Focus on THIS in Retirement (Everything Else is Noise)

23:06And, or you can use a password manager with a designated emergency contact who can request access after a specific waiting period. So that's another thing that you can do. And then what I want you to do is when you have this plan in place and you start to set up what we call the dead box, but when you start to set this up, you can review this every single year. And so when you go back and review it, make sure everything is up to date. It's exactly how you want it. Too many people let too many years go by. And so I recommend reviewing this annually. Now, if not annually, my specific attorney has always told me, Hey, why don't you just review this at least every three years to make sure you're on top of this.

23:39A lot of things change over the years and you want to make sure that you have all of this stuff in place. So hopefully that helps you guys out. Congrats on putting together your estate plan. Again, getting this safe, putting your documents in there to keep them safe, and then using your attorney to kind of help lock up passwords and other things that you want. And then they can give it to your executor once it's time. Now, your executor needs to know that they're the executor for this to work. I have seen people in the past not even tell specific folks that they are the executor and they get contacted after someone passes away.

24:07But making sure you're in constant communication with your family is gonna be very, very helpful. Even if you don't want them to know the specifics, you wanna make sure you are talking to them and in contact with them so they understand what some of the next steps are and where some of this stuff is. And then giving your attorney as much information as possible, you can customize how people get stuff. I think that is one of the best things that you can do and one of the best investments you can make, especially if you have very specific requests or very specific instructions. So I hope this helps.

24:34Congrats on getting all this stuff together. And let me know if you have any additional questions on that. All right. So the next one is from Zakiya. I have heard you talk about paying bills on credit cards to earn rewards as long as you can pay it off right away. But some billers charge an extra service fee when you pay by credit card. At what point does the extra fee negate the benefit of the rewards? And how do I know when it's worth it and when it is not? So this is a great question and a great thing to actually pose because there are some credit card companies that will charge anywhere from one to 2 % when you are, you know, charging on a card.

25:07I've seen some as high as 3%. And so most credit cards are going to give you points anywhere from 1 % to 2%. And so when you're looking at this calculation, a lot of times if they are charging 3 % and you're only earning 1 % back, then it is not worth it whatsoever. So if there is a fee on hand for using a credit card, I always shift to using a bank account. For example, the lawn care company that I currently use has a 3 % fee if I pay via credit card. So instead I pay through my bank directly. And that is when I know I'm not going to lose money and pay that 3 % processing fee. Instead, I'm going to automate the process and just use my bank account instead.

25:42So if there is a fee, a lot of times I will avoid using a credit card. It is just not worth it. Now there are a couple of situations where paying the fee actually makes sense. One is if you're hitting a welcome bonus and you're really trying to hit that welcome bonus, and maybe you're on the fine line and you haven't hit it yet, but you need this purchase to kind of get over the hump, that could be one reason to do this if you're on the line. But for the most part, just trying to find other purchases that could help you get over that hump is much more beneficial overall. Two is if your card earns in a high category multiplier.

26:10So let's say, for example, if it earns three, four, or 5 % in a specific category and you're spending on that category and the Delta is one to 2%, then you can look at doing it there. Or if the points are worth more than one cent each with some of the transfer portals and some of the things that you were doing there, it may be worth it there, or if you're stacking towards a bigger benefit. But outside of some of those different things, for the most part, I would avoid the extra fee and I would just pay it either via my checking account or I'd pay it via a debit card, whatever one is easier, as long as those don't have fees either.

26:42That's gonna be the best way to do it. And if it is something that is recurring and you wanna make sure you're still automating it, you can do automatic bill pay through your bank and go through the process that they have there. So that is the way I would look at that, but it is not worth it if you are losing money with a credit card, because that's the only reason to use a credit card is A, to make sure you get some of those points and miles, and then B, you get some additional protections, but it's nothing that is way more valuable than something like a debit card or your checking account. So if they do charge a fee, I would just go with the debit card or the checking account.

27:11All right, the next one is from Matt S. So I wanna open my investment accounts for my kids, but they do not have earned income. So a Roth IRA is off the table. I'm deciding between a brokerage account in my name or a custodial account. I want flexibility and I'm not comfortable doing a 529 since college is not guaranteed. What is the best option? So really good question, Matt. And this is something for all the listeners out there who have not heard this. To open a custodial Roth IRA for your kids, your kids must have earned income. So they must have to either mow lawns. They could, you know, work somewhere, but they must have earned income to contribute to a Roth IRA.

