In short
Renting vs buying a home using numbers (the “5% rule,” opportunity cost, price-to-income ratios), plus debt decisions (good vs bad debt), debt payoff methods (avalanche vs snowball), and whether to go into debt for big life expenses (engagement rings, weddings, home renovations, IVF, education, kids’ education). Also covers “naked lunch” money self-audits, shame around money, and how interest rates (~6.25%) change mortgage thinking.
Guest
Nicole Lapin, money expert and host of Money Rehab on the Money News Network; previously a young reporter at CNBC and CNN; self-taught/autodidact; has an MBA and MPA; documentary filmmaker turned finance educator; experienced losing a home in the LA fires.
Key claims
Homeownership wealth isn’t automatic; rent can win if you invest the down payment difference; housing yields ~3–5% vs stocks ~7–10%. Debt should be evaluated holistically; credit card debt (often 22–30% APR) is especially dangerous due to minimum payments. Lab-grown diamonds/weddings: don’t finance; invest the difference.
Notable examples
Foreclosure and LA fires shaping her emotional stance; credit card example: $5,000 at 20% paid on minimum takes ~23 years and nearly doubles interest; engagement ring: $20k natural vs $2.5k lab, invest the $17.5k difference.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOUnderstanding Financial Anxiety
0:45 to 2:14
Exploring the discomfort around discussing personal finances and education.
“I'm saying that to— How much is your brain, Naima?”
Assessing the Cost of Education
2:14 to 4:36
Calculating the financial impact of an MBA and the opportunity cost involved.
“But I also went to business school and then made the decision to become a documentary filmmaker after doing three years of grad school.”
The 5% Rule in Real Estate
4:36 to 5:50
Discussing the 5% rule as a framework for evaluating renting versus buying.
“you're not getting the maintenance back, and you're not getting the opportunity cost of investing in the market.”
Emotional and Financial Implications of Homeownership
5:50 to 8:48
Examining the emotions tied to homeownership and the financial calculations involved.
“If rent is below that number, then it's better to rent.”
Redefining the American Dream
8:48 to 11:24
Discussing how homeownership aligns with the American dream and alternative routes to success.
“And if you know you're not going to do that, then home ownership is a great forced savings vehicle.”
Disaster and Perspective on Ownership
11:24 to 13:14
Reflecting on personal experiences of loss and how it affects views on ownership.
“How do you look at like homes that have renovations?”
The Emotional Weight of Homeownership
14:03 to 17:42
Discussing how personal experiences shape views on homeownership and stability.
“it made me less attached to a physical home and that idea of stability that I glorified for so many years.”
The Value of Renting
17:42 to 18:04
Exploring the benefits of renting versus owning a home.
“We're going to take a quick break and we'll be back with more with Nicole Lappin.”
The Value of Renting
18:07 to 19:09
Exploring the benefits of renting versus owning a home.
“The truth is that most renovations do not recoup 100 % of their value.”
The Value of Renting
19:17 to 20:36
Exploring the benefits of renting versus owning a home.
“Based on the bestselling novel from Carly Fortune.”
Show all 22 chapters
Navigating Debt and Homeownership
20:45 to 28:00
Discussing the complexities of debt in relation to homeownership and investments.
“And so before we move on totally from this home chapter, it's like one of the daunting things to me about homeownership is the idea of debt.”
Debt Repayment Strategies: Snowball vs. Avalanche
28:00 to 29:04
Explore effective methods to pay off debt while balancing emotions and efficiency.
“you have a bill that's for$50 and it's at 24%, you're like, I have a magical$100 bill.”
Emotionality in Financial Decisions
29:04 to 30:25
Discuss the impact of emotional factors on financial decision-making and shame surrounding debt.
“And I so agree with you on the emotionality of it.”
Assessing Debt for Major Life Purchases
30:25 to 31:24
Evaluate whether it's wise to incur debt for significant expenses like engagement rings and weddings.
“I brought these paddles into Nicole's studio, and she's terrified and confused as to why I have brought this.”
Home Ownership and Debt Considerations
31:24 to 33:58
Examine the complexities of taking on debt for home ownership and renovations.
“After, you know, 30 years or whatever, it will probably be$300 ,000.”
The Cost of Family and Education
33:58 to 36:14
Delve into the financial implications of fertility treatments, education expenses, and family planning.
“all the things that people might be considering to be able to have a family.”
Investing Early: Lessons from the Past
36:14 to 38:19
Reflect on the importance of early investments and the consequences of consumerism in one's twenties.
“best thing you invested in in your 20s and the worst thing you, quote, invested in in your 20s?”
Maximizing Tax-Advantaged Accounts
38:19 to 39:49
Learn how to leverage tax-advantaged accounts for better financial health.
“Is your daughter going to buy us lunch after this?”
Defining Financial Success
39:49 to 42:00
Discuss how to measure financial well-being beyond societal comparisons and expectations.
“It's a good rule of thumb as you're trying to think about passive income, don't fall into the rabbit holes of the internet that's like, you can do this passive thing.”
Navigating Financial Goals
42:00 to 43:33
Learn how to set and evaluate realistic financial goals with self-awareness.
“We have these conversations all the time.”
The Value of Money and Salary Discussions
43:33 to 45:34
Explore societal taboos around discussing salary and the value of financial transparency.
“So that would basically mean for$3 million, that's kicking off$150 ,000 each year for you to live on.”
Understanding Emotional Investments
45:34 to 47:44
Discuss the emotional aspects of financial decisions like buying a home or IVF.
“Like, why do mothers want to eat their babies?”
Transcript
Automatic transcript. May contain errors.0:00Should I rent or buy a home, spend or splurge on a wedding? And how late is too late to learn about money? This is Smart Girl Dumb Questions. I'm Naye Maraza. And today I'm joined by the money expert, Nicole Lapin. And you have the Money News Network. You have an amazing podcast called Money Rehab. And you're, I guess, is it self-taught? Self-taught, autodidact. You were one of the youngest reporters at CNBC, at CNN. And I just have so many questions for you. So I'm so grateful that you're making the time. Thank you. Bring it. All the questions. All the questions.
