'Money With Katie' Gives Personal Finance Tips

0:00Hey Fidelity, how can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them where you left them. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSE SIPC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. And Neil, today's show is another special holiday episode. Yep, just like Memorial Day last month, we pre-recorded an episode that is a little different from our standard MBD news rundown.

0:45We actually have a special guest coming on the show from the Morning Brew universe. We won't spoil it yet, but we're super excited to have her. But before we jump into the meat of the show, Neil, by the time people listen to today's episode, it'll be Juneteenth. It's one of the newer federal holidays. So Neil, give us a quick rundown of why we're all hopefully not working today. Happy to. So this is the newest federal holiday, only two years old now, that celebrates the end of slavery in the U.S. There's an interesting backstory here. Many people associate the end of slavery with the Emancipation Proclamation that was issued in 1863.

1:21But even after that proclamation, slavery didn't just magically disappear overnight. It was a gradual process. Juneteenth began in Texas as a celebration of the day that 2 ,000 Union soldiers arrived in Galveston a full two years after the Emancipation Proclamation and announced to the more than 250 ,000 enslaved people in the state that they were free. So that day was June 19th, and that's where we get Juneteenth. Right. And despite being celebrated in Texas since way back when, it is now celebrated in all 50 states. That's because President Biden signed legislation back in 2021, establishing Juneteenth as a federal holiday.

2:04Fun fact, it's now the 12th federal holiday. But Biden put pen to paper to bring Juneteenth National in the wake of the Black Lives Matter protests around the murder of George Floyd. And the goal of the holiday is to not only celebrate African Americans and reflect on the history of slavery in the U.S., But it's also just a time for all Americans to learn about and kind of check in on the progress that has and hasn't been made toward racial equality in the U.S. Of course, that's just a very brief overview of Juneteenth and its history. So we'll provide some links in the description to this podcast to learn more about the holiday and dive deeper if you want to.

2:43But I hope you all are having a wonderful day whenever and wherever you're listening to this episode from. Now, Neil, tell us a little bit more about this episode we have coming up. Sure. So as we mentioned, today's episode will be a little different than the standard morning brew daily. Each time we're off, we plan to bring you something different, enjoyable and interesting to consume. Today, we are interviewing another hardworking contributor to the Brewniverse, Money with Katie. Let's ride.

3:15Katie, welcome to the show. We are super pumped to have you. Neil and I are huge fans, and we cannot wait to introduce you to the Morning Brew Daily audience. Thanks for having me. It's a pleasure to be here. No, we're super pumped as well. We just want to give everyone a quick rundown of what to expect from today's special episode. First, Neil and I are going to get into the Money with Katie origin story. Then we'll ask Katie a couple of personal finance questions we've always wanted to know the answers to. before wrapping up with a couple of questions we sourced from our listeners over the last week or so.

3:53That sound good to everyone involved? I'm game. I don't have to answer anything. So this is a delight. All right. I'm up first, Katie. You have had a crazy life and a crazy career so far. You're a personal finance influencer. Your Instagram account has 177 ,000 followers. Your podcast gets hundreds of thousands of listens every week. But five years ago, you had none of those things. That's right. Can you take us through the journey of how Katie Gotti became Money with Katie? Sure. Yeah. So I started learning about personal finance about five years ago, got really into it. But it wasn't until 2020, shortly after the pandemic began and sent us all inside, that I started MoneyWithKaty.com just as a project to keep me busy.

4:43And I found pretty quickly that it was really the only thing I had ever done in my life where I would look up from the desk eight hours later and find that eight hours had passed and be like, oh, I didn't even notice all that time has passed. So it felt very compulsive and it was really easy to stick to it for that reason. But I kind of decided at the outset, I'm going to write two blog posts a week for one year. And if nothing happens after the end of that year, if no one's reading it except for my mom and my next door neighbor, then I'll reassess. I'll double down on my career in tech and try to kind of let this go.

