Pod Insights The Personal Finance Podcast Focus on THIS in Retirement (Everything Else is Noise) About this episode The retirement equation is simpler than most people think. The problem is nobody ever told them which variables they actually get to decide. Here is the framework that fixes that.
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What You'll Learn in This Episode
The JP Morgan Retirement Equation: what you can control, what you cannot, and what falls in between
Why obsessing over market returns and Social Security is a waste of your energy
How to build a cash buffer that reduces sequence of return risk
The health habits that directly predict longevity and why they are a financial decision
The two things you have total control over that determine whether your retirement succeeds
How to store estate planning documents so your family can find everything when it matters
When a reverse mortgage makes sense and what Andrew would consider first
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Tool/s Mentioned
Retirement Calculator https://expert-hustler-605.kit.com/e6b8d4f8a2
Resource/s Mentioned
AnnualCreditReport.com (Free Credit Reports)
NFCC.org (National Foundation for Credit Counseling — Nonprofit Credit Counselor Finder)
Book/s Mentioned
Why We Sleep https://kit.co/MasterMoney/high-performance-book-club/why-we-sleep-unlock
Die With Zero https://kit.co/MasterMoney/high-performance-book-club/die-with-zero-getti
Episode/s Mentioned
The Money Plan for Couples: How to Build Wealth as a Team (Step-by-Step) https://youtu.be/AEfhdlB9mcc
The Biggest Retirement Mistakes People Make (Avoid These!) Jesse Cramer https://youtu.be/VxZBGKJVafE
Watch Next
How to Build Your Investment Portfolio (The Portfolio Pyramid!) https://youtu.be/Vn-NXfFWtfU
How to Invest Your First $10K https://youtu.be/GCW1lfujZ2I
The Financial Priorities That Matter Most (By Life Stage) https://youtu.be/h2WFjoekghE
AI Is Coming for Your Job. Here's How to Prepare Financially https://youtu.be/fC86BKAUBxc
How to Reduce Your Car Insurance (And Save Thousands) https://youtu.be/0PPKtvMQ4MA
Connect with Andrew
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LinkedIn → https://www.linkedin.com/in/andrew-giancola-45027b340
YouTube → https://www.youtube.com/@mastermoneyco/
Question for you:
What is one thing about retirement you have been stressing about that you now realize might be outside your control? Drop it in the comments and let the community help you refocus on what actually matters.
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Transcript 11,506 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Andrew Giancola? 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. 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.
0:44 Andrew Giancola? 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. Now, if you watch this podcast on Spotify, Apple Podcasts, or YouTube, you've probably noticed the wood slat walls behind us. We wanted this podcast set to look professional, but also not be a project that was overly complicated. And I found these slat walls on Wayfair, and it completely changed this space. And it's now basically the background that you see in every single podcast
1:29 Andrew Giancola? or piece of content that we record. And that's one of the things that I love about Wayfair. You can shop thousands of products across different styles and budgets, use customer photos and reviews to see how things actually look in real homes, and find something that fits your space. They also have Wayfair Verified Products that are hand-vetted by product specialists using a 10-point quality inspection. And with more than 20 million verified 5-star reviews, you can feel a lot more confident about what you're ordering. I've used Wayfair for this studio and our home, and I absolutely recommend them for your space. So transform your space with pieces that hold up to real life. Join Wayfair Rewards today and get 5% back on every single purchase.
2:14 Andrew Giancola? Head to wayfair.com or shop the Wayfair app for all things home. That's W-A-Y-F-A-I-R.com. Wayfair: Every Style, Every Home.
2:28 Andrew Giancola? On this episode of the Personal Finance Podcast, focus on this in retirement because everything else is just noise.
2:44 Andrew 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 talking through what to focus on in retirement and what not to focus on. If you guys have any questions, make sure you join the Master Money Newsletter by going to MasterMoney.co/newsletter and you can respond to any of those newsletters that come out every single week. And don't forget to 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
3:26 Andrew Giancola? Podcasts, Spotify, or your favorite podcast player. Now today, we're going to be diving into something called the Retirement Equation. And JP Morgan came out with this chart, which we'll put it on the screen right now, that shows the Retirement Equation. And what it talks through is let's look at some of the things that are completely out of your control when it comes to retirement, but cause people a lot of stress. Then it goes into some of the things that you have total control over, and we're going to talk through some of those and how you can have a big impact. And then it goes through some of the things that you may have some control over. And I want you to understand one big thing. People who are successful with their money, they focus on the things that they can control.
4:09 Andrew Giancola? They make sure that they are locked in on those things that they can control, so that moving forward, they are doing the best overall thing for their money. And so I think this is one of the most important topics that we can talk about when it comes to building wealth long-term, is making sure that you focus on those things that you can control. So we're going to dive into each of those areas. Then we're going to go deeper into some of your questions as well. And we're going to do a Q&A in this second half of this show. And we have a bunch of really good questions that you guys sent in. So we're going to be answering five different questions in that Q&A session. Really excited to dive deeper into those. So if that's something you're into, let's get into it.