27:46And then whatever they earn in that given year, that's how much you can contribute to a Roth IRA all the way up to$7 ,500, which is obviously the max. So if they earn$2 ,000 in a given year, you can only contribute$2 ,000 to that specific account. And so if your kids do not have earned income, maybe you have younger kids or they just don't have earned income, then you only have a couple of options left. A lot that people turn to are things like UTMAs or UGMAs. Now these are accounts where you are the custodian, but the account is actually in your child's name. And so So because of this, depending on what state you live in, when they turn age 18 or 21, the account automatically goes to them.

28:23This is actually the reason why I don't use this account. So you get some tax benefits when it comes to this, but it is not something I'm interested in using because I have less control of the account and when it goes to my kids. And my thought process originally for this was, what if I have a kid who just is not responsible with money? And I know they're going to blow this entire account on something like a brand new car or whatever else kids like during those times. Well, then that was something I was not willing to trade off for. I'm not saving all this money so they can go blow it all at once.

28:50So instead, what I have done is I actually use a taxable brokerage account. Now, the taxable brokerage account is not the optimal place for this. It is not the perfect solution, but it is the solution that allows the most flexibility. And so what I do is instead, I will open a taxable brokerage account in my name. And then the beneficiary of that account is going to be my child. Well, now it's actually my trust, but in my trust, it states that this specific child is going to get that. If you don't have a trust in place, you just put your child as the beneficiary is the way that I originally did this.

29:22And so if something were to ever happen to you, the account would still go to directly to them. But if you are building wealth over time for them, then you can give this account to them whenever you choose. So you can choose to give it to them later on in the line. You can choose to give it to them when you pass away. You could choose to give it to them when you feel as though they are ready to have this account. And so this gives you additional flexibility. And if you invest in this account over time, it is very powerful some of the things that you can do. Now, a lot of people will ask, well, what about a 529 plan?

29:50And Matt already mentioned that here, but a 529 plan is only for educational savings. So you should not be saving in a 529 plan for anything else outside of saving for education. And if you are unsure about that, or you're unsure if your kids are gonna ever go to college, then utilizing some other way to save and invest is gonna be a much more preferred option for you. There's one other account we haven't talked about, which is a newer account, and it's called a Trump account. Now, in the Trump account, this is an account that is worth it for the free money, but I don't think the additional benefits are as worth it as some of these other accounts just because, again, you have reduced flexibility.

30:24So get the free money always with the Trump account. But right now, as it stands, I am not using Trump accounts for my kids. Instead, I'm still following the taxable brokerage account and or custodial Roth IRAs when they start to have earned income. And so that's the area where I think those are the two most powerful account. One is just because of the most flexibility. But the second one is because they can get that tax free growth, which long term is really, really powerful. And the last thing I will say is we do have a really cool plan that we've kind of mapped out a couple of different times where we talk about, you know, the newborn account.

30:54And so what we say is opening a taxable brokerage account when your baby is born and you put a thousand dollars in that taxable brokerage account. And then every month, if you can afford it, you put a hundred dollars per month into that account. And then every birthday and every Christmas, you put two hundred and fifty dollars in that account. Now, by the time your kids turn to age 18, you have a little bit over eighty thousand dollars in that account, which is really cool. That's absolutely fantastic. But if you never contributed another dollar, by the time they turned age 65 and they got a 10 % rate of return, they can have over$7 million inside of that account.

31:26And so this is the power of getting started early and having a really long time horizon. It's gonna help you tremendously. And so you can set up systems like this for your kids. What if you can only contribute$25 a month? Nothing wrong with that whatsoever. That's absolutely fantastic. You can still make your kid a multimillionaire just by investing small amounts of money over time. It is really, really cool what you can do for your kids. If you just start early enough, even if it's a small amount of money, I don't care if it's 10 bucks a month, every single dollar you invest is going to compound for the next 30, 40, 50 years, depending on whenever they need it.

32:00And so this is a really, really cool thing. Also, a lot of folks now, if you've ever read the book, die with zero, basically what die with zero is arguing is that your kids are actually going to need this money, you know, in their twenties and thirties, when they're building a family or they're starting off their career instead of giving it to them way down the line. Well, this allows you for that additional flexibility to give it to them when you feel as though they need it, which is really, really cool as well. The last thing I'll say is if you do plan on going with the 529 plan, you do have the option based on Secure Act 2.0 to roll over$35 ,000 into a custodial Roth IRA for them.

