 2022. So now they've paid off a bunch. So now that we touch the equity and and again sometimes I'm speaking to myself, we have that great interest rate and we have equity. So we're like we're playing around with this. So let's let's go through some numbers here, Amanda.

So let's say you have a a home equity loan of you could do this at 100,000 at 9%, right? Keep keep going versus 100,000 growing at 5.5 per year like that. That's which one looks better, 5.5 or 9?Are you gonna add something?Yeah. And if you had both of these, would you take that 100,000 that's growing at 5 1/2% and pay off your home equity loan at, right, they're equal. You've got the savings. Would you pay it off knowing your home equity loan is 9% and that 100,000 is

only growing at 5 1/2%?Let's do some math and see, right. So we have the loan

interest rates 9% term. Is 360 months, that's that's a little bit of time payments if we pay $804 and interest charge is 189,000, right. So this is the 9% how much it would cost us. And then we have the other side account balance is 100,000. Interest rates lower 5.5 term is 360 months. We are not making any payments and the balance of course is in 30 years. Amanda, why are we not making payments on this one versus this one?

So the what the home equity loan is showing the interest that you would pay if you never if you didn't pay off that loan with your 100,000 sitting in that other account growing at 500,000. And most people will be like, I don't want to pay $190,000 to the bank that I have this home equity loan through, right?Like

I'm going to pay off the loan. But they forget that that 100,000 compounding at 5 1/2%, a lower rate of return than the interest rate on the loan, ends up in the same time frame, 30 years, making $518,000. Plus, right. So do you wanna save 190,000 or do you wanna make 518,000?So or actually really make 418,000 cause you have the 100,000 that you started with never adding a dime to it. So this is like again using that same money and

making money, right?So so there's a difference, right?518 plus versus -189. Yep. And then for those who might not be

familiar with a home equity loan, this is a newer product that was created. It's not a cash out refinance. It is a second loan or an additional loan that you get so that you don't touch your original mortgage that's at a really good interest rate and the interest rates might be less than 9%. Now we kind of did this as a an example you you could have more or less, but but again what it's showing is like having money. Making it or using it,

right. And so, so maybe you might take a home equity loan to create other cash flowing assets or why would you use a even though my interest rate is low, maybe we take out the home equity loan to take out a lot of high interest credit cards going back to #1, right?So twenty-two percent. May be way higher compared to even, you know, 9%, right. Just doing the the math and saying, well, which which is better. And then of course I'm a business owner, so I'm gonna try and do things that create

wealth, not liabilities. What questions you guys have on that one?I think we had another comment here. Oh, she's OK, great. Thanks. Have you guys ever experienced that?Stephanie, Christy, anything you'd add?Yeah. I mean, I guess I would add, you know, in this scenario, it definitely seems to make a lot more sense to be saving that money, right, and building that up so that you can use it,

but. People shouldn't necessarily shy away from something like a home equity loan or tapping into the money that they have sitting in their house if they feel comfortable with it. So to the earlier point, there are a lot of people who want to just know that their primary residence is safe and secure and there's no risk of the bank coming after them. And that's OK. There's definitely something to be

said for that. I personally am a real estate investor and have learned how to leverage some of this debt in a positive way. And I love the idea of something like a home equity loan and tapping into the growth that your property has appreciated over time. And if you know how to use it properly and you have a payback source that you you plan to pay this back over time, it can still be a very valuable

tool to use. And I want to go back to that's why we kind of put this up out here for the the listeners and having like the like the bank yourself infinite banking policies. That we put in together, put in, but also having relationships with the mortgage people that are talking to each other. Like I'm have a good relationship with the people I introduced that do the mortgage side.

