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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode starts with a discussion about what Sean and Liz accomplished with their money this year.
Then we pivot to a celebration of our listeners’ money wins. So many listeners shared their great financial achievements that we decided to do two shows. Be sure to come back next week for Part 2.
Check out this episode on any of these platforms:
Before you build a budget
Track all your spending at a glance to understand your trends and spot opportunities to save money.
You might know what you want to accomplish with your money, but the journey to get there may not be what you expect. Whether you’re looking to become a homeowner or setting your children up for financial success or searching for a new job, think of creative ways to achieve your money goals. An adaptive mindset can open more possibilities for what you can achieve with your finances and in your life.
Regardless of what you want to do with your money, however, saving is paramount. Building up cash reserves for emergencies and dedicated funds for things like vacations or car repairs can increase your financial resilience. And beyond a savings strategy, make sure you’re optimizing how you’re saving for retirement. That might mean opening a Roth IRA to minimize your tax bill in retirement.
Whether you’re saving for retirement, opening a savings account or getting a mortgage, make sure you know how to shop around for financial products. Perusing a few different products can help you feel confident that you’re making an informed decision, and the company you decide to partner with can help you meet your goals and reflects your values.
Leverage your value: The labor market is hot, so it may be a good time to negotiate for a raise or look for a higher-paying position. More money can make it easier to reach your goals.
Save, save, save: Boosting your retirement contributions, saving for emergencies and putting money aside for college can help you build financial resilience — and it feels great.
Shop around: No matter the financial products you’re interested in, check with at least three lenders to make sure you’re getting the rate and terms you deserve.
More about personal finance on NerdWallet:
The author owned Dogecoin at the time of publication. NerdWallet is not recommending or advising readers to buy or sell Dogecoin or any other cryptocurrency.
Sean Pyles: Welcome to the NerdWallet Smart Money podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I’m Sean Pyles.
Liz Weston: And I’m Liz Weston. To send the Nerds your money questions, call or text us on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or email us at [email protected] Also hit that subscribe button to get new episodes delivered to your devices every Monday. And if you like what you hear, please leave us a review and tell a friend.
Sean: This episode, we are doing something a little bit different. Instead of answering your money questions, we are celebrating your money wins. So many of you shared your 2021 accomplishments, and we can’t wait to listen to them and celebrate along with you.
Liz: Yes, but before we get in to our listener wins, Sean and I wanted to do a little bragging of our own and share what we accomplished in 2021. And Sean, you had a pretty big year, so you want to start us off?
Sean: Yeah. I love to brag about things that I’ve accomplished. So I’m happy to do this. And my big one is that I became a homeowner this year. And it was …
Sean: Thank you. You were there for every step of this journey. It was a really long process. It took me nine months from beginning to end because I got a brand new home. So it was a lengthy process. It was also my first time buying a house, so I had to figure out all of the ins and outs of what it means to shop around for a mortgage, how to get my credit in the best shape possible, how to feel OK getting rid of all this money that I’d saved up for so long. But I’m really proud of myself for doing it and I love being a homeowner.
Liz: Yeah. And for new listeners, Sean actually applied with, I don’t know, 8 billion different mortgage lenders, was it?
Sean: It was five, but maybe felt like 8 billion because of all the documents I had to upload and all of the back and forth I had between these different mortgage lenders. But because I did that, I was able to get a very competitive rate. I was actually able to haggle to get some of my closing costs covered and I saved over a thousand dollars in that process.
Liz: Wow. OK. So that’s worth it.
Sean: Definitely. Yeah. 100%. But one of my main takeaways from this whole homebuying process is that you might have to get creative to accomplish the things that you want to do with your money and with your life, because I’ve been saving to buy a house for several years, and the idea that my partner and I had was that he would buy a house in Portland first because he was always the better saver than me in the beginning, and then we would take our time here in this one house, I would save up and then I would buy my own house in Portland. By the time I had enough money to save for a down payment, I was not able to afford anything in the Portland metro area.
And this was August of 2020. The world was on fire. In Oregon specifically, we were in the middle of the pandemic. Things were looking really grim. Wasn’t able to buy a house here, so we thought, “Let’s look elsewhere.” So I ended up buying a house in rural coastal Washington, less than 10 minutes from the beach, which is a place I never thought existed, let alone was a spot where I could buy a house. So I dove in and now I’m the proud owner of a beach house, which is incredible. So I think that if I had limited myself to what I thought a house I could own could be, I wouldn’t have what I have today. So that’s my main takeaway, is get creative to do what you want to do.