32:31So even if you wanted to get up to$35 ,000 into a 529 plan, you do have that option to roll it over into a custodial Roth IRA, but you have to have the account opened up for a certain time period, which I think last I checked, it was somewhere like, I think it was 15 years that you had to have that account open. So that is going to be something to definitely double check. If you do want to save for college, but you are just unsure if your kids are going to go to college, well, that is another option that you have or another out that you have when it comes to saving for your kids college. So listen, congrats on thinking about this.

33:01Congrats on saving for your kids. We're thinking about ways to build wealth for your kids. And the biggest thing you could do for your kids is obviously teaching them how to build wealth as well. But really, really cool that you're doing this stuff. So congratulations to you. Let's jump to the next question. If you've ever felt like your bank is working against you instead of for you, you're not alone between overdraft fees, monthly fees, and just trying to access your own money. It all adds up fast. That's why chime is changing the way people think chime offers fee-free banking built for you, not the bank.

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37:30All right, so let's look at the next question. So I am a dental assistant earning under$80 ,000 and my income barely covers my bills. My husband used my credit card to take on debt that we cannot manage. How do you invest when you have very little left over? And how do you budget when there is almost nothing to cut? and when should someone consider declaring bankruptcy? So first of all, and this is from someone anonymous, but first of all, I am so sorry that you have to go through this. This is one of those things where my heart hurts reading this kind of stuff because it is so incredibly important that we find a way to solve this problem, okay?

38:08And so I am so sorry, my heart is going out to you just for having to go through this. And let's talk about a couple of things that you can do here to make sure that we can kind of get ahead with our money and get ahead with some of this stuff. But first, I think you need to figure out where you stand. And so going to, you can go get like a free credit report. You can go to annualcreditreport.com and you can pull your credit report, but I also want you to pull your husband's credit report to kind of see where you are. You need to see every single account. You need to see what is going on and make sure there's not any surprise accounts that you are not accounting for right now.

38:38Number two is I would take your credit and I would freeze it at all three credit bureaus so that this does not continue and it does not happen moving forward, especially if this happened behind your back. I want you to make sure that your credit cannot be accessed going forward. And so you call up Equifax, you call up Experian, and you call up TransUnion and you get your credit freeze. Well, actually, nowadays, you don't even have to call. You can go to the websites, sign up for an account and actually get your credit frozen that way. And it's actually a pretty quick process. This ensures that nobody can open a credit card in your name, nobody can open a bank account in your name, nobody can do anything like that whatsoever.

39:14and only you can unfreeze these when you wanna open up an account or something else in your name. So that's a very important one, okay? Because this is one of the underutilized areas that most people have that they need to know more about. The next thing I would do is I would have a direct conversation with your husband and I would sit down and have a real conversation because what happened there is not just a credit issue. It's also a partnership issue. You both need to be on board and you both need to figure out exactly where you stand. and if there's financial abuse going on or anything like that, we want to make sure that we get some help or want to make sure that we have some way for us to have a conversation about this.

39:51And so that is the next thing I would do is making sure you have this conversation. Once you freeze your credit, once you pull the credit reports and know exactly where you stand, then you can start to have an open conversation and make sure you both get on the same page. Then every single month, having that 15 minute money meeting is going to be very, very important. If you haven't heard our recent episode talking through how to manage money with a spouse or a partner, that is going to be one that is very, very helpful long term. Now, next, when you're talking about how do you invest or how do you get saved or how do you get ahead when you don't have a lot left over or anything left over, the starting point is just to get started small.

40:22So capturing your 401k match is the first thing I want you to try to do. If your employer offers a 401k, try to get the full match and see if you can start there. Because if you can get 3 % in your 401k and your employer matches 3%, well, at least you're starting with 6 % every single month that you can get the ball rolling invested. That at least is going towards your retirement and is going to be a good starting point. Now, the next thing we want to do is we want to find money. And so when it comes to finding money, we want to call all of our bill providers and figure out, is there a way to negotiate our bills?