And so having that kind of dance from a financial point and and in the end what I really want to grow in this for the people that are listening is I want them to be the master. Of their ship. They need to understand how that works and how they're they they didn't just buy a house just for fun, right?Typically, yeah. I mean, question all your financial professionals, right?You're you're the one driving the ship at the end of the

day. So it's important that you're asking the right questions and you know, pressure testing. Is this the right move for me in my situation?Awesome. Cool. Well, if you guys have questions on that, put it in the comments. We'll come back to it. But let's move on to our most favorite one sometimes. Not really. No, I'm gonna go through this one quickly. The 4th one is

reverse mortgages are a scam, period, right?Like, no, don't ever do reverse mortgages. They're the most horrible thing. And I would say previous to the financial crisis of 2008, that was probably true. Reverse mortgages were oversold to seniors with little oversight, little suitability standards. They needed more regulation and oversight to them, and thankfully that is now put in place.

But there's lots of, you know, horror stories in the media about seniors losing their homes because of reverse mortgages from that time period and occasionally still today. So these are complex. They're difficult to understand. That's why if you're going to get one, there's a lot of hoops to jump through and they can have higher fees or higher interest rates than conventional mortgages, you know, higher closing

costs. And hands down, there's been a lot of aggressive marketing of reverse mortgage that have made a lot of people feel like it's very scammy. So we're going to talk about though why a reverse mortgage could be appropriate for someone. So you know when it's not a scam, even if it is a scam with the majority of the time, if that makes sense. So one thing to know is that there are a lot more regulatory practices in place for reverse mortgages. It's called the HECM program, HECM.

It's a home equity conversion mortgage is what that stands for and there's been a lot more protections in place for those going forward. And what makes them really fun is that they can lock in the home's value and the bank takes the risk. So would you say I'm pull pull the audience here, you can say this in the comments or you can come live. I hear Brandon just unmuted cause I can hear my echo on his line. There we go. Would you say home equity, is that a high or a low right now?Are home

values high or low?If you're watching the YouTube, you can say high or on Facebook or whatever, say high or low in the comments. Christy, Brandon, Stephanie, I'd love to know what do you think?High or low home equity?Is it high or low right now?Depends on which market you're in. But overall I'm gonna say high. Yeah, I would say high. Yep, I agree. It's yeah, overall, yeah, I know when I I'm a little bit of a nosy neighbor slash I I love just looking at my neighborhood and what homes

are for sale. So I've got the realtor app on my phone and I'm always looking. They've got this chart at the bottom that shows, you know, how the home's value has increased or decreased over time and they're always up, right, like an especially a big spike, you know, since 2020 as lots of people. We're getting, you know, you know, buying homes, there's lack of inventory. We might see some of

that cooling. Now we've talked, you know, Stephanie mentioned there's some cooling happening in different locations, that kind of thing of the market, maybe not as hot. But let's say you're a senior, you're we're going to talk about Mary and Martha in our this or that for this one. And the green is going to be Martha, an appropriate use and then we're going to talk about Mary is going to be the inappropriate use. So let's say you're a

78 year old widow. And you're watching this YouTube video or your mom, you know, you referred it to her and she's watching this. She's a 78 year old widow with limited retirement savings and Social Security is barely covering the expenses, right?We've had huge inflation. The Social Security cost of living has not really helped a lot with that. And you know, Martha's starting to get a little old, right?Not old yet and you're only, you know, only as old as you feel, but starting to feel like.

There could be. I want to stay in this house. I don't want to go to a nursing home. I don't have to go live with my kids. I want to stay here. And so I need to do some modifications to make sure my home continues to be accessible. Installing a ramp, putting some, you know, railings in the bathroom, et cetera, et cetera, right. And kind of imagine those. That's a great time to use a reverse mortgage. Because Martha is able to tap

into the home that she owns. Maybe she owns it outright and it's 350,000 and she could tap into that, take a lump sum for 30,000 to maybe make those immediate home improvements, have a a monthly payment to supplement her income. You don't have to take all of the home equity all at once. And then it's also a line of credit that she's already approved for that she can use if she has some future medical expenses or does need to. Go into a nursing home temporarily

or, you know, something like that. This works cause it keeps Martha in her home. It supplements her income. It keeps her ownership while she's still alive. There's no mortgage payments like there would be with a, you know, cash out refinance or a home equity loan or something like that. And her children, in Martha's case, support this decision because they just understand we're not going to have to deal with this home that we don't even want when, you know, mom, you know, goes to the other

side, goes to greener pastures. Great example of this might be a good time to look into reverse mortgage, see if it makes sense and lock in that home value so that if Martha lives to 100 or beyond, she's able to continue using that no matter if we have some kind of real estate market bubble burst, right? Now let's compare that with Mary. So Mary is 62 and recently retired. Wants to enjoy, this should say her 60s.

