Elizabeth Ayoola

How's your credit, Sean? I know we talk about it all the time, but are you in the 850 club?

Well, I actually didn't know, so thanks for that, that you could downgrade a travel credit card. So that's good to know that that's an option. Some people take out several credit cards for the perks, be it travel rewards or points. And I know personally that it's easy to lose track of all the annual fees and also end up spending across multiple cards.

So how should people approach taking out cards for perks? And when is it time to reevaluate whether it's still a smart financial move?

Let's move on to the second part of the question now. So the listener asked whether they should cancel their card. Can you talk us through what the pros and cons of canceling a credit card are?

I like what you just did there, Sean, about I'm in the neighborhood. You didn't give us an exact score. Well, I know. I checked my Experian this week, and I'm 10 points away from 800. So you do the math. Okay. Today, we're going to talk about someone else's good faith and credit. Okay.

I love that nerdy advice. And I actually yesterday was scrolling through my own travel credit card benefits. And I saw that I had discounts and also more points when I use my card for rental cars. So I will be using that during the summer in an upcoming trip.

Credit card debt is becoming increasingly expensive. There's been a rise in delinquency on credit card debt in recent years. Keith is choosing to opt out of them altogether or only have a few credit cards. Melissa, what implications could not having credit cards have on one's credit score?

I know with my credit, I have maybe like two credit cards that are idle, so I don't use them. So is that an option for people if they don't want to cancel their card? Can you just leave it there idle?

Melissa, do you have anything else that you think the listener or anyone else who is considering closing their travel credit card should think about or how to basically maximize their points and their benefits?

Absolutely. And I'm going to add in there that that it may be a good idea to also budget for the annual fee and set a reminder wherever you set your reminders, be that in your calendar or anywhere else, for when the annual fee is coming up. Budgeting for it can ensure that it doesn't throw your budget out of whack when you're suddenly hit with an annual fee that you weren't expecting.

Melissa Lamberina, thanks for coming on and answering these questions. Or should I say mahalo nui loa? It's been a pleasure to be here. And that's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com.

And if you're listening on Spotify, leave us a comment to let us know what you thought of this particular episode. Join us next time to hear Sean ask a nerd questions about managing rental properties. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And here's our brief disclaimer.

We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland and Anahel Hosky. Nick Karisamy mixed our audio. And a big thank you to NerdWallet's editors for all their help.

And with that said, until next time, turn to the nerds.

Ana, at the top, you mentioned some potential impacts on investing. Tell us about that.

And I'm Elizabeth Ayola. This episode, we are looking at some reasons why you might want to switch up your credit cards. But first, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. And speaking of credit, the United States just had its credit downgraded by the ratings agency Moody's.

Our news colleague, Anna Helhosky, is here to explain more.

And thank you, Ana. Of course. Up next, we answer a listener's question about switching up their credit cards. But before we get into that, a reminder to send us your money questions. Do you want to know the smartest way to budget for your summer vacation? Or are you in the market for a new credit card but aren't sure how to find the one that's best for you?

Leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com.

We're back and we are answering your money questions to help you make smarter financial decisions. This episode's question comes from Keith and he sent us an email. Here it is. I have a question about the dreaded credit cards. We have a United Quest visa I acquired because I was traveling via air for work on a regular basis.

So the $350 annual fee and a subscription to the United Club made sense, especially since I could bring my wife when we travel together. However, recently, United changed its policy for the United Club membership and increased their fees to $750 per individual and $1,450 for an individual with access for two guests, making it so expensive I'm no longer interested.

We'd love having the available credit of $16,000, but would pay $100 a year for it. Our 2025 goal is to get off of credit cards other than using one for monthly bills. Should we cancel? I am thinking it's a good thing to have the available credit. We have five now empty cards. We will be 100% no debt this fall minus the mortgage. I have y'all to thank in part for that, by the way. Mahalo nui loa.

Thanks for your thoughts. To help us answer this listener's money question, we have credit cards nerd, Melissa Lamberina. Welcome back to the show, Melissa. Thank you for having me. Before we get started, just a note that we're going to talk about some credit cards in this episode. So some may be NerdWallet partners, but that does not influence our opinions at all.

Also, the benefits, terms and fees mentioned were accurate at the time of posting, but things could change in the future. Some offers may have expired by the time you're listening, but for the latest details, follow the links in the episode description.

All right, so moving along, the listener wants to know whether it makes sense to cancel their travel credit card, especially with the increased annual fee. So Melissa, can you talk us through how to decide whether the annual fee is worth it, first of all?

Otherwise, you're better off with a no annual fee card. Melissa, I'm asking for myself, too. So I currently have two travel credit cards with pretty high annual fees. I probably have them both for under two years. And I just got hit with an annual fee. And I am trying to figure out how to go back and make sure that basically the fee is worth it.

So what are some practical ways that people can do that?

And that's what you want to avoid. So I'm thinking maybe a practical way people can do that is I'm an Excel sheet girl. So maybe noting down somewhere or kind of tracking what you're using, or maybe even just doing a recap at the end of the year to see how much of the benefits you've actually used. So do you think that's a way to go about it?

Going back to Gerson's question, how can people determine how much liability coverage they might need? Elizabeth, I think people can think of this in terms of tiers.

Lisa, I just want to say I have never heard such an engaging explanation for car insurance, so thank you. I have another follow-up question, which is, what would the next tier cover?

Lisa, I don't want anyone coming after me for $2 million either. So I'm definitely going to consider this umbrella policy. So Sean said these policies can be a good deal. What does that mean in practical terms?

So guys, it sounds like you're saying that you have to think about your risk tolerance in some cases, right? To see what level of insurance that you need.

All right, Lisa, can you think of any other coverages that people might not think of as important but are worth considering?

Are we seeing some economic declines now? The economy has been fairly healthy in the last couple of years, despite the elevated inflation, right?

Those are some good tips. I'm definitely shopping around every few months to see if I can get anything cheaper. Do you have any other tips for how folks can save money on their auto insurance? I know in the past when I've called trying to lower my insurance, they've offered discounts in exchange for tracking my driving habits, which I think is also known as telematics. So what do you think, Lisa?

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland. Hilary Georgie helped with editing. Megan Maurer mixed our audio. And a big thank you to NerdWallet's editors for all their help.

And I'm Elizabeth Ayola.

Car Insurance 101.

And those must-haves are essential expenses, including your rent or mortgage payment, transportation, food, utilities, insurance, and minimum loan payments. At NerdWallet, we usually recommend the 50-30-20 budget. That limits must-haves to 50% of your after-tax income, 30% to wants, and 20% to debt payments and savings.

Addressing your debt now is also critical, whether it's a student loan, an auto loan, or a credit card. Interest can add up quickly, so you might consider moving high-interest debt to a credit card with a 0% APR offer on balance transfers. And of course, making extra payments on any high-interest debt now will put you in a better position if times get tough.

Today, our news colleague, Anahil Hoski, is here to talk with us about recessions. So, Anna, are we in a recession right now? Are we in danger of entering one? Should people be preparing?