4:52 Andrew Giancola? So number one, let's look at some of the stuff that is completely out of your control. The first thing that is out of your control is market returns. And I think most people believe they can control market returns, which you absolutely cannot. And when it comes to retirement, there is something called sequence of return risk. And if you don't know what sequence of return risk is, this is when if you retire at a time when there is some sort of pullback or some sort of recession, it can dramatically impact the overall success of your retirement. Where there have been studies done showing people getting started in retirement who had this pullback, they had a 20% pullback, maybe they had a 30% pullback, and they were not as successful in retirement as someone who got started in a better time. Now, this
5:33 Andrew Giancola? is a luck of the draw situation, but you cannot control this. And so instead, you need to act accordingly. You can't control the annual returns in a given year. You can't control recessions or corrections. You know they're coming. You know this is just part of having retirement, and you can't control inflation eroding away at your purchasing power. And so sequence of return risk is something that you really cannot worry too much about. But instead, you can help prepare for this. And so there's a number of different things that you can do about this situation to make sure that you have a more successful retirement. Number one is you can stay invested and stop watching. The average investor dramatically underperforms the market because they pick bad funds. And so if you just stay invested
6:17 Andrew Giancola? and ensure that you're not moving around from fund to fund, this is going to be the first thing that you can do. Number two is to utilize dollar cost averaging. You cannot time the market. You're not going to be able to time when it's at its bottom. You're not going to be able to time when the market is at the top. So instead, what smart investors do is they decide to dollar cost average, meaning they invest the same amount every single month in their investment plan. And so, for example, every time you get paid, let's say you want to invest $500 per month. Well, each time you get paid, you take $500 and you invest those dollars whether the market is up or the market is down because you understand that you can't time the market. All right. Number three is to build a cash buffer in retirement. This is the number one thing that you can do to combat against sequence of
7:01 Andrew Giancola? Return risk is have this cash buffer and many times you want to consider building this cash buffer over the course of a few decades and the reason for this is because as you start to build out your emergency fund you can expand it a little longer and a little longer and a little longer or the reason for this is as you start to build out your emergency fund then you can invest some of those dollars and allow this to grow to build out that cash cushion so that when you retire you may have a couple of years of cash on hand that's a fantastic position to be in because if the market goes down and you have cash on hand you can rely on those cash and actually pull some of that cash for your income instead of relying on some of your portfolio because this is going to drastically reduce your overall sequence of return risk and potentially
7:45 Andrew Giancola? ensure that your portfolio long term is going to last longer the next thing you can do is you can diversify across asset classes so when we look at various asset classes like you have stocks on hand maybe you have some bonds on hand maybe you have real estate this is going to help you long term when it comes to some of these market returns to stay diversified over that timeframe and one of the bigger things I like to do too is lengthen my time horizon if your time horizon is short term a lot of times we have seen this time and time again where you can look at the stats of someone holding the S and P 500 over the course of 20 years versus someone holding the S and P 500 over the course of one year over the course of a 20 year time horizon
8:25 Andrew Giancola? historically people have lost money zero percent of the time if you hold those funds over the course of 20 years so long-term investors always win when it comes to building wealth and this is going to drastically reduce the overall risk that you have in your portfolio now the second thing that you cannot control is the tax and benefits policy that is going to happen in this country specifically stop spending energy here stop worrying about changing tax brackets stop worrying about social security benefits and Medicare benefits these are things that are going to be outside of your control in the future now of course this should be part of your financial plan to think through are you going to have Medicare and are you going to have
9:06 Andrew Giancola? social security but you cannot make any changes or impact to this actually being something that Realistic by the time you retire. And so we know over the course of the next decade, we're going to see some changes in social security. In fact, the government has stated this over and over and over again, that we may see some changes because the way that the system is currently structured is not sustainable. Now, what are those changes going to be? Those are outside of our control, but we can control some things that are going to help us impact this overall. Number one is you can start to look at different tax buckets. So you can utilize pre-tax buckets, you can utilize post-tax buckets, you can utilize pre-tax buckets, taxable buckets, and post-tax buckets to help you diversify some of these sources.
9:48 Andrew Giancola? And so this is things like the Roth 401K or the Roth IRA are going to help you get that tax-free growth so you don't have to worry about taxes later on in the line. The 401K, the traditional 401K and the traditional IRA, those are going to help you save on taxes in this given year and the taxable bucket is going to give you full flexibility long-term when you are thinking through this. The second thing is don't bet your retirement on social security staying the same. Too many Americans in this country, they are relying on social security as their retirement plan. And long-term, I would not make that my retirement plan because this is outside of your control. You can't control if you're going to get the full benefit, if you're going to get 75% like a lot of folks think are going to happen coming up and/or if you are going to get even half the amount that you think you're going to get now.
10:34 Andrew Giancola? Social Security is just icing on the cake and that's how I want you to think about it when it comes to long-term wealth building. You want to make sure that you are factoring in your portfolio to cover the majority of the costs that you are going to incur in retirement. Number three is you can use things like Roth conversions as a hedge. So if you expect your taxes to rise in the future, which is a reasonable assumption, given current deficit levels, converting traditional IRA money to Roth during low-income years could be something that you consider. So these are just some of the things that you can do when it comes to tax and benefits policy. But I don't want you focusing your time and energy and thought process on, "Am I going to have social security? Am I not going to have social security?" This is outside of your control.
11:19 Andrew Giancola? So again, you focus on the factors that You can control and the things that help you build wealth long term. And that's going to help you when it comes to some of these situations. All right, next, let's look at some of the things that have some control. So you have some influence on this, but you may not have every influence on this. So the next one is longevity. So longevity is something that when it comes to retirement, we don't know how long we're gonna live. We don't know how long we're gonna be on this earth and how long we're gonna be blessed to be around. But one thing we can do is make sure we do everything in our power to prepare for this. So you can't choose your genes, you can't choose your, some of your pre-existing conditions, but we can treat health as wealth. And I would do a couple of different things when it comes to your health to make sure you understand where you are when it comes to longevity.
