I have $1 Million Should I Sell Stocks and Go ALL IN on Index Funds

In this episode of the Personal Finance Podcast, we're going to discuss about I have $1 million, should I sell stocks or go all in on index funds? How Andrew Can Help You: Don't let another year pass by without making significant strides toward your dreams. "Master Your Money Goals" is your pathway to a future where your aspirations are not just wishes but realities. Enroll now and make this year count! Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining Index Fund Pro! This is Andrew’s course teaching you how to invest! Watch The Master Money Youtube Channel! , Ask Andrew a question on Instagram or TikTok. Learn how to get out of Debt by joining our Free Course Leave Feedback or Episode Requests here. Car buying Calculator here Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at shopify.com/pfp Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Thanks to Fundrise for Sponsoring the show! Invest in real estate going to fundrise.com/pfp Thanks to Policy Genius for Sponsoring the show! Go to policygenius.com to get your free life insurance quote. Go to joindeleteme.com/pfp20 for 20% off! Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Go to Acorns.com/pfp and start automating your investments and get a $5 bonus today! Links Mentioned in This Episode: Fund Overlap tool 12 Amazon Scams You Need to Watch Out For! 7 Financial Scams to Watch Out for in 2024 The 1-3-6 Method For Building & Managing Your Emergency Fund Connect With Andrew on Social Media: Instagram TikTok Twitter Master Money Website Master Money Youtube Channel Free Guides: The Stairway to Wealth: The Order of Operations for your Money How to Negotiate Your Salary The 75 Day Money Challenge Get out Of Debt Fast Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Giancola?

  Longtime listeners know, one of the best ways to build wealth is to increase your income. And one way to do that is by starting a side hustle. And that's one reason why I absolutely love Whatnot. Now, my son and I, we love collecting sports cards. And we've used Whatnot to buy and sell cards. It's been a really fun way to enjoy something we love together. Now, Whatnot is a live shopping platform where people sell everything from sports cards to clothing, electronics, and collectibles. And what's really cool about it is you can turn something you're passionate about into a business. And you could do it right from your phone. You don't even need a storefront or a website. So whether you're looking to make some extra money or find great deals on your next shopping trip, check out Whatnot.

• 0:44Andrew Giancola?

  Search Whatnot, that's W H A T N O T, in the App Store. Download and start selling right away. When I started the Personal Finance Podcast, I had no idea how big it could become. I just knew I had something I wanted to share, so I started putting it online. And looking back, I definitely wish I would have started a decade earlier. One of the horror parts about building something online, though, is making it look professional. A website used to mean hiring a developer, figuring out design, and potentially spending thousands of dollars. In fact, on my website, I spent tens of thousands of dollars. That's what impressed me when playing around with Hostinger's AI website builder.

• 1:27Andrew Giancola?

  I told it what kind of website I wanted, and I built the first version in minutes. No coding, no designer or developer needed. And Hostinger doesn't stop at launch. Their AI can help with SEO, website copy, email marketing, and more. Plus, your domain, website, email, and marketing can all live in one account, with plans starting at just $3 every single month. Hostinger builds your vision step by step. Create your website today. Go to hostinger.com/pfp and use code PFP for 10% off now. On this episode of the Personal Finance Podcast, I have $1 million. Should I sell stocks or go all in on index funds?

• 2:26Andrew Giancola?

  What's up everybody and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be going through a bunch of your questions on this episode of Money Q and A. If you guys have any questions, make sure you join the Master Money newsletter by going to MasterMoney.co/newsletter and follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now, today, we have five of your questions that we are going to be going through, and we're going to give you some updates today as well. So the first

• 3:09Andrew Giancola?

  question is, should I ditch my individual stocks and go all-in on index funds? This is someone who has a million-dollar portfolio, and they're trying to answer that question. Number two, is emergency fund versus company stock? What's the smartest way to pay for a big expense? Number three, this person is sitting in cash, and they want to know where they should invest for maximum growth and flexibility. We're going to go through the scam of the week after that question, then we're going to go through, I have a high income, but too much debt. Should I sell my ESPP to wipe it all out? And then number five is move now or wait. There's a tough trade-off between their family, their salary, and their financial security. That's a tougher question to answer, but we're going to do our best to get into it. So we have an action-packed episode here,

• 3:54Andrew Giancola?

  so without further ado, let's get into it.

• 3:58Andrew Giancola?

  All right, question one, is my husband is 49, and I am 47, and we have two kids, 18 and 16. Our investment accounts are valued at $1.05 million and are a mix of a brokerage account, IRAs, husband is self-employed, it has a SEP, and I have a Roth, and he has an IRA rollover from a previous job, 403B, and an UTMA for each kid, plus a Roth for the 18-year-old. Both kids have 529s that are currently or will cover college. The value of the 529 is not included in the 1.05 million and the majority of these assets are invested in VOO, QQQ, VIIX, and about a third invested in a few stocks, Home Depot, Google, Apple, Microsoft,

• 4:41Andrew Giancola?

  Nvidia, and Amazon. Should we sell the individual stocks and put that money in VOO? Or just not contribute anymore into individual stocks and leave what we have left in the portfolio? So this is a fantastic question and one thing that I want to say first of all is congratulations, because this is absolutely amazing, the wealth that you have built thus far. First of all, you have a million dollar portfolio, which is an amazing milestone to hit. Most people never hit that milestone throughout their entire life. And the other amazing part is you're not even including the 529s in here. So amazing that you have enough money in the 529 accounts so that your kids do not have to go in debt for college. So absolutely amazing. That is incredible that you have done that so far.

• 5:26Andrew Giancola?