Sure thing. Up next, we're answering all your burning questions about car insurance. But before we get into that, a reminder to send us your money questions. Are you wondering the best way to manage investments ahead of a recession or what this uncertainty might mean for your financial goals? Whatever your question is, leave us a voicemail or text us on the Nerd Hotline at 901-730-6373.

That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com.

To help us answer Gerson's question on this episode of the podcast, we are joined by Lisa Green. Welcome back to Smart Money, Lisa. Thanks so much, Elizabeth.

Wow. I know nobody asked me, but my biggest fear is dying in a car accident. Let's talk about the different coverages you're paying for with car insurance. Lisa, can you run through maybe the top three most important coverages people should keep in mind as they look for car insurance?

All right. Now, hold on. Not so fast. Let's take a step back and get into what we mean by a recession and what is stoking some of those fears right now.

Is this the R word, Sean?

So Lisa, it sounds like liability coverage is the most important for many people. So can you tell us what goes into liability coverage?

For sure. Yes. And that's awesome. And on that note, we are going to answer some of your questions, Maddie, to hopefully help you get on the right path and make your own decisions that's best for you and your family. All right. Please tell us what is your first question?

And I'm Elizabeth Ayola.

Yeah, so for listeners who are maybe unaware of what it is, essentially it's just about investing in companies that align with your personal and your ethical beliefs. So for example, maybe you don't want to invest in companies that contribute to the military industrial complex, or you don't want to contribute to companies that have a history of polluting the environment.

Those are examples of ESG that you might be pulled to. So probably the easiest way to invest when it comes to ESG is to open a robo-advisor account and then invest in an ESG fund. But before we go into that, to your point, Maddie, I think it really depends on your values to say whether it's worthwhile to do ESG investing. Yes, you're right. Some companies do greenwash and nothing is 100%.

It kind of makes me think you guys can throw tomatoes at me if you think this is a bad analogy. But it's just like people who are like, oh, there's no point of trying to save the planet because what's my little contribution going to do, right? And while it does require a lot of people to contribute to make a huge impact, it doesn't mean that your contribution is zero.

Now, that's a good analogy.

Ouch. That hurts almost as bad as these exasperating puns, Sean. And yes, I'm egging you and these puns on because that's what a supportive co-host does.

Okay, good.

So you said that you, which is great on you for calculating around how much you guys need in your emergency savings fund. So did you have any thoughts about what you wanted to do with the other half? If you did, let's say, put aside that $27,000 or six months worth.

I know all too well, eggs are a staple in my refrigerator, so I've been experiencing the hike in real time. For those wondering the why of it all, there are a few factors at play, but the key driver is the ongoing H5N1 or avian flu crisis. Now, in the last three months of 2024, more than 20 million egg-laying chickens in the U.S. died due to bird flu, including cold birds.

And I will just give a personal anecdote. And that is, I have a son and I was also in your position, like I'm not sure whether to open a 529 or whether I should open a Roth. So I actually started out with a Roth. And then when the Secure Act 2.0 was passed and it was possible to roll unused funds, as Sean said, into a Roth, I leaped at the opportunity to open a 529 as well.

So all that to say, it is also possible to have both. It doesn't have to be either or.

To find out how we got here and what's being done to battle the avian flu and the prices you pay at the store, we have our news colleague, Anna Helhosky, here to talk us through it. Hey, Anna.

This episode was produced by Sean and Tess Vigeland. Hilary Georgie helped with editing. Megan Maurer mixed our audio. And a big thank you to NerdWallet's editors for all their help. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

No, that's not the news any of us is hoping to hear.

It's not just the scramble you order at brunch. It's anything that needs to be made with eggs, like baked goods, pasta, my protein shakes.

You got it. Sounds so bad for the chickens. But what happens to the farms? That's a lot of loss.

For those who don't know, the FDA investigates foodborne illness outbreaks as well as other food inspections. That seems concerning for food safety, especially while the bird flu is ongoing. Yeah, it's not an ideal situation. One thing I'm wondering is what happens to the eggs that have already been laid and sent to the market if bird flu is later discovered in a flock?

No problem, Sean. Up next, we answer a listener's question about ethical investing. But before we get into that, a reminder, listener, to send us your money questions. Maybe you're wondering how to save money on groceries when egg prices are sky high, or you're trying to figure out the best way to fund a home renovation.

Now let's get to this episode's money question. That's coming up in a moment. Stay with us.

We're back and we are answering your money questions to help you make smarter financial decisions. This episode, we're joined by Maddie, a listener with some questions about how to get started ethically investing, how to manage their savings and more.

Hi, I'm happy to be here.

I do, Sean. I pay attention to where my money is going and how it's being used. And I try to make sure it aligns with my personal values.

Well, first of all, Maddie, I want to say that you're very brave and you're doing a great job. Oh, thanks. And you're on the right track. I think being cognizant of what your blocks are when it comes to money and being aware of where you need to improve are like great steps. So with that said, my question for you right now is what is your relationship with money?

And honestly, I'm a little behind on my retirement savings too, because all my discretionary income is going towards paying off this debt. So those are probably two things that I would prioritize.

Oh, thank you so much. That makes me feel so much better about my situation. But I want to know which debt repayment method works best for someone like me who wants some instant gratification from paying off that debt. Because when I'm just making the minimum payments, it feels like I'm not getting anywhere.

So is there a specific method that I could use that may kind of give me that instant hit and make me feel like, yes, I'm making progress?

What?

That's crazy. That's crazy, Sean. I don't know about that.

You're breaking my heart, Sean. But I hear you. I hear you.

But Sean, I want to address the elephant in the room. Please. I like shopping. I like going on vacation. Is there a way that I can pay down this debt and still do the things I love and not feel like I'm a prisoner to my own debt?

Well, Sean, I guess I do want to get started on implementing some of the strategies that you have mentioned. So are there any resources that you can recommend? Because it does also feel really overwhelming.

Oh, I'm downloading that right now. Listeners, download that right now. Sean, the information you have given me today, I know it sounds cliche, but it really is life changing. And I feel now like I have a shot of getting out of this debt.

But I just do want to say to those listening out there, everyone needs to be prepared for this emergency and know how to shut their water off and be sure the valve will turn and shut off when needed. And don't be like me. Don't put off your home maintenance. I knew better. This could have been a big disaster if I was gone to work or out of town when I found out that thing was broken.

So please, prepare for an emergency, people.

I know that's right. A little mess up here and there is not a big deal because it makes for a good story, right? I mean, so after I pay all this debt off, I'll have a great inspirational story to share, and I'll feel really good about myself.

Wow. How am I feeling? I'm feeling like I can do anything right now. Thanks to you, Sean.

I don't know if you've ever thought about an alternative career, but motivational speaking, definitely your thing.

For anyone who cares to know the next steps I'm going to be taking, I'm going to be blocking Zara from deleting the apps and blocking Zara. I am going to check out this snowball method. I'm sure you guys have an article on nerdwallet.com about it. We do. I'm going to use that.

