This week they sit down with us to offer some inspiring advice on how to live a fulfilling life without sacrificing financial security. Listen in as they break down how to discuss combating financial anxiety with your partner, how to take a good hard look at what you may be doing wrong with your money, and how to weigh the financial priorities (and sacrifices) in your life. They also tackle the question as to why the LGBTQ community assumes more debt than the heterosexual population, why same-sex couples are 73% more likely to be denied a mortgage, and what financial institutions can do to affect change.
Then, in Mailbag, Jean and Kelly tackle listener questions about how credit cards that get closed due to inactivity may impact your credit score, whether you should contribute to your spouse’s 401(k), and tips on saving for grad school. And in Thrive, details on Facebook’s crypto to come.
This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416
Jean Chatzky: (00:07)
HerMoney is supported by Fidelity Investments. We want you to demand more from your money, so start by knowing what you own and what you owe. We’ll help you take the next step that fidelity.com/demandmorenow. HerMoney comes to you through PRX. Hey everybody, welcome to HerMoney. Welcome to a beautiful day. I feel a little strange saying that because maybe by the time you’re listening to this, it won’t be such a beautiful day everywhere but we have been having such unending rain in New York that to wake up and see the sun shining for the third day in a row is very exciting, but not as exciting as the fact that we finally are having this week’s guests on the show and even better. They’re in the studio with us, David Auten and John Schneider who are also known as the Debt Free Guys and hosts of the Queer Money podcast are with us. They are a married couple who have made it their mission to help other people in the LBGTQ community live fabulously and not fabulously broke. I love that. Welcome.
David Auten and John Schneider: (01:30)
Thank you. Thank you so much for having us. We appreciate it. We’re excited.
Jean Chatzky: (01:32)
Thank you for being here. Why are you in town?
David Auten: (01:35)
So this David, the primary reason that we’re in town is John and I have embarked this year on what we are calling the Queer Money Live tour. Our goal is to actually speak face to face with more people in our community. We’ve been visiting LGBT centers and we also have had a couple of stops at financial locations that are also connected with the LGBT community. The opportunity to share more information and to speak face to face, to actually hear the stories of people in our community, them telling those stories is amazing to us. And so we’ve been touring specifically the Northeast for right now.
Jean Chatzky: (02:16)
It is, and we’ve found this through our, HerMoney Happy Hours as well. And there’s nothing like face to face. We could’ve talked long ago. We’ve known each other through FinCon and the FinCon community now for years, but it’s nice to have people in your studio. It’s nice to be able to make eye contact while you’re having a conversation. Yeah. Amazing. So for those of us in my audience, for those people in my audience, who haven’t heard of you and your mission, let’s take a step back. How did you meet, John?
John Schneider: (02:52)
I moved to Denver, Colorado in 1999 and my goal was to just be out there for about two years to go snowboarding and inevitably I met someone and 20 years later we’re still kind of living out there. We met the very cliche way. We were both dancing at a dance club and he knew a friend of mine and we kind of started to hang out and three years later it was an official relationship. And then we were together for 14 years until we got officially married. And then we just finally did the real show last year.
Jean Chatzky: (03:22)
So it took a while.
John Schneider: (03:23)
It took a while. Yeah, we had to circumnavigate some laws and changing rules.
Jean Chatzky: (03:28)
We recently had Tobin Low and Kathy Tu from the Nancy Podcast on the show, and they were talking about their research on the queer community and how members are more likely to experience financial anxiety. Does that resonate with you? I think it probably does. You’re both nodding at me, which is something that again, our listenership can’t see. But why do you think it resonates?
David Auten: (03:52)
Well, I definitely think it does. John and I, from personal experience, we had anxiety around money even though, after being together for a year and a half, and we finally came out to each other about our financial situation. We had 13 years of experience working in financial services, talking to other people about how they needed to be planning ahead. So those of us who are in the industry are worrying definitely those outside. There’s a statistic out of a study that was done by mass mutual that says 58% of the LGBT community worries about money at least once a week. So it is having an impact on our community.
Jean Chatzky: (04:32)
Is that worry because people often lose support from their nuclear family when they come out?