0:29Nicole Lapin:But do I get to be the smart girl? This is like a promotion. You're the Eileen Goo, and I'm the person whose name we don't know because she was silver. That's what's happening on this episode. So here's the thing. I have an MBA. And yet I know— Yeah, you're the smarter girl. You're the smartest girl. I'm not saying that to show off. I'm saying that to— How much is your brain, Naima? How much is my brain? What does that mean? How much did you spend on your brain? Oh. Have you calculated? No, because see, this is my problem. I don't like to think about money. but I would like to have more money.
1:00It's easier for me to talk about tariffs than it is to talk about my own bank account or taxes or whatever. Is this a common problem?
1:07Nicole Lapin:It is. And there's often a disconnect. And actually people who are in financial services or have their MBA have some of the most shame around money because they think they should know, right? You spent, I'm guessing, 200 ,000 on room, board, tuition, 200 ,000 as an opportunity cost for those two years, I'm assuming. More than. I mean - So like 440-ish thousand is - On that, I actually have an MBA, an MPA. So it was a three-year degree. Then I have four years in my undergrad. So you asked me the, how much is my brain question? And I'm trying to now do the math of if the present value of my brain for the dollars spent on it is more than my present net worth.
1:49It's a great question. Smart girl.
1:53Nicole Lapin:Dumb questions. Typically, if you think about the ROI of an MBA, I like people to think about the opportunity cost of what that would be doing in the market. So if you took that$440 ,000 and put it at regular market returns of 7 to 10 % year over year, after 30 years, you'd have$7.6 million. After 30 years? 30 years. Okay, so we're not there obviously yet. But I also went to business school and then made the decision to become a documentary filmmaker after doing three years of grad school. And my Pakistani parents were so excited, not at all excited about this decision. They're like, oh, you'd like to make films about a band called Sublime.
2:33Great. Great. This is why we invested in higher education. Killing it. I think because I grew up with an older father and I know we've both lost our dads, like I grew up with a sense of urgency and like scarcity of time. So as a result, I haven't thought a lot about money. And I think there's a luxury in that, right? Like I've been fine and I know I can get a job and all the things, but I've been able to take creative risks and I've prioritized for that value versus the financial value. And yet I just think like many millennial women of my age, I'm like, wow, should I have a house by now? I already have those things when it comes to like getting married or having a kid.
3:11But I definitely have that anxiety around home ownership in general.
3:14Nicole Lapin:Why? Because every time you go to a wedding, it's like some aunt will tell you that like paying rent is a waste of money. And they're like, Pakistani people are nosy. They love talking about money. They're like, how much do you spend on rent? And they're like, oh, that is a waste of money. Well, I think this idea that home ownership is propaganda is not true, but the idea that it's the only way to build wealth is completely outdated. And there's a lot of emotion wrapped up into home ownership and stability and safety. You know, I saw my house foreclosed on when I was a kid, and I think about that a lot.
3:43Nicole Lapin:That's invaluable. But I like to go back to the numbers. Listen, I was a poetry major. I did not get my MBA. So I am not a numbers girl in the traditional sense. But when you stick to the numbers in these types of conversations, it actually strips out a lot of the emotion. So there are a few things to think about that quantify this subject of renting versus buying. One of them is the 5 % rule. So the 5 % rule says take 5 % of what that purchase price is. And what goes into that would be everything you can't earn back. So everything you waste. So 1 % to maintenance, 1 % to property taxes, 3 % to the opportunity cost.
4:22Nicole Lapin:Because if you look at apples to apples, you're actually needing to look at the full housing costs, not just rent versus mortgage because you're not taking into account the stuff that you don't get back. The equity, you will get back later. But everything else, like you're not getting your property taxes back, you're not getting the maintenance back, and you're not getting the opportunity cost of investing in the market. The investment opportunity cost. So it's like putting that same money into the stock market into like a whatever ETF would get you. S &P 500 index fund will get you 7 % to 10 % year over year.
4:54Nicole Lapin:Housing historically has yielded 3 % to 5%. Is it negative in some markets? It's like I was reading about how in Las Vegas, the price of a home has like fallen over time. In New York, I know so many people who bought homes, you know, when we're graduating like a decade ago and now their homes are not worth anymore. Well, the thing that you want to look at to equalize this is the price to income ratio. So this will tell you over time how much a house costs compared to your income. So in 1970, it was 2.2 times. Now it's about five times. And in coastal cities like in Los Angeles, it's 12 and a half times.
5:33Nicole Lapin:In New York, it's 10 times. In San Jose, it's 10 times. So the issue with home ownership right now is that prices are much higher than wages are growing. And so the opportunity cost is a much bigger factor in this whole equation. So if you look at the 5 % rule, so 5 % of let's say a$500 ,000 home is$25 ,000. You divide that by 12. So you get your monthly cost. That's$2 ,100. Okay. I'm following the math kind of. This is dumb girl, smart math. Keep going. So$2 ,100 is your threshold. If rent is below that number, then it's better to rent. If it's above that number, then it's more advantageous to buy.
6:15Nicole Lapin:If you're looking at the cost only, again, this is stripping out what the Pakistani lady is saying at the wedding. This is stripping out all the voices inside your head. Yeah, the emotional thing of watching a foreclosure. Exactly. So even you, growing up with that fear and seeing that foreclosure, you have not made the decision to buy a home. Is that correct? Yeah. For me right now, it's more advantageous for my husband and my family and I to be very disciplined in taking what we would have put on the down payment and the difference between the cost of renting versus the overall cost of buying.
6:52Including that 5%. Yeah.
6:53Nicole Lapin:So taking all of that and being really disciplined about investing it. So what I think is the strongest argument to home ownership is the forced savings vehicle component of it. It forces you to earn equity at the end of it. It also gives you a place to stay. I totally get it. Like people come for me so hard on the internet for this. Yeah, it's a very controversial take. Totally. But I want to be really clear. everywhere are scandalized by your take. I'm so scandalous. And here I am just giving you the math. It's great. I love it. But there's a real opportunity cost to that down payment. So again, easy math.
7:29Nicole Lapin:$100 ,000 as a down payment is not$100 ,000. It's in the stock market, your money will double after 10 years. So that$100 ,000 after 10 years becomes$200 ,000. After 20 years, that becomes$400 ,000. But that's not a guarantee, right? Historically, if we look at 50 years of the stock market, that's historically what it's going to yield. And so I want to look at that opportunity cost and truly understand that this math, only maths, if you actually stay disciplined to investing. It doesn't work if you're just like, cool, cool. So I'm just going to use that delta or that extra money and spend it somewhere else.