So I'm going to replace the instant gratification I've been getting from shopping with the instant gratification that will come when I pay down one of those cards.

Oh, thank you for listening and being my therapist and all the other things. I appreciate it.

That was fun. I loved it. We need to do that again. That was fun.

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland, Anna Helhosky, and Hilary Georgie. Hilary also helps with editing. Nick Carissimi mixed our audio.

And a big thank you to NerdWallet's editors for all their help.

Ana, how do we know what the dollar value is? Tell us how it's measured.

Okay.

As you mentioned earlier, the dollar is weakening.

No problem. Up next, we answer a listener's question about how to deal with credit card debt that never seems to go away. But before we get into that, a reminder, listener, to send us your money questions. Are you looking to diversify your accounts but don't know where to start? Are you trying to have a big money conversation with your partner but aren't sure how to navigate that?

Whatever your money question, leave us a voicemail or text us on the Nerd Hotline. at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com.

I like to think that I don't have any bad habits, Sean. Okay, but actually, I'll be honest. It's eating dinner at 10 p.m., especially when I don't feel like I had enough protein for the day.

We're back and we're answering your money questions to help you make smarter financial decisions. This episode's question comes from Allison, who sent us an email with some questions about paying off their debt. And at this point, we'd usually read our listeners email, except that's not what we're going to do. Sean, do you want to tell our listeners this idea that you cooked up?

And I'm Elizabeth Ayola.

Okay. I think I'm following you, Sean.

Me, me, me.

Where do I start, Sean? I think in terms of where I'm doing well, I think I have a good level of self-awareness. So I understand how much debt I'm in. That is one of my pain points at the moment. I have quite a bit of debt. I think I'm earning quite a bit of money. And I generally have a good understanding of my financial basics.

Sean, so at the moment I have two credit cards with high balances. One of the balances, the highest, has $22,000 on it and the other one has $17,000 on it. For the $22,000 credit card, the interest only on that card is about $300 a month. And then for the $17,000 credit card, I'm paying $150 a month of interest on that credit card.

So it's quite a lot of money that's coming out of my paycheck each month. And at the moment, what I'm putting towards that is about $1,100 a month on each card. But you know the issue I'm really having, Sean, can I be honest with you?

even after shelling out about $1,100 per month on each card, I somehow end up charging again. And I just don't understand why I'm in this cycle of paying off the debt and then mounting back up the debt and just finding the debt is not moving anywhere.

Today, we're talking about something that touches everything from your shopping cart to your online checkout screen and your summer travel plans, the value of the U.S. dollar.

What's crazy sometimes with credit cards for me is I use them with the idea that I'm going to pay it off at the end of the month. What I realize is I end up not tracking how much I'm actually spending. And then the end of the month comes and I'm ready to pay it off. And I'm like, well, who spent all that money? Couldn't have been me. But I guess it was me. Yeah. Yeah.

And then in terms of what I spend it on, I mean, different things. I don't know about you, Sean, but the inflation has been kicking my butt. So I'm finding I'm spending a lot more on groceries. I eat out with friends sometimes. I'm paying my bills, of course. And then sometimes unexpected expenses will come up. Sean, oh my goodness.

Recently, I have had to fix something in my home that broke the water boiler. And that's going to cost me about $2,000.

Before we go into that, Sean, I know you said that I'm going to have to charge about $1,000, but no, Sean, I'm going to have to charge about $2,000 on a card I had paid off in January, and it's only April. I'm telling you, it just feels oppressive right now. Like, I need a drink, Sean, but I probably just need to put on my big girl pants and get some discipline over my spending.

I'm bringing home about $5,000 after taxes.

Sean, if I'm going to be honest with you, you lost me at the budget part because I'm terrified of looking at my income and expenses right now because I feel ashamed. I feel a lot of shame around how I'm spending.

And I feel like it's going to be really difficult for me to actually sit down and just rework my budget because then I'm going to have to face my indiscipline and the spending habits that I've adopted right now.

Wow. It feels like such a distant dream. But if I had that extra cash, I probably would throw it into some savings because I know that if I had a solid emergency fund, that could have paid for this emergency that just happened. So I probably would beef up my emergency fund.

Life insurance. You've probably been told you need it, but do you? And if so, how do you know what kind to get? Today, we help a listener figure out whether umbrella insurance is enough. Welcome to NerdWallet Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Elizabeth Iola.

I like that you are shopping around and doing your due diligence every year. And it sounds like ultimately you are trying to shave some dollars off of your insurance. So I'm curious about where you would like to put those extra dollars and if you have anything in mind in terms of what you want to do with that money.

I know you also mentioned earlier that you're not sure exactly how much you should save for their college funds. So how did you come to that estimate? What are your thoughts?

They may be more expensive. I recently switched or got a new term policy and I'm older than I was when I had my original one. So I am paying a little bit more, but I will say, depending on how much coverage you have, obviously, it didn't put a dent in my budget paying an extra couple of dollars.

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general, educational, and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland and Anna Helhosky. Nick Karisamy mixed our audio. And a big thank you to NerdWallet's editors for all their help.

This episode, we answer a listener's question about life insurance. But first, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. And today we're asking what it means if the economy enters into something called stagflation. Our news colleague, Anna Hilhoski, is here to explain more. Hey, Anna.

And thank you, Anna. Of course. Up next, we answer a listener's question about life insurance. But before we get into that, a reminder to send us your money questions. Do you want to know the smartest way to budget for your summer vacation? Or are you in the market for a new credit card but aren't sure how to find the one that's best for you?

Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or you can also pop us an email at podcast at nerdwallet.com. In a moment, this episode's money question. Stay with us.

And Adam, how old are your kids? I'm also a parent.

Okay, so some are a few years away from college.

Oh, congratulations. Oh, congrats.

Got you. So you wrote to us with some insurance questions. So can you tell us how this ties into maybe all of these life transitions you're having if it does at all? And then what your questions are around that?

Elizabeth, do you enjoy sandwiches? I do enjoy sandwiches, Sean. And actually, I had a fire chicken sandwich two days ago and I had an egg sandwich yesterday. And of course, no cheese because we are lactose intolerant over here.

And I'm Elizabeth Ayola.

Mmm, the sandwich generation. I am inching my way closer to that cohort.

Today, we're talking about the labor market and how we, the public, are feeling about the economy. NerdWallet actually has a new report looking at our perception of how things are relative to what they really are. Our news colleague, Anna Helhosky, is here with more. Hey, Ana. Hey, Elizabeth.

Hey, thanks, Ana.

Thanks, Sean. Up next, we answer a listener's question about how to help manage aging parents' finances while also dealing with your own financial stresses as a parent. But before we get into that, a reminder, listener, to send us your money questions.

Maybe you want to know whether high yield savings accounts are still the best place to house your savings or how to get your credit in shape to buy a house this year.

So to help us answer this listener's question, on this episode of the podcast, we are joined by NerdWallet personal finance writer, Lauren Schwan. Welcome back to Smart Money, Lauren. Hello. Thank you. Let's start by talking about what Bailey mentioned about marriage and taxes, because the alleged tax breaks are a big draw of getting married for some couples.