40:51You can negotiate almost any bill that you currently have. And I know you said there's not many other places that you can slash currently, but can you negotiate some of these bills down to reduce the overall expenses? And then when you do get a bill reduced, put it towards debt or put it towards your investing long-term to make sure that you have that paid off. OK, next is let's look at the big three expenses, housing, food, transportation. Those are the big three that have the largest impact overall on your bottom line. You say you make eighty thousand dollars per year. I don't know what your household income is fully, but if you make just under eighty thousand dollars per year, looking at your household income and seeing if we can reduce some of those large expenses can be helpful.

41:27But the big three are the big ones. Housing, food, transportation. Those are the ones that we really need to look at. Increasing your income is going to be the next thing, because if you can't cut back expenses, the number one next move is to increase our income. That is the lever that can grow infinitely. And that's the one area we must pull. For a lot of folks out there, when you're looking at your spending, if you can't cut back anymore, it's the only answer. It's the only thing we can do next is learn how to increase our income or find a way to increase our income. And so this is going to be something that if you are in nursing, is there a certification that you can get to increase your income to do training?

41:59For example, my sister-in-law is a nurse. She then became a business owner. She owns an aesthetics location, but she actually trains other nurses on how to do aesthetics. And she makes really good money doing that. And so is there things that you can train people on? Are there things that you can help out in terms of doing stuff like that? That could be another way to increase your income. Do you have a business idea? Do you have other skills outside of work that you could work on? Increasing your income is really important. If your husband can also help increase his income, that could be a win-win situation so you can get this debt paid off.

42:28Another big thing is I would look at selling items in the house. So if you have stuff in the house and you have this big debt payment, making sure that you get rid of stuff that you do not use anymore. Use Facebook marketplace. I don't care if you're selling it for$10. I want you to sell as many things as you possibly can that you do not need or you do not use anymore. Sell old clothes on eBay. Clothes go for crazy prices on eBay. You can sell shirts. For example, you can sell like golf polos, shirts, shoes, all that kind of stuff can be sold for 20, 30, 40 bucks at a time. Every dollar is going to help in this situation.

42:58And so finding ways to find money is very, very important. Now, when it comes to bankruptcy and kind of thinking about that, what I would do is I would have a conversation with maybe a nonprofit credit counselor. If you go to nfcc.org, you can find an NFCC certified agency and the consultation is completely free and they can help you look through this as well. And they'll review your full situation and suggest a debt management plan. So a lot of times they can help you look at this and say, Hey, no, you don't have to go through bankruptcy. I'll look at your entire situation. I'll help you step-by-step to figure out exactly what you need to do next.

43:33And then they can help you through that. Or they may tell you, I would file bankruptcy in this situation. So that is definitely something to do. And if you do have to file bankruptcy, then you definitely want to talk to a bankruptcy attorney and have that conversation. Now, I'm so sorry that you have to go through this. I hope these steps are helpful. And really, I think increasing the income is going to be the biggest point in time of the lever. I know that's easier said than done. I know it's one of those things that you were probably tired of hearing it, but it might be the only solution. I'm so sorry you have to go through that and someone else creating this debt problem for you.

44:01And really in reality, sitting down and having a conversation on how you both are going to get out of this is the biggest overall step in this whole ordeal. So pull your credit report, freeze that credit and start to have that conversation and be honest and real about this. Cause this is one of those areas that is so incredibly difficult. So I'm so sorry you're going through that. And if you have any additional questions about that, please let me know. And we'll be happy to help. The last question is from Anita. So Anita says, I am almost 70 and always thought reverse mortgages were a bad idea.

44:32My financial advisor told me there are situations where one might make sense. I moved six years ago and still have a mortgage. What are your thoughts on reverse mortgages and when do they actually make sense? So really good question, Anita. I'm gonna be straight with you. I am not a fan of reverse mortgages whatsoever. The fees are high, the interest compounds against you and they quietly can erode the equity that your family has in your specific home. But that said, your advisor is not wrong. And there are some situations where they could be right, but it's not something I would probably ever consider for anybody in my family specifically.

45:06But I will run through this so that you can kind of think through this. So for those of you who don't know what a reverse mortgage is, this is where people who are over the age of 62, they can actually borrow against their home as equity. So instead of you paying the bank, The bank will pay you either in a lump sum or monthly payments or a line of credit. And the loan does not come due until you sell the home or if you move out for more than 12 months. So a lot of people will do this. And this is a way for them to pull income out of their home when they don't have any other options. When they're at a point in time where they need more income, they don't have any other options.