Liz: When you wait, when you have to put together a larger down payment, you do take that risk that you’re going to get priced out of the market. People think they need to have 20% down payments. You really don’t. 3.5% is enough, and sometimes you can get gifted the down payment. There’s first-time homeowner programs that can help get you into a house. But you assessed the situation and said, “Hey, we have another alternative here. Let’s go explore it.” So hats off to you for doing it.
Sean: Yeah. And if I had waited, I actually would no longer be able to afford my own house because of the way the market has jumped. Because my house that I bought, it was very reasonable and well within my budget. My mortgage is barely more than I was paying for rent in San Francisco, if you can believe that. But now, the same model house sold across the block from me for $80,000 more than I paid, which I couldn’t afford. So I’m glad I got in when I did. That’s also another takeaway is, if you are ready to do it, you have the money and you have your life in a place where you can do this, jump for it.
Liz: And you also did a few things with your banking system, as I remember.
Sean: Yeah. 2021 was a big year for me, totally revamping the way that I manage my money through my banks. I’d had my account with my big national bank for several years, since high school actually. And I was never really fond of them because they seemed like one of those traditionally big evil banks that you hear about. They would charge me every time I used an ATM on top of the ATM fee, which was never fun. And out in the Pacific Northwest, there aren’t many of these banks around, whereas in Chicago, where I’m from originally, they were all over the place. So I decided to jump into a credit union in the Pacific Northwest, and I’m really glad that I did. I have my money now more focused in my community.
So that was one big thing that I accomplished. And then I also got my savings bucket set up this year. In the beginning of the year, I really wanted to have this system where I have X amount going into my emergency fund, a car fund, a fun fund. I even have a fence fund for my house now. And I finally got it all allocated. After I bought my house, I’ve had a few months of tweaking how much I have going into different accounts because my budget is totally different now. But that’s part of the great flexibility of having the savings bucket, because you can define how much you want to go into each area and make that work for you.
Liz: It can feel so hard to break ties with a bank if you’ve been with them for a while, and it can take a lot to make you want to move, but as you proved, it’s certainly doable and it probably wasn’t as much of a hassle as you thought it was going to be, right?
Sean: It really wasn’t. And technically, I still do have my old bank account because my mom’s bank account was connected to it. That’s how I got it originally, back in high school, and I gave her my cell phone money for that, my part of the cell phone bill. So I technically still have it, but I don’t use it for practically anything besides the cell phone bill. And also I will say, I didn’t have any qualms about leaving this bank. I was jumping for joy when I finally got my new debit card for my new credit union.
Liz: Good for you. Congratulations.
Sean: Thank you. Well, so Liz, I think that’s enough about me. What did you do with your money this year?
Liz: I didn’t really do much that was new, so it was mostly just keep on keeping on, continuing to invest, continuing to save. I maxed out our 401(k), which I like to do every year.
Liz: Yeah. It’s something that’s really, I think, helpful in getting the tax bill down, but it’s also a great way to obviously save for the future. And NerdWallet has something cool. It’s called the mega backdoor Roth. And what that basically means is you can put money in after-tax and then immediately convert it to a Roth IRA. And NerdWallet even made this automatic. Now it used to be, I had to call up our 401(k) administrator and ask them to do it. Now it just happens. So for folks whose income is high enough that they can’t contribute directly to a Roth, this is a great way to get money into a Roth.
Also for the first time in a long time, we’re going to do an HSA. So that’s a health savings account. We’re going to go with the high-deductible health care plan. And we are not one of those families that barely uses health care. We use a ton of health care, but we learned that if you are sure that you’re going to meet the deductible, which we are, then an HSA can actually work for you, a high-deductible plan with an HSA.
So for people who don’t know, the health savings account gives you a tax break for the money going in. You can invest the money, it can grow tax deferred. You don’t have to take it out, and it can be kind of a supplementary retirement fund. So when you take the money out in retirement, it can be tax-free.
And I’ve always liked that, but I’ve never really liked the high-deductible health care insurance plan.
Sean: That’s a straight off.