So firstly, Sean, can you break down what people should know about this?

Listeners may remember way back last fall when there was a lot of talk about economic vibes and how they didn't seem to match up with what national statistics were telling us about the economy. I am a listener and I will say I was also confused by the mismatch between musing shared in my social networks and the economic data that we were presented with.

Thanks for breaking that down, Sean. So Lauren, you're the only one who is married here. Did getting married change your and your husband's tax situation much?

Absolutely. So Lauren, it sounds like this listener's partner experienced something really terrible with their finances a few years back, and they're still trying to recover from that. But even if the listener and their partner do get married, the credit issues that the partner is dealing with won't port over to the listener's profile, right?

So Lauren, as we mentioned earlier, you are married. So how did getting married change your financial life? Did you have any like, why did nobody tell me this moment or things that you didn't expect?

All right, Lauren, can you share some thoughts about how couples can help support each other financially for anyone listening out there?

This episode was produced by Sean and Tess Vigeland. We had editing help from Pamela De La Fuente and Hilary Georgie. Megan Maurer mixed our audio. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

Dream weddings, tax breaks, sometimes love too.

Up next, we're going to answer a listener's question about some of the more nuanced financial implications and benefits of marriage. But before we get into that, a reminder, listener, to send us your money questions. Maybe you're trying to figure out how to better your credit so you can buy a home this year, or you need some help figuring out which financial goal you should prioritize.

Either way, leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. You can also pop us an email at podcast at nerdwallet.com.

Now let's get to this episode's money question. That's coming up in a moment. Stay with us.

And I'm Elizabeth Iola.

Definitely. So Sean and Elizabeth, our listener is wondering about when it makes sense to focus on investing instead of paying off debt. What do you guys think about that?

Sean, what's the RoboAdvisor account? Asking for myself and also for listeners who may be unfamiliar with that.

Okay, thank you for clearing that up for us.

Truthfully, I'm still very new to investing and I don't have any investments beyond a retirement account. I think that with these economic times where it's getting harder for many people to cover their living costs, I'm of the mindset of keeping as much liquid cash as possible. I'm focused more right now on building up my emergency savings account than investing.

But if I hit a point where I feel like I can comfortably part with more money, then I'll be willing to risk investing and maybe that'll change.

Thanks, Sean and Elizabeth. I'm happy to be here and I hope I can help.

Yes. So it's an approach to debt that focuses on paying off your smallest debt first. And once that's paid off, you take the amount that you are putting on that one and you move it over to the next largest balance. And then you keep that pattern going.

So with every debt that you pay off, the amount of money that you're putting towards your debt grows like a snowball rolling downhill and slowly getting bigger. Hence the snowball method.

So in Alex's case, for example, the debt snowball method will look like prioritizing putting more money towards whichever debt has the smallest balance first, which could be the loan with a 6.9% interest rate or the loan with a 3.9% interest rate while continuing to make the minimum monthly payment on the other debts.

Remember, with debt snowball, you're focused on the account balance and not the interest rate and then rolling that money to the next largest debt.

Sure. We do love a good snow analogy. I think that having a visual of your debt payoff, be it snowballs or something else, it can help make it a little easier to understand the method. So the debt avalanche is the opposite of the debt snowball method.

Instead of focusing on paying off the smallest debt first, you tackle the debt with the highest interest rate first while making the minimum monthly payment on your other debt. And then you roll that money into the next highest interest debt and then you keep it going.

Well, first, I think it helps to figure out whether you'll be more motivated by small and quick wins, which you get with the debt snowball method, or if you're more of a patient and analytical person who can stick out the debt avalanche method, which may take longer. So paying off your smallest debt first may give you the energy to stick out paying off your debt, while the debt avalanche method

could lead to you growing weary, especially if your largest debt is also the one with the highest interest rate. At the end of the day, I think the best payoff method for you depends on your goals and how you approach money. So you have to be honest with yourself.

I understand that. So Irene, I want to ask you, what are your thoughts in terms of how to fund it? So there are three primary ways. Of course, there are more, but three primary that you could fund your home renovations. And one is through a home equity loan. You could also do a home equity line of credit or a cash out refinance.

So what are your thoughts in terms of how you want to fund this home renovation or what have you been exploring?

Kate, do you want to talk through the different ways of financing a home renovation?

All right, Kate. So since that is not a very maybe viable option for many people, let's talk about HELOCs and home equity loans.

Okay. I'm going to pivot the conversation a little. I want to ask you, Irene, whether you've thought about whether you're prepared to add to the financial burden you already have with a mortgage by potentially doing a renovation. And also, are you ready for the emotional labor of home renovations?

Kate, what are some ways to approach home renovation plans? What would you say if you had to give an outline for ways people can approach it?

All right, Irene, do you feel like you have some steps to take based on our conversation?

So this has been a great conversation and a reminder that this is not individualized advice, but we hope that the chat that we've had with Kate is enough to equip you with information you need to make your own decision. So I hope that's the case for you, Irene.

We look forward to hearing what you decide when you decide to do the renovations. Please feel free to send us pictures of the renovations. Would love to see. And thank you so much for coming on, Irene. Thank you so much for having me. I appreciate it. Kate Wood, thanks for joining us again and sharing all of your nerdy knowledge. Of course. Always love being here.

And that's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us the questions that you have at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Also, visit nerdwallet.com slash podcast for more information on this episode.

And remember, you can follow the show on your favorite podcast apps, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

This episode was produced by Tess Vigeland. Hilary Georgie helped with editing. Nick Karisamy mixed our audio. And a big thank you to NerdWallet's editors for all their help. And with that said, until next time, turn to the nerds.

Have I peaked? No, my best days are ahead of me. But have you peaked at your 401k balances? Sean, also no, because their best days are ahead of them too.

And I'm Elizabeth Ayola.

Yeah, thanks, Sean. Up next, we have a listener's question about home equity lines of credit. But before we get into that, a reminder, listener, to send us your money questions. Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcasts at nerdwallet.com.

To enter for a chance to win our book giveaway, send an email to podcast at nerdwallet.com with the subject book sweepstakes during the sweepstakes period. Entries must be received by 1159 p.m. Pacific time on May the 7th. include the following information, your first and last name, email address, zip code, and your phone number.

For more information, please visit our official Sweet Stakes rules page.

One of the ways to be smarter with your money is to ignore it, or at least parts of it. The recent wild fluctuations in the stock market is one example.

We're back and answering your money questions to help you make smarter financial decisions. Now, this episode, we're joined by Irene, a listener with some questions about the pros and cons of home equity borrowing and the best way to fund home improvements. Welcome to Smart Money, Irene. Hi, I'm so happy to be here. We're excited. It's going to be a great chat.

And I'm also joined by NerdWallet Mortgage's writer, Kate Wood, to help me answer Irene's questions. Welcome back to Smart Money, Kate. Thank you so much for having me back. Let's get the conversation started. So we're going to start with a little icebreaker for you, Irene. Now, if you had to describe your current financial situation in one word, what would it be and why? Okay.