John Schneider: (04:40)
We think that’s a cause of it. More of that data showed that a lot of it was based on too high of expenses, particularly credit card debt that they’re managing. We haven’t been able to dig deeper into the data beyond that, but we are starting to get the impression that our community assumes more debt because they either feel like they have to leave homes sooner or they can’t necessarily get the financial support that maybe your, you know, straight peers can get.
Jean Chatzky: (05:07)
It’s interesting that you use the words coming out to each other financially. I mean, that sounds to me like something that should not be limited to the queer community, that all couples should come out to each other financially. What did that entail and what did it take you to get there?
John Schneider: (05:25)
That was a dramatic story.
Jean Chatzky: (05:27)
Oh, give it to us.
David Auten: (05:30)
John and I had been together for a year and a half and we were living a very unconscious life when it came to our spending. We had by all outward appearances, a fabulous life. One weekend…
Jean Chatzky: (05:40)
What does that mean?
David Auten: (05:40)
We wore designer clothes, we had decent jobs, we had a great group of friends that we went out with regularly, we did happy hours, dancing on the weekends, Sunday fun days, nice vacations. Everything on the outward appearance was nice. And one weekend we took a trip to the mountains to visit a friend of John’s. We resonated with the little town that we had visited. We decided this would be a great place to have a vacation home. We hopped in the car, driving down the mountain, the lower in elevation we drop, the lower our conversation got from that fantasy of buying land and building a vacation home to finally opening up the door to our place, walking down a flight of stairs into a basement apartment, that was so dark in the winter time you didn’t know what time of day it was. It was at that point, John and I did confess to each other that between two of us, we had $51,000 in credit card debt. So for us, fortunately we were locked in a car together for an hour and a half.
Jean Chatzky: (06:40)
Well, have you heard my story of the most important thing I ever learned from my mother?
David Auten and John Schneider: (06:46)
No, I don’t think so.
Jean Chatzky: (06:46)
It’s that if you’re going to have an important conversation, you have to do it in the car.
David Auten and John Schneider: (06:51)
Oh really? Never heard that.
Jean Chatzky: (06:52)
Yes. I mean I’ve learned many, many things from my mother, but this was a biggie and it’s because you can’t get out, right? I mean you could, but it would be very dangerous and it’s not going to happen. So, you know, for me with my teenagers, that’s where I talked about the important stuff in a moving vehicle.
John Schneider: (07:11)
Smart. I like it. No one can escape.
Jean Chatzky: (07:13)
Often from behind the wheel. Right. So you can not look at them and talk at the same time.
John Schneider: (07:17)
Yeah. Nice. Well that’s exactly what happened to us. I mean, we had to get really honest with ourselves. With $51,000 in credit card debt and not owning our own home, we really had no reason to believe that we could build a vacation home, let alone even go up there on a, you know, a couple of times a year. And we were really messed up. And so it was kind of forcing ourselves to stay in or being in that car kind of forced us to have a conversation we probably wouldn’t have had otherwise.
Jean Chatzky: (07:42)
I know, just from some examples that we pulled before you came in, I mean, having nice clothes was kind of the tip of the iceberg. You went to see Madonna and you paid for it with student loan money.
David Auten: (07:56)
I didn’t do that. John did that.
John Schneider: (08:00)
I did that. Although later on we did go see her and had front row tickets and I paid for it with a credit card.
Jean Chatzky: (08:07)
Right. Breakfast and lunch every day without thinking about your bills. So you got honest. And then what happened?
John Schneider: (08:15)
What actually started to happen was we started to ask ourselves questions of why are we sabotaging ourselves? Based on our careers alone, we should have known better. And why weren’t we being more honest with ourselves?
Jean Chatzky: (08:26)
And what was the answer?
John Schneider: (08:28)
Well, it took us a long time to really get there. But ultimately we realized that we were trying to get the validation we didn’t get in our childhoods by buying things we couldn’t afford as adults. So we both came from times and places when it wasn’t okay to be gay. We came from very conservative households. We were both bullied and picked on when we were younger. And then when we finally had the courage to come out of the closet, we were so desperate to fit in. We were so insecure about ourselves that we felt if we didn’t have the right clothing and the right car, we didn’t live up to sort of the cliche of being fabulous, that we wouldn’t be accepted by another community. And so we kind of had all these airs about us mainly so we could fit in.
