5 Things You’ve Always Wanted to Know About Money – Investing and Credit Edition

This week on the podcast, we tackled some of your burning questions about personal finance.

It’s common to have questions about money, but sometimes you may be hesitant to ask them of your friends and family. We get it! At one time or another, we’ve all had questions about personal finance that we wanted answered but were afraid to ask for various reasons.

This is why we decided to tackle some of these popular questions in our podcast, and in the summary below.

Here are 5 things you’ve always wanted to know about money, the investing and credit edition.

Everything you wanted to know about credit and investing but were too afraid to ask answered here.

What is the best way to start investing in your early 20’s?

This question can depend a lot upon your personal financial situation, but in general, we decided some of the best ways to get started investing are by contributing to your employer sponsored 401K if you have the option at your job. Otherwise, there are several other ways you can get started investing on your own with an IRA, or a Roth IRA.

The most important thing is that you start investing as soon as possible so you can take advantage of compound interest working in your favor so you don’t have to invest as much of your own money, but instead can take advantage of the interest earned on your interest for years to come.

Why is buying a house a good investment?

This question was fun to discuss despite the fact that we have no first-hand experience with using a house as an investment.

Our opinion is that you should NOT treat your primary residence as an investment unless you truly plan to use it as such in the near future (1-5 years). Otherwise, your primary residence shouldn’t be seen as an investment other than as an “investment” into your family or your life, not a financial investment.

Buying houses specifically for investments, however, is a good strategy, but you need to be well-versed in the best practices for this strategy before you get started.

What do finance experts thing about buying vs. renting a house?

Ahh! The old buying vs. renting debate. We actually dedicated an entire episode of the podcast to this very question a few weeks ago.

In the end, we decided that there are definitely pros and cons to both sides of this real estate debate, including both financial and non-financial factors that must be considered.

The answer to this question is really “it depends”, and this is something that has also been echoed by real estate expert Paula Pant of Afford Anything.

What are the best ways to invest money?

Once again, we touched on investing strategies with this question. One of the most important things to do when you are investing is to “set it and forget it” rather than being an investment micro-manager.

We also discussed using automated investing options such as lifecycle funds that will automatically adjust as you age and get closer to retirement and the need to withdraw your funds. Lifecycle funds will be more aggressively invested when you are young and will slowly get less aggressive so you are exposed to less risk later on.

Erin also advocated for the use of index funds to help your investment portfolio with diversity without having to select multiple funds yourself.

Most important of all is the need to understand and educate yourself about investing options before you buy into them.

Will closing old credit cards and setting up a new one hurt my credit score?

Your credit score can be hurt both by closing credit cards, as well as opening a new one. Here’s how:

  • Your score may be damaged if you close an old credit card because your credit history length may be shortened.
  • Your score may be damaged if you carry a balance on other credit cards because your credit utilization ratio will be higher if you close a card once the balance is paid off.
  • Your score may be damaged if you open a new credit card because creditors will do a “hard pull” on your score. However, the effects of this will be short-lived and rather minimal.

If you aren’t totally sure what a credit utilization ratio is, here’s an example. If you have two credit cards with a combined credit limit of $10,000 and a balance on one card of $2,000, your credit utilization ratio is 20%. If the card you close has no balance and a limit of $5,000, your combined credit limit will be decreased by $5,000 but your balance of $2,000 will stay the same. Now your utilization ratio is $2,000/$5,000 or 40%.

We also offered some alternatives to closing a credit card if your main reason is to avoid temptation of racking up more debt. You can hide your credit card, shred it, or freeze it in a block of ice so it’s hard to access it to spend money.

You can also call and lower your credit limit so you have less access to credit. Even if you rack up debt then, you won’t be able to dig as big of a hole. Lowering your credit limit will still have a negative affect on your credit utilization ratio though, so be considerate of that before asking for a lower limit.

Can you withdraw money from a credit card?

Our final question was if you can withdraw money from a credit card. The short answer is yes, but the better answer is that should NEVER do this if you can avoid it.

The interest rates on cash advances are often several percentage points higher than the interest rate for regular purchases, plus you may also be charged a fee for taking out a cash advance at an ATM.

Although we never advise people to take on more debt, if you are in a jam, you should consider all other options, like a personal loan, before taking out a cash advance to help pay your bills.

Do you have any questions about things you’ve always wanted to know about money?

If so, shoot us an email or reach out to us on Twitter. We’d love to hear from you!

FCP021 – Things You Always Wanted to Know About Money (But Didn’t Want to Ask)

Welcome back to the Financial Conversation Podcast!

In this episode, we did things a little differently. We decided to tackle some of the most popular personal finance questions from Quora.

These are things you might have always wanted to know about money but were a little afraid to ask. #nojudgement

In future episodes of Things You Always Wanted to Know About Money, we’d love to tackle questions from our readers, so be sure to send us questions if you want us to answer them.

There are a lot of financial questions that go unasked because of embarrassment, fear, or ignorance. Here are 5 things you've wanted to know about money!

In this episode we discuss:

  • 2:00 – What is the best way to start investing in your early 20’s?
  • 6:00 – Why is buying a house a good investment?
  • 8:15 – What do finance experts thing about buying vs. renting a house?
  • 10:30 – What are the best ways to invest money?
  • 17:20 – Will closing old credit cards and setting up a new one hurt my credit score?
  • 24:30 – Can you withdraw money from a credit card?