5:24But that's not what happened. About, I would say, eight months in, things really started to pick up steam. And by the time a year was up, there were solid sponsorships underway. The Instagram account had been started and was already growing at a pretty healthy clip. And I think what is increasingly clear to me in retrospect, because this is not my first rodeo content wise, is that I think the secret ingredient to quote unquote making it is just being very earnestly obsessed with whatever it is you are creating content about. So we interviewed Thomas Frank a couple of weeks ago for the Money with Katie show, and he makes$140 ,000 per month selling Notion templates that are just complemented by his YouTube channel, which is highly specific to Notion tutorials.

6:17And in that interview, he said, I tinker around with Notion hacks on Saturday mornings for fun. It's like what I do at 9 a.m. on a Saturday just because I want to. And that really resonated with me. I think I do the same thing, but with all things money. So I think now that I'm where I am, I do think that it would be difficult otherwise to turn content creation into a career unless you are just that obsessed with the craft. You said that this wasn't your first content rodeo. What was your first? I had a personal blog that I started in 2015 when I was in college and I would just publish on it whenever just random musings.

6:58And I did that one for four years, like longer than I've been doing money with Katie. And it went absolutely nowhere. So I do think that, you know, sometimes the first time you strike it, it doesn't really pan out. But I definitely think that has been the main differentiator is that this time it was the subject matter itself was so intriguing to me. Speaking of the subject matter, you are intentionally very open about your finances. You share your purchases and your income publicly on social media, which is sounds very freaky to me. Like, what are you trying to achieve? Like, what is your strategy behind this radical financial transparency?

7:40Maybe talk about what you've learned from, you know, opening the books publicly on the Internet. Yeah. When I started writing about money, I was making a median salary and I was ravenously pursuing financial independence, which meant that I was making a lot of very creative financial decisions to try to save as much money as possible, which really lent itself to content. And I think everything in that fire world, the financial independence retire early world, is backwards. So having stuff is not a status symbol. Having a high save rate is a status symbol. and part of the culture in that personal finance and financial independence community at the time some I would say it still is the culture but especially back then was openly talking about your numbers how much you are making how much you are spending and what you are spending on how much you're managing to save what you are investing in that level of openness was just very much part of the peer group that I was in when I started.

8:47And I really believe in that because I think transparency does help everybody make better choices. If you and I are both earning$50 ,000 per year, and I tell you that my car payment is$150, and then you go to the dealership and they try to tell you that you can afford a$400 per month car payment. If you know someone else that makes the same amount as you that spends less than half that, you're probably going to be reasonably skeptical about what they are trying to sell you on. So I think that all in all, it is a very useful benchmarking tool when you share your numbers openly. And we witness that same type of transparency in other hobbyist groups, people that are like bodybuilders.

9:26They're talking very openly about how many calories they're taking and what their macros are, what they are trying to achieve weight wise. And so when you add real numbers to things, I think it helps everybody. And it was a fun way to just stay accountable, but also to celebrate each milestone. That said, as my personal financial situation evolved, as I began earning more, as my net worth grew, it began to cross into the territory of, in my mind, not being as helpful anymore, as well as potentially a legal liability. So I have not shared specific numbers around how much I earn or how much I have in over a year, really, at this point, but I still share what I spend from time to time where it feels relevant as well as business milestones because the business's revenue is not the same thing as my personal take.

10:18So I think that type of growth journey is interesting to people. And I have really tried to extend that culture of transparency in the areas where it still makes sense to do so and doesn't open me up to legal risk. It's a totally different world than the one we exist in. I guess it's a good problem to have. Like you're succeeding. And so therefore you have to change kind of your playbook a little bit. Yeah, thanks for sharing that with us. All right. So Toby and I are people just like anyone else who have to figure out their finances. And while we don't disclose it publicly, we still have some things to ask you.

10:59No time like the present, Neil. Kind of, yeah. We're not going to get into specifics. But just selfishly, before we get to our audience questions, Toby and I have a few questions of our own around like the current personal finance environment and topics that we're thinking about. And to me, the thing that comes to the tops of mind is that we're living in this so-called like golden age of cash where interest rates have led to savings accounts like apples that advertise yields as high as four or five percent. So I have a two part question around these kind of accounts. Are there any green or red or beige flags I should be looking at when choosing between these accounts, these high yield savings accounts or CDs as well?