12:03 Andrew Giancola? So step one is I would get a full annual physical every single year. Even if you're healthy right now, making sure you get an annual physical and making sure you get your blood work done every single year is so incredibly important. I did this as of recent and I had no idea, but realized pretty quickly that I have high blood pressure. And so when I did this, I made a lot of changes to my diet. I made a lot of changes to my exercise plan to help combat against this. Step two is I would prioritize resistance training and cardiovascular training as much as you possibly can. This is something that I prioritize every single week. I make sure I at least get four cardio sessions in and at least five strength training sessions in, because those are two of the biggest predictors of longevity long term.
12:46 Andrew Giancola? Three is sleep seven to eight hours every single night. Making sure you get enough sleep is gonna help preserve your longevity. It's gonna help you be productive at work. It's gonna help you honestly make more money by getting more sleep. So making sure you're prioritizing that. And if you don't get a good enough sleep right now, I highly recommend the book, Why We Sleep. That one changed my life when it came to looking at why we sleep, why it's so important and how you can improve your sleep overall. Now, step four is I would highly encourage you to try to figure out a way to manage your stress. Exercise and sleep are gonna be two big factors that help you do this. But I would encourage you to maintain strong social connections and making sure you're just managing those stress levels as much as possible. Also, step five, don't smoke, limit alcohol.
13:29 Andrew Giancola? These two alone can add years on to your life, and I think it's very, very important. For those of you out there who are weakened drinkers, weakened smokers, try to avoid that or limit it as much as possible. And then plan financially for a long life. You want to plan as if you're going to be living to 100 because a lot of us, I think in the age of AI, are going to be living a lot longer. And so when we build out our portfolios, we want to make sure that we are planning for this long-term and longevity, especially if you are very health-conscious as I am. So, health is a huge component of what I do and what I think about every single day. There's a lot of things I do for my health now, and I will talk more about those as we have some more Health Corner episodes. So, longtime listeners know, we've had these episodes in the past that we call Health Corner, where I talk about some of the things that I'm doing for my health, and a lot of
14:14 Andrew Giancola? you have sent me emails asking for those back, so we will bring those back as time goes on here. Really, really excited for that. Now, another thing that you have some control over is your earning power. So, earning power is something that is going to have a huge impact on your retirement long-term, but this is something where you don't have full control over, especially if you are not controlling your own destiny and running a business, but you do have some control over. So, what I would do is, A, making sure that you're investing in high-demand skills, like certifications, courses, those types of things. We talk a ton about increasing your income here. Two, making sure that you are focusing your time and energy on your income, investing dollars in certifications, investing dollars into training, maybe learning more about AI so that you can increase your income over time. This is going to help you dramatically when it comes to retirement because you can get
14:58 Andrew Giancola? more dollars into things that actually matter to you that are going to help you long-term. Number three is if you can develop a second stream of income somehow, or starting a side hustle, or starting a side business that maybe brings in enough to really boost your retirement savings, that can be a huge factor. Just saving an extra $10,000, $20,000, or $30,000 per year would dramatically reduce the amount of years that you would have to work. And then the last one is delay retirement if possible. Each additional year of work is going to add contribution, it's going to avoid withdrawals, and it shrinks the number of years that your money needs to last. And so, you being able to delay retirement if you want to, for most of you out there, I want you to retire as early as you possibly can, but delaying retirement is something
15:41 Andrew Giancola? you can do if you are unsure about your portfolio. So, that is the other thing that you have in your control when it comes to some of these areas.
15:50 Andrew Giancola? All right. So the next one is what do you have total control over? Total control is going to be this area in your life that you want to make sure that you are focusing the most time and energy on. And for most of you out there, these are the areas that we talk a lot about in this podcast. We talk a lot about this in Master Money Academy, and we talk a lot about all of our content across the board about some of these areas that you can control. One is saving versus spending. So obviously figuring out the difference between how much you are saving versus how much you are spending and how much you burn every single month is going to be a key factor in controlling your retirement. I would argue that this is the biggest lever in the market equation. Why? Because when you are looking at this, the difference between saving and spending, we know that this is called the gap, and the gap is where wealth is built.
16:34 Andrew Giancola? This is where you can take those extra dollars, put them towards your financial freedom, or put them towards things that you actually value, and use money as a tool. That is the key when it comes to this, is using money as a tool. And so you can figure out exactly how much you need in retirement. So saving versus spending is one of those things that you can control. Try to get to a point in time where you understand what's your retirement number. If you don't know what your retirement number is, we have a free retirement calculator that you can check out at mastermoney.co/resources, and it'll take you step by step through the number so you can figure out exactly what your retirement number is. The next thing that you can control is your asset allocation and what you're investing in. So you can figure out what your risk tolerance is, decide what you want to invest in,
17:17 Andrew Giancola? and ensure that you utilize that to build wealth over time. Because your risk tolerance is one of the most important areas, and then you can start to develop that asset allocation. For me specifically, I have a pretty aggressive asset allocation because I am in growth mode still. I want my portfolio to grow over time. So I have a high portfolio in stocks and businesses. For some people out there, maybe you are getting closer to the timeframe where you want to be in preservation mode. And if you are in preservation mode, then you're going to have a higher segment of your portfolio, potentially in bonds. And so between these two things, this is the way to think about building out your portfolio and your asset allocation, to choose where your money lives. So those are the two areas that you can control. Making sure that you understand the areas
17:59 Andrew Giancola? Retirement that you can control, the areas of retirement that you cannot control, and the areas that you have some control over will help you so much understand where to focus. This is going to help you focus all your time and energy. So you're not worrying about things that you don't have to worry about. It should be a relief to you to know that some of these things I cannot control. There's no way to control market returns. There's no way to control what is going on in the market. So instead, you've got to focus on those areas that you can control. So hopefully this was helpful. The goal is to bring as much value as possible to you guys with these. And so let me know down below in the comments if there are some areas that you've stressed about in the past that you've really realized, hey, I can't control this. This is something that I really need to focus less on. So I can make sure I'm building out the best retirement plan for me going forward.