Liz: Yeah, exactly. It definitely is. But we kind of looked through and did the numbers and went, “You know what? This year it really makes sense.” So we are not planning to use that money to meet our deductible. I’ve actually got another savings account for that and I’m hoping to just let that money ride and continue to grow. And if this doesn’t work out, I’ll let you know.
Sean: Yeah. You can always change it for next year.
Liz: Exactly. Yeah. It’s kind of an experiment.
Sean: I signed up for a high deductible health care plan this past year, as well, and I also opened an HSA starting in January, and I’ve really enjoyed it so far. My concern was that I would somehow forgo health care because I didn’t want to have to cover some of these expenses. And because I had that in my mind, I think I was really intentional about it and I had all the appointments that I should have had over this past year. So that’s good. But that’s a concern for some people, because they do have to fork out more out of pocket, they might not have that annual checkup, which can lead to problems down the road.
Liz: The first time that we did this, I didn’t have the right mindset for it and I did exactly that. I kept putting off a screening that I should have had. And that was a little scary to me, which is what made me not want to do that in the future. But when it came around again, I realized what will help me is actually setting aside the cash so that I know it’s there, it’s dedicated to that purpose. I will use it, and then once the deductible is met, our health insurance kicks in and it’s actually pretty generous. So I think this will work out for us, but I’ll let you know at the end of the year.
So the only other big thing that happened was my daughter going off to college and we have …
Sean: Which is a huge thing.
Liz: It’s a huge thing. And the fun part of it was trying to figure out what a good budget for her would be. So I didn’t really want her to have to work the first semester that she was there. I worked like 3, 4, 5 jobs every semester I was in college, and it was too much. So I want her to have a job, I just don’t want her to be working around the clock. So figuring out a budget was a little bit of a give and take kind of thing, but it seems to be working out, which is great. And again, another shoutout to the 529 college savings plans. It’s a load off my mind to know that that money is there and waiting for her.
Sean: That’s what I was thinking as we were heading into this segment, is that it’s not what you did this year. It’s what came to fruition this year for your daughter. You’ve been saving for your 529 plan for years and years and years, and you can finally use it, and what a relief that must be.
Liz: Well, I’ve got to check my privilege here. We also have a very generous grandfather who’s involved in this mix, so he’s helping enormously, and not everybody has that. And being able to give our daughter the gift of not having to have a massive dose of student loans is huge, but obviously very few people are in that fortunate position.
Sean: That’s great. Shoutout to grandpa for helping with that. Yes. Well, I think that we have yammered on about our own wins enough. Let’s get on to what our listeners did in 2021. All right. And here’s the first listener win.
Listener 1: Hey guys, I’ve had a really great financial year this year. I’ve done a lot of things that I had never done before. I opened a high-yield savings account, and I have several different accounts within that, and I have money set aside in my emergency fund and for my house and for my dog, and then a fun fund, which is kind of for travel and things like that. And I also started regularly contributing a percentage of my income to my retirement fund and putting it in a Roth IRA. I’m self-employed, so that hadn’t really been something that I’d been on top of until recently. I’ve been budgeting pretty well and have enough room for all of that savings. So really excited about what I pulled off this year, and I kind of wanted to share it with the world. Thanks a lot for all you do.
Sean: Yay. I love all of these different savings buckets. This is so exciting. And we talk about it so much on NerdWallet because it is such an effective way to save for many different things at once. Whether it is a dog or an emergency or a vacation you have coming up, it can make it so simple to save for all of these things.
Liz: Yes. And those savings buckets are so helpful in making sure that you put aside the money and don’t touch it for other things.
Sean: I think I might take a page out of this listener’s book and start a pet savings fund. That’s something I do not have, because you never know when your cat or your dog will eat something mysterious on the side of the road and have an emergency that requires several hundred dollars to fix. So that’s a really smart idea.
Liz: Yes, it absolutely is. And I’m a fan of pet insurance, but it’s not for everybody. And even when you do have pet insurance, you need to have some savings to meet the deductible. So, great idea.
Sean: We need to talk more about pet insurance in the new year. I’m also happy to hear that our listener is saving with a Roth IRA because they’re self-employed, but because they’re self-employed, they have tons of options, as we’ve been getting into more recently on the show. So Liz, what do you think they might want to look into for their retirement account options?
Liz: Well, that SEP IRA is probably the easiest one. And the more money you make, the more options you might want to check into. Other options, like a simple or even solo 401(k) typically require more setup, and they require more ongoing expense. So the SEP is a great place to start.
