00:00
Peter Dunn
It's. And we're back on the Pete the Planner show. I've completely abandoned the musical open. We had animation put together, and I play it, and it makes it look professional, but alas, I don't know why I can't do it. It takes about 15 seconds to do Damian. What do you think is do you think it's Laziness? Do you think I like the more spontaneity opening this way? Why do you think I've abandoned the formal open of the show?
00:30
Damian Dunn
Here's the thing. One of the things that got universal comments and compliments on the show was the intro by Mr. Kinetic.
00:42
Peter Dunn
True.
00:43
Damian Dunn
And you have abandoned that. So I think it's contempt for your audience that you've abandoned that.
00:49
Peter Dunn
It's certainly not due to a lack of respect for Mr. Kinetic. He's a great man. All right, Dame, here's what we have on the show this week. Good to be with you. Of course. I just turned my sound volume down. Did it mess you up?
01:00
Damian Dunn
No, I'm good.
01:01
Peter Dunn
Okay. Hello, Danza. Hello, Neil Brown. So here's the thing. I have a meeting later today right by Neil Brown's house. Like, I might even park in his driveway. And I was going to leave, like, anonymous note on his door that would have panicked him in several different ways. And I told Mrs. Planner what the note was going to say. Like, this is something I really thought of last night, and she said, it is way too mean and I should not do it. So, Dame, after the show, I will tell you what the note would have said.
01:32
Damian Dunn
How about if I write it and you leave it?
01:35
Peter Dunn
I don't know. I write like a serial killer. I was going to actually cut magazine stuff, like letters out of magazines to do it. Hey, it's Jenny Enchanto. Big fan. Hi, Jenny. How are you? Good to be with you. I've got sort of a Count Dracula jacket on today. I know. This is radio blogging. This is not a blog. What happened to me? I turned 44 last week, and now I call anything on the Internet a block. I was on my blog.
02:07
Damian Dunn
On mySpace.
02:09
Peter Dunn
Okay. All right, dude, let's do the show. There's craig Anderson. Weighing in. I know the podcast people are listening right now. They're like, Just do the show, dummy. Just do the show. I will. Dame, on the show this week, we're talking going through a column. Someone wrote me an email. I wrote a column about it, and we're actually going to answer it on the air as well. We're going to talk about the backdoor Roth IRA loophole or the back door is getting closed. I don't know how we would say that, but that is something that may be happening soon. There is new debt collector rules, which are a little bit shocking, I got to be honest. You would think, Dame, if there's going to be changes in regulations around debt collection, it would go more to the side of the consumer. This one not so much.
02:56
Peter Dunn
It's surprising. So we'll talk about that and then we're also going to talk about wait, is that it? Where was there another something else, wasn't there? What's the third thing?
03:05
Damian Dunn
Do you talk? Student loans.
03:06
Peter Dunn
Oh, yeah. In February. Student loan relief is gone. Right? I mean, if you have not been paying your student loans, then they're going to start back up. So we're going to talk a little bit about what that can mean and how people should begin to address that now as opposed to just waiting for it to happen. And then biggest waste of money of the week and the news right here all on this blog. All right, let's start the show. You ready?
03:31
Damian Dunn
Yes.
03:31
Peter Dunn
Are you? Good. By the way, you're doing well.
03:33
Damian Dunn
It doesn't matter.
03:34
Peter Dunn
It doesn't. I will say I would like to thank Damien publicly and his lovely Mrs. Dunn for making me a pie on my birthday this week. I was very thoughtful. I really appreciated it. It was a peanut butter pie.
03:47
Damian Dunn
Did you share it?
03:49
Peter Dunn
I did share it reluctantly with my family.
03:54
Damian Dunn
Were the compliments universal in that Dunn household? The south dunn.
03:59
Peter Dunn
Yeah. We loved it. We have peanut butter pie. It's a universal recipe. There's no secret to it. It's vanilla pudding, peanut butter, confectioner sugar and a graham cracker crust with Cool Whip on top. And that's it. It's delicious.
04:13
Damian Dunn
Yeah. It's a sight and a taste to behold.
04:16
Peter Dunn
I've forgotten to eat lunch seven out of the last eleven business days.
04:23
Damian Dunn
I don't know what that says about you.
04:25
Peter Dunn
I don't know. And I brought that up because I started talking about pie. It's because I don't think about food during the day. But then I talked about pie, so now I'm hungry. So today will not be one of those days.
04:33
Damian Dunn
Good for you.
04:34
Peter Dunn
Let's start the show. Three. Okay, two, one. This week on the Pete the Planner show, we answer your money questions. Here's how the show works. You email us? Ask Pete@petetheplanner.com that's. Askpeet@petetheplaner.com. And then something magical happens after that. We either answer it right here on this very show on your radio or podcast, or I write about it in the newspaper. This week I'm doing both. Damian Dunn, vice president of advice at Your Money Line, joins me now. Hello? D***.
05:03
Damian Dunn
Hello, Pete.