Jean Chatzky: (09:05)
It’s just, it’s a huge societal problem.
David Auten: (09:07)
John and I say that 80% of money is the same for everyone across the board. Very transactional. But it’s the 20% that really is based on who we are, the feelings that we have, where we’ve come from in life, that 20%, whether you are part of the LGBT community, or you’re a part of some other community, it’s that aspect of your life that can have a huge impact on the expectations you have of yourself or others have of you and then I think that bleeds out into the rest of our lives, especially into our spending habits.
Jean Chatzky: (09:40)
How do you get a grip on that 20%? how do you realize where you’re acting emotionally, when you’re acting emotionally, and how did you rein yourselves back in?
John Schneider: (09:52)
I think for most people, at least for us anyway, what it came down to was to figuring out what it is that we most wanted. We did like going out and clubbing and having the fancy dinners and the nice clothing. But when we really started talking with each other and getting to understand ourselves better, what we really wanted was to save for a secure retirement, to travel the world more and not do it on credit cards, and also to give back to our community, which we really couldn’t do when we were buried in debt. So once we realized what was most important to us, and we could spend accordingly, or invest accordingly, kind of put everything into perspective for us.
Jean Chatzky: (10:26)
Did you use a specific methodology to get back on track to pay off that credit card debt to start saving?
John Schneider: (10:34)
Yeah, so the probably the number one best first step that we took was David itemized all of our expenses for an entire year. He grabbed all of our statements, accessed all of our accounts online, everything from our credit cards, investment accounts, checking accounts, and he itemized all of our expenses. And we realized that for so many years, we kind of thought we were poor, we weren’t earning enough money, we weren’t keeping up with our peers in terms of income. But when we looked at our spending, it was ridiculous. There was some months or some weeks where we were spending $400 a week on groceries and $400 a week dining out.
Jean Chatzky: (11:06)
Wow. For two of you.
John Schneider: (11:06)
That’s just for two people. Yeah. We are not a family. We don’t have kids.
Jean Chatzky: (11:12)
You’re a family.
John Schneider: (11:12)
We don’t have dogs. You know, so that just between two people, that was just astronomical to us. And we had a couple of other, we have found that for most people there’s, you know, two or three outliers in their budget that if they can rein those in, verything gets a lot easier. And for us, we had some clear outliers that we had to rein in. And I think that was probably the best first step you took.
David Auten: (11:32)
Yeah. I think one of the other things is that when we did that deep analysis of where our spending was, there were many times going throughout the year that we felt like we didn’t have a great life, that we had that FOMO, missing out on things and we are not doing this, we’re not doing that. And then when we sat down and we looked at how much we spent on the social categories, the dining out..
John Schneider: (11:57)
The wine to be honest.
David Auten: (11:57)
Our wine budget. Those kinds of things, we were like, wow, we actually had a really, really good life. Although at that time we recognized that it was being financed by credit cards, we realized that we had become so used to some of the nicer things in life that they became so mundane to us and we kept on feeling like we needed to push it even more.
Jean Chatzky: (12:23)
David Auten: (12:23)
When we pulled it back, we started to recognize that we actually did like going out once in a while, not every, you know, every night of the weekend. We would do it much more frequently. And we enjoyed it more than when it was just a habit.
Jean Chatzky: (12:39)
I want to dig in a little bit more to the things that you learned that can help other people, but before we get there, let me just remind everybody that HerMoney and conversations like these is proudly sponsored by Fidelity Investments. What if you could demand more from your money? What if you could make your savings work as hard as you do? And what if all of that helped you reach your financial goals faster? It starts with a financial checkup, much like the one that David and John undertook. It starts with an understanding of what you own and what you owe. And from there, the folks at Fidelity can work with you to evaluate your investment options and different ways to grow your savings. You can get started today at fidelity.com/demand morenow. We’re happy to be back with The Debt Free Guys. I noticed your shirts say Queer Money. They don’t say The Debt Free Guys. Have you morphed?