45:41And so they're pulling the equity out of their home. And then the bank's thought process is, well, once they sell this home, they'll have enough to cover. Obviously, they're not gonna let you borrow against the entire amount of the home, but they give you a portion of the home where you can pull as an income source. Now, there are some real costs to this that you need to understand. Reverse mortgages have some of the highest fees in lending, and there are a lot of predatory reverse mortgages out there, in my opinion. You can expect origination fees are gonna be really high, mortgage insurance premiums are gonna be high, servicing fees and closing costs are all really high, and they can total three to 5 % of the home value up front.

46:17So on a$400 ,000 home, that could be anywhere from$12 ,000 to$20 ,000 before you even see a single dollar. And then the interest compounds on the full balance. So this is something that you really need to know, including those fees. So the interest is compounding against you. Now, there are some non-negotiables with this as well because you still have to pay property taxes. You still have to pay your homeowner's insurance. You still have to maintain the home. And if you fall behind on any of those, the loan can be called and you can lose the house. So I have heard of people losing their house because they did not maintain their home properly within the parameters of their reverse mortgage.

46:51And so you need to kind of run through a number of different situations to see where it makes sense. So if you plan to stay in the home for life and you have no heirs who want the property and you're not planning on passing this house down, potentially tapping into some of the equity could be something that you do. And if you really have no other options, that could be a possibility. So those are possibly some of the situations that it could make sense. But there are also a lot of situations where it may not make sense. Because if you want to leave the home to your kids, well, typically when you are using a reverse mortgage, this could compound against you.

47:21And a lot of times you may be forced to sell the house if you take on too much. And so you really wanna run the numbers carefully on this and be very cautious when it comes to reverse mortgages. So I would consider the alternatives first. This is what I would do in your shoes, especially if it's something that's a little bit more difficult. One is I would consider downsizing. Can you sell the house? Can you make a profit on the house? If you can't, then really a reverse mortgage doesn't make a ton of sense anyway. But if you could buy something smaller with cash or maybe just find something else and rent and then invest the difference, that's one option that you have on hand.

47:53The second option is if you could look into a HELOC. Now a HELOC, if you still qualify, is a traditional home equity line of credit and usually has lower fees, though it does require income to service a HELOC. So that is one thing that you must note. You can also look at refinancing. So if rates have come down, you can lower your current mortgage payment by refinancing that house depending on when you got the house. Or you can cut housing costs directly, find a roommate who possibly is retired, who wants to live there, or move to a lower cost of living area. Those are some things that I would consider first before I ever did a reverse mortgage.

48:24But if you still want to explore this, I would do a couple of different things. First, I would go to HUD approved counseling. This is usually required anyway when you are looking at a reverse mortgage. And I would try to take this seriously. The counselor can kind of walk you through the situations of what would happen when it comes to a reverse mortgage. Secondly, is if you do try to go forward, I would get quotes from a bunch of different banks, not just one bank, but making sure you look at a bunch of different banks. And then I would involve your family in the conversation if you can, because they need to understand kind of what the parameters are around this and they deserve to know what's gonna happen to the home.

48:55And they may offer help that helps you avoid having to go get a reverse mortgage. That's another thing that I would do is just start to have some conversations around this and be open with your family around this as well. So again, there are some situations where it could make sense if you have a massive amount of equity in a house, and you know you can sell that house, you know, down the line for a lot more than you paid for it and you have tons of equity in place, it could make sense if you owned it for a long time. But at the same time, for most people, it would not be something I consider.

49:21Like if my parents came to me and said, hey, I'm thinking about getting a reverse mortgage, I would tell them no. And that's kind of the way that I look at this specifically. But every person's financial situation is very different. I am not a huge fan because of fees and anything with high fees, I feel as though is not the good move for most people. But thank you so much for sending in your question. And if you want to get your question answered, you can join the Master Money newsletter by going to mastermoney.co slash newsletter. Shoot over a message and we will get your question answered. You can also send us a message on Instagram at the personal finance podcast.

49:51And we will go through the DMs and look through your questions and add them to our list to get your question answered. Hopefully you like this format where we talk through, you know, a specific topic up front. We answer some of your questions on the back end. I really enjoy this process. I really enjoy answering your questions. I think this is a really, really fun episode and really something that we want to do going forward. So thank you guys so much for being here. I truly appreciate each and every single one of you, and we will see you on the next episode.