LMM loves listener questions. If you’re wondering, other people are too and doing a five questions episodes allows us to reach more of you. Today we have five awesome questions from you.
Today we will answer your five awesome questions about individual stocks, student loans, the 4% rule, You Need a Budget, and investing 101.
Listen to the show every Monday, for free:
1. Hey LMM!
I have a question about investing. I am using Betterment right now and hoping to start a Vanguard account soon. If I own VTI in Betterment and I own VTI in my Vanguard, is there any point to buying single stocks in Apple or Amazon or another company that is in the VTI fund since I already own those companies in my VTI funds?
There are some pros and cons to each. A good reason to own shares in a company outside of a fund is the possibility of more significant gains when that company has a good year. Say you have $1,000 in a fund, you might only have $50 of Apple within that fund.
Then Apple has a big year, you only get the gains from that $50. If you had $1,000 of Apple outside the fund, you get the gains from that $1,000. Is there is a company that you feel strongly about? Go ahead and buy individual shares after doing your due diligence.
A downside is that you when you have a fund through a company like Betterment, they do tax loss harvesting for you. We thoroughly explained tax loss harvesting here. Owning individual shares outside of Betterment can mean that you lose the benefits of tax loss harvesting.
Owning individual shares might also cause you to obsess over how that company is doing, continually checking the news to see how the stock is doing. The opposite of our “set it and forget it” investing philosophy.
2. Hi Guys,
I started listening to you guys about two weeks and was wondering if you can help me with my student loan dilemma. I have a 0% APR credit card and want to use it pay my student loan of $11,000. But Great Lakes who holds the loan won’t take a credit card payment.
It has to be a debit card or secured credit card. I tried a company that refinances loans you mentioned in an add, but I didn’t graduate from the school I went to and didn’t qualify.
A 0% APR credit card can be great if you carry a balance on another card. It allows you to work on getting the balance paid off without paying interest. But read the fine print. Once the 0% APR period runs out, you could be paying a higher interest rate than you were on the original credit card. Be sure to pay the balance off in full before the APR goes up.
The reason your student loan company won’t allow you to pay with a credit card may be that they don’t want to pay the processing fee. They also take more risk, when you pay from your bank account, that’s your money, and once you’ve made the payment, you can’t get the money back.
A credit card company may have ways to claw back a payment. It also may have something to do with a great loophole some people have used to get around the rules about having student loans discharged in a bankruptcy.
Some people were paying their loans with their credit cards and then declaring bankruptcy. Credit card debt can be discharged in bankruptcy, so this may be Great Lakes way of closing a loophole.
If you thought you were poor in college, wait until you start paying back your student loans.Tweet This
Refinancing your student loans through Earnest is a great option, but as you found out, not everyone with student loans is eligible for those companies. Look into refinancing through Citizens Bank. The average borrower saves $1,536 per year when the refinance with Citizens.
I’ve been binge-listening to your podcast the last several weeks and am finally getting a grasp on investment strategies, yay! My question is: does the 4% rule still apply if one is retiring early? Being conservative, I imagine it does. However, I feel like the ability to draw from a 401k/IRA (Roth if possible) at age 59 1/2 should be taken into consideration. Is this even practical?
A calculator in a recent post suggests that it is more efficient for me to invest vs. pay off my student loans faster. I agree, especially since I will likely be unable to contribute to a Roth IRA (tax-free earnings: hell yes!) in a few years as my bonus structure will change.
I think it would be useful to have a long-term “goal value” for my personal investment account (and age for financial independence) to channel the motivation of a tangible number, much like that used to pay off a debt. It never hurts to overestimate, but I’m not sure how to go about setting this goal.
P.S. Do you have a list of your favorite beers posted anywhere?
Thanks for all of your input!
The 4% rule is meant to be a rule of thumb. It’s a good rule of thumb though. It can help you get to a goal number. Great, I need to have $X saved and then I can retire. If you follow the 4% rule, your money should last for 30 years.
Because everyone is different, there are some considerations you need to calculate into the 4% rule; do you want to retire early, how are you defining retirement, will you move to a higher or lower cost of living area, are you in good health, etc.?
Your asset allocation is a significant factor too which is what the chart below demonstrates.
As to your beer question, we have an awesome listener who went through every show note and pulled out the beers. Look for it soon; it’s getting its own page on the LMM site!