John Schneider: (13:39)
We have not morphed. When we first started our journey to help the community, we started out as The Debt Free Guys for a number of reasons. But we’ve realized, kind of, about a year and a half into it, the connection to our community wasn’t clear enough and we thought at that time we would try to create a podcast and we decided to call the podcast Queer Money. We’ve got two kinds of brands all housed under The Debt Free Guys brand.
Jean Chatzky: (14:00)
As far as helping members of the queer community live more fabulously on a reasonable budget. Another piece of research, this one came from the University of Iowa, it showed same sex couples are 73% more likely to be denied a mortgage. What’s up with that?
David Auten: (14:21)
Yeah, that’s a staggering statistic. Yeah.
Jean Chatzky: (14:23)
Do you think, first of all, sometimes I get this research and I wonder is it accurate? Do you think it’s accurate? And then if it’s accurate, why?
David Auten: (14:32)
I think the first thing is John and I are grateful that these studies are actually starting to include our community. These studies are very important for our community. This is one of the first studies that actually talked about banking information.
Jean Chatzky: (14:46)
Who did this study?
David Auten: (14:47)
This was a Prudential study, right? And it was a part of their…
John Schneider: (14:50)
Part of their 2018 Financial Wellness Census. And then they’d had a sub study under that called The Cut.
David Auten: (14:56)
Yeah. They looked at diverse populations. And that included many populations, including the, the LGBT community. So right now it’s the only touchstone that we have to that kind of data. But, one of the things that we’ve said is even if it’s off by…
Jean Chatzky: (15:14)
Half. It’s still huge.
David Auten: (15:14)
Right, right. Even if it’s off by a margin of error of 10%. Right? That means 40% of the community doesn’t. So we think that there are probably some reasons why many in our community still are, um, leery of working with financial institutions, especially in areas where, across the table, maybe somebody who may notssupport them. Right. And so if they identify as an LGBT person, they may live in one of those 30 States in this country where they still could be fired or lose their housing or human services because somebody knows that they’re LGBTQ. So I think that there’s inhibition there. I think that also a number of individuals in our community work jobs that are traditionally either cash-based or they’re predominantly jobs where they’re actually not getting a regular paycheck. So it’s not a place where they would have a direct deposit coming in, that the company they work for would traditionally do that. So they’re used to using either check-cashing services or getting paid in cash or predominant portion of their incomes comes in and maybe in tips. So they’re just used to living on a cash lifestyle and they are not aware of the fact that they’re actually spending more money doing that rather than being banked.
Jean Chatzky: (16:36)
I recently had the opportunity to be at a conference called Think, which is run by the folks at Co-op Financial Services and I moderated a panel on underserved populations and a woman described walking into her credit union freely, more freely, because there was a pride sticker right on the front door. Are you advocating for more financial institutions to just put out signs like that or signals like that?
David Auten: (17:09)
Absolutely. One of the things that John and I believe, you know, we’re here in New York during the month of June, World Pride, and there are rainbows everywhere, which is amazing and we love that. But we also need to remind, especially financial institutions in this case, that we exist 365 days of the year. And when we don’t see that invitation to the community throughout the year, there may be an inhibition to go in.
Jean Chatzky: (17:34)
I think it’s the same research, and if I’m wrong, correct me. But that said, same sex couples are 73% more likely to be denied a mortgage.
John Schneider: (17:44)
That was recently reported by NBC and it’s not the same study, but I can’t remember the source of that study off the top of my head. Yeah.
Jean Chatzky: (17:50)
Well we’ll find it. We’ll put it in the notes.
David Auten: (17:52)
It was a 20 year study that came out of the university of Iowa. The thing that we found so surprising with that is that they did this over a 20 year period. So this wasn’t just a survey out to individuals. They actually studied this deeply for 20 years and found this data, which interestingly enough, kind of overlaps with this fact that Prudential found that LGBT individuals, 33% of them, own their own home compared to 66% of non-LGBT individuals. So, and if that’s one of the measurements for having the American Dream or financial success, then that’s one of the reasons why our, maybe our community is falling behind.
Jean Chatzky: (18:36)
If it’s a 20 year study that you’re looking at, has it gotten better?