Oh, I love that. And because finances are a journey, I think you're always growing. So it sounds like you're in a good spot.

Let's dig into your financial situation. So tell us some basics about your financial life generally. What's going well? Where do you think you have more room to grow?

I can relate with that challenge, especially in this economy. So speaking of savings, what are your savings like? How much do you all have saved currently?

And then I'm curious to know in terms of your savings, does that cover three to six months worth of expenses?

Now let's move on to your debt. Do you have any debt at the moment? We do.

And just for interest, what do you and your husband do? What are your occupations?

Okay, great. So now we're actually going to go into the conversation about what you wrote us about, which is home ownership. So talk to us a little bit about your home ownership journey.

Our news colleague, Ana Helhosky, is here with more. Ana, you're going to help us out here, right? Bring us some sage advice on how to keep on keeping on in our retirement and college savings account.

Sean, what's the last thing you bought that you know for certain was made in the United States?

I love the ideas of sinking funds and that is something honestly I don't do. I do have a savings account and I have a spending account and I usually pull from my spending account if I have something non-emergency to spend on. I also find that having too many accounts makes me dizzy. So Sean, how do you stay organized with all the accounts for all the things?

Oh, that makes sense. And I like the idea of having most of the accounts at the same bank. That feels a little less chaotic. All right. Our listener also had a question about whether they should keep money in a money market account or a high-yield savings account. Kim, can you talk to us first about what a high-yield savings account is? I find some people mistake them for investment accounts.

And I can quickly explain what money market accounts are. So they're essentially savings accounts that have features of your traditional checking accounts like debit cards and check writing features as well. Now that can be a con for some people, talking about myself here, because easy access can encourage spending.

Since the listener would be using the money for ongoing home repairs, though, a debit card could be helpful. Now, a downside to MMAs, or money market accounts, sometimes they have higher minimum deposit or balance requirements than high-yield savings accounts, and that could range from hundreds to thousands of bucks.

One other option that's more on the investment side of things is an Atomic Treasury account, which is available to open right in our free NerdWallet app. So basically, an Atomic Treasury account is an investment backed by the US government and typically offers a higher APY than a high-yield savings account.

The exact APY varies, but as an example, as of late April, you could earn a 4.39% APY on T-bills with the Atomic Treasury account. Now, they are slightly less flexible than an MMA or a savings account since they don't have debit cards or allow you to write checks, but you can withdraw your money at any time.

Another thing is that you also don't pay any state or local taxes on interest earned, though you will owe federal taxes, like with the interest you earn on a savings account. We'll put a link in the description of the episode if you want to learn more about atomic treasury accounts, and the page includes a calculator you can use to see how much that you could potentially earn as well.

Kim Palmer, thanks for coming on and answering this savings related question. Of course. Thank you so much for having me.

Join us next time to hear about whether to pull back on retirement account contributions in times of market turbulence. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

This episode was produced by Tess Vigeland, Anna Helhosky, and Hilary Georgie. Hilary also helped with editing. Nick Karusemi mixed our audio. And a big thank you to NerdWallet's editors for all their help.

Okay, you're going to have to give me the name of the jeans after the show because I love a good pair of jeans. This episode, we're looking at what it really means for a product to be made in the United States and what we're all willing to pay for that label.

Not really, honestly. I care more about the quality of the product as opposed to where it comes from. But I will say that I do try to support products that are made ethically.

And I'm Elizabeth Ayola.

Okay, so if you want to buy something made in the U.S., what's the best way to go about it? How can you find Made in America products?

No problem. Up next, we answer a listener's question about how to rebuild your savings. But before we get into that, a reminder listener to send us your money questions. Do you want to know the smartest way to budget for your summer vacation? Or are you in the market for a new credit card but aren't quite sure how to find the one that's best for you?

Today, we're talking about why it isn't always easy or economical for products to be made in the USA.

Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com.

To help us answer this listener's money question, we have Kim Palmer, a personal finance nerd. Welcome back to Smart Money, Kim. Thank you so much for having me. Kim, to start with, our listener, whose name is also Kim, in case you didn't catch that, is worried about spending all their savings on home repairs. How should the listener think about spending money from their savings pot?

Kim, since it seems like you're going through a similar situation as listener Kim, can you talk about how you're thinking about using savings for home improvement projects and then rebuilding your savings or emergency savings fund?

Also, I want to mention that Kim can prioritize home repairs in terms of urgency. So what comes to mind is maybe she focuses on repairs that could become more expensive later if they aren't addressed immediately. For example, let's say you have mold somewhere in your house. That's probably going to be more urgent than a more aesthetic improvement like swapping out a light fixture.

And it can be a good idea to keep an emergency fund intact for unexpected expenses and then start a new savings fund for other things like home repairs.

And I'm Elizabeth Ayola.

I think, Amy, the things that you're thinking about are valid. And I also want to validate you by saying my retirement number was around two million something. And I was like, well, how the heck am I supposed to save all that money? So I understand how it feels to be freaked out by the number that you get. But I also want to ask you, How do you and your husband manage your household finances?

And also kudos to y'all because it's not easy being a full-time gig worker or entrepreneur or creative and having that uncertainty. So how do you guys navigate managing your household finances with your income?

Okay, so if your head is spinning from the tariff news in the last week or so, you're not alone. Our news colleague, Ana Helhosky, is here to help sift through what this means for our finances and how best to manage the impact, including basics like how to save on groceries. Ana, you've been tracking the play-by-play of this drama, but what do people need to know right now about the tariffs?

So I know that you said that you guys work as a team, but you kind of have separate finances. So during retirement, do you guys plan to pull your finances together or you're going to spend your retirement money and he will spend his?

So then I have another follow up question. So I know you asked us about maybe how much do you need to save for retirement, right? So when you ask that question, do you mean separately or as a couple?

And I would like to circle back, Amy, because in my past time, well, no, my present time, I love to play with retirement calculators, a very strange hobby. You mentioned that you and your partner have done that. Yes. But I do want to point out that seeing a big number like 2 million can feel very intimidating. I want you to also remember that you're not saving 2.5 million on your own, right?

So you're investing a smaller amount with the hope that it's going to grow over time into the amount that you expect to need for retirement. And I fell into that trap recently as well. And I'm like, oh my God, I'm so far from my goal. And then I forgot for a moment that my money's going to compound over time and it will start multiplying itself essentially.

So for those who are listening who don't understand a compound interest, you earn interest on your interest in investment accounts, effectively allowing your investments to snowball. And the acceleration of growth is often much more rapid in the final years of retirement. So all that is to say your money's going to grow over time.

So you want to think about your retirement savings in terms of what you might need on an annual basis versus the total number. But if you are behind on your retirement savings, you have a few options. I think the four main options that you have if you feel behind is one, you could work for a few more years than you originally planned.

Two, you can spend less and invest more in your retirement accounts. The third option would be to change what retirement looks like for you. So maybe it's a hybrid of retirement and picking up side jobs. And then the fourth one may be to employ some combination of all of these options. So when I say that, what stands out to you, Amy, for maybe an option that you could explore?