8:07Nicole Lapin:Or I know myself. Like you have to have true self-awareness to know if your habits are going to stay true to what makes this math math. So what makes that actual down payment earn more money than if it was stuck in housing? If you just look at the historic numbers, it's by putting that extra money to work for you in the stock market. If you're going to do that, it's a better overall investment to rent and then take that extra money of the down payment and the extra that you're spending on all the things with housing and invest it in the stock market. You've just made it seem more complicated to not own a house than to own a house for me.
8:41I'm like, I feel like I need more Excel sheets to not own a house because of the discipline that it would require. But it was so validating until that point.
8:48Nicole Lapin:No, it really does require discipline. And if you know you're not going to do that, then home ownership is a great forced savings vehicle. Over time, at the end, you're going to make three to 5%. You're not going to make seven to 10%. Typically speaking, do not come for me. There are markets. There are things. I know. But I'm just looking at the data. Yeah. You're taking aggregate data. This is so interesting. So this is like the third episode in the smart girl, dumb questions, smart money series that I'm doing, which is sponsored by time. The first episode I talked to the divorce attorney and he talked about this idea of you have to have a naked lunch with yourself and really know your own finances and your own approach to money before you kind of pair up with someone.
9:27I would say something you should do individually is have what I would call a naked lunch, like where you really look at what's at the end of your fork. Like, the most dangerous lies in relationship are the lies - The image in my head is so fucked up right now. I'm just imagining a naked person looking at a fork, a long fork. Looking at the end of their fork. Okay, I mean, listen,
9:45Nicole Lapin:whatever the metaphor does for you, it's fine. You know, it tells more about you than me. It's like a Rorschach test. It tells more about you. It's a Rorschach test of sorts. I think what happens economically is the most dangerous lies are the lies we tell ourselves. Yeah. Totally, and I would even say, because I talk about the idea of looking at your finances as like sitting in front of the mirror naked eating, but also putting fluorescent lights on yourself. Oh gosh. To be really, really honest. Nobody wants to do that. Nobody wants to have this meal with anybody, maybe, although it sounds a little bit like Vegas.
10:15Okay. The second episode was with Raj Chetty, who's done a lot of work around the American dream.
10:19Nicole Lapin:So it's a lot of debate nowadays about people renting versus buying. Yeah. One way you can actually get to the American dream is to rent a home in a neighborhood that It offers better opportunities for kids, better schools, better pathways to jobs, etc. From the perspective of homeownership, I guess that's not achieving the American dream. From the broader perspective of achieving prosperity, that might actually be a smart thing to do. Your zip code matters more than your deed. Literally, exactly, whether you own a house or not. And we talked about what is the best path to progress and what is not propaganda, but like is a lore or a myth around progress and homeownership being part of the second category of like, it's been this version, this temple of the American dream, a home you own, a white picket fence, two and a half kids, whatever it is.
11:07And that's just, that's not getting people to the amount of progress that they hope to feel. And I think that's definitely true in our generations.
11:14Nicole Lapin:There are emotional factors to it. And if it makes you sleep better at night, then that's amazing. But just be really, really honest that that's the reason. Yeah, how did you emotionally get over it? Money. Money. You did the math. The math got you over it. Yeah. I think when you have a lot of these hard conversations and emotions swell up, and if you're working with a partner who also has emotions around it, I think if you go back to the numbers, for us, it was most important to optimize for net worth after 30 years. Not right now. How do you look at like homes that have renovations? Because I feel like a lot of people are buying like fixer-uppers nowadays, and then they're getting a couple of things.
11:48They're getting a roof over their heads. they're getting some project that is either going to make or break their marriage together. They might be getting content. Like they create channels where they're just like renovating these homes, but there's so much of like a renovation culture.
12:02Nicole Lapin:Yeah, that's not my life. That scares the hell out of me. Well, you know, that's been popularized obviously by HGTV and you think you can flip. And that's not what we're talking about here. We're talking about typically what you're going to be spending on those property taxes is around, again, 1%. Every area is going to be different. And then, you know, whatever typical maintenance you're going to have, the roof needs fixing, the HVAC system goes out. I mean, you just need to remember that at that point, when you become a homeowner, nobody is coming to fix that stuff. And that stuff is very, very expensive.
12:38Nicole Lapin:And insurance costs don't even get me started. And there's also home warranties and home insurance. Is like a home warranty worth it? It's worth it for the companies that sell it. Yeah. I mean— That's very telling. If you look at insurance, you want to insure stuff that you cannot afford to lose. Your life, your health, your home. The other stuff, like a warranty on a toaster, you know, the extended cell phone coverage, all that stuff is being sold because it's very lucrative to the companies. It's insane. Like, it's like the idea of, like, when you buy an Amtrak ticket, they're like, do you want insurance for this ticket?
13:07It's like, no. Like, that's insane. Buy a refundable ticket.
13:11Nicole Lapin:Historically, it doesn't work out well for the consumer. So you've obviously gone through a big shakeup in your life 18 months ago or so. The fires in LA and you lost your home. Did that change your philosophy on all of this and on the idea of ownership in general? Yeah, it reminded me that, you know, systems, huge city systems, state systems can fail in a way that felt very uncomfortable for me at the time. I was also two weeks postpartum, so I was extremely emotional. You know, we built out a nursery. We built out a home that I'm mostly more in the future of, not necessarily even the past of.
13:57Nicole Lapin:And so I think that when that happened so quickly and so obviously unexpectedly, it made me less attached to a physical home and that idea of stability that I glorified for so many years. And I thought, okay, well, when I become this, then I'll be happy, right? We always play this game and we never get our brains to the other side of it because there's always another there there. So when I get a home, when I get married, when I have a kid, then I'll be happy. And the truth is wherever you go, there you are. And there's always going to be, maybe not to that extent, there's always going to be something that happens that's going to get in the way of what you imagined that time to be.
