37: Interest Rate Work-Arounds for 2024 | Rich Habits Podcast

Intro

In episode 37 of the Rich Habits Podcast, the hosts dive into the topic of interest rate work-arounds for 2024. They discuss how interest rates impact various aspects of your financial life, from savings and debt to investments and real estate. They also explore strategies for finding lower interest rates and share insights on financial education for children. Join them as they provide valuable advice and answer listener questions.

Main Takeaways

Maximizing Savings and Managing Debt

• Interest rates impact every part of your buying power and financial life.
• Higher interest rates mean higher yields on your savings.
• Emergency funds should be parked in high-yield savings accounts or T-bills.
• Money should not sit idly in a savings account; consider the velocity of your money.
• Always have your money accounted for through budgeting and understanding your debt-to-income ratio.
• Higher interest rates mean paying more on debt, including car loans, mortgages, and personal loans.

Workarounds for High Interest Rates

• Workarounds for high interest rates include finding distressed buyers with low interest rates and assuming their mortgages.
• Only FHA, USDA, and VA loans are assumable.
• Research and get involved in these strategies to save money and reach financial goals.
• Assumable loans are a way to save money and reach financial goals by taking over someone else’s loan with a lower interest rate.
• This applies not only to mortgages but also to car loans and boat loans.
• It’s all about the lender, and some lenders offer assumable loans such as Capital One.
• Assumable loans can be found on Facebook Marketplace or through friends and family.
• It’s also possible to negotiate with the seller to participate in the deal.
• When buying a car, check the value of the vehicle before negotiating with the seller.
• It’s possible to negotiate with the seller to participate in the deal and pay back some of the negative equity on the car.

Investing and Wealth Building

• High interest rates impact the stock market and your portfolio.
• Investors need to be aware of the risk-free interest rate that can be earned on money through Treasury bills.
• Investing in companies carries risks, and if the potential upside isn’t there, the market will discount the stock price to account for that risk.
• Dollar cost averaging is an important strategy to optimize portfolios.
• Automating investments takes the emotion out of the equation.
• Optimizing for portfolio income can help smooth out volatility.
• Having perspective and a long-term investment goal is crucial.
• Markets go up and down but tend to trend higher by about 8% to 10% per year.
• NEO’s investments offer unique ETFs aimed at providing monthly passive income with tax efficiency in mind.
• Investing in the stock market tends to trend higher by about 8% to 10% per year.

Financial Education for Children

• Children as young as nine can start learning about money and financial habits through simple introductions and conversations.
• Starting a custodial Roth IRA for a child can be a good way to introduce investing and wealth building.
• It’s important to recognize the importance of financial education and instill good habits early on.
• Start teaching financial education in late middle school or early high school.
• Be mindful of conversations about money around children as it can affect their relationship with money.
• Teach children the difference between trading time for money and managing money.

Debt and Credit Management

• Consider a HELOC instead of a cash-out refi for mortgage payments.
• Fannie Mae 5% mortgage is a great program for wealth building in real estate with a low down payment.
• Check if the debt is on your credit report.
• The Statute of Limitations may be up for the debt.
• Consider ignoring the scare letter and not paying the debt.
• If it shows up on your credit report, try to settle it for less than what is owed.
• Be prepared to pay the settlement if you agree to it, as it reinvigorates the debt and they can go after you.
• Always have settlements in writing to avoid future disputes.
• Use a debit card to pay off settlements and avoid giving access to your bank account.

Other Insights and Appreciation

• High interest rates on savings can help you earn more money.
• Understanding the velocity of money is important.
• Interest rates impact portfolios, stock markets, and cryptocurrencies.
• Follow Rich Habits Podcast on Instagram and join their Discord community.
• Thank you to Jorge, Philip, and Felicia for their questions.
• Appreciation for the support of their listeners.

Summary

Maximizing Savings and Managing Debt

Interest rates have a significant impact on your financial life, affecting your buying power and the value of economic assets. Higher interest rates can lead to higher yields on your savings, making it important to consider parking your emergency fund in high-yield savings accounts or Treasury bills. It’s crucial to avoid letting your money sit idly in a savings account and instead focus on the velocity of your money. Budgeting and understanding your debt-to-income ratio are essential for keeping your money accounted for and managing your debt effectively.

Workarounds for High Interest Rates

If you’re looking to save money and reach your financial goals, consider exploring workarounds for high interest rates. One strategy is finding distressed buyers with low interest rates and assuming their mortgages. However, it’s important to note that only FHA, USDA, and VA loans are assumable. Research and get involved in these strategies to take advantage of lower interest rates, not just for mortgages but also for car loans and boat loans. Look for assumable loans on platforms like Facebook Marketplace or through connections in your network. Negotiating with the seller can also be beneficial, especially when it comes to buying a car and dealing with negative equity.

Investing and Wealth Building

High interest rates have implications for the stock market and your investment portfolio. It’s crucial for investors to be aware of the risk-free interest rate that can be earned through Treasury bills. Investing in companies carries risks, and if the potential upside isn’t sufficient, the market will adjust the stock price accordingly. Dollar cost averaging is a valuable strategy to optimize portfolios, and automating investments helps remove emotional biases. Optimizing for portfolio income can help mitigate volatility, and maintaining a long-term investment goal is crucial for success. The stock market tends to trend higher by about 8% to 10% per year, making it an attractive avenue for wealth building. NEO’s investments offer unique ETFs that aim to provide monthly passive income with tax efficiency in mind.

Financial Education for Children

Introducing financial education to children at a young age can set them up for a successful future. Simple conversations and introductions about money and financial habits can begin as early as nine years old. Starting a custodial Roth IRA for a child can be an effective way to introduce them to investing and wealth building. It’s crucial to recognize the importance of financial education and instill good habits early on. Consider incorporating financial education into the curriculum in late middle school or early high school. Be mindful of the conversations about money that take place around children, as these can significantly impact their relationship with money. Teach children the difference between trading time for money and managing money effectively.

Debt and Credit Management

When it comes to managing debt, consider alternatives such as a home equity line of credit (HELOC) instead of a cash-out refinance for mortgage payments. The Fannie Mae 5% mortgage program offers a great opportunity for wealth building in real estate with a low down payment. It’s important to check if a debt is on your credit report and assess whether the Statute of Limitations for the debt has expired. In some cases, it may be beneficial to ignore scare letters and not pay the debt. If the debt does show up on your credit report, try to negotiate a settlement for less than the amount owed. However, be prepared to pay the agreed settlement amount, as it reinvigorates the debt and the creditor can pursue collection. Always ensure settlements are in writing to avoid future disputes, and consider using a debit card for payment to protect your bank account.

Other Insights and Appreciation

Aside from the main takeaways, it’s worth noting that high interest rates on savings can help you earn more money. Understanding the velocity of money and its impact on your financial life is essential for making informed decisions. Interest rates also have implications for portfolios, stock markets, and cryptocurrencies. To stay connected with the Rich Habits Podcast community, follow them on Instagram and join their Discord community. The hosts express their gratitude to listeners and acknowledge the support received. They also address specific questions from Jorge, Philip, and Felicia.

Conclusion

The Rich Habits Podcast episode on interest rate work-arounds for 2024 offers valuable insights into maximizing savings, managing debt, exploring workarounds for high interest rates, investing and wealth building, financial education for children, and debt and credit management. By understanding the impact of interest rates on various aspects of your financial life, you can make informed decisions to save money, reach your goals, and build wealth. Remember to stay engaged with the Rich Habits Podcast community and continue learning from their valuable content.