18:43 Andrew Giancola? All right, let's jump into the Q and A.
18:47 Andrew Giancola? All right, so question one comes in from Taran. So my husband and I have an estate plan, but we have not organized the documents yet. A physical document feels risky to keep at home. And a lockbox requires sharing the code with family and keeping it digitally feels even riskier. What is the best way to store and organize your estate planning documents? So there's a couple of things that you can do, Taran. This is a wonderful question and something we have not covered yet on this podcast. So really excited to kind of dive deeper into this and talk through a few things that we do. So the first thing I would do is separate the originals from the copies. So when it comes to estate planning documents, there's going to be the wet signature copies that you've signed. Those are going to be the ones that you want to separate out from some of the copies that are on hand. The second thing I want you to do is look at investing in a fireproof safe.
19:31 Andrew Giancola? Now you can get a fireproof safe that is relatively cheap. And it is something that you can have on hand in the house for other valuables and belongings. But this is going to help you make sure that you store the originals in that safe. Now you can also do a safe deposit box at a bank. But in some states, that box can be sealed the moment the account holder dies. And so there are some caveats to this. We want to make sure that we are thinking about as we go through this. So a home safe avoids all of that mess and ensures that you have this on hand. Now, step three is you can keep a scanned original or certified copy with your estate attorney. So my attorney, for example, has a copy of all of my specific documents. So those are on hand and so that if anything were to ever happen to you, you could tell your family, "Hey, just call our attorney.
20:15 Andrew Giancola? Here is the phone number and they're going to have the copies for you." You can scan and store everything on an encrypted vault if you want to as well. There are places like Trustworthy or EverPlan. Those places can help you make sure that you have an encrypted vault on the web. If you are worried about keeping it in a drive or in something like Dropbox, then that might be a more safer solution. And then also you can store the passwords with a password encryption place. So you could do like OnePassword or Bitwarden. There's a bunch of other platforms out there that have these, but that'll help you, A, store the password. Then B, you can have the, if you use something like Trustworthy or EverPlan, that's going to help you double up the encryption there. Now, this is the most overlooked piece, and this is the thing I think most people need to do, is you need to write a letter of instruction.
20:57 Andrew Giancola? So you need to make sure that everyone knows exactly where the documents are, especially specifically your executor. And so the first thing that should be in there is where the originals are stored and how to access them. So if you are putting them in a safe or you are putting them somewhere safe, they need to know exactly where those are. Number two is your attorney's name and contact info, obviously. You would be amazed at how many people do not know this information when someone passes away and they are the executor. Three is the list of all of your accounts, institutions, and account numbers. This needs to be all in one spot. We call this the dead box, but this is something where you have all of this stuff in one place so that they can utilize that. Insurance policies and contacts are another one. If you have life insurance or if you have term life insurance
21:41 Andrew Giancola? or whatever other insurance you have on hand, you want to make sure that you have a place where all of that stuff is stored so they know where to access it quickly and they don't have to dig through all of your stuff to go and find it. It's already stressful enough to lose a loved one. And then when you have to double down and go try to find all the documents that you were looking for, it is not the best situation overall. Also, you want to make sure that they have at least the master password to where you are storing all your passwords. So digital asset access, things like your OnePassword account or if you have something like Bitwarden, you can utilize that as well. And then the location of the home safe and how to open it. Obviously, you need the code in the location of the home safe to make sure that that is on. On hand as well. So all of those are going to help whoever is your executor,
22:25 Andrew Giancola? understand where everything is. And so just making a letter, a list, it could be a one pager to show where everything is, is really, really important. Now, I've also seen people create binders for this and they have binders for, hey, here's where the bank is, here's all the bank's information, here's where you know, the safe is, and here's all the safe information, here is the attorney's information, they can tell you, you know, the rest of this kind of stuff. And so this helps a lot of other people create a little binder so that they have that in place as well. Now, if you're trying to think through the sharing the code problem, there's a couple of things that you can do. One, you do not need to tell your family the code today to the safe or whatever else. You can actually give the code to your attorney and tell them to release it to your executor upon death. This is going to be one of the easiest ways to get this done is then you can, you know, you can get creative when it comes to estate
23:09 Andrew Giancola? plans. And especially if you do this through an attorney, they will be able to do pretty much whatever you want. So you can kind of ask these questions to them as you get this started. Also, you can use a sealed envelope with a trusted third party and make sure that they have that on hand and/or you can use a password manager with a designated emergency contact who can request access after a specific waiting period. So that's another thing that you can do. And then what I want you to do is when you have this plan in place and you start to set up what we call the dead box, but when you start to set this up, you can review this every single year. And so when you go back and review it, make sure everything is up to date. It's exactly how you want it. Too many people let too many years go by. And so I recommend reviewing this annually. Now, if not annually, my specific attorney has always told me, hey, why don't you just review this at least every three years to make sure you're on top of this. A lot of things change