And so she's thinking about taking out home equity or or taking out a reverse mortgage to enjoy her youth, right?Travel, get that dream car while she can still drive. You know, all the things. And in this case, it's probably an inappropriate use because Mary's still relatively young. And this limits the the potential benefit right over the long term. There are those upfront costs, origination fees, mortgage insurance

premiums, those can be substantial. And to pay those costs right at the beginning of retirement, that impacts the rest of the financial future for Mary. The proceeds are being used for discretionary spending rather than necessities. There's. We don't didn't talk here about other income sources that Mary might have, but maybe Mary has other ways to pay for these things rather than the equity they have in their home. And really it's all about the long term,

right?Let's say that both Mary and Martha live to 100. Martha's got 22 years to 100. Mary is 38 years to 100. That's a lot longer for that interest to be building, you know, the the things to come up that, you know, completely derail this and. So a very good like, OK, we need to factor all these things in to account. Make sure if you're going with a reverse mortgage, don't just assume it's not appropriate or assume it is appropriate.

Kind of weigh the pros and cons. I would say because I always have to say something right is I remember having a client that that was around in the 80s and and heard about reverse mortgages, how bad they were and were very. Um, wary of it, but but she ended up doing one because I introduced her to our friend and it was mainly because she had too much month and not enough money. And so we needed to figure out a a plan for cash flow,

right. And so she was trying to work a business, trying to do all this fast rate of return type stuff because she didn't. She had a gap. So. So I was like, well wait, you you have a paid off house like. Why aren't you somehow systematically using that for for eggs or whatever she was buying at the time, right. And so, so she did that and she came back to me later and I again, we didn't make any money off of this, but it was just an introduction to our friend and said maybe you should consider

this. And she said that was one of a really good decision that gave her Peace of Mind because now she had that for her and her husband. Yeah, and helped avoid all the credit cards that they probably would have, you know, gone into debt and paid much higher anniversary time. And I said we need to do something maybe. And that helped to at least stop the bleeding. Yeah, love that. OK, we've got a bonus myth and then we've saved the best for last. All debt is bad and we're gonna

hand it over to Christy for that one. For

this one, we're going to talk really quickly about 401K loans. A lot of people, this is their first go to. Something to remember is that 401 KS haven't been around forever, right?First implemented in 1981. And for many of us, this is all we have for retirement, right throughout our entire adult lives. So when it comes to taking a loan from that asset, it's a natural place that a lot of people turn. And in this whole idea of paid interest to yourself sounds really

appealing. There's no credit check required, right?There's lower interest rates than some of the other alternatives, no impact on your credit score. So it's why people believe this myth with 401Ks. That's where I'm going to go first. But one of the things that a lot of people don't realize is that the interest that you pay in a 401K, you don't get any tax deduction for it now, right? Plus you pay taxes on it when it comes out as income in retirement. Wait, can you say that

again?Yeah. So the interest that you pay on your 401K loan, you don't get any tax deduction for it like you do your, you know, your contributions to your 401K, right?You're paying back the loan with interest. That interest doesn't get a tax deduction, but then it's in your 401K balance. And when you take money out of your 401K, you do get taxed on it twice. Yeah, paying taxes twice. There's also limits in how much

you can take. So don't think you can take your full balance or you know millions of dollars out of this at once. You're limited to about $50,000 or 50% of your balance if you and then if you leave or lose your job while you have a loan outstanding, the balance comes due immediately or within you know a certain time frame you have to repay that loan. So and then there's also this idea so that this or that for this one. You have a 401K, take out 10,000 5 years versus leaving that 10,000 invested.