11:42And how much should I be putting in these high yield savings accounts as a share of my overall investing portfolio or savings? Yeah, this is one of those decisions where I think most people probably spend an inordinate amount of time thinking about it and thinking about whether or not they should switch for the size of the payoff. So to calculate the value of this choice, I think a quick exercise is kind of illustrative. So let's say you're going to put$20 ,000 in a high yield savings account that has a 4 % yield and a 5 % yield option comes along. So, okay, that's a higher number. Should I be trying to make moves, right?

12:25In one year, the difference between those two is going to be about$200 before taxes or about$16 a month. Interest is taxed like income every year. So after taxes are taken out, you're looking at probably keeping about 75 % of that net. So my point is that it's not really a decision that I would be losing sleep over. I think getting the bigger things right, like what is your save rate? What percentage of your income are you saving for the future? That's going to tell you quickly whether or not you are set to become financially independent at a timeline that you're happy with or your asset allocation, making sure that you're not too cash heavy or too bond heavy in your twenties and your thirties, when you're theoretically in a position where you can be a little bit more aggressive with your long-term timelines, like those types of things are going to have a much larger impact on your long-term financial picture than your high yield savings account provider, or how much that account is paying, whether it be 2 % or 5%, you know, not that it's insignificant if the amount that you're saving is super significant, but just that it is to me, a question that you don't want to, you want to make sure you're devoting the appropriate amount of energy to a question like this one.

13:35So the answer to the second part of it is I think it really depends on both your age and what that cash is for. So if you're not saving for anything specific, you're just storing an emergency fund. These are just your cash reserves. Roughly, we'll call it six months worth of expenses that might skew a little bit lower if you're a renter and you have no dependents. It might skew a little that hire if you're a homeowner who has children, but typically six months is about the benchmark. But holding much beyond that in cash typically creates a lot of opportunity costs in the form of foregone gains.

14:10So a 5 % APY on an emergency fund is fantastic, but it's not going to be the best use of your capital that could be put to more productive use via investment in things like the stock market or real estate or a small business or something else. So in that sense, I think about it as less about the percentage of your overall portfolio that's in cash or cash equivalent and more about what is the end game for this money. And if it's money that I'm going to use for a down payment in two years, great. Like if it's money that you're hoping to save for retirement, that's 30 years away. Well, now cash is likely not the asset class that's going to make sense for you.

14:48That sound you hear is me furiously scribbling notes down in the background because every sentence you say is just dropping gems. Okay, this is my turn, my question now. Hit me. I have Googled this a million times, but I simply cannot stomach another nerd wallet or points guy listicle. I know those sites are great, but what is your favorite credit card or credit cards? Is it one that you really like or do you have a combo platter that you use? And I totally realize that this is subjective and different cards work better for different people, but I guess I just kind of want to hear what your favorites are and some recommendations from you.

15:26The Morning Brew Corporate card. The card that I'm not paying for. Yeah, no, that's a great answer. That's good. No, so my favorite credit card is probably the Platinum card from American Express because of the customer service, the purchase protection, the extended warranty benefits. It's a very diverse set of benefits, but it does come with a pretty steep price tag. So I think unless you are a frequent traveler who likes to stay in nice places, it is probably not worthwhile. Like that is the profile of the person. Like look at the benefits, make sure you are traveling a lot, make sure that you like the types of places that it's going to help you stay in more cheaply or is going to give you more benefits if you stay there.

16:10If you're like, no, no, no, I'm trying to travel once a year and stay in an Airbnb, this is probably not the credit card for you. But I am a big fan of this one. And if you're just beginning a credit card journey and you're interested in getting into travel rewards and points, I would probably go for the Chase Sapphire Preferred card because it's going to grant you access to this very lucrative Chase Ultimate Rewards portal. And you're going to get a great sign-up bonus that's very lucrative, but it has a very low annual fee, relatively speaking. I'm grinning because I have one of those. I was just remembering a few years ago, the reserve card had the most ridiculous reward sign up.

16:51And do you remember that? It was like 100 ,000. Like everyone was getting this reserve card a few years ago. And they've obviously paired that back. But I was just remembering the golden age of the reserve card. The golden age of credit. Before all the banks got wise to the churning and were like, wait a second. I think the 100 ,000 point sign up bonuses on Chase are unfortunately behind us now. But I do think that like as far as maximizing points go, my system is a little bit of overkill. Like I would not recommend people lose sleep or spend a lot of energy on this unless they are just genuinely interested in it and have fun with it, which is me.