14:37Nicole Lapin:It was not the plan, but it also made me less attached to this idea of home ownership. I can't imagine. And I don't want to make you relive that very difficult experience. One of my closest friends lived in LA, had a home in the Palisades. Her son is my godson and they lost their home. And I'd seen her like really, you know, spent a lot of time and picking that lot, designing that home. Like it was a special place. It was like, felt like my home in LA. And so seeing that, I totally understand what you're saying about losing confidence in the idea of stuff and the physical world, but also in some of the institutions that we're still finding out like why this happened and where the accountability lies and how to pursue that.
15:24I'm certainly seeing that in my friend's experience.
15:26Nicole Lapin:But I remember leaving that day and just thinking we would come back. I just left with the clothes on our back. We put the dog in the car and the baby and we're like, it's cool, we'll be back later. We were gonna go to a friend's house And then, you know, how could they let this burn down? And also my husband was like, yeah, and I just paid so much in taxes. Like, we're good. The trucks are on their way. Like I paid for the fire hydrant stuff. No, none of it was there. And so that's really unnerving on so many levels that the systems that you expect to be there when you need them the most aren't.
15:57Nicole Lapin:But yes, Rick Caruso was our first guest here, which felt very poetic and fitting to, yeah, rebuild the office and the studio. and yeah well you've I mean I'm sitting here in Nicole's beautiful studio and it's stunning thank you for letting us thank you here and it's just I mean you've rebuilt a lot thank you the idea of renting like feels good to me on a financial and an emotional level because of that yeah I cannot compare with that experience but I will just say like one of the reasons I've always been a renter is because one I've grew up in multiple continents like I've always moved a lot I've lived in a dozen cities in like as many years or in 15 years, I've lived in a dozen cities.
16:38And I like the idea that when the washing machine breaks, I call somebody and I don't spend hours of my life on it. And there's a huge value of that to me that I cannot put in. I could probably like figure out the marginal utility calculation on it. But for me, it's just, it's liberating to not have to deal with those things.
16:56Nicole Lapin:Yeah. If you're moving around like Gen Z and millennials are, it is more advantageous to rent. I think the idea that there's so much shame, once you tease through some of these issues and you get to a point where this is an intentional decision, I, Naima, move around a lot. I, Naima, am being disciplined that I'm investing in the market, you know, and I'm consciously choosing to rent so that I can free up more of my capital to grow faster for me. You know, that's a different mindset than saying like, oh, I'm such a loser. I'm renting. I'm suck at life. Like, what am I going to tell the Pakistani ladies at the next?
17:33Nicole Lapin:The aunties. You don't know these aunties. Nicole, I'm telling you, these aunties. It's about you getting good with that conversation with yourself. We're going to take a quick break and we'll be back with more with Nicole Lappin.
17:49Is that home renovation worth it? Everybody on my social media feed seems to be renovating their homes and I find it all a bit boring. Like I once broke up with a boyfriend because he wouldn't stop talking to me about kitchen tiles. They're a broader compatibility issues. But did those kitchen tiles make his house worth more? And when do renovations come with a reward? This is a sponsored dumb question brought to you by Chime, the most rewarding way to bank. The truth is that most renovations do not recoup 100 % of their value. A kitchen remodel might get you 110 % back and maybe a nicer spot to enjoy your nachos.
Read the full transcript
18:16And the data shows that actually adding a bathroom could give you more yield than adding a bedroom to your home. Adding a deck, it looks really nice and gives you some vitamin D, but data suggests that you you only see 90-ish percent of that money back. And lastly, a new garage door could actually triple your return with a whopping 300 % plus ROI. Excuse me while I go install a garage door in my New York City rental. By the way, I actually did do a bunch of small renovations, painted stuff, swapped out the lighting fixtures and those switchboard thingamajiggies. And don't tell my landlord, but I'm pretty sure it upped the rental value.
18:45It definitely makes me happier every day. All of this stuff, it might be worth it, but it is expensive. And sometimes we overlook that cost when we're just budgeting out our rent or our mortgage payments. So when you're saving up, think about doing so with Chime. No monthly fees, no overdraft fees, no minimum balance. And with Chime Card, you can get up to 5 % cash back in a category of your choice. Plus high yield savings and credit building on everyday purchases. SGDQ is a garage door and everyday purchase. Visit Chime.com or download the app today.
19:14Nicole Lapin:This episode is brought to you by Prime. What if you had one more chance with the one that got away? Sam, you came home. Based on the bestselling novel from Carly Fortune. Every Year After follows childhood friends Sam and Percy as they reunite in the dreamy, nostalgic lakeside town of Ferry's Bay. Love can be hard to find. So if you're lucky enough to find that person, never let go. A second chance at first love. Every Year After, now streaming only on Prime. You have one new message. Translating. Disney and Pixar's Hoppers is now available on Disney+. You could say that again. Critics are calling it Pixar's funniest movie ever and a wildly entertaining ride.
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20:45I think of you as someone who's extremely resilient, not just because we're sitting in this beautiful office that you've rebuilt, but also because of the story that you have told around having been in debt and getting out of debt. And so before we move on totally from this home chapter, it's like one of the daunting things to me about homeownership is the idea of debt. And even if you have a fixed interest mortgage, which I don't think they exist anymore, kind of, or they do, but they're at much higher interest rates than they were years ago, right? No? You can correct me. That's the whole idea.
21:17I am allowed to be dumb on my show. Yeah. Nicole's giving me a sad face. Do you mean adjustable rate mortgage? There are adjustable rate mortgages. But they used to be much lower percentages. Yeah, the interest rate. On the interest rate. Yes, exactly. Totally.
21:31Nicole Lapin:When interest rates were lower. Yes. Yes. And now we're about six and a quarter percent. You know, obviously we were at rock bottom interest rates around the pandemic. And when we saw financial Armageddon in 2008, but that was an emergency measure. So those rock bottom interest rates were what people got used to, but they're not typical. We're at more of a typical interest rate level right now. So given the choice, I know that you're not going to buy a home anytime soon. It sounds like I'm not going to buy a home anytime soon, although I do have to have like a very naked fluorescent lunch with myself and figure out how much money I should be putting in the market because I'm not buying a home.
22:07That's my kind of homework. We can do that. Yeah, we can do that together. Yeah. Would help me do that. I'll have naked lunch with you. Wow, I love it. Naked lunch is, yeah. That's great. That would be amazing. It is so scary. And I even find myself punting meetings with my wealth manager because I'm just afraid to confront numbers. And they're not bad. I'm pretty good at saving and I'm pretty good at investing, but I just don't want to think about it.