Well, what if you lose your job, right? You got to pay it back. If you take that out, do you have $10,000 that you could pay that back?Well, if you did have the 10,000, why would you even take the 401K loan in the 1st place?And then, you know, leaving it invested?Well, are you going to pay interest somewhere else, right?Do you have that credit card that you could pay off of the 401K loan?This isn't a good, bad. It's a unique situation. Everybody needs to make a good decision.

And think about opportunity cost and the long range as you're making these decisions. I I think it was Brandon probably that put that not a fan of paying taxes once, let alone twice. Great. Anything else here?Are we ready for debt myth #5?I just want to highlight that paying taxes twice one more time because it's so important and you know, I've talked to a lot of people who do think about taking a 401K loan and. Their thought process with it is, well, the interest gets paid back to my

account. So, you know, I'm paying myself that interest. That's great versus paying that interest to a bank. But again, not so great because you're being taxed twice. So that right there is a very well-known myth, I would say. Yeah. OK. I would wanna go add in the whole like using the policy life insurance. Well, that's where we're going. Don't get ahead. Don't get ahead. There's a better way than 401 KS. But Yep, we're going to pass it over to Christy. Let's go, Christy #5, save the

best for last. OK, awesome. Yeah, let's dive into a topic that affects almost everyone. Debt. You know, we've talked about mortgage, credit card, student loans. You know, there's also, you know, business investment, stuff like that. Debt really plays a role in everyone's financial lives here. But you know, as we're about to find out all. Debt is not created equal. There's some types of debt that can help us build wealth, you know, create that financial

security. And there's others that can trap us in a cycle of stress and hardship and, you know, just put us in a bad hole that we have to dig ourselves out of. So I like to think about it this way. A knife can either prepare dinner or it can cause harm. Um, and you know, in the same way that can be a tool for financial growth or it can be a trap that leads to financial ruin. Uh, I think the key, the most important thing here is to know the difference between, you know, good

and bad debt. So a lot of times. People, you know, we've grown up. People around us believe that, you know, all debt is dangerous. We're not really taught about it in school. We don't really, you know, learn about it specifically, unfortunately, in our classes like we should. Then also, you know, there's a lot of different, you know, religious beliefs that reinforce the idea. For example, you know, Romans 13 says owe no one anything.

And there's also a law in Islam that forbids charging interest called riba, and it considers it exploitative. There's also, of course, financial gurus, you know, Dave Ramsey, others like him that promote that cash only lifestyle. You know, as the ultimate financial goal, there's, you know, good and bad things about that. And then also just, you know, us ourselves, you might have had a bad experience in the past with debt, having, you know, credit card debt or high interest loans in the

past. And that could create an aversion, like some sort of emotional aversion that would, you know, make you want to just avoid debt altogether. And for some people, all debt, you know, any bit of debt is bad, but for others, debt. Can be used as a tool to create wealth. Yeah, but you can do better than just being debt free. And let's talk a bit about good debt and bad debt. Good debt is that low interest debt that helps you build wealth and it increases

your assets. Bad debt, that's going to drain your finances, create, you know, liabilities and it's not going to add any value. Um, to yourself or your net worth, Um, there's really two types of assets, you know, appreciating assets that can build that wealth, Um, and then depreciating assets. UmAnd you know, they're usually associated with the

good and the bad debt. Um And you know, for example, owning real estate, like Stephanie mentioned, she holds real estate, you know, where tenants are paying the mortgage and your property is appreciating, you know, that's a good type of debt. And then also as we're going to talk about, yeah, I'll just hint at it, using bank on yourself policy loans can also be a good type of debt, a good book that really explains this concept. Is Rich Dad, Poor Dad by Robert

Kiyosaki. And he talks about how good debt increases assets more than liabilities and how bad debt increases liabilities without increasing those assets. You know, there's just a lot of different perspectives, a lot of, you know, different things out there. One thing in that book, in that book by Robert Kiyosaki, it talks about how debt can allow you to. Leverage someone else's money to grow wealth. And I think that's great. You know, that's, you know,

creating that wealth. There's also a way where you don't have to use other people's money. You can use your own. And I'm excited to share that with you as well. I believe we're on to the next. So Yep, here we talked about bad debt has a pure cost versus good debt and it increases the value of your money. You know, we talked about the different types. We've already gone over some of those, but really just, yeah, increasing those liabilities without increasing assets is

what happens with those bad debts. Yeah.