  So congratulations. That is great. Now let's look at your current situation. So you have a million dollars invested in a bunch of different retirement accounts, UTMA, and some other accounts there. Now, most of your investments are in VOO, which is the S and P 500 ETF for those that are listening, QQQ, which is the NASDAQ 100 ETF, which is the 100 biggest stocks in the stock market, VIIX, which is the S and P 500 and like a 403B. So that's typically one that comes with a lot of different government agency plans, which are strong and diversified funds. And then about one third of your investments are in individual stocks. So Home Depot, Google, Apple, Microsoft, Nvidia, and Amazon. So here's a lot of things that are happening here. I can't tell you exactly what to do,

• 6:11Andrew Giancola?

  because this is not a show that gives financial advice. But what I can do is tell you how I would think about this. Number one is a lot of these funds actually overlap. So if you go to, there's something called the Fund Overlap Tool, and let me get the exact URL for you here, because on the Fund Overlap Tool, this is one that we talk about a lot. We talk about this in Index Fund Pro a lot too. But with the Fund Overlap Tool, if you go to the ETF Research Center, We'll try to link this up down below in the show notes too. But the ETF Research Center has something called the Fund Overlap Tool. So what you can do is you can put in something like QQQ. Let's do this right now and VOO. Okay. And we're going to look at the fund overlap on QQQ and VOO.

• 6:55Andrew Giancola?

  So if you look at that fund overlap, 84% of QQQ's holdings are also in VOO. Whereas only 17% of VOO's holdings are also in QQQ. So this actually has a 48% fund overlap between those two funds. Now, what that tells you is that, you know, how much of this fund is overlapping? Well, I'm just being redundant here. Am I being redundant in this situation? Whereas anything above a 50% is where you really want to analyze it. If it gets up to 80% of the overlap by weight, that's where you really want to look further into that. So the first research you can do is some of the overlap. Now, one thing you could look at though, is if you look at, for example, QQQ and its top 10 holdings. It is mostly the stocks that you hold.

• 7:37Andrew Giancola?

  So it's Apple, Amazon, Costco, Netflix, Microsoft, Nvidia, Tesla, T-Mobile, Cisco Systems. Those are the top holdings by weight in QQQ. And if you look at VOO, the top 10 holdings are Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, Google, Broadcom, Alphabet, Berkshire Hathaway. And so what's happening here is that most of these investments that you hold, whether it's the single stocks and Home Depot is usually pretty close. Cause I saw you, you own Home Depot too. Home Depot is pretty close in the top, usually like in the top 25. So when you own all of these stocks, really you just have a bunch of overlap going on here in terms of all those companies are already owned inside of VOO. And you also own them individually.

• 8:18Andrew Giancola?

  And so the question you have to ask yourself is, do I want to continue owning these individual stocks? And am I willing to make sure I stay on top of these individual stocks to understand, hey, when their earnings calls come out, what's happening? Am I willing to kind of read through some of their financial statements? Is this something that I'm going to make sure that I stay on top of the news to know what's going on in each of those individual stocks? The risk with individual stocks is that if one of them starts to underperform, you could lose that whatever net worth or percentage of your Portfolio you have in there. And if you're not willing to do the work to kind of stay on top of it, that's the question. Secondly, you need to have a plan in place. So like for me, for example, I am very bad at predicting the market. I am not good at, you know, when I have individual stocks,

• 9:00Andrew Giancola?

  if I sell them, it's always too early. And it's just one of those things that I typically, all my individual stocks, I buy them with the intent of holding them long term, meaning I'm going to hold them for the next 30, 40, 50 years. So I buy companies that I think will have an impact for that timeframe. Can you be wrong? Absolutely. It could be a top 10 holding in the S and P 500 and start to fall down the list pretty quickly as time goes on. But I think, you know, if you like holding individual stocks, if you enjoy, you know, the process of owning individual stocks, I enjoy owning some individual stocks. I like owning some as a percentage of my portfolio. So if that's something that you enjoy as well, there's nothing wrong with keeping and holding those individual stocks. But if you want to simplify your portfolio,

• 9:41Andrew Giancola?

  you can absolutely do that and just simplify into index funds. That's kind of the questions that you have to ask yourself upfront though, is am I willing to think through this? My risk is a little bit higher with individual stocks. My diversification is really not that different because I hold all of these in VOO. And so for you specifically, that could be the considerations. Now, another big one, and this is a huge one, is considering the tax situation. If these are in your Roth IRA and you want to sell them and move them, you're not going to pay taxes on that money. That's the beautiful thing about the Roth IRA. If these are in a taxable brokerage and you decide to sell these and you want to move them over to VOO or vice versa, then you're going to have a tax event that happens that you're going to have to make sure that you pay taxes on.

• 10:25Andrew Giancola?

  So just thinking through that option as well, you got to make sure you understand the tax situation. If it's in a certain retirement account, you may be okay. But if it's not, that's the last consideration that I would make. So what you can do is if going forward, you're like, I don't want to own these individual stocks anymore. You do have those three options. One is you could just continue to buy index funds and not continue to buy those individual stocks. That's one option that you can think through and research if you want to do that. So you don't have that taxable event. But secondly is you can also move them over if it's inside of a Roth or something like that and you don't care. So Whichever way you decide, it's really not going to make a huge, huge impact. But the individual stocks do hold higher risk if one of those stocks starts to go down or if something is going to happen.

• 11:08Andrew Giancola?

  Whereas a basket of stocks is just more diversified and holds less risk. And so that's the way I look at all of these. But again, if you enjoy holding some individual stocks, you like, you know, just the research process of that. If you like to listen to earning calls, sometimes be a part of that whole process. I get it. I like it too for certain things. But if you want a more simplified portfolio, if you want to make sure your portfolio is easier to manage as you start to progress past this million dollar mark, which again, congratulations, that is amazing, then maybe you want to simplify it more. And index funds to me are just the simple format to do that. But that's the way I would think about it. I would do a little research into fund overlap. I would kind of see how much of these are overlapping. What are the top holdings by weight? And another way you can also do this is plugging this into a free tool called Portfolio Visualizer.

• 11:53Andrew Giancola?

  That tool is pretty cool and can help you long-term in terms of just kind of seeing your portfolios and how much by weight they hold of individual investments. So I like that tool a lot too. And that's kind of how I think about this. So you're really well diversified already, but a lot of these funds are overlapping. You're going to have a lot of the same companies within those funds, but you're doing a great job. And I think that is amazing how you have this set up for your kids and how you've built wealth thus far. The cool part is you're in your 40s now and you're going to be in the part where it's really going to start to grow now. As you start to see this compound, you're going to see a huge, huge shift where you could get to your next million in like a quarter of the time that it took you to even get to that first million. It's going to be really fast what happens next. So really excited for your progress there.