05:04
Peter Dunn
All right, so I got a great email this week and I answered it in my Indianapolis Business Journal column, which comes out on the 3 December. Dear Pete, I heard some colleagues talking about discretionary spending the other day timeout. At what point do you think a person calls their coworkers? Colleagues versus coworkers, you know what I mean? What's the delineation there? What can we learn about this person that they call them colleagues and not coworkers? Do you think it speaks to a level of education? What can we know from this?
05:37
Damian Dunn
That's a great question. I feel like colleagues implies some level.
05:42
Peter Dunn
Of friendship there as well out of respect. Right? I sense some respect anyway and it got me thinking about how much money I allow myself to spend in any given month. I typically give myself some cushion for dining out in a random purchase here or there. But beyond that I keep a pretty low balance in my checking account because I tend to spend more responsibly if I limit the amount of money I have access to. How do you think about discretionary spending? This is from Kate in Naptown. So Dame, what direction do you want to go? Do you want to start with how do you think about discretionary spending? Maybe let's start there and then address checking account balances after that. How do you wizard of Money damien Dunn think about discretionary spending?
06:30
Damian Dunn
Discretionary spending is kind of weird because if you maintain a budget, your discretionary spending is planned discretionary spending, you just don't know what you're spending it on yet. So if you can get past that you are planning to not know what to spend money on, you're well on your way. But that's okay. Discretionary is going to obviously come after all the other normal expenses are taken care of or attributed to for in your budget. So whatever that ends up being, maybe it's a very small amount of money because you've got some really aggressive financial goals that are going on that you're trying to accomplish. Maybe it's a little bit bigger because you've reached a point in your life where you can handle that you can spend a little bit more money and enjoy some things that you might not have earlier in life because you were nosed to the grindstone figuring stuff out.
07:17
Damian Dunn
So discretionary spending is going to be variable, family to family. Just because you may have the same income as the neighbors down the road, your discretionary income could look tremendously different. That's not something you want to judge yourself on or compare yourself on with other families.
07:33
Peter Dunn
It's of no surprise that the very first thing you said is the very first thing I said in my column, which is you need to make sure that the discretionary part is not about the money, it's about the category that the money is planned and set, which is the biggest mistake people typically make. They're like, well discretionary, the whole account is in fact discretionary and it's like no if you have to think about it in this parlance, then think about it. You're giving yourself an allowance, which I hate thinking of it that way, but it's easy. You're giving yourself an allowance. What you choose to spend that allowance on, that is what is discretionary. And I think if we're going to talk about a certain percentage of people go wrong as it relates to discretionary spending, a vast majority of them go wrong at that checkpoint is that they are variable in the amount that they view to be discretionary.
08:23
Peter Dunn
So that is item number one, for sure. Item number two, which is part of that, I think, is how we use digital financial tools. I think discretionary spending took an ugly turn when online banking came into our lives. I think that when you constantly check your checking account balance that it leads to more spending and in not such great ways. Because we have so many transactions today, because the debit card is such a popular financial tool, we can't possibly, in our mind, when we check our bank balance on any given day, know what transactions have cleared and which ones haven't. And if we assume something has cleared and it has not, therefore our balance is higher than we thought it would be. We view that extra money as discretionary spending. And I think that's one of the big issues people deal with.
09:19
Damian Dunn
Yeah, I agree. People that constantly check their balances are walking a very fine line between what appears to be there and what's actually going to be there based on some transactions that are coming up. I think one of the easier ways to get around that, however, is to set up another checking account and send your discretionary income to that checking account and then use that for the debit card. That way, all of your transactions, all of your budgeted items, stay inside that primary checking account, and you do not spend discretionary money out of that primary checking account, only the one that you have transferred money to throughout the month and then do whatever the heck you want with it. I don't care.
09:59
Peter Dunn
You know what's interesting about this is what you've just suggested is an interesting way to do it for people who it would work for, because what you're not saying is everyone should do it that way. What you're saying is if this is something you struggle with and this is how budgeting should work. Damien and his team teach budgeting for a living. There's not one way to do it. There's a lot of different ways to do it. And if the way you're doing it doesn't work, don't say I'm terrible at budgeting or budgeting doesn't work. No, the way you're doing it doesn't work. You have to find a way that works. I've talked about it on the show. I will now tell you once again, the way I do it, and this works for me, I fund my goals first. That's it. I fund them first, and I fill them completely.
10:48
Peter Dunn
When I fund my retirement, I fund it to the amount that I know I need to accomplish my retirement goal. When I fund my college education account for my kids, it's to the amount that I know I want to have in there by the time they get to college. Therefore, I'm not left trying to decide between spending money on things that I want to spend money on in the now and accomplishing or not accomplishing the major milestones of my financial life. I call this the lazy person's budget, which means all the money that I possibly need for anything is completely out of my face prior to having access to it. Therefore, I don't really care what I spend money on. Of course, you also need some other parameters there. You can't use your credit card if you're going to do it that way, because you'll just find yourself into debt.
11:34
Peter Dunn
You can't tap your savings account if you're going to do it that way. And you better turn off overdraft protection because otherwise it is a blank check that you've just written on your financial life.
