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In today’s episode, you’ll hear from just your Hosts! That’s right no guests to save the day.
As a reminder, Justin chronicles his life at Saving-Sherpa.com and Cody writes at FlytoFI.com
In today’s episode, the guys tackle 10 financial tips they always hear and give their take on what’s true.
Hopefully, you enjoy this special episode!
Listen, learn, and let us know what you think.
Episode Summary
Credit Card Balances
- We discuss why you should ALWAYS be using a credit card
- The need for setting up autopay to pay off the full balance
- Neither of us recommends carrying any balance
- Some think it helps build their credit
- In reality, you’re just setting yourself up to pay a ton of fees
- The actual factor that relates to this is credit history which doesn’t require a balance
Rent vs Buy
- Justin calls out the importance of keeping in mind closing costs, HOAs, insurance, etc
- It’s much more complicated than comparing a mortgage to just your rent
- These things are especially true if you’re moving every two or three years
- If you can go beyond and do things like house hacking, then buying is certainly a great option
- Also, keep in mind the non-money part of the decision
- Owning a house can be stressful and add in more variables to your life
New vs Used
- Justin recommends buying a car that’s 5 years old on a deal
- Then keep that car for two to three years and try to sell before you hit 100k
- Justin prefers these cars to be under $10k
- Cody discusses depreciation and interest rates
- Justin then compares buying a car and keeping it for 20 years vs rebuying periodically
Good vs Bad Debt
- Obviously there is some debt that’s terrible such as credit cards with 15% interest
- Then there is a middle ground where it’s debt that doesn’t earn revenue but allows you to invest more
- Both felt like anything that 4-5% range in interest should just be paid off as quickly as possible
Going to College
- Going to a community college first isn’t a no-brainer
- Many scholarships that universities offer are only given to incoming freshman
- Justin would have missed out on 10s of thousands if he went to community college
- Cody calls out how important it is to just be intentional
- He also calls out the cool trades and technical skills that don’t require a college degree
Filling Up Savings Accounts
- Justin highlights how destructive inflation can be
- It’s also scary to see how many people have avoided investing during the last five years
- These people are often terrified that we’ve hit the top
- Both guys highly recommend buy and hold as well as getting into the market right away
Financial Advisors
- Justin does see value for some to have a tax specialist but doesn’t see the need for a financial advisor
- It may be a good idea to pay a one time fee for an advisor to help set up a plan you’re comfortable with
- That could help you get off the sidelines without being tied down to fees long term
- These advisors often charge at least 1% which can really add up
- You can see how much these fees are costing you by using Personal Capital’s Fee Analyzer tool.
- If the only reason you’re using an advisor is to give you a scapegoat when things go bad, rethink that
- To round it out, Justin cautions employees from having too much of their portfolio in their employers stock
Whole Life Insurance
- Justin highlights that no reputable financial independence writer has recommended Whole Life insurance
- People want to sell you these because the salesman gets a royalty for life
- Whole Life mixes insurance and investing which means neither is as efficient as it could be
- This doesn’t mean you should necessarily cancel your plan if you’re already deep into it
- If you’re really interested in this topic, we covered it previously in-depth
- You can find that episode with Sa El here
- Also, don’t forget to check out our sponsor Bestow for great insurance quotes
Financial Infographics and Rules of Thumb
- Justin really hates these generic infographics
- “How much you should spend on housing”, “What you’re 401k balance should be by age”
- These articles can both enable you and handcuff you
- It enables you to do some minimum threshold but handcuffs you to not go beyond
- If you read that saving 15% is your goal, you may be less likely to shoot for 25% or 50%
- These infographics can also turn people off from chasing goals at all
Increase Pay and Decrease Spending as Much as Possible
- The guys discuss how dangerous it can be to fixate on both of these
- Obsessing can take you too far and lead to burning out
- In reality, just by chasing financial independence you’re already ahead of 95%
- Finding a balance is so important
- There’s also an ROI for both of these things
- You can do a ton of work to increase your savings rate just 1-5% but may barely change your retirement date
- As always it’s important to enjoy your journey to financial independence
Key Takeaways
- It Depends: So many people try to push rules of thumb on each other but it’s important to tailor things to your life
- Don’t limit yourself: The internet is full of answers, but it may give you some that are well beyond what you’re capable of
- Enjoy the journey: We can always make a little more or spend a little less, but always consider what the real cost of those decisions are
Call to Action
Find someone you know who is struggling or just curious about these topics and share this episode with them!
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Learn More About Your Hosts
Fly to FI (Cody’s Blog)
Saving-Sherpa (Justin’s blog)