• 12:37Andrew Giancola?

  And let me know if you have any other questions or you want us to dive deeper. The next question is, Andrew, I listen to a lot of financial podcasts while walking my dog. Yours is by far the best, most practical advice. Well, thank you so much. I truly appreciate the kind words and I love your take on most everything you cover as it pertains to my situation. I can't remember hearing anything to guide me with the question of how to pay for a large expense. I have some work on the house that is needed and I got an interest-free loan for six months. I have the cash to cover in my emergency fund, which has Three months expenses. I also have $30,000 in stock that my company gave as a bonus a few years ago. Should I use the emergency fund to replenish that over the course of the next year or cash in some of that stock to cover it? I value your opinion and you always offer a smart

• 13:22Andrew Giancola?

  solution. Thanks. So this is really, really good question and it's a tough question to to answer without knowing kind of the rest of your financial situation. But we'll talk through kind of your options and I will kind of see what we think through. So option one is going to be the emergency fund and using your emergency fund to pay for this expense. Option two, though, is going to be utilizing your stock and your company's stock options. So the first question I guess I would have is obviously the repair on this house or the maybe it's an improvement, I don't know, but the repair on this house is most likely needed. So you most likely need to do this. And I do like the idea of getting a six-month interest-free loan as long as you plan on kind of paying that back before the interest rate hits. My second question, though, is maybe what is the interest rate kind of when that loan comes through and when it hits in the future?

• 14:06Andrew Giancola?

  You can also look into if it's a low-interest loan, it may be something where you don't have to pay it back immediately. But if it's a high-interest loan, then obviously anything above a 6% interest rate, we want to get rid of. Now, here's how I would think about this. One is you have six months to try to save some cash up in order to pay a portion of this loan. So what I would do first is start to get some cash together to start to pay back over the course of six months as much as you possibly can. Maybe it's only a couple thousand bucks, maybe it's 6,000, maybe it's 10,000, maybe it's 15. I don't know how much you make, but I would first think through that process. Maybe it's only 3 to 5,000. It doesn't matter what the final number is, but trying to get as much as you possibly can towards that loan to pay down. So your second decision becomes easier. So you have this six-month runway and so you could

• 14:51Andrew Giancola?

  kind of start to look at this. But then secondly, let's look at these two options. Number one is your emergency fund. Now, your emergency fund is in place in order to protect you against life. So it's there to protect you so that you do not have any other issues in life. And so that three months there is a good spot to be in so that you can continue to invest. And then I want you to kind of grow that three months over time, once all of this situation is resolved. So utilizing your emergency fund would be a good solution if this

• 15:18Andrew Giancola?

  Was an emergency, meaning if this repair needed to be done, maybe you need a new roof, for example, and it's going to cause issues with your house. If you do not need a new roof, then you can use your, your emergency fund for that situation. That's a great use of funds for an emergency fund. Or maybe you need a new air conditioner, yours is about to go out and summertime's coming down the line and you live in a hot climate and so you need that new AC. And so that's one of the repairs that you're doing to the house. Those are very reasonable reasons to utilize an emergency fund. In fact, most people don't want to use their emergency fund, but it's there for emergencies. So that's the first situation is you can use it for emergency situations. I like to preserve mine in case I need it, if I have other options. So let's look at your second option here. Your second option is to go and utilize company stock options.

• 16:03Andrew Giancola?

  I have questions on that. First is, do you believe in the company long-term? Like, sure, you work there, but do you believe in the company in a stock market sense? Like, is this a company that is a really great company that long-term? Like, do you work for Apple or Amazon or Google and you think this stock is going to go up long-term more and more every single year? Or do you work for a smaller company and you're not really sure what direction you're going to go in? You know, they tell you internally, everything is great, but do you actually think that that stock is going to be performing well long-term? Cause if not, then the way I see this is it's just a forced emergency fund and you can utilize those funds for that. But you have to do your research into what you think that stock is going to do long-term. And then the second question is like, what are your other investments? Do you have investments for your future in other spots? If so, then that's great.

• 16:47Andrew Giancola?

  You could probably utilize this one if it's just extra funds that you have and it was just a bonus that was given to you. I would just treat that as cash that was given to you and you can utilize those funds to pay that down. But to minimize the amount that you have to use, I would probably save up as much cash as possible over the course of the next six months. Then my second option, if I do not believe in the company going forward, or if it's not some huge company that I think is going to be a sure thing, then what I would do is probably consider the stock options if I was in your shoes. Now, this is not financial advice, but it's just, you know, me saying if I was in your shoes, that's what I would do. And then thirdly, I would consider the emergency fund, but I would also not hesitate to utilize the emergency fund if it's for an emergency. If it's a roof thing, like you have to put a brand new roof on, or if there's some repairs that you're doing, that is definitely one thing that I would consider as well.

• 17:32Andrew Giancola?

  If it's remodeling, like a kitchen or something like that, then I'd probably be less likely to use the emergency fund because it's not a true emergency. And so we just got to think through what that remodel is and then we can kind of go from there. This is a great question, though, and that kind of how I would think through this process. The other option, though, is if you do use your emergency fund, you could use it, you know, over the course of the next six months, you could try to replenish it as much as possible and try to build up that emergency fund and then use some of the funds when you get closer to the six-month mark and go through that process. But I would use that six-month interest-free period since you've already got the loan. I would use that as at least a runway to give you some more options over the course of the next six months. And then from there, then you can kind of decide exactly what you want

• 18:15Andrew Giancola?

  to do. So, great, great question. I hope this helps you, but preserving your safety net is a great option. And then utilizing those stock options, if you don't believe long-term in the company, and if you do, then you can kind of consider, you know, what that situation looks like. You can also do a hybrid approach would be the third option. Probably not exactly what I would do, but you could do a hybrid approach if you believe in both. So that's how I would think about that. And from there, then I would kind of make my decision. And if I was in your shoes, it'd probably be company stock options if I don't believe in them. One, I would wait the six months, then company stock options, then emergency fund. Just because your emergency fund is at that three months, it's probably going to take some time to build a backup. So, six months, get as much cash ready for it, then go to stock options, then emergency fund is my thought