11:45
Damian Dunn
Were you ever a down to the penny budgeter? Pete no.
11:49
Peter Dunn
But I will tell you this, and this gets to our next point. My checking account balance gets really low the day before payday. Really low, purposefully low. I mean, it gets sometimes less than $100, sometimes less than $50. And I like it that way because I don't know if you I'm dumb. I'm a dumb man. And if I have more money in my account, I will spend it. And so I keep a very tight low balance because I know my own behavior. I think too many highly educated, high income earners keep way too much money in their checking account. And that's a problem.
12:41
Damian Dunn
How about Mrs. Planner?
12:45
Peter Dunn
So we have separate checking accounts. Both our money, we just sort of, again, manage our own. Our own plural. She does not get that low. She would flip out if it got that low. But understandably, she has more expenses that she runs through her account than I do. I just don't spend money that frequently. I used to spend money a lot. I'm a very infrequent purchaser at this point in my life.
13:09
Damian Dunn
It's not a bad thing.
13:11
Peter Dunn
Yeah. I will say this. If you have a checking account balance at the low point on that checking account balance is $5,000, get money out of that account, transfer 3000, 2500 over to savings at the low point of the month, and then watch what will happen next. And here's what will happen. It will climb back up to $5,000 in like four months because you're so nervous. And it's an interesting way to save money and to game the system and to trick yourself. Dame speaking of gaming the system and tricking ourselves, coming up after the break, we're going to talk about one of the most popular loopholes in all of tax planning, the backdoor Roth IRA, why it may go away, and why debt collectors can slide into your DMs on social media. As of well, right now, I'm Pete the Planner, and this is the show.
13:59
Peter Dunn
I know it's into the end of the year, but was that not outro of the year?
14:03
Damian Dunn
It was pretty darn good.
14:06
Peter Dunn
I've had my caffeine levels at a really good place these days, and I've even sort of gone away from Miguel, which is the cold brew coffee that we have in our office here. Cold brew cans. It's got a puma on it. Or Jaguar. And we named him Miguel. I have not even been putting Miguel inside of myself. I've just been going with traditional hot coffee.
14:25
Damian Dunn
I wondered where that Miguel name came from.
14:28
Peter Dunn
Because you've heard us reference Miguel?
14:30
Damian Dunn
Yeah.
14:31
Peter Dunn
We never explained it to you?
14:32
Damian Dunn
No.
14:32
Peter Dunn
That's weird.
14:34
Damian Dunn
I'm there so frequently.
14:36
Peter Dunn
Yeah, that's true. Okay.
14:44
Damian Dunn
You ready to do more show?
14:47
Peter Dunn
Do you want to do the heavy lifting on the.
14:51
Damian Dunn
Back door raw lift? Whatever you want me to lift, sir.
14:55
Peter Dunn
Okay. Well, I just want to have you explain it to people that don't understand it. Sure. All right. That's how the show works. In three, two, one. Back on the Pete the Planner show. Dame, earlier this week, I noticed a newspaper article. My newspaper. I saw it on a blog. Everything's a blog. I saw it online and it basically said part of the Build Back Better. Is that what it's called? Build back america. Build back better.
15:22
Damian Dunn
BBA. Build back better America.
15:27
Peter Dunn
I don't know. It's great. I love acronyms. Anyway, this acronym suggests that the back door Roth loophole, which so many people enjoy, might get closed. And so what I'd like to do is I'd like to talk about what that means, what the implications are. Maybe we should start by first having you explain what in the world am I talking about? Yeah.
15:50
Damian Dunn
Backdoor Roth. We say loophole, and I guess technically it is, but the IRS knows about it, everybody knows about it. And it is a perfectly legitimate way to fund a Roth IRA if your income prohibits you from doing that just by sending a check in. So how that works is you make a nondeductible contribution to your IRA and then you convert it. You recharacterize that into a Roth contribution. You will pay taxes on it. Any growth, I should say, that comes over, especially if you have commingled funds. If you have an IRA already established and you make nondeductible contributions, a portion of that's going to be taxable every time you make this Backdoor Roth contribution. So be aware of that. But it is a way for you to make a Roth contribution if your income would otherwise prohibit you to do it.
16:41
Peter Dunn
And it's a smart thing to do. It makes a lot of sense for a lot of people. Consult your tax advisor or your financial advisor about that. But I will also note, what makes it so great is sometimes people will put in those nondeductible IRA contributions and then immediately convert it. And since there was no growth to speak of, the tax implications are even more positive, as we often talk about on this show, especially a couple of weeks ago when we talked about why 401K limits are not going up. Why Dame? Why are we seeing less tax advantage for people who love to max stuff out?
17:21
Damian Dunn
Why are we seeing less tax advantage for people who love to max stuff out?
17:25
Peter Dunn
Yes. Why are we? I mean, it's a very obvious answer here. You said it two weeks ago.
17:30
Damian Dunn
You tell me, Pete, because I'm a little lost at this point.
17:32
Peter Dunn
Well, you have not got your caffeine.
17:34
Damian Dunn
I have not checked for today. I've given up caffeine, Pete. Did you know that?