Related links to check out:

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3 Effective Strategies to Deal with Haters

This week we discussed a very important downside you may experience on your financial and professional journey: interacting with haters.

While most people in your life will be genuinely happy for you and your success, some people won’t so it’s important to acknowledge that.

Sometimes haters are people close to you who may either be hating, or they might just be looking out for your “best interests”. Sometimes haters are people who aren’t close to you at all.

At times, it can be difficult to tell true haters apart from people who really have your best interests in mind, but one thing sticks out when questioning whether someone is a hater or not and that is their negative attitude/mindset and intentional blatant disregard to offer you any support when you need it.

It can almost seem like haters are waiting for you to mess up or fail so it can bring them some type of satisfaction and that’s not pleasant to be around.

Since haters can seriously derail you from reaching your goals, you need to take it upon yourself to develop an effective strategy to deal with them and continue on the road to success.

Here are some of our tips for how you can deal with haters.

Everyone has to deal with haters at some point in their lives, but how you deal with them is key. Here are 3 strategies you can use to come out on top!

1. Avoid Taking Negativity Personally

It’s not uncommon to judge someone else too harshly when you don’t know their personal situation. This is something I feel haters do too often at times.

Sometimes social media can portray people under a certain light that doesn’t truly reflect your life. If you are sharing all the positive news about your life and keeping the bad news to yourself, people may naturally assume you are bragging, have it all together, or want to appear like you’re better than others. Some people may not believe the things you say and judge you harshly whenever you make a mistake and that can be hurtful.

It’s important to realize than whenever someone is projecting negativity or jealousy about you or what you’re doing, it’s not necessarily anything you’re doing wrong and can be an internal struggle that person has to deal with. For example, if you make sacrifices and work hard to start crushing your student loan debt and you share news about that with others, people who aren’t making much progress and have low self esteem about that may feel a little envious and purposely ignore your news. This isn’t your problem, it’s theirs. Not everyone will act this way, so you need to give more attention to the people who offer support and encouragement which we will detail in the next point.

It’s hard to feel genuinely happy for someone when you don’t have your own stuff together so try not to take it personally. Keep doing what you’re doing and avoid bragging. Act gracious and humble instead and don’t look for large masses of people to congratulate you on your success. Having low expectations of certain people means you will pleasantly surprised at times.

-Chonce

2. Surround Yourself with Positive and Supportive People

I’ve never actually had to deal with “haters” per se. At first, some people were skeptical of my decision to quit my job and start freelancing, but that’s also because they didn’t understand the industry or how people legitimately make money from it.

With finance, my friends and family have always been supportive. I believe that’s a huge key in not having to deal with haters in the first place. I’m very grateful that most of my friends were in the same position as me when we graduated from college, and they share many of the same values, so frugal outings are the norm. If something wasn’t in the budget for me, I would tell them, and that was that.

If you have friends and family who are bad influences or who don’t share (or understand) your business or financial goals, it’s going to be more difficult to be open with them, and they may not be as accepting. So make surrounding yourself with people who are positive and supportive a priority when getting serious about your goals.

-Erin

3. Take What Haters Say with a Grain of Salt

One of the ways I deal with haters is just to embrace the fact that they have an opinion. Everyone is entitled to having their own opinion and expressing that opinion. When I run across a hater, I try to keep this in mind and know that one person’s opinion isn’t going to hurt me in the long-run. I also try to keep a positive attitude and remember that for all the haters out there, there are plenty of people who also have a positive opinion about me and my goals too. Plus, at the end of the day, it only matters what I think about my goals and progress, not what other people have to say about it.

-Kayla

Listen to the Bloopers!

Have you had to deal with haters? What strategies have you used?

FCP020 – How to Deal with Haters

Welcome back to the Financial Conversation Podcast!

In this week’s episode, we discussed a touchy topic but one that needs to be addressed: haters.

Hopefully it’s no secret, but everyone has haters, and there’s a proper way to deal with them.

When you’re on your financial journey – whether it’s paying off debt, living frugally, or starting a side business to increase your income, haters and their negativity can really throw you off. Let’s find out if you hustle as hard as you hate!

On this week's podcast, we're talking about how to effectively deal with the haters you'll inevitably come across in your financial & business journey.

In this episode we discuss:

  • 1:20 – We all have haters
  • 2:05 – Different types of haters
  • 7:50 – Dealing with a negative Nancy
  • 10:20 – Dealing with actual haters
  • 13:45 – Exploring our financial journeys
  • 16:50 – The accountability buddy system
  • 22:15 – Having an accountability partner

Like It? Subscribe!

We would love it if you subscribed via iTunes, Stitcher, or SoundCloud, or if you left us a review! While we love getting together and chatting each episode, it’s great to know people are listening. =)

We want to hear from you! Do you have suggestions or questions? Comment below, or follow us on Facebook or Twitter.

Busting Tax Refund Myths

A lot of people dislike taxes because they think paying them takes too much time and costs too much money. If you don’t know much about taxes, then it’s easy to get mislead by myths. In reality, the situation is better than you probably think.

Despite the sting you may feel when you look at your paycheck, the average American’s income tax rate is only 10.1 percent of his or her income. Unless your family earns more than $200,000 per year, your income tax rate probably isn’t even that high. If you make less than $40,000, then you have a negative income tax rate that can help you make ends meet. Even when you include excise, income, and payroll taxes, you don’t exceed 20 percent until you earn more than $100,000.

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