So one of our favorite examples of strategic debt that is using a bank on yourself policy loans and. A couple reasons why we love them is that there's no additional risk to your underlying asset, meaning that your cash value keeps growing whether you take a loan out or not. And that's just a really important point. You can be using your money day-to-day and it's also still

growing for you. There's not many other places you can find that around and that's also another reason why people say it's better than buying than paying cash. Because you don't lose that compounding. Then also, yeah, here we see there's no required payments, although you know, we recommend that you do, you know Repay. There's no fixed schedule or penalties. You can repay on your own terms when you're able. You know, you're

not having someone. There's no fees or penalties for, you know, late payments or anything like that. And then interest rate is competitive and compounds only once per year. This one's a really great one. It has a simple interest. Often, you know, credit cards, stuff like that. That's compounding daily. That's every day. You know, it's compounding here. Interest compounds one time per year. That's it. And allows you to, you know, keep more, you know, that money and not have to pay as much.

And then, yeah, available through a bank on yourself professional. All of us here are bank on yourself professionals. Yeah. And just if you're interested in learning more, want to find out, you know more about what we do, reach out. We'd love to help you and. To help you rethink debt and building wealth. What do you guys, do you guys have anything to say about any comments, any experience with good debt or bad debt?

Yeah, great, Christy. I put, I put the ways to connect with us. We're kind of up on time here and we plan to go for about an hour today. So wanted to make sure we get that out there. The bank in yourself type policy loans are also a really great way I've found to pay off debt without destroying my future. That's how Brandon and I got out of student loan debt was putting money into our policies 1st and then taking policy loans to wipe out that debt and take

power for our future. When we do the math for some people, we'd end up having an extra 6 figures for their retirement because of strategies like that. It's a lot of fun. Yeah. I think again, the bigger thing is the cash flow and having that full working with someone of us, it's the concept of banking yourself and using those are one piece of the pie, but understanding how that is accrued, how real estate might be

impactful to you. How in a positive way or negative and also student loans and all those things we need to be thinking holistically. And so that's what we do as a team here is we're holistic thinkers and being able to say that's a bad debt, like going and buying a Gucci purse that you can't afford is probably not the best idea. Maybe Stephanie will tell you and not me, but you know. That's a way of thinking about how to use the debt wisely. So thanks guys for joining us

too. If you want more of these, we want to do more of these lives with our team here and do more things that impact you. Not just debt. I mean, we all are in a world of of this debt interesting thing. So we just want to make sure we're providing more value. So if you have comments, if you want us to share some things, put them in there. We'd love to know. And who knows, we will bring it back in next month's episode or

something. Yeah, and I did put two comments in over on YouTube, those that might be seen on Facebook. If you have a myth we didn't cover that you'd like to see in a future video, we want to hear from you. And we'd also love to know which debt myth surprised you most. Was it the credit card minimums?The. Let's see if I can remember all of these the.

Parent PLUS loans and, you know, compared with other ways to pay for college, was it the not touching your home equity and that there's this HE loan option, home equity loan option?Was it reverse mortgages?Was it 401K loans?Or was it how bank and yourself type policy loans work?I'd love to know which one surprised you most and I'll let somebody else wrap us up. All right, Stephanie, close us out. I'll jump in. I mean, I hope this was really informative

for any everybody. I know this was all game-changing for me when I learned it for the first time. And yeah, just do your exploration and see what's out there because there are all sorts of tools that you can use. And as you've seen on this webinar, you know, not everything is created equal. Boom. Mic drop. Thanks, everybody. Oh, and Dee says parent PLUS loans is definitely a surprise. That origination fee. Yeah, all the things. Thanks, Dee. Glad you'rehere.