17:37
Peter Dunn
Yeah, I did not know that, but I do know that. It's always funny when you quote someone back to themselves and they don't know.
17:43
Damian Dunn
What you're talking about.
17:44
Peter Dunn
I think it's a good gag.
17:45
Damian Dunn
Trying to buy time, essentially, is here.
17:48
Peter Dunn
Is what you said. You said, because the government needs tax money, dummy, is exactly what you said.
17:54
Damian Dunn
Yeah.
17:56
Peter Dunn
You were like, well, of course they're not going to raise the 401K max to $30,000 because then even less money is being taxed and they're trying to close budget shortfalls and all sorts of other things. And in this circumstance with the tax loopholes you're talking about this idea that if people keep converting to Roth IRAs in such a tax advantage way down the road, when we try to get people's tax dollars, we being the government tries to get people's tax dollars when they retire, there's going to be no tax dollars to get. And you're going to see revenue shortfalls increase significantly.
18:36
Damian Dunn
Yeah, darn, that disappearing income for the government. If they could only get the other side of their ledger in order, maybe income wouldn't be so needed.
18:45
Peter Dunn
Brian pinkens, financial expert, weighs in on the live chat. He says people are still liable to pay taxes on the money transferred in that same year. Absolutely right. Because that's a nondeductible IRA. They're not getting the deduction anyway. Yeah. There we go. We got it. Dame, there's another crazy news story out this week that has me a little bit concerned. I think most people feel like debt collection had gotten to a predatory place. Do you agree with that? I mean, it's a big statement.
19:21
Damian Dunn
Yeah, no, if it wasn't predatory, it was darn near there. Some of the things that were legal at different points in time for collectors to use, tools to use and tactics to use were not great. Frankly, they were pretty scary.
19:40
Peter Dunn
They were. And some of this the worst stuff is how court dates would be set with automatic defaults and judgments. And then people get into these lien situations. They get into wage garnishments. Then you have people losing jobs and it just got crazy. And of course, you get into, like, debtors, jail and all of these other horrible things. And so I will project with the current climate that we look at in our country as it relates to taking care of everyone or trying to take care of everyone's financial situation, get more equal footing for people, good, bad or otherwise, you would think, well, we're going to certainly get rid of some of those practices. Well, the new rule is kind of weird. Debt collectors can now contact you on social media to find out whether or not you have intention to pay. Now what they can't do is make a public post on your Facebook page or they can't mention you on Twitter, but they can slide into the DMs or send you a Facebook messenger message.
20:54
Peter Dunn
And dame, this is crazy for a couple of different reasons. Which of those reasons stick out to you is why this is a horrible idea?
21:01
Damian Dunn
The fact that they can stalk you on social media and contact you that way. I will say that they have to identify who they are and who they're with, and you do have the right to decline that message and have zero contact with them. But man, who knows how many people out there. Somebody says, I've got a debt, I didn't know about that. I need to check that. There could be an open door for a scam is what some of this could lead to. Pete, I'm sure there are going to be a number of collection agencies that try and use this, but you can darn well bet there's going to be a bunch of scammers that try and use this as well.
21:39
Peter Dunn
I didn't even think of that. Like, all the links going to be dropped in. And click this to check your account. Click link hacked cryptocurrency, ransom note. Lose your pants?
21:51
Damian Dunn
What?
21:51
Peter Dunn
I don't know. Did I ever tell you about the dead I had in collections?
21:54
Damian Dunn
Does it involve pants?
21:56
Peter Dunn
No, I just got off track there. I get nervous. Did I ever tell you about the dead I had in collections?
22:01
Damian Dunn
No.
22:03
Peter Dunn
Okay. I have had a dead in collections. And where I thought you were going with your earlier statement is some people might not know that they have a debt in collection. Sure. It's a surprise. It's like you get called and you're like, what? Really? That's what happened to me. So years and years ago, probably 2001, I set up a separate bank account for my business. I don't know, I did business and air quotes. I'm a business owner. Problem with me, I know you can't see air quotes on the radio, but I just did air quotes business and I set up a separate checking account at a bank I don't really bank at because I wanted it for a special project I was working on. Don't get too much into the details. It was silly, it was dumb. I was like, mailing something and I just wanted one account to do it.
22:52
Peter Dunn
Whatever. Are you calling me any question of.
22:57
Damian Dunn
Like a special business that requires in its own personal account?
23:02
Peter Dunn
No, it was just like weird. It was like a 22 year old kid who was trying to feel more important than he really was.
23:08
Damian Dunn
Say no more.
23:09
Peter Dunn
That's it. I mean, have you been there?
23:11
Damian Dunn
Yes.
23:11
Peter Dunn
Okay. I'm still there. Just 44 now. And so anyway, had this account. Forgot I had it. The balance was so low, it was like a couple of $100. So what happens? Account fee, account fee, account fee. Four years later it goes negative. And then they keep deducting fees from money that doesn't exist. So then they send it to collections. So like four years after this, I get a call and they're like they leave a message at home. Mrs. Planner hears it and she's like, you have a debt in collections. I was like, what? So I get a hold of these people and they explain what happened, and I'm like, how do I owe money on money that they took from me? You know what I mean? Yeah, that sort of stuff happens all the time. But that also was when I began checking my credit report on a regular basis because otherwise I would have seen it.