23:54 Andrew Giancola? over the years and you want to make sure that you have all of this stuff in place. So hopefully that helps you guys out. Congrats on putting together your estate plan. Again, getting the safe, putting your documents in there to keep them safe, and then using your attorney to kind of help lock up passwords and other things that you want. And then they can give it to your executor once it's time. Now, your executor needs to know that they're the executor for this to work. I have seen people in the past not even tell specific folks that they are the executor and they get contacted after someone passes away. But making sure you're in constant communication with your family is going to be very, very helpful. Even if you don't want them to know the specifics, you want to make sure you are talking to them and Contact with them so they understand what some of the next steps are and where some of this stuff is and then giving your attorney as much information as possible, you can customize
24:38 Andrew Giancola? how people get stuff. I think that is one of the best things that you can do and one of the best investments you can make, especially if you have very specific requests or very specific instructions. So I hope this helps. Congrats on getting all this stuff together and let me know if you have any additional questions on that. And so, all right. So the next one is from Zakiya. I have heard you talk about paying bills on credit cards to earn rewards as long as you can pay it off right away. But some billers charge an extra service fee when you pay by credit card. At what point does the extra fee negate the benefit of the rewards and how do I know when it's worth it and when it is not? So this is a great question and a great thing to actually pose because there are some credit card companies that will charge anywhere from 1% to 2% when you are, you know, charging on a card. I've seen some as high as 3%. And so, most credit
25:23 Andrew Giancola? cards are going to give you points anywhere from 1% to 2%. And so, when you're looking at this calculation, a lot of times, if they are charging 3% and you're only earning 1% back, then it is not worth it whatsoever. So if there is a fee on hand for using a credit card, I always shift to using a bank account. For example, the lawn care company that I currently use has a 3% fee if I pay via credit card. So instead, I pay through my bank directly and that is when I know I'm not going to lose money and pay that 3% processing fee. Instead, I'm going to automate the process and just use my bank account instead. So if there is a fee, a lot of times, I will avoid using a credit card. It is just not worth it. Now, there are a couple of situations where paying the fee actually makes sense. One is if you're hitting a welcome bonus and you're really trying to hit that welcome bonus and maybe you're on the fine line and you haven't hit it
26:08 Andrew Giancola? yet, but you need this purchase to kind of get over the hump. That could be one reason to do this if you're on the line. But for the most part, just trying to find other purchases that could help you get over that hump is much more beneficial overall. Two is if your card earns in a high category multiplier. So let's say, for example, you know, if it earns 3%, 4%, or 5% in a specific category and you're spending on that category and the delta is 1% to 2%, then you can look at doing it there. Or if the points are worth more than one cent each with some of the transfer portals and some of the things that you are doing there, it may be Worth it there, or if you're stacking towards a bigger benefit. But outside of some of those different things, for the most part, I would avoid the extra fee. And I would just pay it either via my checking account or I pay it via a debit card.
26:51 Andrew Giancola? Whatever one is easier, as long as those don't have fees either. That's going to be the best way to do it. And if it is something that is recurring and you want to make sure you're still automating it, you could do automatic bill pay through your bank and go through the process that they have there. So that is the way I would look at that, but it is not worth it if you are losing money with a credit card, because that's the only reason to use a credit card is A, to make sure you get some of those points and miles, and then B, you get some additional protections. But it's nothing that is way more valuable than something like a debit card or your checking account. So if they do charge a fee, I would just go with the debit card or the checking account. All right, the next one is from Matt S. So I want to open my investment accounts for my kids, but they do not have earned income. So a Roth IRA is off the table. I'm deciding between a brokerage account in my name or a custodial account.
27:34 Andrew Giancola? I want flexibility and I am not comfortable doing a 529 since college is not guaranteed. What is the best option? So really good question, Matt. And this is something for all the listeners out there who have not heard this. To open a custodial Roth IRA for your kids, your kids must have earned income. So they must have to either mow lawns, they could, you know, work somewhere, but they must have earned income to contribute to a Roth IRA. And then whatever they earn in that given year, that's how much you can contribute to a Roth IRA, all the way up to $7,500, which is obviously the max. So if they earn $2,000 in a given year, you could only contribute $2,000 to that specific account. And so if your kids do not have earned income, maybe you have younger kids or they just don't have earned income, then you only have a couple of options left.
28:17 Andrew Giancola? A lot that people turn to are things like UTMA's or UGMAs. Now, these are accounts where you are the custodian, but the account is actually in your child's name. And so because of this, depending on what state you live in, when they turn age 18 or 21, the account automatically goes to them. This is actually the reason why I don't use this account. So you get some tax benefits when it comes to this, but it is not something I'm interested in using because I have less control of the account and when it goes to my kids. And my thought process originally for this was, what if I have a kid who just is not responsible with money? And I know they're gonna blow this entire account on something like a brand new car, or whatever else kids like during those times. Well, then that was something I was not willing to trade off for. I'm not saving all this money so they can go blow it all at once.