Sean: Easier is better, and ironically, the simple is not the simplest. So that seems to be the way to go for a lot of people. Well, let’s get on to our second listener win.
Listener 2: Hi, my name is Ryker from Wyoming. My big win for this year was I started a new job this summer and maxed out my retirement accounts and then went large into cryptocurrency just to see how that would play out, and my largest one being Sandbox, and that has worked out quite well as of recently.
Liz: Oh, I love that Ryker maxed out retirement first, but I’m a little concerned about going large into something that’s so speculative.
Sean: Yeah. This year was huge for crypto. A recent CNBC survey found that more than 10% of those surveyed were invested in crypto, and 65% of those who were invested did so for the first time within the past year. And I am among that group, despite not being included in this survey because I got into Dogecoin very early in this year, and it was something that I’d heard about online. Now it’s pretty much mainstream. It is still, as far as I’m concerned, a complete joke, but I understand many people are really interested in it because my initial investment of $70 into Doge is at around $1,500 at the time of recording. So that’s a huge return, but people who are super into this community think of it as an actual currency. I’m not using Doge to buy ice cream around the corner, but it’s kind of cool to watch. It’s a fun new emerging market, I suppose. But again, it is really risky, really volatile, not a replacement for a comprehensive investment strategy.
All right, let’s get on to our third listener win.
Listener 3: Hi, Sean and Liz. It wasn’t what I did, it’s what my kids did. My kids both started a Roth IRA. Yes, at 20 and 23 years of age, they started their first Roth IRA. I tell you, it was hard for them to let go of that money and see it disappear, and I say, wait for the next 50 years, you will be rewarded greatly for this. So that’s what we did to help our financial success for the future. Thanks.
Sean: This listener is so right. Their kids are going to be rewarded greatly for starting to invest in a Roth IRA as young as they are. I love to hear about young adults taking advantage of their expansive time horizons. So you should be a proud mom for sure.
Liz: An early start is twice as good as a late start. If you start in your 20s with saving for retirement, you can accumulate twice as much compared to starting even 10 years later, and you can double the advantage again if you get started in your teens. So as a side note, we matched our daughter’s earnings and put that money into a Roth for her. So if you are a parent looking for ways to get your kids started on the right path with investing, as long as they have earned income, you can match it up to the maximum Roth contribution and put that money in there for them.
Sean: And the flip side is that me starting my Roth IRA at 30, I did that this past year, I will now have half as much compared to our listener’s kids. And I got to say, I’ve got some FOMO, so I wish I could have those years back to build this money up, but that is so cool to hear. Great job.
Liz: Any start is great, but the earlier the better.
Sean: Yeah, exactly. Ready for the next one?
Listener 4: Hey team, you asked me for my biggest financial accomplishment of 2021, and for me it would have to be, I got a new job and I negotiated a 16% raise in salary and I also negotiated a $10,000 signing bonus. And before this, I had never tried negotiating, but I heard about it on your podcast and I figured I’d give it a try and it worked out great. So thank you. Keep on keeping on.
Liz: I love this. Not only a nice substantial raise, but a signing bonus. That is so cool.
Sean: Oh yeah. And now is a great time for workers to negotiate wages, especially if they’re starting a new job. We found that wages actually increased from July to September of 2021 at their fastest rate in 20 years. So given the great resignation and the fact that a lot of people are shifting around what they’re doing with their lives and their jobs amid the pandemic, right now is an excellent time to begin to haggle for higher wages.
Liz: The key is doing your research beforehand. You want to know what other people are getting paid for jobs similar to yours in your industry, and you want to focus on your accomplishments and why your work is deserving of a raise.
Sean: And it’s also, again, after you do this research, worth having that conversation, because a lot of people just don’t do it.
Liz: So earlier this year, we talked about negotiating a salary. And one of the best bits of information was that the person who has more information should be the first to name the figure. If you are asking for a raise, the person with more information is essentially you, you know everything you need to know. If you are negotiating for a starting salary with a new job, typically you want to wait for the employer to make the first offer because you don’t know enough about the position.
Sean: There’s pretty much no benefit to bluffing when you are negotiating a salary. You want to have the facts and figures to back up why you are asking for as much as you are or wait for the people who would be offering you the job to put forth what they think you might be worth. And that’s when you can counter and say, “Well, actually, based on other people working the same job elsewhere in the economy, here’s what I think I’m worth.” And then you can start the conversation.