John Schneider: (18:40)
We don’t have that information just yet.
Jean Chatzky: (18:42)
Does it feel like it’s gotten better?
John Schneider: (18:44)
I feel like financial institutions are trying to connect with our community more. It does feel like there’s an effort to improve things. I don’t know that it’s necessarily connecting with our community quite yet. ‘Cause there’s a Mass Mutual study done a couple of years ago that found that 58% of LGBTQ people don’t trust financial services or financial services individuals because they think they don’t know how to, or don’t want to help them. So we’ve got, I think our industry has to overcome that. But I think the industry is trying to change and I think we’re getting there.
Jean Chatzky: (19:14)
So if you are a same sex couple, one of these same sex couples that wants a mortgage, and you fear you’re going to be denied for discriminatory reasons, how do you outsmart the system?
David Auten: (19:28)
I definitely think that as a community we need to be looking at those organizations, those financial institutions that do display that they support us all throughout the year. And that unfortunately means that in many cases, although it was the story you just mentioned about walking into the credit union and seeing the sticker or the pride flag, we need to look for those or supportive organizations because then we know that when you fill out a mortgage and you’re telling the individual that you’re splitting expenses with another person, and they’re a same sex person, you want to confidently say, we’re not just roommates. We’re more than that. And so knowing that there are institutions out there that do that, just please look for those institutions that are displaying it more than just changing their logo to a rainbow in June.
John Schneider: (20:16)
I think another important thing to do, and the reason that we’re on this tour right now is to get our community, in and of itself, to start talking more about money. There are examples of other niche communities who have improved themselves as individuals and as a community by simply talking about what’s working for them, what’s not working for them, who’s the financial advisor that is not only okay that they’re LGBTQ, but loves the fact that they’re LGBTQ, and our community needs to start having that discussion. So, if you can find the lender or the bank or the financial advisor who is excited and capable to help you get that loan, then share that with your friends in the community.
Jean Chatzky: (20:48)
Are there other pieces of advice, as we wrap this up, that you have found yourself giving out on this tour that you think everybody needs to hear?
Jean Chatzky: (20:58)
I think a reoccurring question that we’ve been getting is how do I get my partner on the same page about money?
Jean Chatzky: (21:03)
Oh, please. I get that question all the time.
John Schneider: (21:07)
And I think that it’s great that at least one of you wants to improve your financial situation. What David and I like to say is maybe don’t get so mired in the numbers or what your fears are, but focus on what your high level goals are, what you want to aspire to. So what kind of retirement do you want? What are your goals? Do you want to travel? Do you wanna open a restaurant? You know, whatever it is that you want to do together as a couple or even as an individual that you can support each other, and focus on those more aspirational things and then figuring out, okay, how do we back into that? What do we have to overcome in order to get there?
David Auten: (21:38)
I think one of the other things that John and I address in our own lives is that idea of legacy feelings and how we need to address those.
Jean Chatzky: (21:48)
What do you mean?
David Auten: (21:49)
The feelings of lack of self worth? For many young people, and especially individuals in the LGBT community who may not have been raised in areas where it was okay to be out. We come with the baggage of our families, our churches, our schools, even media saying to us, you’re not. You don’t fit in. You’re not a part of society. So we come with that negative feeling about ourselves. And letting go of that as much as we can when we’re making financial decisions, when we’re trying to push for another job or we’re trying to educate ourselves, it’s important to remember that every single person, no matter who you are, deserves an awesome life and we all deserve that because we are human. Every human deserves to have a great life. And so think about that when you’re making your financial decisions. What kind of financial decisions can you make that add to you having a great life?
Jean Chatzky: (22:45)
Amen to that. Thank you guys for coming in. It’s a pleasure. I hope you can come by the next time you’re in town or when I’m in Denver. We can get together there.
David Auten and John Schneider: (22:54)
That would be awesome. Thank you.
Jean Chatzky: (22:54)
Right. Thanks so much and we’ll be right back with Kelly and your mailbag. Kelly’s with me in the studio. Hey Kell.
Kelly Hultgren: (23:04)
Jean Chatzky: (23:05)
How are you?