22:32Nicole Lapin:Yeah, we make up a lot of stories in our head that end up taking over. And the best antidote for shame is truth and looking at it and realizing actually I suffered more in imagination than in reality. That's like a stoicism vibe for you. Okay. All right. I love that we're now on Ryan Holiday's podcast. We're doing the Daily Stoic. If you were considering, even though neither of us are buying this home, we're just having naked lunch, would you be less likely to take a fixed interest rate loan for a mortgage right now? Or what would you advise people? Is there a hope that interest rates are going to come down?
23:07Do you have a theory on that? I know you're not giving financial advice, all the disclosures, but is there a way to think about that?
23:13Nicole Lapin:Yeah. Well, we also do have these conversations at our wealth management firm, Private Wealth Collective. And this is truly a holistic approach. So you can't really look at homeownership in a vacuum. You have to look at your entire financial picture. You know, people often say, like, can I buy a home? It's like, hold on a second. I have a thousand other questions for you. Like, what other kinds of debt are you holding? Do you have student loans? Do you have credit card interest rate? You know, what are your goals? And all of those questions should be looked at together in a holistic picture. And so not all debt is created equal.
23:47Nicole Lapin:So I used to be so scared of any kind of debt. I'm first-generation American, you know, grew up in an immigrant household. Like, you buy something if you have the literal cash to pay for it. And that was the end, like, period, end of story. And so I used to— That is keeping people poor. So rich people have debt, but they call it leverage. It's the same concept, but they use it to make more money or lower their cost of capital, which is essentially taking the difference between the percentage that you're borrowing money at and the percentage that you would make money at. So if you're borrowing at 3%, but you can make 10%, then you're pocketing that spread or 7%, for instance.
24:25Nicole Lapin:And so, you know, good debt and bad debt, two different things. So good debt for your beautiful, beautiful brain. You know, in theory, that asset is going to earn more than the interest rate, right? Yes. So that's good debt. Or you're using that debt to buy assets that will appreciate. So a home. It's sort of, you know, we're six and a quarter percent. Again, that calculation that we did around the 5 % is more like 6%, maybe 7 % in today's interest rate environments. And credit card debt, bad debt, right? Credit card debt that I got into was 24%. So right now, new credit issues are coming in at 22%, 24%.
25:16Nicole Lapin:You miss payments, you're up to 30%. And did you know that? Like, had you read these, like, because I feel like there's always the asterisks and then the star and then they have these other, like, insignia for the footnotes and they've come up with every character under the sun. And if you don't know, you don't have perspective. 24 % amazing compared to what? You don't know. You don't know. And it's all these, like, hidden, is it hidden fees or it's just, like, lightly fine printed fees? I don't know. Yeah, so APR is the interest rate that you pay. APY is what you get at the bank. What you get at the bank typically is much lower than what you're paying on a credit card.
25:50Nicole Lapin:And that type of debt is what can snowball out of control. The biggest issue with that type of debt is the minimum payment. It's not even necessarily the rate. If you can understand what that rate is or pay it off on time, but the minimum payment thing is what's keeping a lot of people stuck. It kept me stuck. I thought, okay, I'm paying the minimum payment. This is an option on the credit card portal. I got into credit card debt when I finally got a credit card and I was rebelling against, you know, not ever having one or stashing cash under the sink behind the maxi pads just in case. That's just how I grew up.
26:25Nicole Lapin:But using that type of, I think, predatory lending can get you really, really stuck. So$5 ,000 at 20%, which is not even the highest, by paying just the minimum will take you 23 years to pay it off and almost double what you're spending in interest. Wow. So when you're thinking about debt, like you have to think about two different kinds of debt and what the percentage is. Right. And what you're doing with that. Are you buying things? Are you buying a depreciating asset with it? And you're using high interest credit card debt versus your brain. Yeah. Hopefully, lower interest rate. Hopefully, like outperforming inflation unless you decide to become a documentary filmmaker, in which case probably not, but that's fine.
27:12It's psychic income. How much debt did you get into? I got into$5 ,000 of credit card debt originally.
27:20Nicole Lapin:I broke that down by the day to get out of it. I didn't know at the time that I was doing the avalanche method. Yes. There's two ways you talk about to get out of debt. Yep. Avalanche method and snowball method. So it doesn't really matter which one you choose as long as you choose one and stick to it. So avalanche. That doesn't sound nice. No, no. I want you to tell them. I don't know. You're like, I don't want to be in snow at all. I'm like, this sounds terrible. I have an easy on terror. Let's get inside. Yes. So, Avalanche Method is ranking your highest interest rate credit card debt first and paying that off the first.
27:53Nicole Lapin:Okay. So, if you have, you know, a bill that comes in for$100 and that's at 5%, let's say, and you have a bill that's for$50 and it's at 24%, you're like, I have a magical$100 bill. I'll just pay the$100 one off, right? Because I'll rip it up, it'll be cathartic. But that's not the most advantageous way. I would put, you know, half of that toward paying off the higher interest rate. Credit card debt likely first, because that's going to snowball fastest. Even though the snowball method is paying for the smallest bill first, so you can have momentum to keep going. So it's like snowball method is psychological, and avalanche method is like more efficient.
28:39Nicole Lapin:Yeah. And again, I give these choices because not every financial choice is a true numbers choice. It's often an emotional choice. So whatever you're going to stick to, you're going to spend more over time. Right. But as long as you stick to that and it works for you, then I like that method for you. I like that too. But the one that's cheaper is the avalanche. Yeah, the efficient one is the avalanche one. And I so agree with you on the emotionality of it. Like Jim Saxon and I were talking about this, the divorce attorney and I. Like when you date somebody, you're not dating their approach to money.
29:12You're dating like their parents and grandparents approach to money. And all of this stuff is so hard-coded in us that it's really hard to separate the emotionality and the finance. And I love what you do because it's partly extremely practical and partly psychological.