17:28Like I have a lot of fun trying to make, OK, I'm going to put food on the Amex gold and I'm going to put this on that card. That's not it's overkill. But I do think that my general recommendation is if you do not have a history of credit card debt or reckless spending, you are going to benefit from spending on a credit card, both in the form of whether you choose cash back or points, you're going to benefit from getting some of that back. But you're also going to get increased security and fraud prevention, which I think is something that we don't often talk about in the credit card conversation.

17:58my identity was stolen a few years ago because someone was able to skim the number off my debit card at some point of sale system and it created this massive headache because they effectively were able to circumvent the fraud prevention department and took like eight thousand dollars out of my checking account in a span of a few hours so i did end up getting it all back but it was not an experience i would wish on anyone and i think that when you when you spend on a credit card you just have an extra line of defense between your checking account and any point of sales system swipe or chip insertion that you're going to be having when you're spending that just can give you a little bit of extra peace of mind too.

18:35That was much better than a nerd wallet listicle. So thank you for that answer. My criteria is what's the heaviest? What makes the biggest clank when you drop it on the table? You know what? Probably platinum or you know what? The black card. I've never even held a black card, but I bet they don't let me in the room where they sell that. Me neither. All right, Katie, thank you so much for answering our questions. Now we want to move on to some of the listener questions we received. And we were honestly blown away by how many emails we got. Like we kept refreshing the inbox and people love you already because a lot of people listen to your show and listen to ours.

19:13So great questions from everyone. We pulled a couple for the show today that we'll ask you in order to kind of get your take much like we just did with our questions. I'm up first, and this question is about emergency savings, and it comes from Brian. And this is Brian talking now. My wife and I have saved up around$20 ,000 in our emergency savings, which equates to six months of expenses, and we are currently investing 15 % into our respective 401ks. My question is when we have to dip into our emergency savings for unforeseen issues like like surgery for a dog, a broken dishwasher, et cetera, should we decrease our investing percentage or even stop it altogether to quickly build up our emergency savings to that$20 ,000 amount?

20:04Yeah. I think this question ultimately comes down to cashflow, but I want to start by saying having six months of expenses and a 15 % save rate is excellent. So well done, Brian. But I think that the urgency with which you replenish an emergency fund is probably going to depend on how much of it you're using. So if you were to totally wipe it out, you probably would want to act with more urgency, reprioritize accordingly to get back up to that three-month mark as quickly as possible. But if you were to shave, say, a month's worth of expenses off, I don't necessarily think that would necessitate stopping the presses on all of your investment contributions.

20:43Ideally, in a perfect world, you could find other areas to cut back with your spending to build back up the savings. But I think if things are tight, that it's not always possible. But those 401k contributions are so valuable every year from both a tax advantage standpoint, lowering your taxable income, and the fact that you cannot retroactively contribute for years past. So that$22 ,500 limit is use it or lose it. And so I would be loathe to stop contributing to that to try to quickly reach another goal if you don't have to. But that's how I would think about it. I would let new cash flow slowly replenish the savings, but just try to avoid completely stopping your dollar cost averaging into your investments.

21:27Cool. All right. So now we have a question from Nathan that comes on the opposite side of the savings spectrum. He writes,

22:03money into it for things that aren't due every month, like annual vet visits and property taxes. Our bills are always paid and we're able to make ends meet, but I know that we'd have a lot more flexibility if we were saving less. So here's my question. Is it possible to save too much? I love this question because I think what I want to commend, um, what I want to commend Nathan for here is that he's never going to be surprised. Like there is no expense that is ever going to take this man by surprise because he has thought it all out tires phone insurance like that's fantastic i do have a question is this a over-the-top savings apparatus like is this one of the more extreme examples that you've seen um i wouldn't say it's over the top or extreme i just think what i really keyed into with this question and maybe he just didn't mention this part but he's mentioning saving.