• 18:58Andrew Giancola?

  process personally, but you got to weigh out the options for your personal situation. So, awesome question, and congrats on being in this position where you have some options there, so you don't have to go into debt. But the last thing I would do, again, is go into debt. So, awesome, awesome question. Thank you so much for sending it in. And if you have any other questions, please send them over. All right. So, in this segment, I want to talk about a new scam that is currently going around right now. And I had a friend who this happened to recently, who got a text message in that said, "Hey, you are way backdated on your tolls. You have a bunch of tolls that you have not paid, and you need to go ahead and pay those by tomorrow, otherwise you're going to have a late fee." And so my friend clicked the link, they went into the link, and it looked just like the state's website that, you know, where you

• 19:40Andrew Giancola?

  go and pay tolls. So like, in the state of Florida, for example, you know, you go through the toll booths, and now the toll booths don't have gates anymore where you pay a person. You just kind of drive through, they take your license plate number, and it is a really, really quick process. And so because of that, people, you know, start to rack Back up these toll bills that cost X amount of dollars every single month if you drive on highways that have tolls. And so when that happens, you know, you'll get a letter in the mail that tells you, hey, you gotta pay this toll in order to be able to be up to date and not get any late fees. And so my friend got this text message, this text message came through and said, hey, you owe on these tolls, please pay this by tomorrow, otherwise you're gonna have a late fee. And that's one of those bills, like a lot of people just kind of put to the wayside when they get it in the mail.

• 20:22Andrew Giancola?

  And so you gotta make sure that you are up to date on those a lot of times. And so people forget and they have to go in and get this going. So my friend clicks the link, it looks just like the state website how it normally does, but something seemed a little off. And they realized pretty quickly and did a quick Google search and realized this is a scam that is going on right now. Where there are text messages coming to people that look like government agencies saying, hey, you gotta pay this bill or this fine. And if you don't pay it by tomorrow, you're gonna have late fees. And so they create this sense of urgency, making you think you have to pay this. And so when you make this payment, all of a sudden they have your credit card information, they have some of your personal information, they have your address. And this will always complete the puzzle of usually what they're looking for. They're usually looking for the rest of your information so that they can start scamming you.

• 21:07Andrew Giancola?

  Opening loans in your name, accounts in your name, but also they have your credit card information and they can steal money from you as well. And so this is a huge scam that has been going around the country and it's been across the country. And I started to read some articles through this on how many millions of dollars have already been stolen from this specific scam. So I want all of you to make sure that if any messages come through, you understand where it came from. And maybe you just log into your, if you get a toll message, for example, you log into your account online, make sure it is actually true. And not just someone trying to scam you. Now, how do they get your information to even send you this text message? It's because of data brokers. So there's data brokers out there who have your name on lists, who these scammers can go buy your information with your phone number.

• 21:51Andrew Giancola?

  Maybe it's your address, maybe it's some other stuff and they'll be able to access your information. And so to get your information removed from these data brokers, you can go to each one individually and you can ask to have your information removed. Or you can just have a service remove it for you. Which is exactly what I do. I use a service called Delete Me. And what Delete Me does is they remove your personal information from these data brokers so that you can get off of these lists. So when I initially did it and I signed up for Delete Me, they removed my name from thousands of different data brokers. And so it's something that I truly, truly believe in and it's a really low cost service for what they do. They save you hours and hours every single month and they will continuously remove your personal information from these data brokers throughout the year.

• 22:34Andrew Giancola?

  So if you want to save time, money, energy and be less susceptible to these scammers, go to joindelete.me/pfp and they will be able to help you remove your personal information. I did it for myself. I did it for my wife. I'm having my family members do it now because everybody needs to get their personal information removed and keep their personal information off the internet. We don't need it on the internet. And so that's something where for sure getting your information removed is going to be the key. So a lot of episodes and a lot of our Q and A episodes for sure, we have segments talking about different scams going on. Last episode, we just talked about the scam of packages being delivered to your house where you have no idea where they came from. You scan a QR code and they steal your information as well. So make sure you check that one out if you haven't heard it.

• 23:16Andrew Giancola?

  But every Q and A we go through and talk through some of these scams and that's another one to watch out for. These things are developing like crazy and I'm seeing more and more of them. So that's why we talk about them. Let's jump into the next question.

• 23:28Andrew Giancola?

  All right. The next question is, I have a high yield savings account that I have a large lump sum of money in and I have no clue what to invest in. Should it be a Roth IRA or mutual funds or index funds or something shorter? We anticipate moving or adding to our current house and do not know if it's better to get a construction loan or pay cash or a mixture of both. The only thing we have invested is my 401k and my husband's 401k and a small SEP IRA. How do we diversify our investments or invest in different places to maximize growth? Our current plan had only about 6,000 in interest from the high yield savings plan through Discover. Okay. So this is a wonderful, wonderful question and really what you need to be doing is kind of developing an investment plan. Now, Index Fund Pro will actually teach you exactly how to do this

• 24:11Andrew Giancola?

  kind of step by step. So if you've never checked that out, that's our course teaching you how to invest in index. Funds in ETFs, if you go to mastermoney.co/courses, it takes you through this process, but I'm going to give you kind of a broad thought process on how to do this. Because what you really want to do is first figure out when you're going to need this money, how much you're going to need for the home addition. And that's going to be one big one that you definitely want to make sure that you have enough saved aside for that. And typically that money I would keep in cash. So that would be money that is for a specific purpose. And if you have money set aside for a specific purpose, I always keep that in cash. I don't invest it so that I don't get my, you know, investments cut in half if there's a recession or something like that. And so if you have money set aside for that additional dwelling unit, then making sure you have that in cash set aside is the best option.

• 24:55Andrew Giancola?