Yes. But I do have some like, I don't know if this is good news or not. There are different types of fire, right? So while you may have to be stringent for like Sean said, the more pure type of fire, there is also barista fire for those who are listening who may be like, oh, I want to retire early.

And that's essentially when you save enough to work part time, but no longer need to depend on full time work. And based on what you told me about you and your husband loving your jobs, which is awesome, and being happy to do it, you know, for as long as you need to do it, there is also the option of working part time.

And the goal there is to have enough so that you don't have to work full time, but you'd still work part time. So that's a form of fire as well. What is it called again? Barista fire. Barista fire. I like that. Uh-huh. There are different types.

It might be. Yeah. And the cheeky plug for the listeners who are like, what other types of fire are there? We have an article on nerdwhite.com about the different types of fires. So we will put that in the show notes.

And here is our brief disclaimer that you love to hear. We are not financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Sean and Tess Vigelin. Hilary Georgie helped with editing. Megan Marr mixed our audio.

And a big thank you to NerdWallet's editors for all their help.

So many tariffs and it feels so hard to keep up with. So are there more tariffs on the way? It's very likely.

I do. And I also know we're sick of talking about eggs, but I can't live without them. And I'm also sick of the prices going up. Olive oil, too. I use that to make my eggs.

Thanks, Sean. Up next, we answer a listener's question about catching up on retirement savings. But before we get into that, a reminder, listener, to send us your money questions. So take a second and think, where do you need help with your money? Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com.

Now let's get to this episode's money question. That's coming up in a moment. Stay with us.

Amy, welcome to Smart Money. Hi, thank you all so much.

And I'm Elizabeth Ayola.

Sean, I don't know if you remember the show we did last week.

Yes, that one. The one where we joked at the top of the show about how there wasn't much news going on out there.

And here we are a week later and the barrage of news out of the Trump administration continues unabated. Honestly, it's hard to keep track, but that's our job.

Let's get up to speed here. On January 31st, the head of the CFPB, Rohit Chopra, was fired and Scott Bessant, who is the new Treasury Secretary, was named the acting director. Now, soon after that, Bessant ordered that the Bureau cease all investigations and said no new rules or guidance would be issued. And it only went downhill from there.

So at this point, it looks like the agency is effectively dead in the water, which leaves a lot of unanswered questions like, what does this mean for consumers moving forward? To get a better idea of what happens now, Ana spoke with Chuck Bell. He's the program director for advocacy at Consumer Reports.

I sure did move for the thousandth time. And easy is not an adjective I would use to describe the process, Sean. It was also probably the most expensive thing I've done in my adult life. So it was so expensive that Little Miss Nomad, yes, that's me, has no intentions of moving anytime soon, which is crazy coming from me.

Yes, thank you. Up next, we answer a listener's question about preparing financially for a big move to a new city and a new job. But before we get into that, a reminder, listener, to send us your money questions, especially your questions about tax season 2025. We're working on an episode all about taxes and we're going to take on some of your burning tax questions.

Now let's get to this episode's money question. That's coming up in a moment. Stay with us.

But it does seem like Chris wants to change their habits and use their money to live their life. How do you, Amanda, think Chris can begin to rethink how they're using their money?

Chris has this pent-up desire to just live their life and use their money to do so, but is afraid, maybe because they don't know exactly what they would like to do with their life or their money. So defining their personal goals would be an important step for them to take. Because, as we often say on Smart Money, your money is just a tool to get you what you want in life.

So Amanda, how do you think Chris can begin to map out their financial goals?

I love that suggestion, Sean. At 23, I just finished my postgraduate degree. I had moved back to Nigeria for a second time and was also pursuing a media career like you. So I knew little about money management and was just looking at how to survive on what felt like an impossible income at the time.

One thing I will say, though, is that I knew what life I wanted to live, but I just wasn't clear about how big of a role finances would play and also how to even create a financial plan. If I'm being completely honest, I just thought one day I would earn enough money and everything would just work itself out. Optimistic, but definitely not a plan.

But that said, I wouldn't trade the life experience that I gained from moving to a developing country alone. Having financial stability is important, but those life experiences honestly shaped me.

Speaking of investing, I actually was going to say my biggest mistake was not investing. As I listened to you talk, Amanda, I had a different thought. And it would be because I was thinking I just was so broke. I didn't have enough money to invest because I was earning in Nigeria like the equivalent of $200 a month. And I didn't have any other income but that.

In my 20s, I spent a lot of time thinking that I didn't deserve to earn a good amount of money. So I never really negotiated my salaries. And I also didn't look for jobs that would pay me a reasonable living.

I don't know if that's a mistake or learning, but I definitely would have valued myself more, asked for more money, and done a lot more research into how I could pursue my passions and still make some money while I'm doing it. And then, of course, I would have invested more.

By the way, if you want to play around with the investment calculator that Sean mentioned, you can find a link to it in the description of today's episode. Now, speaking of investments, Chris also asked about finding a balance between their rigorous investing and and saving and having life experiences, do you think they should maybe pull back from saving and investing so much?

From my point of view, I think the lifestyle they hope to live during retirement is a big piece to answering that question. $1.5 million may be enough for one person, while someone else's lifestyle may require $3 million, for instance.

Me too. I'm considering an art class sometime soon. Yes. All right. Any other thoughts you want to leave our listeners with, Amanda? Do you have any more gems for us? Well, check your credit score always and always.

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland. Hilary Georgie helped with editing. Nick Karasimi mixed our audio. And a big thank you to NerdWallet's editors for all their help.

And I'm Elizabeth Iola.

Unless you've been living in the desert for the last few weeks, you know we are in a new era of tariffs. President Trump has called tariff, quote, the most beautiful word in the dictionary. And he's followed through with one of the most significant trade wars in modern history.

But it's our new reality, Sean. And they have the potential to affect just about everything we buy, including, perhaps most expensively, cars.

Thanks, Sean. Up next, we answer a listener's question about whether it's okay to loosen the strings a bit when you've amassed significant savings and want to move out of your parents' house. But before we get into that, a reminder, listener, to send us your money questions.

Maybe you're wondering what the recent stock market crashes might mean for your finances and how you can get ahead of a potential recession. Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD or email us at podcast at nerdwallet.com.

To enter for a chance to win our book giveaway, send an email to podcast at nerdwallet.com with the subject book sweepstakes during the sweepstakes period. Entries must be received by 1159 PM Pacific time on May the 7th. Include the following information, your first and last name, email address, zip code, and your phone number.

For more information, please visit our official sweepstakes rules page.

Hey, guess what? Smart Money is a finalist in the 2025 Webby Awards, and you can help us win. Just head to vote.webbyawards.com, register real quick, and vote for us in the best individual podcast episode business category. It's free, it's fast, and unlike borrowing your neighbor's Wi-Fi, totally guilt-free. You've got until April 17th to cast your vote. One more time, that's vote.webbyawards.com.