24:05
Peter Dunn
But I also have to note from 2001 to 2005 or so, it was relatively difficult to look at your credit report.
24:10
Damian Dunn
I'm going to go out on a limb and say this was with a large national bank regional.
24:14
Peter Dunn
All right. Coming up after the break, student loan repayment pause ends in February. What will you do to get back on track? I'm Pete the planner. I'll tell you next. Caffeine is slapping it. Slaps. No cap. I don't the key is not to have anything else in your stomach. So one, that you get an ulcer, and two, it just it really gets into the bloodstream.
24:46
Damian Dunn
I wouldn't know that anymore.
24:47
Peter Dunn
I like our varying energy levels today.
24:50
Damian Dunn
I'm sorry.
24:51
Peter Dunn
No, I'm way over the top.
24:54
Damian Dunn
I'll do some jumping jacks before the next segment.
24:58
Peter Dunn
Okay. Oh, great. Craig Anderson is watching this next segment and we're going to talk about this. So now I feel completely inadequate about what I'm about to say because he is a student, loans are when you.
25:09
Damian Dunn
Check with him to see if he was available for this today, you think.
25:14
Peter Dunn
I do pre show planning?
25:16
Damian Dunn
Barely.
25:17
Peter Dunn
I don't. Okay, you ready to go?
25:24
Damian Dunn
Yeah. I'm pretty confident he's just judging you and not me, so I feel better.
25:28
Peter Dunn
Okay. Three, two, one. Back on the Pete the Planner show. Dame, I don't know if you remember this, but in March of 2020, we found ourselves in a global pandemic.
25:43
Damian Dunn
We did.
25:44
Peter Dunn
Yeah, we're still in it. But do you remember March of 2020? A lot of uncertainty in these uncertain times. There was a lot of that. It was the beginning and you didn't know how long it was going to last. I said internally, here in our offices, guys, be prepared. I think it's going to be twelve weeks. And you guys were all like, no, it'll be two weeks. Needless to say, it's going to be at least two years. So, Dame, one of the things that happened when the economy shut down and jobs went away is that people, some people found it difficult to make student loan payments, right? Is that a good way to say it?
26:21
Damian Dunn
That is true.
26:22
Peter Dunn
And so one of the things the government chose to do to offer a sense of relief was to set interest rates on federal student loans to 0%. And in doing that, they took away the obligation for someone to make a student loan payment for a certain period of time. It was part of the Cares Act at first. Then it got extended by President Trump, and then it got extended and then President Biden extended it. And that all goes away as of now. What at the end of January, is that when it ends?
26:58
Damian Dunn
Yes, sir. February 1, all this kicks back in.
27:01
Peter Dunn
So that is to say, for roughly two years, there was a large portion of people not making student loan payments. And the good news is those particular student loans weren't increasing in value during that time. That's good to know, but it's quite possible. Dame the people moved on with their lifestyle decisions, with their discretionary spending, as some people call it, and they may have reabsorbed the money that they had previously set aside for those payments into their lifestyle. And so when they go to make payments once again starting in February, there's going to be a rather large portion of people who are going to be in pretty big trouble. Do you think my hypothesis holds water or do you think I'm being an alarmist?
27:45
Damian Dunn
No, I think you're absolutely right. Especially when there was so much talk about loan forgiveness. If you were somewhere under ten grand, you're thinking, man, I'm never going to have to pay these again. Because we've got all these politicians saying we're going to forgive some student loans, we're going to do this and we're going to do that, and surprise, here we are when these are all going to kick back in and no loans were forgiven.
28:11
Peter Dunn
I do feel like that was a big it's not a blunder because I'm not trying to be critical of anyone in particular, but when people hung their hopes on loan forgiveness during this exact period of time in which there was student loan relief, it was a bad bet to place.
28:31
Damian Dunn
Yeah, we absolutely warned people not to do that. You had to carry on with your finances like they weren't going to be forgiven because they weren't. And if you countered on that and you reabsorbed that income, a little bit of lifestyle creep, you're going to have to try and figure out a way to get yourself out of that hole pretty darn quick.
28:51
Peter Dunn
I will point out a weird silver lining. I don't know if it's a silver lining or not. I'll just point out something that doesn't necessarily stink for people in this situation. If you happen to work for. A nonprofit and you otherwise qualify for public service student loan forgiveness, this period of time in which you have not had a payment due, each of those months will count towards your 120 payments that make you qualified for student loan forgiveness. And Dame, that's no little feat. In some cases. We're talking, what, 22 payments out of 120 required? If you work for a nonprofit, you've not made a payment for 22 months, and you otherwise would have to make 120 payments to have the rest of your student loans forgiven. Well, you just got 22 free months, and that's incredible.