  Now, if you are thinking like, should I get a construction loan or should I pay for it in cash? You can look at either option. A lot of times, construction loans are going to have higher interest rates. And so what you can do is if you want to get the loan short term, you can get a construction loan, have the additional dwelling unit built, and then you can either refinance on the back end and refinance the property so that you have, you're going to have a larger mortgage, but you could refinance for whatever the value of the property is and just making sure that you can afford that new payment. That's option one is to set that up if you can get a low enough interest rate. The interest rate needs to be below a 6% interest rate in order for that to even make sense when you refinance. So when you are setting up the construction loan, the construction loan is probably going to be pretty high. It can be anywhere from 8% all the way up to, I've seen them 15, 16% before.

• 25:41Andrew Giancola?

  And so it's going to be really high, but it's going to be a short term loan. Once the construction is complete and you have that additional dwelling unit, then you can refinance the entire house, get that lower rate, but the rate needs to be low enough to kind of make sense and not mess up your current rate. So if you have like a 1% to 2% current rate, then I wouldn't do this. But if you have a current rate that is a little bit higher, then you could consider refinancing into that lower rate. Another option is to utilize something like a HELOC if you wanted to go that route for that additional dwelling unit. If you did not want to utilize this cash because you wanted to grow it for investments and wealth building, then you can utilize something like a HELOC to, to build that additional dwelling unit. And there's nothing wrong with that. I think, you know, as long as the interest rates are okay, you can definitely utilize a HELOC. So that's the first way I would think about this.

• 26:25Andrew Giancola?

  Secondly, though, is to build out your investment plan. What I would consider here is I would definitely consider figuring out, hey, what's my time horizon? How long do I have and what do I want to do with this money? So if you have a longer term time horizon, you can start to build out a plan where I would go step by step through growing my wealth. So first, the way we talk about this is we look at the Roth IRA as a great option for a lot of folks to be able to grow their wealth tax free. So the way that the Roth IRA works is you put money in that has already been taxed from your paycheck. The money grows tax free and you can pull the money out tax free. So that's a great option to look into to add to this portfolio since you already got the 401ks. I would increase contributions to the 401ks if you can as well and then start to invest

• 27:09Andrew Giancola?

  in areas that you're comfortable with. Index funds and ETFs are a great place to start looking and researching into. That is my favorite place where most of my portfolio is and you just want to have a balanced portfolio. And so looking into how you want to construct that portfolio can be something that I think makes a ton of sense. So this would be something like having maybe a US stock, maybe you want an international stock. I don't invest much in international stocks because I think the US stocks have enough international business, but some people say you need to have international stocks and then maybe having some bonds in there as well if you want to reduce the volatility. And so putting together your portfolio is going to be really important. So we have some YouTube videos if you want to check these out too. We talk about the Warren Buffett portfolio is one that you can look into. We talk about the

• 27:53Andrew Giancola?

  three fund portfolio and we have some other two fund portfolios that we talk through. If you go to Andrew and Cola, just Google my name and we have some YouTube videos on some of those. And we also break down a lot of like index funds and ETFs in those videos and why I like them. So that's going to be another one that you could definitely check out if you're interested. And then putting together that financial plan is just making sure you understand your time horizon. You consistently invest in some of those accounts so you can grow your money over time and you can build wealth that way. Now, secondly, those you need to maintain and keep some of this cash for an emergency fund. So if you don't have an emergency fund in place, you need to have at least six months of expenses as our minimum baseline, what we talk about. And so putting that into your high yield savings account and keeping it there is a great option. And so that needs to come first. And then once you get to at least three months of expenses, then you can start to invest.

• 28:37Andrew Giancola?

  And growing your wealth that way. So if you haven't heard us talk about the emergency fund, we have something called the 136 method. That is an episode that will kind of help you through that process too, on exactly how to do that. But you are amazing, amazing progress here. And if you have a large amount in a high yield savings account, you can do a lot of things that are going to help you build wealth. What I wouldn't do is hoard all the cash in the high yield savings account outside of the emergency fund. So the emergency fund and the additional dwelling unit fund, those two I would keep in the high yield savings account. And then everything else, I would start to move over to things that can actually help you grow your money. Because if you don't invest your money, you're never going to be able to retire. So we want to make sure we are working to grow our money over time. This is a very, very powerful way to build wealth long term. So again, I would look at maybe contributing to some Roths and researching those,

• 29:21Andrew Giancola?

  maybe contributing more to the 401k, and then the SEP IRA if your husband still utilizes that. And then beyond that, then you can start to contribute to brokerage accounts and/or HSAs, those types of accounts as well. So really, really good stuff. You are honestly on a great track here, and you have a lot of opportunity to grow your wealth over time. And this is a wonderful question. So thank you so much for sending it in, and congrats so far on your wealth building journey.

• 29:47Andrew Giancola?

  My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money. Now, I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions. That's one of the reasons I love Monarch. It's the personal finance app that tracks everything, from your accounts and investments, to your savings, goals, and spending. So you can see your entire financial picture in one place. One habit that's made a huge difference for me is my five-minute drill every single morning. I open Monarch, check my spending, investments, cash flow, and net worth, and I'm done in just a few minutes. It gives me confidence that nothing is slipping through the cracks. I also love the AI weekly recap, because it'll flag spending

• 30:31Andrew Giancola?

  changes, upcoming expenses, or shifts in my net worth before they become a problem. Instead of reacting after the fact, I can make adjustments early. It really feels like having a financial advisor in your pocket. Write your own money story with Monarch. Use code PFP. At monarch.com to get your first year of Monarch Core half off at just $50. That's 50% off your first year at monarch.com with code PFP. If you've been listening to this show for a while, you know it's not just me anymore. It takes a great team behind the scenes to make everything happen. And if I had to hire someone tomorrow, I'd want someone who could jump right in and make an impact. That's why I'd use Indeed Sponsored Jobs. When workplace chaos hits,

• 31:16Andrew Giancola?