To help us answer Chris's question on this episode of the podcast, we are joined by personal finance writer, Amanda Barroso. Amanda, welcome back to Smart Money. Thanks for having me back, you guys. I'm loving this question. We have a really unique situation with our listener here today.

financially, they appear to be doing everything well, and it almost feels like they're doing everything too well. So I know I was a hot mess in my early 20s, but it seems like the listener is hyper-focused on saving and investing at the expense of just living their life, which is pretty much the opposite financial problem that most people have.

Vicki mentioned selling stock before doing the rollover. Now, Kate, why might they have to do that?

What are the tax implications of doing this? I know depending on where they live, they might owe state taxes on capital gains.

Most economic data is released on at least a one-month lag. So last week, for instance, we learned about April's unemployment rate and the size of the labor force that month. But we also learned about hiring and layoffs in March. and economic production, or the GDP, for the entire first quarter.

What are some potholes that people can avoid when doing an HSA rollover? What are some ways to minimize the potential of penalties?

Well, Kate, is there anything else people need to know or the listeners should know that we haven't already covered?

So when we talk about the health of the overall economy, it's a matter of making sense of all of these different snapshots of various parts of the economy at various times. But then you're also putting them together with what we know about how the economy has behaved in history and the impact of things that are happening right now.

And if you're looking for more nerdy information about investing in an HSA, we'll link an article in the episode description that walks you through why and how you should invest in one of those accounts.

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

So things that we don't even have data for yet, or in some cases, historic precedents, like the current tariffs. So it can make for a very complex recipe.

Well, the economy is holding up, but consumers and businesses are being cautious. So a quick rundown is that the unemployment rate is at a moderate level, wages are growing in a sustainable way, and prices aren't increasing dramatically. However... Hiring continues to slow, and we know people are trying to get ahead of the impact of tariffs.

Over the past few months, for example, imports surged, and so did vehicle sales. So we're beginning to see in the hard data, but also in sentiment data or consumer surveys, that people are preparing for potentially tougher economic times in the form of higher prices, for instance. I want to talk more about economic growth.

So GDP is the standard way that we measure economic production or growth. It's a formula that tries to capture most everything that an economy produces. So when the change in real GDP is positive, the economy is said to be growing or expanding. And when it's negative, we call that a contraction. Generally, the long-term average of real GDP is about 3%. So in 2024, for instance, it was around 2.5%.

And in the whole of 2023, it was 3.2%. So there's some bouncing around that average. However, this last week, we learned that real GDP for the first quarter was negative 0.3%, which is just slightly negative, but it does indicate a contraction. And at first blush, this could be alarming, but a look at what goes into the calculation provides some clarity.

So the primary cause of this negative number is the effect of a rush to import goods ahead of tariffs. Household and government spending, business investments and exports, all of those are added together in GDP, but imports aren't produced here, so they aren't counted in the same way.

If enough goods are imported but not counted as inventory on store shelves or consumed in the same time period, it can result in a negative number, and that's likely what happened with the first quarter number. So while the GDP reflected a contraction, it wasn't really a broad-based decline in economic activity, rather the big effect of this one big number.

Well, coming into this year, I think it's safe to say the labor market was really coming into balance, if not fully balanced or normalized. And this is relative to where it was a few years ago. Back then, workers really had the upper hand as labor demand or employers seeking workers outpaced supply or workers themselves. And while this was really great for workers, it helped drive high inflation.

So the Fed raising rates, among other things, has helped bring that labor supply and demand into better balance. You know, that feels less great to workers, but it's far more sustainable. Right now, I think the labor market is at a potential precipice, though. So normalization has looked like lower hiring rates, fewer job openings, and slightly higher but still okay unemployment rate.

Unfortunately, the current pressures on the economy and the labor force could tip these things from where they are now, which is stable, into a trouble zone. So I think the labor market is healthy, but there are increasing risks to that health.

Well, yes, inflation continues to slow as of March, which was the latest data we received. Then headline inflation or overall inflation was 2.3 percent, which is down from 2.7 percent in February and down from over 7 percent in 2022 before the Fed began raising interest rates. And I want to reiterate that this percentage we use to discuss the PCE index is a measure of price growth.

And I'm Elizabeth Ayola.

So when we say it's decreasing, it means that prices are growing more slowly, not that price levels are coming down. But overall, inflation is at a much better place now than it was a few years ago. And it's really within spitting distance of the Fed's 2% target. The big question now is whether it will hit that target, and I think not.

Going back to what we were discussing earlier, this data is on a lag. So the 2.3% is the March growth rate, and the biggest tariff announcements were saved for April.

So if prices were increased in anticipation of tariffs or as the initial tariffs started to take place, we're likely to begin seeing that when we get April data, followed by months of potential increases as various tariffs take effect, if, in fact, they do.

Consumer sentiment data, like the index you just mentioned, can serve as leading indicators for the direction of the actual economy. In other words, how people feel can signal both things they're experiencing that haven't yet made it into the hard data, but also how they might be changing their behaviors, which will ultimately impact the hard data too.

So sentiment data from several sources, including the Conference Board and the University of Michigan, has been declining. And it's likely a solid warning sign to pay attention to. We do our own sentiment research at NerdWallet, working closely with the Harris Poll. That's a partnership we've had for over a decade now.

Today, we're digging into what's going on with the economy at large right now. The latest GDP numbers are showing that the economy actually shrunk in the first quarter of 2025. And we've been hearing from listeners with questions about whether we're on the cusp of a recession or if we're already in one.

And recently, we found 87% of Americans say they're planning to change their financial strategy over the next 12 months in response to tariffs. So when these strategies involve changes to spending, investing, and saving, it can have dramatic impacts on the economy overall.

Definitely, yes, in the soft data, which is what we often call sentiment data, as I was just discussing. But we're seeing it in the hard data, too, in imports and purchases ahead of tariffs. This is just the tip of the iceberg, though. We'll first see things that people are doing in anticipation of the potential economic change. Then we'll see reactions to the actual economic change.

In the case of tariffs, this is higher prices and constrained supply chains. Further, we'll continue to see reverberating effects of this in the labor market as businesses deal with higher costs and lower consumer demand, and potentially even further downstream in things like debt levels and delinquencies.

Well, I can say pretty confidently that we are not in a recession right now. You know, something to keep in mind with all of the recession talk that is bound to increase in volume is that the official dating or declaration of a recession comes from the National Bureau of Economic Research.

And generally, they announce an official recession after it's already begun and sometimes not until it's over. So this space between where a recession begins and when it's officially called is is when you look to the experts for their educated opinion on whether we'll look back at the current moment as being in a recession.

And with all of the data and information I have available to me today, I would say no, we are not in a recession, and I am not alone in that statement. But for many of the reasons we've discussed today, there is a definite risk of one on the horizon, and that risk increases the longer this trade war continues.

Well, I really wish I had more eyes for all of the things I'm trying to keep an eye on. But really, I think we've discussed many of the primary indicators that I watch on a regular basis to get a read on the overall health of the economy. One thing that we haven't touched on that I keep my eye on is consumer debt.