29:44
Damian Dunn
Yeah, you've effectively cut off two years of a ten year plan to get yourself out of debt by a program public service loan forgiveness through the gift of the government. So if you were on track for public service loan forgiveness, or you think you might be on track because there have been some changes there as well, check it out, man, because you could be in really good shape, especially considering those 22 months all count as on time payments made for the full amount.
30:18
Peter Dunn
Okay, so here's what I was trying to get my head around this morning. I told you that I'm now of the age where I cannot stay asleep. I just cannot do it. I wake up at four and I just lay there. And then I'm listening to like, Pandora Zen radio. Like, I can't sleep. One of the things I was thinking about this morning was, is this good timing that it ends in February? Because people spend more in December, November, and December, and so they won't spend that way in January, so it'll allow them to refined discretionary money. Is that the way it's going to work? Or if it were going to work that way, shouldn't it actually end December 31 and then they don't have that extra 30 days that they go to spend that money on something else? Because if you're not following, listening along here, let's give some numbers.
31:09
Peter Dunn
Let's say that prior to the pandemic, you were paying $260 a month towards your student loans. You hit pause. Cool. Glad. I hope it provided some relief. Somewhere along those 22 months, though, you found another purpose for that $260. Out of necessity or simple want, well, now piper's back. Time to pay the piper. February 1, that $260 is going to start back up. And so, Dame, that's my concern is that it's not as simple as saying, well, I guess I'll cut my dining back, cut dining out back, or I'll cut this or that back. There's more behavior involved in that.
31:48
Damian Dunn
Yeah, I think they're planning on people giving up on their fitness goals and cutting off those gym memberships in February 1 and just using that money to pay for their student loans.
31:56
Peter Dunn
I like you're very funny. Okay, so you and I like to make predictions, but like toothless predictions on this show. The show could be called Toothless Predictions, which is a lot better than the original title of this show back in 2009. Remember? It was like the accidental economist or something stupid. What?
32:17
Damian Dunn
I wasn't around then.
32:18
Peter Dunn
Well, you weren't, but I was one of the first names. I was the skeptical economist. That's what it was. I was going to name my show The Skeptical Economist, which is stupid because I'm not skeptical generally, and I'm sure as heck not an economist.
32:36
Damian Dunn
Economists, it's the dismal science. So you weren't that far off the.
32:43
Peter Dunn
Toothless prediction show with the skeptical economists. Anyway, here's our toothless prediction that you and I are going to try to make right now. What will be the impact, the six month, the twelve month impact of the student loan repayments starting up in February of 2022? What will be the butterfly wings impact of that?
33:08
Damian Dunn
I think it's very possible that within a couple of months, we start hearing a renewed push for loan forgiveness.
33:14
Peter Dunn
Right. That seems like low hanging fruit and.
33:17
Damian Dunn
A really good one for a couple of reasons. One, we're going to be going into an election cycle not too far after that. And plus, you're going to have all sorts of news stories about saying people saying that I can't afford these student loan payments, and we're still trying to figure out how to get by, which could be very true. But I think that's the low hanging fruit. I think we have a renewed push for student loan forgiveness.
33:41
Peter Dunn
Student loan guru Craig P. Anderson, who is participating via Facebook Live right now, notes it will stop inflation as spending drops. Wow. Maybe that's interesting. I know he's half joking, but is that possible?
33:59
Damian Dunn
It could be.
34:00
Peter Dunn
Could it slow the economy?
34:02
Damian Dunn
Possibly. It depends on how much of that money is actually being spent. However, I do have a news story that may help answer some of this question.
34:11
Peter Dunn
Do I have to wait till the news segment?
34:12
Damian Dunn
Yes. That's called a tease, Peter.
34:14
Peter Dunn
Oh, how about this? We have, like, a minute left here in this segment. What percentage of people who were making payments in March of 2020 do you believe have restarted payments? So people that stopped okay. People who were making them stopped. What percentage of those people have restarted? No way. No way, no way.
34:41
Damian Dunn
Why would you pay money right now if you didn't have to?
34:44
Peter Dunn
Because a lot of people needed the relief, but they want to get rid of that debt. See Rick on Facebook live says 5%. I disagree. I say 25% to 30% of people have restarted payments.
34:59
Damian Dunn
I love arguing about things we'll never know.
35:01
Peter Dunn
I do, too. That's the best part. Toothless predictions with the Skeptical Economist coming up after the break. Biggest waste of money of the week right here on Toothless Predictions. I'm Pete the planner. The outros are hot fire this week, man.
35:16
Damian Dunn
I think it's because I'm setting you up for them. Setting you up for success.
35:23
Peter Dunn
Appreciate that. This is one of those bombs this week that I think that you're going to be like, no, that's awesome. Every once in a while, I get you there.
35:35
Damian Dunn
I'm hoping so. It does create a little bit of a conflict, but that's all right.
35:43
Peter Dunn
All right, here we go. People are weighing in on Facebook. I appreciate that. In the spirit of brevity, I'm going to keep moving. It's a way to have an interactive show.
35:59
Damian Dunn
What were you asking me about the difference between us and a peloton show the other day?
36:02
Peter Dunn
Stop it. The attractive hosts? Yeah.
36:05
Damian Dunn
The answer was the attractive hosts.