29:27Nicole Lapin:And thank you so much. But when I was in debt and I continued to, you know, be in debt and feel a lot of shame around that debt, especially when I was also a business reporter and I was covering these macroeconomic things, but personally in my own microeconomy, I couldn't get my own financial shit together. You know, I felt so much shame around that. I felt so much shame about the lineage too, because I was like, well, I clearly deserve this. I suck. I'm not a numbers person. I'm bad with money. Of course, this is going to happen to me. And then these stories that continue to proliferate and shame is not a good money management system because it keeps you avoidant.
30:06Nicole Lapin:It keeps you out of these conversations that really could be helping you. And so I think it's a mistake to remove the idea that shame has a huge part in what's keeping people in a cycle of debt. That's so well put. I am now going to completely lowbrow your conversation about shame and pull out paddles. Something else to mention. I brought these paddles into Nicole's studio, and she's terrified and confused as to why I have brought this. She thought we're going to be up to something sexier than we are going to be. So, okay. I was like, am I going to get spanking here? What's happening? No, no spanking.
30:41There's nothing to be ashamed of. But I want to run through kind of big outlays that people have in their finances. And I want your kind of red or green. Okay. These paddles have two sides. One is red and one is green. And you're going to tell me, is it worth going into debt for green? Or is it not worth going into debt for red? Number one, you have a very nice one, an engagement ring. To go into debt for it? Yes, red. Hell no. Hell no. Hell no. Don't go into debt. Get a lab diamond. Get a lab diamond. Green. Green on lab diamond.
31:13Nicole Lapin:Red on debt. Invest the difference. Yeah. Okay. A two-carat engagement ring, a natural diamond is$20 ,000. A lab-grown diamond is$2 ,500. Invest the difference. $2 ,500. We're going all in. After, you know, 30 years or whatever, it will probably be$300 ,000. Better than a natural diamond. Yeah. The lab-grown will be? No, if you invest the difference. Oh, yeah. Sorry. If you invest like the$17 ,500. I thought lab-grown diamonds were like a wild appreciating asset. My God. I got to rename the podcast Dumb Girl Smart Questions. Okay. What about your wedding? Going into debt? Yeah. No, same situation.
31:51Nicole Lapin:Like the average wedding cost is$35 ,000. Yeah. Spend half of that, invest the difference. Again, you'll have$300 ,000 after 30 years. We had a micro wedding. What's a micro wedding? A baby wedding. A baby wedding. I like the idea. I was also pregnant. Oh, a shotgun wedding, Nicole? A shotgun wedding. A white trash wedding. That is what the aunties would say at the wedding. Oh, it is a shotgun wedding. Anyway, it was the best wedding, small. You know, we invested the rest that we didn't blow out. Yeah. I think one of the greatest things that the pandemic has done is like made more weddings micro and like people are doing the city hall wedding or like a smaller wedding.
32:26And I'm like, I'm so down for that. Okay, home ownership.
32:30Nicole Lapin:Going into debt. The debt for home ownership. Just through a regular mortgage? Yeah. I think it depends. It depends. I'm going to say green. Sure, if it works for you. Yeah. If it works for you, I'm into it. But you have to answer all the questions and like check the boxes that we talked about. Okay, homeowner. Just not going in blindly. Yeah, and thinking that that's the way to grow wealth. It's one way to grow wealth. Home renovation. Are you on HGTV? Like I have questions. If you're on HGTV, it's green. If you're just a regular person. And if you're going to stay there forever and ever, and you can afford it in your overall financial picture.
33:08Great. Or you think you're going to recoup it somehow. You're going to drive up. You're doubling the value of the home by doing this new kitchen splash.
33:15Nicole Lapin:Totally. Some of that is speculative. Okay. It sounds like you're a red and you're just giving a green to be generous. What about fertility care? IVF, the journey? Oh, going into debt for it. It's tricky. Yeah. Yeah, probably, right? Yeah, I did IVF. It's no fun, but I know how deeply personal that is. So if it's something that you feel like you need to do, then, you know, there are a lot of ways to get out of debt. And it's a problem you can deal with later. And I count in that like egg freezing or fertility or adoption or surrogacy, all the things that people might be considering to be able to have a family.
34:04It seems like the kind of thing that, okay, feels like there's only so many choices and it's a priority in a certain window of your life.
34:13Nicole Lapin:Yeah, because I think when you think about there's two ways that you spend money, right, on impressing other people, consumption, and experiences. And there's no greater experience, obviously, than having a family. And if that's deeply, deeply personal to you, like, who the hell am I to— to put a bad paddle up. I was going to show you, like we're going to get to some paddles where you actually want to do the green, not your resistant green for homeownership. Your education. I would say red. It really, it depends if you do the math, if you know the opportunity cost, if you really think that it's going to yield a higher return over time, but likely not.
34:57I think that 10 years ago, my answer on this might have been different, but I just feel like where we are with the precipice of AI and like, I see so many people who have dropped out of college, like George Lucas built, you know, everything that he's built from having gone to community college. And I think there's a lot of routes and we kind of overemphasize prestige education in this country. Yeah. So I'm probably going to be a red on that.
35:21Nicole Lapin:I don't know where people that have hired went to college. I don't anyone knows where I went to college or cares. Yeah. I mean, obviously where I went didn't help me know anything about money. So it was so bad. But your kid's education. No, going into debt yourself. Always put your oxygen mask on first. They can get student loans. You can't get a loan for your retirement. So when parents will say, well, I'm saving for my kid's education and that's so lovely. And I get that as a parent, but only after you've taken care of yourself first. So if you're prioritizing their college and not your retirement, and you are desolate when you're older and you're like, I have no place to live.
36:02Nicole Lapin:I'm coming over to your house and I'm sleeping on the couch. I have no food. Like that's not helping your kid. So you have to take care of your retirement first. Do not go into debt for their education. I'm curious, like what's the best thing you invested in in your 20s and the worst thing you, quote, invested in in your 20s? Oh, man. I was not investing in my 20s. That's the problem. I think, you know, no one has ever in the history of the world said, I'm so glad I didn't invest earlier. Like, oh, my God. The reason that I do what I do every single day is because I'm like, please do not make the same mistakes I did.