  Indeed Sponsored Jobs helps you reach qualified candidates faster. Your job gets boosted in search results, so you're spending less time searching and more time interviewing the right people. Plus, you only pay for results, which I absolutely love. Sponsored jobs posted directly on Indeed are 95% more likely to report a hire than non-sponsored posts. That's a huge advantage when you're trying to grow your business. Spend less time searching and more time actually interviewing candidates who check all of your boxes. Less stress, less time, more results. When you need the right person to cut through the chaos, this is the job for Indeed Sponsored Jobs. And listeners of this show will get a $75 sponsored job credit

• 31:59Andrew Giancola?

  to help get your job the premium status it deserves at indeed.com/podcast. Just go to indeed.com/podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com/podcast. Terms and conditions apply. Need to hire? This is a job for Indeed Sponsored Jobs. It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before. And it reminds me that while we can't predict the future, we can prepare for it. That's one of the reasons I like PolicyGenius. See, PolicyGenius isn't an insurance company. They're an online marketplace that lets you compare

• 32:42Andrew Giancola?

  life insurance quotes from some of America's top insurers side by side for free. And their licensed team helps you compare coverage, prices, and terms, answers your questions, and even handles the paperwork so you can get the right policy without the hassle. For me, Having life insurance isn't about expecting something to happen. It's about knowing my family is protected so I can actually enjoy these moments together instead of worrying about what comes next. And with PolicyGenius, you can find 20-year life insurance policies, starting at just $276 a year for $1 million of coverage. Head to PolicyGenius.com to compare life insurance quotes from top companies and see how much you can save. That's PolicyGenius.com.

• 33:26Speaker 01

  Low energy, unfocused, foggy? You might be dehydrated. Gatorade Zero powders have been scientifically designed to help improve hydration balance in the body with a clinically proven electrolyte blend and no artificial colors or flavors. Great tasting hydration, no matter where you're going. Shop now online or at retailers nationwide. Gatorade: Hydrates Better Than Water. Is it in you? Symptoms noted are signs of mild to moderate dehydration. Consult a healthcare professional if symptoms persist.

• 33:55Andrew Giancola?

  All right, the next question. I am 26 years old and have been in sales for three and a half years. I feel I do well for someone at my age, making between $125,000 a year to $150,000 a year. Amazing, that is a great job. I have been contributing 10% of each paycheck towards my ESPP, my Employee Stock Purchase Plan, that has an unrealized value of about $50,000. My savings account is around $1,000 and checking is usually around $500 at the end of every month after bills and living expenses. I'll be the first to admit, I spend too much money on things I don't need and have racked up about $7,000 worth of credit card debt. On top of that, I have about $35,000 of student loans left and about $15,000 left until my car is paid off.

• 34:38Andrew Giancola?

  If you were me, knowing I'd like to purchase a house ASAP, would you take the money out of the ESPP portfolio and pay down debt? Or continue to make monthly payments until all debt is paid off? Happy to share more if it would be helpful and look forward to hearing more. All right, so there's a lot of things happening here. And I hope you can take this because I'm going to be pretty real here in this scenario. So from, based on what I know about you here is you have a really high income. And what we're looking at here is we're racking up credit card debt, which should not be happening. So number one is your income is too high to be racking up this credit card debt. You know that you've said it here, which I appreciate you sitting in this question because this is a really, really good question. I think since you're in sales and you're probably a high performer, you're going to be willing to kind of hear this.

• 35:21Andrew Giancola?

  But what we're looking at here is we are in a situation that is not a good financial foundation whatsoever. And you have the 50,000 that's only going to the ESPP, but really all of your value and every dollar that you're putting towards investments, unless you have investments other places and maybe that was just left out. But if this is the entire financial picture, then we are in a risky scenario because your job is associated with one company and all of your investments are also associated with that company. And so first of all, just making sure that you kind of do some research and diversifying this investment is going to be really, really important. But secondly, we have zero financial foundation at all within our personal finances, meaning that we have no emergency fund in place and we have nothing set up in order to make sure that we can actually pay down this debt.

• 36:06Andrew Giancola?

  So here's what I would suggest is first, we need to make sure that we get rid of that credit card debt. The interest rate is way too high on credit cards to even carry any balance whatsoever. So yes, should some of this go towards the credit card debt, the credit card debt boom should be wiped out immediately. That's $7,000 needs to be wiped off and using the ESPP to do that is 100% a yes from me in terms of how I would think about this. Now you can kind of do your research. If you want to talk to some professionals, definitely go for it. But that high interest debt needs to be eliminated immediately. That is one for sure. Secondly, is you're talking about you want to buy a house ASAP. We're not ready to buy a house yet. When the way I look at this scenario is first, you need to build up that emergency fund.

• 36:46Andrew Giancola?

  So the only way and the only reason why we tell people that they can buy a house is if you have a financial foundation set up. So this is six months of expenses in cash need to be saved in an emergency fund and you need to have some money going towards investments already before you can start to buy a house. The reason for this is because buying a house is not a great asset, meaning that if you go run total cost of ownership of a house, you're going to see houses are going to appreciate over the course of the next year. You know, people have $400,000 in equity and it's a great tool in your tool belt. It is not a huge wealth building machine, meaning that when you go and buy a house, you need to run total cost of ownership. What a lot of people do is they make the mistake of not running the numbers on a house. So they will go out and they will purchase a home.

• 37:29Andrew Giancola?

  And instead of running the numbers on the biggest financial decision they ever make, they just go and buy the house. Right now, in this scenario, I would not buy a house until you get your financial house in order. So debt needs to go in terms of credit card debt first, okay? And then we need to build up the emergency fund immediately with six months of expenses in an emergency fund in a high-yield savings account in cash. Now, you need to make sure the emergency fund does not get touched unless you actually have a financial emergency, because right now, we're spending extra dollars on a credit card. So we're going to need to cut back the spending some in order to make sure that we can start to have a sustainable lifestyle. You have a high income, you can definitely do this, there are areas you can cut. We got to reduce that spending in order to make sure that we are in a spot that's going to help us in the future.

• 38:12Andrew Giancola?