Kelly Hultgren: (23:06)
I am great. How are you?
Jean Chatzky: (23:08)
I’m good. I really enjoyed that conversation with the guys. I felt like I’ve known them now for about three years, maybe a little longer through the FinCon community. FinCon for those of you who are not familiar is the big financial blogger, financial content producer conference that happens about once a year. And I go, I don’t go every year, but I go a lot, and so I’ve had the chance to meet them, but I don’t really feel like I knew them as well as I know them now.
Kelly Hultgren: (23:38)
I know. And my favorite takeaway from the show was the moment of, I think all of us being able to relate to spending to fit in or keep up at so many different times of our life. You can even think back like when you’re young and you’re not even affording your own clothes yet, and you’re asking your parents to buy you certain clothes so you could fit in at school. Like, I mean, it’s all different levels of this, right? But it’s that feeling that you’re doing something to fit in and to be accepted. And that part just, you know, broke my heart but also like made me so inspired because their story is so inspiring.
Jean Chatzky: (24:18)
Yeah. And the fact that you can get a grip on it by paying attention. But I do think the fact that they did it together, that they had a partner to work with to support them along the way, that’s a huge, huge deal.
Kelly Hultgren: (24:31)
And how powerful, too, because they both said they could relate to that. And I mean it’s just, it’s so powerful. It always goes back to the idea of sitting on the couch and figuring out, like, why we are the way with our money emotionally before we can actually make long lasting change.
Jean Chatzky: (24:47)
No question. No question. So we’ve got a full mailbag.
Kelly Hultgren: (24:51)
We do have a full mailbag. Thank you to everyone. You’re continuing to use firstname.lastname@example.org. You’re emailing us your questions and it has absolutely streamlined our process of being able to make sure we’re getting all of your questions, accounting for them, organizing them in a way that I think we’d like to work towards doing more themed mailbags. So thank you everyone.
Jean Chatzky: (25:11)
Kelly Hultgren: (25:11)
Our first one is from Vicky. Could you please let me know if your credit score is affected by a store closing your account because of inactivity? I no longer use that store card so I don’t know if I should let it go or not. I just received a letter saying it would be closed if not used in the next month. I also would love to hear another podcast on finding the right financial advisor or replaying an old one.
Jean Chatzky: (25:33)
That your store card will be closed if you don’t use it in a month sounds to me like an invitation to go shopping, right? No, I think it does.
Kelly Hultgren: (25:43)
I was not expecting that.
Jean Chatzky: (25:44)
No, it’s not an invitation may be a veiled threat that should you not do some sopping with us shortly, we are going to take this action that could have a detrimental impact on your credit report.
Kelly Hultgren: (25:56)
Could they do that? Are they allowed to legally close?
Jean Chatzky: (25:59)
Yeah, they are allowed to legally close accounts for inactivity. So by the way are Visas and MasterCards if you don’t use them, yeah they’re allowed to shut you down for inactivity because if you think about it from their perspective, they send you statements like there’s a cost they incur just to keep your account open. The good news is if you’re not using it, the impact that it will have, particularly a store card where your line of credit is likely to be really, really, really small on your credit report, on your credit score, rather, is going to be very small. So I would not worry about that at all. I would not let it lure you into shopping that you don’t want to do or need to do or to carry a balance on a credit card that you don’t want to carry or need to carry. Let it shut you down. Like, if it’s a store credit card that you value because you use the friends and family sales, you get points, you are collecting some other valuable reward and you’re paying off the card every single time you use it, that’s fine. But it doesn’t sound like that’s the case here. And so I would just let this happen and I wouldn’t worry about it.
Kelly Hultgren: (27:18)
I have a personal question.
Jean Chatzky: (27:19)
Yes, go ahead.
Kelly Hultgren: (27:20)
Have you ever opened a store card that you regret?
Jean Chatzky: (27:23)
Yeah, absolutely. I regret my Banana Republic card. Because at some point when I moved, I lost track of the bills on that Banana Republic card and I missed one and my credit report absolutely got dinged by that. But I also just think I used to open cards to get the discount before I knew better. And then you end up with a really fat wallet that you don’t want to carry around. I don’t really have, I have one store card at this point. I have Bloomingdale’s and I have it because I actually like the friends and family program. Yeah, I use that. Otherwise I don’t have them.