36:07
Peter Dunn
Yeah. What's the difference between this show and a peloton workout? The attractive hosts? Yeah.
36:13
Damian Dunn
And people don't get a sweaty you.
36:15
Peter Dunn
Have been due using the peloton app, haven't you?
36:17
Damian Dunn
Yes.
36:18
Peter Dunn
What instructors do you like?
36:22
Damian Dunn
The ones that encourage me in foreign accents?
36:25
Peter Dunn
Yes. Okay, fair enough. I was about to give my peloton name here on the air, but I really don't want people following my workout. Isn't that weird how we're conditioned to be like, oh, hey, follow me on this, but then I'm like, no, don't follow me on this.
36:42
Damian Dunn
Yeah, totally.
36:43
Peter Dunn
I'm not giving you my name. I have a joke that I can't. All right, let's continue the show. All right, you ready to go? Three, two, one. This week's biggest waste of money of the week right here on the Pete the planner show is the Tesla cyber whistle. While we continue to wait on the arrival of the cyber truck regulatory nightmare, elon Musk is giving Tesla fanboys something to occupy their time. The cyber whistle is a scaled down model of the illustrious pickup that can also play a little tune. It's fashioned from medical grade stainless steel with a polished finish and, as described, includes integrated attachment feature for added versatility. Dame it looks exactly like a cyber truck in my estimation, and I have to let you know it has a cost associated with it. What do you think the Tesla cyber whistle costs directly from the Tesla website?
37:55
Peter Dunn
This is not like a novelty knock off some artist. This is on the Tesla website. You can buy it. What do you think it costs? You guessed high. You never guess. High.
38:06
Damian Dunn
Yeah, it's cool. And it'd be a nice little trinket for somebody who actually gets a cyber truck, but I can't imagine spending $5 on this.
38:18
Peter Dunn
Dame, I am a 44 year old man as of this week, and there are certain aspects of being that age which make life incredibly difficult. One of them is that my son plays basketball at a facility in which there are eight or nine courts, full size courts. At any given time, there are eight or nine games going on with two refs on each court. It is a whistle fest. I'm so distracted, my head's shooting around, and I don't know if it's my age, but I think it's my age. It is the worst thing in the world to be in a giant facility and every 2 seconds to hear a shrill whistle coming from a different direction. It's really alarming. Is this just me or is that it's a problem in my life?
39:06
Damian Dunn
I think it would disturb me as well. You're probably going to have to start taking noise canceling headphones to make sure that you have some amount of tranquility.
39:14
Peter Dunn
I do. Oh, I absolutely do. Dane, what's in the news this week?
39:19
Damian Dunn
Well, Americans are hoarding cash because of fatigue and uncertainty, with little chance the trend will reverse soon. Over the past two years, households have socked away close to $1.6 trillion in, quote, excess savings or resources they otherwise wouldn't have been able to save before the COVID-19 crisis. According to the Federal Reserve Bank of New York, funds are well beyond the three to six months of emergency savings generally recommended by financial advisors.
39:48
Peter Dunn
Not a financial advisor. Consult your financial advisor.
39:51
Damian Dunn
Yes. So, Pete, before I move on to the controversial, disturbing part of this piece, any thoughts on that?
40:03
Peter Dunn
Our savings account has gone up. The planner household and I can't tell you why, other than we have the opportunity and I'd rather have some additional dry powder, as they like to say, as opposed to really hammering our investments away. Although, that being said, we've increased our investments too. I'm willing to be transparent. These two years, these 22 months have been financially good because spending has gone down. You don't have as many expenses in different areas, and so you just save the money. We've taken less vacations. We're not going as many places. So I feel like in that respect, our spending has come down, therefore our savings has gone up. Yeah.
40:51
Damian Dunn
It's easier to address maybe some habits that you wanted to change during this time period as well. So it could be, albeit painful, a very financially healthy process for some people.
41:04
Peter Dunn
So what's the controversy?
41:06
Damian Dunn
Bear with me on this. As inflation continues to tick up, sitting on a pile of cash savings has obvious downsides, says Charlotte Galetka, managing partner and owner of the financial advisory firm Silver Penny. I'm not going to give the rest of it because I don't want to.
41:23
Peter Dunn
Oh, come on.
41:24
Damian Dunn
Mrs. Galetka says she has spoken with clients who are concerned that the stock market is overvalued and worried about investing their cash savings. She recommends that clients split the difference by putting one portion of their savings in the market and keeping the other liquid for easy access should the long feared emergency arise. I'm calling people, quote I'm calling people saying, listen, you have to be in the market because your growth has to outpace inflation. Wait, this is why we need to keep you invested, she says. I think that makes them feel more secure. It's okay to be willing to take the risk knowing that their savings is maybe a little bit larger than the recommended amount.
42:03
Peter Dunn
Man okay, I have some problems. Yeah. I mean, I know how exciting it is to be quoted in the media, but you really have to pump the brakes before you say something like that.
42:17
Damian Dunn
This was in a very well respected financial publication.