  Because if we keep down this path, you're going to live paycheck to paycheck forever. So we just got to make sure that we are making these quick decisions. So first, goal number one, wipe out that credit card. Goal number two, six months in an emergency fund. Goal number three is let's take a look at this debt. So you have $35,000 left on student loan debt and $15,000 is left on your car before it's paid off. Both of those, I would prioritize investing before those unless they are high interest debt. So I want to know what the interest rate on that debt is. If it's a 7% or 8% interest rate, I think we need to make sure that we are looking at paying those down a little quicker. The ESPP could be an option for that for sure. But we got to make sure that we are paying some of that debt down if it's a high interest rate. So like if you have a car loan and you're at a 10% interest rate, for example,

• 38:56Andrew Giancola?

  that's going to be one that I want paid down, you know, as fast as possible. Whereas if you have a 5% or 4%, 3% interest rate, I'd be less likely to care about that, paying it off as quick as possible. You can if it bothers you, but I'd be less likely to care about that as much as some of these other things. Credit card debt, yes, but those can come a little later. So option three is look at the interest rates. If it's a high interest debt and you think above a 6% interest rate, then let's get a little more aggressive on paying that down first. And if it's not, then we can go to the next step. Then, once you have money going towards investments automatically every month, Outside of just your ESPP, I would try to diversify those investments in other areas. Once you are doing that, then we can consider buying a house. So I know you want to buy a house ASAP, but we honestly, it's just not the time, the way that this is currently set up.

• 39:41Andrew Giancola?

  But you have the income to make a quick shift and have a big, big change that could really, really impact your bottom line and honestly make a big difference. So what I would do is kind of follow through on those steps first. And then from there, then we can kind of look at buying a house as time goes on. And I really, really appreciate you sending in this question. I'm saying all this out of love, but we're not ready to buy a house until we, we can actually get our financial house in order first. So awesome, awesome stuff and amazing that you learned how to increase your income at that level. That is the hardest step. Now we just have to get the rest of it in order, which I know you can't. So thank you so much for sending that in. And if you have any other questions, please let me know.

• 40:19Andrew Giancola?

  All right, the last question. My wife and I luckily bought a small home at the perfect time coming out of college in 2021. Our interest rate is 2.99% and the monthly mortgage payment, including everything is $1,500. I currently make $99,000 a year and our current house to debt income ratio is about 15%. Incredible. That is a great home to income debt ratio, which I know is really low. But when first coming out of college, my salary was $60,000 and our house debt to income ratio was 34%. And we felt like we have no breathing room in our budget during that time. We've always saved fairly aggressively for retirement and I max out my employer contribution. We currently save $1,000 a month specifically for buying a new house. And we do not have any at all frivolous spending.

• 41:02Andrew Giancola?

  And to reduce any of our current expenses would be hard. Again, we really don't have any frivolous spending and save substantially. Side note, I just had my annual review and my salary will jump to $114,000 next month. And we plan to increase the house savings amount to 2,000 a month. Here's our dilemma. First of all, before I get into your dilemma, awesome job thus far. You're increasing your income every single year. You are in a great spot and I love just the way that you even think about money. Where you are saving a good portion of it and you're making a big, big impact to your bottom line. Our dilemma is this, we don't like where we live and we want to move closer to family. I've been applying To jobs and I have been interviewing with a company in a smaller job market and I'm cautiously

• 41:42Andrew Giancola?

  optimistic I'll get an offer where the advertised salary range is $61,000 to $92,000. I'm applying what you've taught about salary negotiations and those obviously haven't started yet, although in my initial screening interview, I did tell them that I currently make towards the high end of the range and the higher the salary, the more ideal. The job is in the perfect spot for my family proximity. Our major concern is housing cost for the houses in that area, buying or renting that we want to live in, our monthly cost is at a minimum $2,500, but most options are $3,000 a month. Hypothetically, if I were to take this job and my salary was $92,000 to pay for the housing, we'd need to use about 1,500 that we currently pay, plus our current allotted

• 42:26Andrew Giancola?

  savings amount of $1,000 a month, just to barely meet the bare minimum of housing. And then we'd have nothing left over to save for a future house until I get a raise. We both want my wife to continue to stay at home with the kids and don't want her to enter the workforce. Okay, so if I get an offer and can't get the company to go higher than 92,000, I feel like we're down to three options. Lower our standards in housing to get cheaper housing. Obviously, this doesn't appeal to us. Okay. Sacrifice our budget to pay for the more expensive housing, doesn't feel possible for our goals and for saving as well as our limited amount of unnecessary spending. Number three is wait in our current situation, save aggressively while searching for higher paying jobs. Is there any options we're missing out on here?

• 43:09Andrew Giancola?

  So, okay, so this is a great, great question and honestly, I love the depth that you went into on this one as well. And I would prioritize these three options in a number of different ways. What I don't want anybody to ever do is I don't want them to sacrifice their entire life and their happiness just to optimize their money. Now, I know that you're not doing that now and I know that that's not exactly what you're asking, but what we want to think about here is for a lot of people, if you are unhappy with your housing situation, you hear me talk about, you know, I just talked about in the last question, a house is not the best investment in the world, but it is an investment in life. Lifestyle, meaning that the reasons why you're talking about buying a new house are the reasons

• 43:53Andrew Giancola?

  why you should want to buy a house. It's not for an investment. This is more so because you want to change your lifestyle. You want to be closer to family and friends. Probably you want to be in a nicer living situations. Those are all reasons to spend money because you're utilizing money as a tool to improve your life. Now, the question then becomes is there's a huge trade off in terms of you can't save for the future, which I don't know if it is sacrificing your investments. I don't see that it is. It looks like you're saving for future housing. So it's not sacrificing your investments per se. It's more so sacrificing for future house savings. So there's a couple of things that you can look at here. Number one is lowering your housing standards. So the only time I would do that, if you're lowering your housing standards because it's not ideal to you, you're not going to be happy, your spouse is probably not going to be

• 44:37Andrew Giancola?

  happy. And so you're just going to be in a situation that you don't really want to be in. And let's get real. If we're in that situation, we want to get ourselves out of that as fast as we possibly can. And so in that scenario, if you lower your housing standards, the only way that I would do that is if you're renting a house. So you can lower your standards where it's a situation that you can get out of it. You don't have to sell the house later on. You're just renting a house for the short term. Maybe you're spending, you know, 2,500 or 3,000 a month. Now, when you rent a house, the thing about that is you could spend a little more. You get closer to that 3,000, which is going to be closer to the 30% of your income, or you'd probably need to get to, if you get to 92, you'd probably need to be at $2,700 per month or less. And so to get to that number, since it's a short term solution, you could rent a house and kind of be on the

• 45:21Andrew Giancola?

  higher end. See, I like my housing expenses to be below 30%, but I like them to be, for me specifically, just like how you're living right now, you're able to make some of this financial progress because your housing expenses are so low. And so because they're low in comparison to your debt to income ratio, you're able to take a larger chunk to put it towards house savings and in addition to max out some of those retirement accounts. And so because of this, I think that lowering your housing standards, if you went that route, it would have to be in order to rent. That's where I would kind of go with that. Long term, you're just not going to be happy and I don't really want you sacrificing your happiness day in and day out. That you rest your head every single night for money. That's just not the thing that I would probably consider.