Kelly Hultgren: (28:10)
I have a story about a friend and I promise this friend isn’t me. I’m not using a friend default to tell a personal embarrassing story about myself. Not this time. So my friend who had opened a Victoria’s Secret store card and I had just started working for you, so I was learning about credit cards and best practices, do’s and don’ts. And she confided in me, or just shared with me that you know, she had this card and this is how she was using it. And it dawned on me that she wasn’t paying it off, like, ever. So I quickly realized what was happening and how much she had amassed and with no plans of paying it off, it’s as if it was like this misconception of like a gift card that you don’t have to pay back for a really long time. Who knows how she was positioning it? But it was, that was my first time like putting into practice for someone what I was learning. But it’s confusing. I think, you know, they are tricky for people and oftentimes they come with extremely high interest rates.
Jean Chatzky: (29:06)
Very high interest rates. You never want to not pay off a store card.
Kelly Hultgren: (29:10)
Right, right. So I’m happy to report that that credit card is long gone for said friend. But that was my first experience. And I haven’t opened any myself.
Jean Chatzky: (29:19)
We have so many other ways to pay, which is good. She asked about shows that would help her find a financial advisor. I would suggest going back to the show that we did with Jill Schlesinger. She is a CFP and she had a lot of really, really great advice on finding a financial advisor and you’ll be to find that show if you go to HerMoney.com we’ve got all the podcasts up there. You can just search and you will find your way there.
Kelly Hultgren: (29:48)
That was great. And we’ll do one from Robin. I love your podcast. I discovered it a few months ago and it has helped me use language to money that I never had.
Jean Chatzky: (29:55)
Kelly Hultgren: (29:56)
Really nice compliment. Thank you Robin. My question is this, I am going to be getting married in October. My future husband wants me to start contributing to his 401(k). After we attack to my student loan debt, which is approximately $100,000 we will have plenty in retirement for both of us, but I am fearful that something will happen and we will be left with nothing if things don’t work out. Is it smart to have something of my own to contribute to? Do I need to prepare myself for the chance that we divorce? I think I am just fearful but don’t know what is smart to do. I have a SEP IRA that I contribute to monthly currently but otherwise have been self-employed with no other 401(k) accounts.
Jean Chatzky: (30:31)
So this question confuses me a little bit here. Here’s why it confuses me a little bit. You’ve got a retirement account. Your SEP IRA is a retirement account. Because you’re self employed, there’s no employer there to offer you a company match on making contributions to your own retirement, but you are contributing to your retirement when you fund your SEP IRA. With your husband. The one thing I would be conscious of with him is that as a couple, you are maximizing his ability to get any matching dollars. If he is on his own unable to contribute enough to his 401(k) to get those matching dollars, that’s something that I would say you want to put more of your family resources toward, but beyond that money unmatched that he puts in a 401(k) versus money that you put in a SEP IRA is pretty much a wash and there’s absolutely no reason that you should not be contributing to your own account. The second thing, of three, that I want to say is that if you were to divorce assets, unless there’s a prenup in place, assets that you have accumulated as a married couple, whether they are in your SEP IRA or his 401(k) are likely to be treated as marital assets. I am not a lawyer, but this is what happened when I got divorced. So this is why I believe that this is the case. And thirdly, you said you were thinking about ramping up retirement contributions after you finished paying off your student loan. I want you to take another look at whether that order of operations is the right order to pursue. And the reason for this is that if you refinance that student loan and you get the interest rate down to a reasonable interest rate, it may be very possible for you to get a better return on your money by putting it away for retirement than by putting extra money against that student loan. You may want to pay off that student loan faster for emotional reasons because it’s such a large chunk of debt and I get that, but we also need to look at the return on our money.
Kelly Hultgren: (33:03)
Assuming that his 401(k) is employer sponsored, is it possible for someone other than the person employed to contribute?