36:36Nicole Lapin:Like, I wish. And I was covering, by the way, on the floor of the stock exchange, Like, I have a video of me saying like, Google just announced Gmail. You'll never have to delete a single email again. Like, why was I not buying Google stock? That was crazy. Or like, I have a video that shows me reporting on the launch of the iPod. What was I doing? Like, what was I doing? Why was I buying clothes and shoes and whatever? And why was I not buying stocks? I was buying too much stuff and not enough stocks. Totally agree. And I feel like I've constantly been in that situation where I remember my college boyfriend was like buying oodles of Google and like all these stocks.
37:13And he was telling me about them. And I'm like, I don't know, it seems risky. Now I look at the fact that like Google has like gone up, I don't know, hundreds of X. If Amazon has gone up thousands of X, like 3 ,000 X, it would have been smart to be buying that earlier in life. What about the worst thing you quote invested in, even in your thirties, like something you thought was going to be an investment that paid off and didn't? Yeah. I, yeah.
37:38Nicole Lapin:Any like designer, anything. I know this is cliche, but yes, I think we normalize giving gifts of stock, not stuff to ourselves and to others. Yeah. Okay. So you're going to give your daughter stock? Yeah, of course. She already has stock. She has more money. We were just looking at her portfolio. My daughter is richer than my husband and I were in our 20s and probably in our early 30s. Because what are three things that people can do if they have a baby that they want to— She has a 529, which is traditionally thought of as a college savings account, but it is much more flexible. She has a custodial Roth IRA and she has a custodial brokerage.
38:16Nicole Lapin:Got it. Oh, wow. She has a whole, like. Your daughter's rich. My daughter is rich. Is your daughter going to buy us lunch after this? Honestly. We can't. Yeah. It's a jailbreak that money. You're going to pay a lot of penalties. Okay, Naima. Don't you? Nicole is finally impressed by one piece of knowledge. It's like our last five minutes of the interview. I love it. Right? There's a lot of penalties. No? There's some penalties. There's some penalties. Yeah. But sometimes you can do it. Okay. What about health savings accounts? Are those worth it? For debt? No, no, just in general. The pedal's over.
38:50Nicole Lapin:We're done with the pedals. We're done with the pedals. Put the pedal away. Yeah, I mean, there are a lot of tax-advantaged accounts that I would put my money in first and then go to taxable accounts. So, like, if you look at HSAs, if you look at 401ks, IRAs, or Roth or a backdoor Roth, you know, a year, a person who's making $100 ,000,$300 ,000 can put about$35 ,000 into those tax-advantaged vehicles. And so once you get those, and by the way, any match is like obviously free money. Half of people say no to a 401k match, which is like saying no to a raise. Yeah, that's dumb. Yeah. But so do that at first and then like a taxable brokerage account, which is where you can get low cost S &P 500 index funds and the rest of it.
39:37Nicole Lapin:And if you want passive income from that, then I like to think of like$50 ,000 a year for every million-ish that you have. So without touching the principle, what you can get as income to live on. It's a good rule of thumb as you're trying to think about passive income, don't fall into the rabbit holes of the internet that's like, you can do this passive thing. It's so simple and easy. It's not. One piece of data, by the way, when I was looking through this that broke my mind is there's a recent survey of 2 ,000 people who are either recently engaged, married, or in relationships. And 78 % of people surveyed would rather start married life debt-free than spend on an engagement ring.
40:18And I was like, what's up with the other 22 % of people? But it sounds like most people wouldn't. Most people wouldn't, but the number goes down by generation. 70 % of millennials said they wouldn't, and 64 % of Gen Z said they wouldn't go into debt. But it's still the majority, but that's 40 % of Gen Z who might be far away from making that decision, thinking that they would go into debt for a ring. Lab-grown. Lab-grown. Invest the rest. Invest the rest. I feel like I put it on a t-shirt.
40:47Nicole Lapin:Bumper sticker. Let's go. So the last thing I want to ask you about is when you sit down and you do this naked lunch and you sit with yourself, how do you know if you're rich or poor? Like what are the milestones that you should have in your mind to really measure that? Because there's the dollar value, but then I think there's like, we're living in a world of vast comparison. Like you're constantly comparing yourself to other people. You're comparing yourself to where your parents were in the generation. How do you know if you're doing well financially? If you answer the question really honestly with what do you want financially, what's going to make you happy?
41:22Nicole Lapin:And for everyone that's different, if you are going to be stoked in retirement, living on a small piece of land with your lawn chair from Target, amazing. Let's stick to that and not change the goalpost on ourselves when we scroll on Instagram and we see like our friend's friend with a yacht and be like, oh my God, I suck at life. Because I think you can have it all, but only if you truly define what it all means and stop changing the definition on yourself mid-game. Because that's when it doesn't work. Yeah, because as you get more, you expand your possibility set of what you need. And I think that's why it's really important to work with any trusted wealth advisor that you have.
42:03Nicole Lapin:We have these conversations all the time. Like it's nice to have an accountability partner and somebody who's going to keep you honest with what your goals are. You know, people will call and say, well, you know, I want to get this or that or whatever, or why am I not getting this? It's like, hold on. Like we went through like your whole goals and all of the, you know, breakdown of timeline here. That's not what's on there. We can change that. You can always change that. But stay really true and honest to what that looks like for you in your most honest, quiet moment off social media. Yes. Off social media.
42:37And just like kind of in your own room. Like I think my dad, when I was growing up, had this rule, which is like, I'm never going to say no to you, but don't ask me for something I should say no to, which was a good self-regulation for me in asking for things. And, you know, it wasn't mostly financial things. It was like sometimes time things, help with something or whatever. It's like just kind of being self-aware in what I was expecting out of life. And I think sometimes we let go of that. And I had this conversation with Mark Cuban too. It's like, how much money is enough money? And he said, how much money is too much money?
43:08It's like, you can just get caught in a trap of wanting more and more and more and like only make yourself feel poorer as you get richer, which I've certainly seen in some of the billionaires I've covered too.
43:19Nicole Lapin:Yeah, I think having that framework around the passive income that you can make off a portfolio without touching that is a good benchmark to think about like the 4 % rule or the 5 % rule. So that would basically mean for$3 million, that's kicking off$150 ,000 each year for you to live on. Is that enough? I don't know. Like only you can answer those questions. Yeah. You know, if it's not, is it more? Is it less? Do you want$50 ,000? and then that's a million dollar portfolio that kicks off that income. A million dollars to get 50 grand a year. Ish, like 800 to one and a half depending on like the interest rate that you're getting.