• 46:03Andrew Giancola?

  But you can lower those options and then you lower those options until you get an increase in salary. That's kind of how I would think about that. Secondly, since you can't cut other expenses to pay for more expensive housing because you don't have frivolous spending, so there's really no room to cut. You'd be relying kind of on those future raises. And so you kind of lose out on the financial flexibility if you need those future raises for the future housing. So you may feel stuck in a job. I don't want you to have the golden handcuffs to feel stuck in a job based on that. Option three is to stay put and save aggressively while searching for higher paying jobs. Now, this is one that if you're okay, like if it's okay to stay where you are currently and you're kind of getting by, you're going to get this raise coming up.

• 46:45Andrew Giancola?

  You can increase the contributions towards another house by saving up that raise. If you can stay put for a little bit longer, meaning that this is just a patience game when it comes to this. So that you can stay in your specific location and you can start to look for other jobs in that area. It may take you a little longer. Let's say, for example, it takes you another year, but you find another job that pays you closer to the amount that you're making now and/or it's going to pay you even more. It's going to pay you 130, maybe 140, depending on what you're doing. If you can get that increase in salary and just be a little bit more patient, you can put yourself in a much better financial situation. Because if you get an offer at 92 and it really is stretching your budget, it's not really where you want to be.

• 47:26Andrew Giancola?

  But then you wait a little bit longer, you find a better job that's going to be paying you even more in that specific situation. That's probably the route I would go where I would stay put. Since your interest rate is really low and you have this debt to income ratio at 15%, you have a lot of room here, meaning you are in a cash building machine right now that is allowing you to actually put yourself in this situation to even think through these options. So if you can even wait a little bit longer, maybe it's just a year longer and you set the goal of, okay, we're going to wait one more year. You and your spouse get together and say, are we on the same page with this? Can we wait another year so that I can look for additional jobs in this area that may pay more based on what my experience is and my expertise?

• 48:07Andrew Giancola?

  What I would do is spend a lot of my time trying to network and trying to find jobs in that area that pay more. That way you have the time to then make a decision that makes more sense. Because right now, the decisions that you have to make seem like, and this is just for me reading this. But right now, the decisions that you have to make seem like you have to rush to make the decision that is not the best for you. But what you could do is stay put short term over the course of the next year. Find a higher paying job. And then, once that higher paying job is found, then you can kind of make a decision based on what that new salary is. That's how I would probably think about it. Now, if you cannot wait anymore and you got to move to that area, I'd go the rental route. But I would try to be a little bit more patient in terms of how long I wait because you are in such a great housing situation

• 48:51Andrew Giancola?

  in terms of the interest rate and your debt to income ratio. Now, option four, I'm going to give you one extra option that maybe you haven't thought of is that, and maybe this is impossible, but if you work in an office or something like that, then maybe you can also try to see if you can keep your current job and move. You can ask them, hey, can I keep my, I just had a friend who just did this. He moved from Connecticut down to Florida again. And he asked his current employer, hey, can I just keep my job here and I'll just work remotely? And they let him. And so that was one option that he had as well. So maybe you could do something like that. But a second alternative is, but this one, it just isn't guaranteed, is that you take the lower paying job in the short run. You rent while you have that lower paying job.

• 49:33Andrew Giancola?

  And then you try to find the higher paying job while you are in the lower paying job. Now, the only thing is you're going to be job hopping within the course of possibly a year, which doesn't look amazing on a resume sometimes. But this is one of those things where if you really need to get out quickly and you really have that urticity to get out, that is another option is where you could take the lower paying job. It's just not guaranteed that you're going to find the higher paying job. And I really like guaranteed things for me specifically. I'm just risk averse when it comes to that kind of stuff. So that's another option is you can move, you could rent, you could take the $92,000 per year job. And then you can go out and try to find a higher paying job while living in the location that you like. So those are the options that I also see. The ones I wouldn't take probably are to try to save more. It doesn't sound like you can, cutting up those other expenses.

• 50:17Andrew Giancola?

  And then also just kind of lowering your housing standards, you're not going to be happy with that. And so overall, I think probably either staying put and saving aggressively, or finding a hybrid option of a way for you to either remotely keep that job and move, and/or the third option is to see if you can rent for the short term if you need to leave, and then go try to find a higher paying job while you're renting. So those are the options that I see. And if you have any other questions on this, thank you so much for sending this question in. You're doing an amazing job at Building Wealth, and I really appreciate you sending this in. But if you have any other questions on that, please let me know and I can expand even further. And thank you guys so much for listening to this episode. We truly appreciate each and every single one of you being here. If you guys have any questions,

• 50:59Andrew Giancola?

  again, make sure you join the Master Money newsletter by going to mastermoney.co/newsletter, and don't forget to follow us on all the socials at Master Money Co. And if you're getting value out of this episode, consider sharing with a family member or friend. That is the greatest gift that you can give is sharing these episodes with someone else. So thank you guys so much for being here, and we'll see you on the next episode.

• 51:34Speaker 02

  Are you ever shopping online and suddenly a discount that helps you save pops up? It makes your day, sometimes even your week. Want that feeling month after month? Well, new customers who save by switching their home and auto insurance to Progressive, save hundreds. Cue your happy dance. Get your quote today at progressive.com. Progressive Casualty Insurance Company affiliates and other insurers not available in all states.