29:01 Andrew Giancola? So instead, what I have done is I actually use a taxable brokerage account. Now, the taxable brokerage account is not the optimal place for this. It is not the perfect solution, but it is the solution that allows the most flexibility. And so what I do is instead, I will open a taxable brokerage account in my name. And then the beneficiary of that account is going to be my child. Well, now it's actually my trust, but in my trust, it states that this specific child is going to get that. If you don't have a trust in place, you just put your child as the beneficiary is the way that I originally did this. And so if something were to ever happen to you, the account would still go to directly to them. But if you are building wealth over time for them, then you can give this account to them whenever you choose. So you can choose to give it to them later on down the line.
29:46 Andrew Giancola? You can choose to give it to them when you pass away. You could choose to give it to them when you feel as though they are ready to have this account. And so this gives you additional flexibility. And if you invest in this account over time, it is very powerful, some of the things that you can do. Now, a lot of people will ask, well, what about a 529 plan? And Matt already mentioned that here, but a 529 plan is only for educational savings. So you should not be saving a 529 plan for anything else outside of saving for education. And if you are unsure about that, or you're unsure if your kids are gonna ever go to college, then utilizing some other way to save and invest is gonna be a much more preferred option for you. There's one other account we haven't talked about, which is a newer account, and they call it's called a Trump account. Now, in the Trump account, this is an account that is worth it for the free money,
30:29 Andrew Giancola? but I don't think the additional benefits are as worth it as some of these other accounts, just because again, you have reduced flexibility. So get the free money always with the Trump account, but right now as it stands, I am not using Trump accounts for my kids. Instead, I'm still following the taxable brokerage account and/or custodial Roth IRAs when they start to have earned income. And so that's the area where I think those are the two most powerful account. One is just because of the most flexibility, but the second one is because they can get that tax-free growth, which long-term is really, really powerful. And the last thing I will say is we do have A really cool plan that we've kind of mapped out a couple of different times where we talk about, you know, the newborn account. And so what we say is opening a taxable brokerage account when your baby is born, and you put a thousand dollars in that taxable brokerage account. And then every month, if you can afford it,
31:13 Andrew Giancola? you put a hundred dollars per month into that account. And then every birthday and every Christmas, you put $250 in that account. Now, by the time your kids turn age 18, you have a little bit over $80,000 in that account, which is really cool. That's absolutely fantastic. But if you never contributed another dollar, by the time they turned age 65 and they got a 10% rate of return, they can have over $7 million inside of that account. And so this is the power of getting started early and having a really long time horizon. It's going to help you tremendously. And so you can set up systems like this for your kids. What if you can only contribute $25 a month? Nothing wrong with that whatsoever. That's absolutely fantastic. You can still make your kid a multimillionaire
31:54 Andrew Giancola? just by investing small amounts of money over time. It is really, really cool what you can do for your kids if you just start early enough, even if it's a small amount of money. I don't care if it's 10 bucks a month. Every single dollar you invest is going to compound for the next 30, 40, 50 years, depending on whenever they need it. And so this is a really, really cool thing. Also, a lot of folks now, if you've ever read the book Die With Zero, basically what Die With Zero is arguing is that your kids are actually going to need this money, you know, in their 20s and 30s when they're building a family or they're starting off their career, instead of giving it to them way down the line. Well, this allows you for that additional flexibility to give it to them when you feel as though they need it, which is really, really cool as well. The last thing I'll say is if you do plan on going with the 529 plan,
32:34 Andrew Giancola? you do have the option, based on Secure Act 2.0, to roll over $35,000 into a custodial Roth IRA for them. So even if you wanted to get up to $35,000 into a 529 plan, you do have that option to roll it over into a custodial Roth IRA. But you have to have the account opened up for a certain time period, which I think last I checked it was somewhere like, I think it was 15 years that you had to have that account open. So that is going to be something to definitely double check. If you do want to save for college, but you are just unsure if your kids are going to go to college, well, that is another option that you have or another out that you have when it comes to saving for your kids' college. So listen, congrats on thinking about this. Congrats on saving for your kids or thinking about ways to build wealth for your kids. And the biggest thing you could do for your kids is obviously teaching them how to build wealth as well.
33:19 Andrew Giancola? But really, really cool that you're doing this stuff. So congratulations to you. Let's jump to the next question.
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38:32 Andrew Giancola? So I'm a dental assistant earning under $80,000 and my income barely covers my bills. My husband used my credit card to take on debt that we cannot manage. How do you invest when you have very little left over? And how do you budget when there is almost nothing to cut? And when should someone consider declaring bankruptcy? So first of all, and this is from someone anonymous, but first of all, I am so sorry that you have to go through this. This is one of those things where my heart hurts reading this kind of stuff. Because it is so incredibly important that we find a way to solve this problem. Okay. And so I am so sorry, my, my heart is going out to you just for having to go through this.