4. Hey guys!
I’ve been listening to your podcasts for awhile and have been learning so much so thank you! I have a few direct questions- and I know some of these have been answered in podcast episodes but wanted to ask directly for your feedback.
I know you all prefer Mint, but I was wondering why this and not “You Need a Budget”? What are the main differences and why do you think Mint is better?
My husband and I have been married almost two years and have never combined finances. Should we? Why or why not? What are your thoughts on this?
LMM has been a big proponent of Mint for a long time. It’s free, easy to use, and is the first step a lot of people take to becoming financially healthy. The reason we prefer Mint to YNAB is that Mint gives you a 1,000-foot overview of your finances.
Not only can you create a budget in Mint but you can track your net worth and all of your investments.
YNAB is strictly a budgeting tool. It’s excellent though for people who have irregular income, people like freelancers or real estate agents.The program budgets the money you made last month for the upcoming month which takes the guesswork out of budgeting for those who don’t bring in the same amount of money each month.
Money for couples is not one size fits all. There are some things that apply to everyone though when it comes to money in a relationship. Everone must be on board. The two of you must agree on the same goals.
The conversation around money must be an ongoing one. You should meet regularly, once a month in the beginning, maybe quarterly once things are on lockdown, to check in on your progress, to find weak spots and fix them and to make adjustments when necessary.
Before children, a “yours, mine, and ours” approach to money can work. You each have separate accounts, and a joint account from which shared expenses are paid. Often one partner makes considerably more money. In that case, you might each contribute the same percentage which won’t be the same dollar amount to the shared pot.
When you are committed enough to have a kid, then you have to be committed enough to combine your money. If you divorce someone, you never have to see or deal with them again. Once you have a kid, you are in each other’s lives for the rest of your lives no matter how miserable it is, even after you’re divorced.
5. Hey guys,
I’ve recently started following your podcast and enjoy it. I get a lot of great content, and can always dive into the show notes for more info. Your guests are great, and your interviews relatable.
My wife and I recently finished grad school and landed pretty decent jobs in our fields. We moved away from all our family and friends to pursue our own adventures–but ended up in an area that is blowing up regarding their housing market.
We’re saving up pretty quickly while renting, even while paying off some minor student loans. We want to buy, but it seems like the wrong time.
Right now, our savings are sitting in a typical savings account, earning pennies. We want to start investing, but don’t know where to start. We’d like to keep growing our nest-egg for when the market turns, and we can buy low–but we’d like something more aggressive than a savings or CD. Financial advisors seem prohibitively expensive for what we bring to the table, and I wouldn’t know where to start to build my portfolio.
Do you guys have suggestions on where to start and how to take that first step? What resources might prove straightforward and not overload the info for beginners? It could make a good episode, as I know at least some listeners are in my same boat, listening religiously, taking good notes, but overall a bit lost on how to start.
Thanks for the help!
The housing question depends on whether you want to buy a home to rent out or to live in. As long as the house is cash flowing from day one, it’s a good investment no matter what the market in your area is doing. Andrew designed a whole tool around doing this calculation.
If you want to buy a home to live in, it will always cost you money. Even when it’s paid off because you still have expenses like property taxes and upkeep. An investment is something that makes you, not costs you money and that does not describe a home you plan to live in.
But we can’t make every decision based on money. For many people buying a home is an emotional decision, a place to put down roots, to raise a family, to leave to your children. Nothing wrong with that but in this case, the market does come into play.
You may not be able to afford to buy in your area for many years or maybe ever. If you’re planning to move within a few years, then you should wait until you’re more settled.
We have done a lot on investing for beginners because many of our listeners come to us as beginners. It’s a fallacy that your money is safer sitting in a checking or savings account than invested. When you are making less than the 1% interest nearly all of those accounts pay, inflation is eating away at that money year after year.
Start dipping your toes into investing using dollar cost averaging. Rather than dumping $10,000 into the market at once, you would invest $1,000 a month for ten months. We always recommend Betterment for beginners because the fees are low and it’s easy to use.
Keep ‘Em Coming
Thaks guys, we love reading your questions. You keep asking, and we’ll keep answering!
Asahi Super Dry: A Japanese beer with a refreshing barely flavor.
Tool Box: All the best stuff to manage your money.