43:59Yeah, okay, I'm gonna keep working. I'm gonna keep working, I'm not there yet. I end every episode of Smart Girl Dumb Questions asking my much smarter guests, what are they dumb about? What is a question that you have that you've been embarrassed to ask out loud or you've, with some shame, asked your phone recently?
44:13Nicole Lapin:Oh, what's in my, what's in my clod log? Yeah. I have, I have so many. I have one that's more serious and relevant to what we're talking about, which is why is it taboo to ask what a person's salary is when it's not taboo to ask within 30 seconds of meeting them what they actually do? Because we're lying to ourselves that that question is not about what their salary is. Totally. It's complete. So is where you live. Where do you live? And oh, do you, you know, people have all these questions for trying to understand how much money you make. So, okay, I love it. So just ask that. So who made that Emily Post type rule?
44:48Nicole Lapin:Yes. Yeah. When did that happen? And I don't like it. And also just asking what you do in the first 30 seconds. I have this one anecdote in one of my books where I was at an event in New York, and there was sort of a group at a financial services thing saying like, where are you from? And I said, Los Angeles. And everybody laughed at me. And they were like, where are you from? Again, they asked. and I kind of got that what they were asking for was what firm am I from? And I was just like, Los Angeles. Because, you know, let's have another conversation about actually getting to know each other as humans.
45:24Nicole Lapin:But anyway, I digress. The biggest question that I have right now is why do I viscerally, like at my core, want to eat my baby's leg? No, you do not. I want to eat her leg fat. Like I just want to live in her thigh. This is not carnivorous. You just think it's so cute and chunky. No, no, no, no, I'm not. But there's a thing. Like, why do mothers want to eat their babies? No, I don't want to. I have to get out of this. I'm afraid for my own life. Some army hammer shit is going down. It's the smell of the baby. Really? Like, I want to just, like, gnaw on her fat legs. And it's like that? It's just that?
46:04It's not her arm?
46:04Nicole Lapin:It's mostly her fat leg, her fat arm, too. Like, I just, like, I truly, Why do mothers want to bite on their children? What's the number for child protective services? I know you love her so much. It is so cute. Like kids are so cute. And they're like chubby, chubby, chubby cute. Here's a question I have. Do chubby kids become skinny adults and skinny kids become chubbier adults? I have this theory, but I don't know if it's true. Well, I thought our daughter was getting too skinny because the leg fat rolls were disappearing much to my chagrin. and so I was like we need to we need to fatten her up okay fatten her up she's already rich she can buy some food we can get her some food it sounds like she's it's not her lack of food I know she takes her height after her father thankfully she's lengthening out and the pediatrician was like her parents are not don't have fat rolls on their legs so it's like fine that she doesn't she's like no give me back the fat rolls I must eat a small fat roll I love it I want to meet your daughter I am I'm not going to eat her.
47:06But thank you so much for doing this. Thank you so much. The podcast is called Money Rehab. The network is called The Money News Network. Nicole has written five books, which I have one sitting on my desk right now called Rich Bitch.
47:19Nicole Lapin:Hell yeah. I love that.
47:24Okay, are you renting or buying? And what are you ashamed of when it comes to money? I want you to email me your shame at naima raza101 at gmail.com. Other than the gobbling up of her child, which is apparently a TikTok trend, talking about it, not actually gobbling up children. I liked everything that Nicole Lappin just taught me. And I think she's all the wiser for everything that she's lived and lost in the last couple of years. But the thing I most take away with me is that concept that shame is not a good money management system. And this idea of investing and what's worth going into debt for, whether that's a home, an MBA, or IVF or egg freezing.
47:57I think a lot of times the math doesn't always account for the emotional return to you. So I was listening to her kind of talk about the 5 % when it comes to buying a home. I was thinking also the emotional stuff that you can't really put into a number. Like I spent some money redoing and renovating a bit my rental just because it gives me tremendous joy. And I'm curious what that is for you. Like what brings you joy? What do you spend on or splurge on that is, you know, in that category of experience versus consumption or showing other people what you have that Nicole talked about. Anyways, clearly I still have a lot to learn about money.
48:28And thankfully this is the third, not last installment of the Smart Girl, Dumb Questions Smart Money series brought to you by Chime. We're going to have a couple other episodes in the feed and then come back to you in that last money episode. It won't be our last ever money episode, but last in this series. It's going to be all about how you make it, how you get there, and how you progress. Anyways, I'll see you next time on Smart Girl Dumb Questions. This episode was produced with Desta Wunderad, Melissa Lee Gibson, Santana Nigam, and Aisha Jordan. It was edited by Darlena Chiem and mixed by Cam Schenken.
48:56Our theme music is by David Kahn, and I'm your host, Naima Raza. I'll see you next time for smart girl, dumb questions.
49:20Nicole Lapin:This Father's Day, when you ship UPS Air at the UPS store, your items arrive on time with your money back, guaranteed at no extra cost. It's like the father of all shipping services. It shows up to the airport way too early just to play it safe. It's overprotective about all the things that truly matter. And it's always prompt, especially to be with family. Make it your first choice to celebrate your dad. Ship UPS Air with our money-back guarantee. Exclusively at the UPS Store U.S. retail locations. Visit the upsstore.com slash air shipping for full details. Terms and conditions apply.
From the publisher
Rent or buy? Student debt or skip the degree? Nayeema asks @MoneyRehab host Nicole Lapin the money questions we all have. They discuss if home ownership is still part of the American Dream, what money mistakes NOT to make, and why it feels SO vulnerable to talk about your personal finances. Turns out “shame is not a good money management system.”
Also on the agenda: IVF, MBAs and what is worth going into debt for? How much is Nayeema’s Harvard and Stanford educated brain worth? Plus: lab grown diamonds, the avalanche method of debt recovery, stocks as gifts and why Nicole’s baby might be richer than all of us.
Send us your “dumb questions” on IG/TikTok @smartgirldumbquestions or by calling 1-855-MyDumbQ.
Make sure you’re following Nayeema and the show on YouTube, Instagram and TikTok. And obvi: SHARE THE SHOW WITH YOUR FRIENDS, YOUR MOM and your favorite accountant.
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