39:12 Andrew Giancola? And let's talk about a couple of things that you can do here to make sure that we can kind of get ahead with our money and get ahead with some of this stuff. But first, I think you need to figure out where you stand. And so going to, you can go get like a free credit report. You can go to annualcreditreport.com and you can pull your credit report. But I also want you to pull your husband's credit report to kind of see where you are. You need to see every single account. You need to see what is going on and make sure there's not any surprise accounts that you are not accounting for right now. Number two is I would take your credit and I would freeze it at all three credit bureaus. So that this does not continue and it does not happen moving forward, especially if this happened behind your back. I want you to make sure that this, your credit cannot be accessed going forward. And so you Call up Equifax, you call up Experian,
39:56 Andrew Giancola? and you call up TransUnion and you get your credit freeze. Well, actually nowadays, you don't even have to call. You can go to the websites, sign up for an account, and actually get your credit frozen that way. And it's actually a pretty quick process. This ensures that nobody can open a credit card in your name. Nobody can open a bank account in your name. Nobody can do anything like that whatsoever. And only you can unfreeze these when you want to open up an account or something else in your name. So that's a very important one, okay? Because this is one of the underutilized areas that most people have that they need to know more about. The next thing I would do is I would have a direct conversation with your husband. And I would sit down and have a real conversation. Because what happened there is not just a credit issue. It's also a partnership issue. You both need to be on board,
40:40 Andrew Giancola? and you both need to figure out exactly where you stand. And if there's financial abuse going on or anything like that, we want to make sure that we get some help or want to make sure that we have some way for us to have a conversation about this. And so that is the next thing I would do is making sure you have this conversation once you freeze your credit. Once you pull the credit reports and know exactly where you stand, then you can start to have an open conversation and make sure you both get on the same page. Then every single month, having that 15-minute money meeting is going to be very, very important. If you haven't heard our recent episode, talking through how to manage money with a spouse or a partner, that is going to be one that is very, very helpful long-term. Now, next, when you're talking about how do you invest or how do you get saved or how do you get ahead when you don't have a lot left over or anything left over? The starting point is just to get started small. So capturing your 401k match is the first thing I want you to try to do.
41:25 Andrew Giancola? If your employer offers a 401k, try to get the full match and see if you can start there. Because if you can get 3% in your 401k and your employer matches 3%, well, at least you're starting with 6% every single month that you can get the ball rolling and invest it. That at least is going towards your retirement and is going to be a good starting point. Now, the next thing we want to do is we want to find money. And so when it comes to finding money, we want to call all of our bill providers and figure out, is there a way to negotiate our bills? You can negotiate almost any bill that you currently have. And I know you said there's not many other places that you can slash currently, but can you negotiate some of these bills down to reduce the overall expenses? And then when you do get a bill reduced, put it towards debt or put it towards... You're investing long term to make sure that you have that paid off.
42:06 Andrew Giancola? Okay. Next is let's look at the big three expenses, housing, food, transportation. Those are the big three that have the largest impact overall on your bottom line. You say you make $80,000 per year. I don't know what your household income is fully, but if you make just under $80,000 per year, looking at your household income and seeing if we can reduce some of those large expenses can be helpful. But the big three are the big ones, housing, food, transportation. Those are the ones that we really need to look at. Increasing your income is going to be the next thing because if you can't cut back expenses, the number one next move is to increase our income. That is the lever that can grow infinitely, and that's the one area we must pull. For a lot of folks out there, when you're looking at your spending, if you can't cut back anymore, it's the only answer.
42:47 Andrew Giancola? It's the only thing we can do next is learn how to increase our income or find a way to increase our income. And so this is going to be something that if you are in nursing, is there certifications that you can get to increase your income to do training? For example, my sister in law is a nurse. She then became a business owner. She owns owns an aesthetics location, but she actually trains other nurses on how to do aesthetics. And she makes really good money doing that. And so is there things that you can train people on? Are there things that you can help out in terms of doing stuff like that? That could be another way to increase your income. Do you have a business idea? Do you have other skills outside of work that you could work on? Increasing your income is really important. If your husband can also help increase his income, that could be a win win situation. So you can get this debt paid off. Another big thing is I would look at selling items in the house.
43:30 Andrew Giancola? So if you have stuff in the house and you have this big debt payment, making sure that you get rid of stuff that you do not use anymore. Use Facebook Marketplace. I don't care if you're selling it for $10. I want you to sell as many things as you possibly can that you do not need or you do not use anymore. Sell old clothes on eBay clothes go for crazy prices on eBay. You can sell shirts. For example, you can sell like golf polos, shirts, shoes, all that kind of stuff can be sold for 20, 30, 40 bucks at a time. Every dollar is going to help in this situation. And so finding ways to find money is very, very important. Now, when it comes to bankruptcy and kind of thinking about that. What I would do is I would have a conversation with maybe a nonprofit credit counselor.
44:10 Andrew Giancola? If you go to NFCC.org, you can find an NFCC certified agency and the consultation is completely free and they can help you look through this as well. And they'll review your full situation and suggest a debt management plan. So a lot of times they can help you look at this and say, hey, now you don't have to go through bankruptcy. I'll look at your entire situation. I'll help you step by step to figure out exactly what you need to do next. And then they can help you through that. Or they may tell you, I would file bankruptcy in this situation. So that is definitely something to do. And if you do have to file bankruptcy, then you definitely want to talk to a bankruptcy attorney and have that conversation. Now, I'm so sorry that you have to go through this. I hope these steps are helpful and really I think increasing the income is going to be the biggest point in time of the lever. I know that's easier said than done. I know it's one of those things that you were probably tired of hearing it, but it
44:55 Andrew Giancola? might be the only solution. I'm so sorry you have to go through that and someone else creating this debt problem for you. And really in reality, sitting down and having a conversation on how you both are going to get out of this is the biggest overall step in this whole ordeal. So pull your credit report, freeze that credit and start to have that conversation and be honest and real about this because this is one of those areas that is so incredibly difficult. So I'm so sorry you're going through that. And if you have any additional questions about that, please let me know and we'll be happy to help. The last question is from Anita. So Anita says, I am almost 70 and always thought reverse mortgages were a bad idea. My financial advisor told me there are situations where one might make sense. I moved six years ago and still have a mortgage.