42:21
Peter Dunn
Well, I don't blame the publication. I would go more so to say. That's why she chose to make a big round statement. That is a bad idea. Yeah, I've said it on the show before. I think sometimes when you try to be an expert, a public figure expert on a topic, it gets you in trouble because you oversimplify it. One of the pieces of criticism I got years ago on social media was that I oversimplify things to the detriment of my audience. And I remember taking that really hard. But if I really step back and I'm honest, it was probably true. And I've really tried not to do that. But wow, dame, please let everyone else in. Why is what she said so bad?
43:14
Damian Dunn
There's risk involved in the market, and if you have money setting aside in a savings account because you are concerned about what the future may bring, putting in the market is not going to be your solution. Because if you are concerned and you want that money available to you, and you go to find that money because you need it someday, and you find out it's gone down 1015 20%, that's going to give you a whole nother round. Another sort of anxiety that you didn't already have. If it's there for emergencies, if it's there for some planned need within three to five years, don't expose it to the market. If you put it in the market, it's no longer emergency savings. It could be savings of some sort, but it is not emergency savings.
43:55
Peter Dunn
Yeah, I mean, you take that and then you take people's increased appetite for risk via alternative investments, things like crypto, and it is sort of a recipe for disaster. I think. What frustrates me the most about her comments, with all due respect, right. I mean, I've been there. I've said dumb things in newspapers, I've written dumb things in newspapers. But the issue is you can't have your risk tolerance. You can't reflect your risk tolerance on your clients. You can't do it. And this idea that you always have to be getting yield on your money is also absurd. Now, I realize, per her point, people are losing buying power, but that is the trade off for some people when it comes to aversion to risk. This is also why I think when people are overly critical of things like annuities, that they're totally dismissing the idea that people are okay with those trade offs.
44:52
Peter Dunn
Yeah, maybe the fees are higher. Maybe that you don't get double tax benefits by putting annuity inside of an IRA. I totally get that. And by the way, we don't sell any of those things. So I have no skin in the game here, but that's projecting financial guidance on people who have other values, and that's what bothers me about that.
45:15
Damian Dunn
Yeah. And I'm sure you remember there are times in your career where you've looked at someone and thought, you absolutely could take more risk than you are right now. But we can't do anything about it. We've got to serve the client and make sure that we're attending to what their needs are and what their comfort level is, because otherwise you're doing a disservice to them.
45:33
Peter Dunn
I remember as a young advisor, I had a client, husband and wife, both really high paying jobs. Husband probably an aggressive investor by definition. Wife conservative to moderate, probably conservative. That's not that unusual of a situation, by the way. Two married people having different viewpoints. And it got to a point in their career where she was making gobs more money, and to fuel their financial plan, they needed to put her money at work. And it just became so cumbersome. But that's also about the time I learned this is early 2000s. It's not the husband's risk tolerance that's going to impact this. It's not the advisor's risk tolerance that's going to impact this. It's the person that's actually taking the risk with their money and it's with that dame. Did we really do one news story this week?
46:28
Damian Dunn
Yes.
46:29
Peter Dunn
Save them for next week. All right, everybody, thanks for listening. Sending you good vibes because good vibes are all that's in the budget. He's Damian Dunn. I'm Peter Dunn. No relation. We'll see you next week on the Pete the Planner show. I'm telling you, I don't know what it is, but maybe it was Thanksgiving fire this week.
46:49
Damian Dunn
Yeah. Took a week off, came back ready to play.
46:52
Peter Dunn
All right, that's it. They have new boots. I got new boots for my birthday.
47:00
Damian Dunn
You did?
47:01
Peter Dunn
Yeah. I'm trying to think if I can show them. Let me see if I can show them. Hold on a second. I'm going to show them to the camera.
47:08
Damian Dunn
Are these boots that you picked out and they were just purchased for you?
47:14
Peter Dunn
I had a relative that was like, hey, we don't know what to give you, so we're going to give you money now. I don't need anything. You're going to give me money? I'm going to buy something. Let me show you. Hold on. I'm also disconnecting my hearing so when I sit back down is when I'll be able to hear your comments. Hold on, everybody.
47:32
Damian Dunn
Ladies and gentlemen, we're going to see Pete's feet. I know you've all been waiting for it. Oh, ladies and gentlemen, playing at home. They are embossed some sort. They're very pretty.
47:49
Peter Dunn
Did you see that?
47:49
Damian Dunn
Yeah, that embossing. Is that what that's called?
47:53
Peter Dunn
Yeah, it's sort of like a leather stamp. Like the leather is I don't know. I don't know why I did that other than I now had a really good stretch getting my leg up there. If you've ever tried to put your foot up to a camera I did.
48:06
Damian Dunn
A little color commentary for those playing along. In the podcast or the blog?
48:10
Peter Dunn
The blog. Thanks, everyone, for being on the blog this week. Oh, you know what was great? The podcast listener. Yeah, you were right. If guess listener segment where they had.
48:24
Damian Dunn
A guy show his boots, you can apologize.
48:29
Peter Dunn
I'm sorry, everybody. Okay, that's it. Hey, everybody stay getting money.