23:00I'm not hearing him use the word investing. Like he's talking about the long-term and saving for purchases, but I'm not hearing talk about investing, which makes me wonder, particularly for those long-term things, are you literally just putting money in a savings account or are you putting that money to more productive use in the stock market? Because I think, for example, they're talking about a kid's college education. I think in the full question, he the kid is not even they don't have a child yet like if you're talking about saving for a kid's college education that child has not even been born you're looking at a minimum 20-year timeline like in no world should that money be in a savings account like that would be a prime example prime candidate for you want to be investing that money putting it to more productive use so that would be my first call up but i think the heart of the question though comes down to, am I prioritizing my future too much at the expense of my present?

23:54And I think that is definitely possible. It's just not a personal finance question that we hear about very often because most people have the opposite problem where they're prioritizing the present. But when you're first starting out, you're trying to get a cash savings bill. Obviously, sacrifices are going to be necessary, but I do think this is something that you have to constantly recalibrate, right? And before Nathan and his spouse start thinking about saving money for a kids education 20 years from now, they probably want to check back in with those goals. And hey, are we on track for our own retirement?

24:25Like there are no student loans for retirement. So let's make sure that the money we're saving is going to the highest and best use. And one thing that I think makes sense is pushing yourself to the point where it starts to hurt, where it starts to feel tight. Okay, now you know you've gone slightly too far. You can taper back. I tend to think that once you get a save rate beyond like 40%, you're hitting the point of diminishing returns because going from 10 to 15%, that's going to shave years off your working timeline. The jump from 40 to 45 is barely going to move the needle. The more you save, the less incremental savings are going to make an impact.

25:02Okay. So, Nathan, sounds like you put a great structure in place and it might be time to wonder whether you can pull back a little bit. scale back a little bit. But good job. Yes. But overall, incredible work. Your savings plans are so intricate and are laudable. Yeah. Now let's zoom out a little bit to the big picture. We have a question from Shalia. I've been hoping to learn more about the Fed interest rates and how they affect people of different tax brackets. I never fully understood how it helps or hurt the economy. I know it's kind of a broad topic, but as a middle class working citizen, I'd love to learn more about how the Fed interest rates trickle down and impact me and my family as well as others.

25:47Yeah, super curious question. I love that. And I think this is one of those things where like there's probably a satisfactory surface level answer that will keep things tactical. but I want to acknowledge that you could devolve into an incredibly complicated discussion about this because monetary policy is one of those things where there are a lot of smart people who disagree about what the short and long-term effects of these things are. So to keep it in the tactical realm, I think it's generally accepted conventional wisdom that a higher interest rate tends to hurt consumers in a couple of ways.

26:20Anything that you need to borrow money to buy will now be more expensive because borrowing money is more expensive. So this in practice tends to just mean that you can afford less. And I think in times of high inflation, that is actually expressly the point. They want people spending less. So inflation will slow down more on that in a second. But, you know, you'll see higher interest rates on mortgages, auto loans, your variable rate debt. Debt will become more expensive. But the flip side of that is the higher yields that we were talking about earlier. So So savings accounts, bonds. In the low interest rate environment of the last 10 or so years, there was this saying TINA, which stood for there is no alternative.

27:01If you wanted yield, you had to take on risk. You had to invest in equities. Bond yields, rates on CDs, savings accounts, it was all very low. So in that sense, it can be very helpful. It's also one of the only levers that the Fed can pull to address inflation. but it is an imperfect solution that like arguably is not the right approach in all instances. But it's a rock and a hard place for them because inflation typically hurts wage earners the most whose incomes no longer are going to go as far, but don't benefit from the asset inflation that people in higher income brackets or who have higher net worths are going to benefit from where their stocks and their homes are now worth more.

27:43So I think in general, the way to sum it up is just to say that higher interest rates tends to slow things down, also tends to slow down hiring, suppress wages. But again, all of that is kind of part of what the Fed is actually trying to engineer. And now we're starting to veer into the theoretical territory. So I'll stop there. No, you definitely hit on some of the practical things. And yeah, I mean, we talk about it on Morning Brew Daily all the time from a very macro level. So that is a good kind of zoom in into how it is affecting people personally. Yeah, I think mortgage rates is where you can really see it tangibly play out.