45:37 Andrew Giancola? What are your thoughts on reverse mortgages and when do they actually make sense? So really good question, Anita. I'm going to be straight with you. I am not a fan of reverse mortgages whatsoever. The fees are high, the interest compounds against you and they quietly can erode the equity that your family has in your specific home. But that said, your advisor is not wrong and there are some situations where they could be right, but it's not something I would probably ever consider for anybody in my family specifically. But I will run through this so that you can kind of think through this. So for those of you who don't know what a reverse mortgage is, this is where people who are over the age of 62, they can actually borrow Against their home with equity. So instead of you paying the bank, the bank will pay you either in a lump sum or monthly payments,
46:22 Andrew Giancola? or a line of credit. And the loan does not come due until you sell the home, or if you move out for more than 12 months. So a lot of people will do this. And this is a way for them to pull income out of their home when they don't have any other options. When they're at a point in time where they need more income, they don't have any other options. And so they're pulling the equity out of their home. And then the bank's thought process is, okay, well, once they sell this home, they'll have enough to cover. Obviously, they're not going to let you borrow against the entire amount of the home, but they give you a portion of the home where you can pull as an income source. Now, there are some real costs to this that you need to understand. Reverse mortgages have some of the highest fees in lending. And there are a lot of predatory reverse mortgages out there, in my opinion. You can expect origination fees are going to be really high.
47:06 Andrew Giancola? Mortgage insurance premiums are going to be high. Servicing fees and closing costs are all really high, and they can total 3% to 5% of the home value upfront. So on a $400,000 home, that can be anywhere from $12,000 to $20,000 before you even see a single dollar. And then the interest compounds on the full balance. So this is something that you really need to note, including those fees. So the interest is compounding against you. Now, there are some non-negotiables with this as well, because you still have to pay property taxes. You still have to pay your homeowner's insurance. You still have to maintain the home. And if you fall behind on any of those, the loan can be called, and you can lose the house. So I have heard of people losing their house because they did not maintain their home properly within the parameters of their reverse mortgage.
47:49 Andrew Giancola? And so you need to kind of run through a number of different situations to see where it makes sense. So if you plan to stay in the home for life, and you have no heirs, you want the property, and you're not planning on passing this house down, potentially tapping into some of the equity could be something that you do. And if you really have no other options, that could be a possibility. So those are possibly some of the situations that it could make sense. But there are also a lot of situations where it may not make sense. Because if you want to leave the home to your kids, well, typically, when you are using a reverse mortgage, this could compound against you. And a lot of times, you may be forced to sell the house if you take on too much. And so you really want to run the numbers carefully on And be very cautious when it comes to reverse mortgages. So I would consider the alternatives first. This is what I would do in your shoes, especially if it's something that's a little bit more difficult.
48:34 Andrew Giancola? One is I would consider downsizing. Can you sell the house? Can you make a profit on the house? If you can't, then really a reverse mortgage doesn't make a ton of sense anyway. But if you could buy something smaller with cash, or maybe just find something else and rent and then invest the difference. That's one option that you have on hand. The second option is if you could look into a HELOC. Now, a HELOC, if you still qualify, is a traditional home equity line of credit. It usually has lower fees, though it does require income to service a HELOC. So that is one thing that you must note. You can also look at refinancing. So if rates have come down, you can lower your current mortgage payment by refinancing that house, depending on when you got the house. Or you can cut housing costs directly, find a roommate who possibly is retired, who wants to live there, or move to a lower cost of living area.
49:18 Andrew Giancola? Those are some things that I would consider first before I ever did a reverse mortgage. But if you still want to explore this, I would do a couple of different things. First, I would go to HUD approved counseling. This is usually required anyway when you are looking at a reverse mortgage. And I would try to take this seriously. The counselor can kind of walk you through the situations of what would happen when it comes to a reverse mortgage. Secondly, is if you do try to go forward, I would get quotes from a bunch of different banks, not just one bank, but making sure you look at a bunch of different banks. And then I would involve your family in the conversation if you can, because they need to understand kind of what the parameters are around this. And they deserve to know what's going to happen to the home. And they may offer help that helps you avoid having to go get a reverse mortgage. That's another thing that I would do is just start to have some conversations around this and be open with your family around this as well.
50:02 Andrew Giancola? So again, there are some situations where it could make sense. If you have a massive amount of equity in a house and you know you can sell that house, you know, down the line for a lot more than you paid for it. And you have tons of equity in place, it could make sense if you owned it for a long time. But at the same time, for most people, it would not be something I consider. Like if my parents came to me and said, hey, I'm thinking about getting a reverse mortgage, I would tell them no. And that's kind of the way that I look at this specifically. But every person's financial situation is very different. I am not a huge fan because of fees and anything with high fees, I feel as though is not the good move for most people. But thank you so much for sending in your question. And if you want to get your question answered, you can join the Master Money newsletter by going to mastermoney.co/newsletter, shoot over a message and we will get your question answered. You can also send us a
50:46 Andrew Giancola? message on Instagram at the personal finance podcast and we will go through the DMs and look through your questions and add them to our list to get your question answered. Hopefully you like this format where we talk through, you know, a specific topic upfront. We answer some of your questions on the back end. I really enjoy this process. I really enjoy answering your questions. I think this is a
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51:34 Andrew Giancola? Really, really fun episode and really something that we want to do going forward. So thank you guys so much for being here. I truly appreciate each and every single one of you and we will see you on the next episode.
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