Liz: Well, let’s listen to win number five.
Listener 5: Being a full-time freelance musician and having my entire industry shut down due to COVID, it was an extremely scary time, a time that I thought I was going to be absolutely destitute coming out of it. I thought that I was going to use every penny that I had squirreled away, which is not much. And instead, I paid off almost $15,000 worth of credit card debt. I grew my net worth by about 600%.
Obviously, it sounds more drastic when you didn’t have much to start with and then have a lot to grow. And I am currently working to buy a house one day. I’m excited to continue to stay credit-card-debt free. I do have student loans, but thankfully the interest rates are quite low on them, and I can continue to make my payments and not feel like my world is going to completely get swallowed up. And I’m excited to have a future and have a retirement. It’s something that’s very rare. And quite honestly, it’s scary to hear how many of my colleagues don’t have a retirement fund, especially being freelance musicians, contractors, never knowing how much money we’re going to make week to week, month to month. So yeah, those are my wins. I hope that this inspires others, especially in this very strange niche world that I’m a part of, that it’s possible to make better choices and it’s never too late.
Liz: Wow. This may be the great underreported story of the pandemic. It’s been so hard for so many people, but I know a number of folks who finally got ahead, thanks to expanded unemployment benefits and the pause on student loan payments.
Sean: We saw a lot of credit card balances plummet during the pandemic as many folks did use their stimulus checks to get out of debt, and also many directed funds that they would’ve spent toward debt payoff. I think our listener’s response speaks to how much opportunity can open up for you when you do get debt-free. Now that they’ve gotten rid of that huge sum of credit card debt, they can begin to think about other goals like buying a house, which is so great, and saving for retirement because that’s really important. And as they also mentioned, it’s scary how many people are not really saving enough. So it’s good to learn lessons from other people’s mistakes, which is something I’m very fond of doing, and work to get yourself up in a great position. And I’m sure this will inspire many other people like them.
Liz: We talk about financial resilience a lot, and this is the starting point. Once you have a little bit, you see how valuable it can be and you want to build more. It’s not always possible, of course, but I really hope this listener takes this great start and continues to build on it.
Sean: Another thing that I wanted to touch on is the idea of net worth. This is something that personally I have not really thought or cared about much, probably because my net worth is negative given my student loans and my mortgage, but there is some value and understanding in building your net worth. And Liz, I know you have strong feelings about this.
Liz: Well, it’s actually something they teach you in CFP school. It’s one of the very first things that you do with a client, is you find out what their assets are and what their liabilities are, and then you track that over time. And once you know that number, you can get more invested, as it were, in wanting to build that. And honestly, Sean, I’d be surprised if you actually did have negative net worth, because your house has equity in it. You have a retirement fund. Even if you do have a lot of student loan debt, you probably have eked your way over into the positive territory. But even if you are negative, that’s so common in your 20s. So it’s something that you build over time. It’s not going to happen overnight. But once you have that number, you tend to want to make it increase. So it’s a good thing to know.
Sean: For me, because I’ve always had so much debt with my student loans and now my mortgage, I thought that it was more of a vanity metric thinking about your net worth, but it can also inspire you to create a goal based on improving your net worth.
Liz: And it can get you serious about paying off some of that toxic debt like credit cards, if you have it. And also it shows you, in very concrete terms, what happens when you invest. When you put money in the stock market over time, your net worth is growing. And same with buying a house. Typically over time, the equity grows, and that helps your net worth. So it makes you a little bit more leery to add debt. It makes you a little bit more interested in adding assets.
Sean: What do you think is the easiest way for folks to measure and track their net worth?
Liz: You can do it with a spreadsheet. There are also a lot of budgeting apps that can help you. And of course, NerdWallet has an app that can help you track your net worth. It really is a good number to know.
Sean: Keeping that in mind for 2022.
Liz: There you go. Your to-do list
Sean: And that is all we have for this episode. We had so many wins that we are actually doing a part two of this episode next week. In the meantime, call or text us your money questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected], and visit nerdwallet.com/podcast for more info on this episode. And remember to subscribe, rate and review us wherever you’re getting this podcast.
Liz: And here’s our brief disclaimer, thoughtfully crafted by NerdWallet’s legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and may not apply to your specific circumstances.
Sean: And with that said, until next time, turn to the Nerds.