Jean Chatzky: (33:12)
No, I didn’t read the question that way. It isn’t possible for 401(k) contributions come out of your paycheck. Right, so his contributions are coming from his paycheck. Right. I read this as she was being asked to divert some of the money that she might be putting into her SEP IRA into maybe their joint checking account to pay for other household expenses, enabling him to put more into the 401(k).
Kelly Hultgren: (33:46)
Yeah, cause I was like that is novel and I haven’t heard of it before and I feel like more people would be interested in that.
Jean Chatzky: (33:54)
And retirement accounts are just like that. I can’t contribute to my husband’s IRA. He can’t contribute to my Roth. They’re all individual. They’re individual retirement accounts and 401(k)s are also individual.
Kelly Hultgren: (34:08)
Hmm. Okay. And we’ll do one more from Madison. I was wondering what’s the best way to save for grad school in the next five years? I don’t know what the best way of saving and growing the money that I have is. I have around $7,000 in my savings account, but I feel like I should be doing something else to maximize this, like investing.
Jean Chatzky: (34:24)
Madison a couple of things. You can open a 529 college savings account. You can put money in there. You should do it with automatic contributions so that the money just goes in on a regular basis. I don’t know where you live, but maybe you will get a state tax deduction for making that contribution, which can be a good way to do it. The other thing that you can do is simply to move the money to a high interest rate savings account. What I don’t want to see you do is take a huge amount of risk with that money by putting it largely in stocks then seeing the stock market correct right before you want to make a tuition payment and then that tuition payment just isn’t there.
Jean Chatzky: (35:06)
Or to tie it all up, so I’ve asked myself this same question, Madison, and if $7,000 is your entire savings, make sure you keep a fraction of that for emergencies before you put…
Jean Chatzky: (35:19)
Oh for sure.
Kelly Hultgren: (35:19)
The majority of it somewhere else to grow it for grad school.
Jean Chatzky: (35:23)
But by putting it into a high interest rate savings account, you’re set on all that and you can go to bankrate.com or any number of places that track high interest rate savings accounts to get a list of places you can earn a good 2.5% on your money.
Kelly Hultgren: (35:39)
So great, I need to do that. Thank you Jean and thank you everyone for writing in.
Jean Chatzky: (35:43)
Absolutely, and just a reminder to everyone who is writing in who has written in, we also publish two newsletters every week. If you aren’t on our newsletter list, go to hermoney.com/signup because you’ll find a lot of information and tips on a weekly basis that, if you like this show, we think you’ll like as well in today’s Thrive. If you are already itching to spend some Libra, that’s the new Facebook cryptocurrency, you’re not alone. The vision is a grand one. If all goes according to plan, we will all be Libra-ing is that a verb?
Kelly Hultgren: (36:21)
I don’t know.
Jean Chatzky: (36:21)
By 2020 sending payments instantly anywhere in the world with almost no fees. But don’t get too excited just yet. Libras blockchain technology is still being developed and Facebook, along with its 27 partners in this venture, still has to find banks willing to hold money to ensure the currency. Once it’s up and running Libra will likely function a lot like Bitcoin. Users will have a wallet and, ostensibly, any company will be able to accept the currency, not just Facebook. But when there are already more than 1600 cryptocurrencies on the market, why is this one creating so much buzz? Well, for starters, it’s Facebook and the company has 2.7 billion customers. Compare that to the 32 million Bitcoin wallets that currently exist in the world. Essentially, as soon as Libra is rolled out, more people could be paying with cryptocurrency than with any other currency in the world. Facebook is also putting a lot of manpower, a lot of thought into this project. There is a nonprofit from Switzerland designing and setting up Libra and the company has plans to eventually include financial services like lending and investing. In other words, if you are still struggling to figure out Venmo or your bank’s app, it’s time that you ask for a tutorial. Soon, it seems, we will be paying for just about everything via our devices, which means that even if cash is still king in your book, or at least a major player, we all need to learn these brave new ways. I want to thank you for joining me today on HerMoney. Thank you to David Auten and John Schneider for the great conversation. If you like what you hear, we hope you’ll subscribe to our show at Apple Podcasts and leave us a review. We love hearing what you think. We want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Track Tribe and our show comes to you through PRX. Join us next week when we’ll be back with another great guest and we’ll talk soon.