And this is less of a predictive recession indicator and more of a way to look at how a recession might impact households. So we know debt levels are higher now than they were just a few years ago. And higher debt obligations mean less wiggle room in the budget to absorb financial and economic stressors. So that's concerning to think about in the context of a potential recession.

Well, I'm hoping my insurance covers most of it since I give them my hard-earned money every month. But whatever is left, I'm paying for it with my emergency savings, investment accounts, and a hope and a prayer.

And when you begin to see higher rates of debt delinquencies, you know households are really struggling. One of my many concerns right now is that should we find ourselves in a situation where a growing number of households are in financial dire straits, are there resources to help them?

And with federal grants being cut for community services, like food pantries, for instance, I'm not sure the answer is yes.

It might sound a little bit cliche, but people should really focus on what's within their control, namely their saving and their spending. I think most of us, myself included, have varying levels of anxiety about the future of the economy and our place within it. But there's really only so much we as individuals can do in this moment.

So the primary thing I would recommend is to revisit your emergency fund. And I know that's something you guys talk about a lot on the podcast. But having easily accessible emergency savings can be useful whether you have an unexpected expense like a medical bill or something as serious as a job loss. You know, ideally, you have several months of living expenses saved up.

But this can be a tall order, especially if you're starting with nothing. So don't be afraid to start small. Focusing on this safeguard doesn't only result in real insulation from financial shocks, but it can provide a sense of control in this time when everything feels a little chaotic.

Absolutely. Thanks for having me back.

Sure thing. Up next, we answer a listener's question about managing their health savings account. But before we get into that, a reminder, listener, to send us your money questions. Do you want to know the smartest way to budget for your summer vacation? Or are you in the market for a new credit card but aren't sure how to find one that's best for you?

Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. or email us at podcast at nerdwallet.com.

To help us answer this listener's money question, we have Kate Ashford, NerdWallet's Medicare and Health Insurance Authority. Welcome to Smart Money, Kate. Always happy to be here, Elizabeth. First of all, can you explain what a health savings account is for listeners who don't know much about it? I will say that I love HSAs for their triple tax benefit.

And I'm Elizabeth Aiola.

I will say a refund and saving money sound like great incentives to me. Let's turn to a couple of questions that we got from listeners about taxes. Here's the first one, which comes from Diana. Hello, I've been trying to max out my Roth IRA, but I'm worried that I will hit the cap on MAGI, so won't continue to be able to put money into it.

The problem is that although my salary is not close to the limit, my brokerage account dividends are putting me closer to the limit. I don't understand why the dividends get reported on taxes since I haven't ever taken the money out. I also don't understand the difference between ordinary and qualified dividends.

Lastly, I don't understand how it will work later for taking the money out since some of it was included in my taxes now and some was not. I've been just putting money in for the future, but don't know how to actually take it out later. Thanks, Diana.

I think backdoor Roth IRAs are like a gift because they sound too good to be true, but they're actually true. So thanks for that, Bella.

All right, so another question we often get from listeners is about whether they should take the standard deduction or itemize. Can you explain to the people the difference and why someone might choose to do one or the other?

All right, Sean. So we'd all be forgiven for sticking our heads in the sand this week and not paying any attention to what was happening with our 401ks and IRAs. I mean, honestly, it was a hot mess.

Ha ha. I'm not answering that. Ask me again next week.

Good job, Sean. We're learning from you.

This episode was produced by Sean and Tess Vigeland. Hilary Georgie helped with editing. Megan Morrow mixed our audio. And a big thank you to NerdWallet's editors for all of their help. And here's our brief disclaimer. We are not financial or investment advisors.

This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

I'm not sure about y'all, but I definitely like to hear about some ways to cope with the news so we don't become our own worst enemies.

Sean, I hope you did not look at your retirement funds this week.

Up next, we answer a listener's question about taxes as we barrel towards April 15th. But before we get into that, a reminder, listener, to send us your money questions. Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com.

Now let's get to this episode's money question that's coming up in a moment. Stay with us.

And to help us answer all the tax questions on this episode of the podcast, we are joined by NerdWallet tax writer, Bella Avila. Welcome back to Smart Money, Bella. Thanks. I'm happy to be back on.

That's for sure. And I've been doing the same. So let's hear a bit about what's going on over on Wall Street and some tips for making smart investment decisions.

So what advice do you have for the procrastinators out there who might not make that April 15th deadline?

I love that you added that people have to still pay their taxes because I will not lie, I might have forgotten that part. And also good suggestion on the calculator, Bella. I'm a calculator girl. So for everyone listening, we will have a link to NerdWallet's federal income tax calculator in today's show notes.

Or you can just search in Google or whatever search engine you use, NerdWallet tax calculator.

Alright, so are there any big changes this year that people should be aware of?

And I'm Elizabeth Iola.

So, Sean, as we just mentioned, the news in the last couple of weeks has been a lot.

So let's try to clear up as much as we can. Today, we're breaking down some of the key recent actions by the Trump administration that could affect your finances and the economy. Our news colleague, Ana Helhoski, is here to help with that. Ana, thanks for stopping by. Yeah, you got it.

All right, so let's start with tariffs, a topic we've talked about on the podcast in the past, but more hypothetically. Now it seems this tariff business is starting to become a reality.

I also want to put it out there that tariffs placed on one country often lead to retaliatory tariffs in response. And that's what we saw this week, too.

All right, so another big topic in the headlines lately is the federal spending pause, or should I say the federal spending pause pause?

So since we don't know what could happen, if anything, to that personal information now that Doge has access, we can't give specific advice on what to do next. But what we can say is that we recommend freezing your credit in general because it blocks scammers from accessing your credit reports and also opening fraudulent accounts.

For those who don't know, the CFPB is an independent agency that oversees the consumer finance industry. So that includes banks, lenders and other financial institutions. Its main job is, as the name suggests, to protect consumers, often through enforcement actions. Over the last 13 years, the CFPB has recouped $19.7 billion for consumers.

And the Education Department is in charge of overseeing all federal education policy, along with managing financial aid and student loans. So it has a laundry list of duties.

Another good opportunity to repeat our House view on freezing credit. So, Ana, if Trump doesn't get rid of the education department, he could still dwindle its power, right?

Yeah, sure thing. Up next, Sean and Sarah Rathner answer not one, not two, but three listener questions about travel credit cards, opening investment accounts for grandkids, and more.

Maybe you're wondering if you should itemize or claim the standard deduction, or if there will even be an IRS to send your tax return to. Whatever your tax question, send it our way. One more time, leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com.

I would not say that, Sean, not even remotely. In fact, it's dizzying trying to keep up with everything that's happening right now with the new administration. And some of it could affect all of our finances.

Sean, how's your car doing these days?

Tiffany may be in a scenario right now where repairs are getting pricier than the actual value of the car, considering it has over 136,000 miles. Now, generally speaking, if the car's value is lower than the repair cost, it might make financial sense to get a new car. But I know that's not always black and white.

So what are some scenarios where it might be cheaper long term to buy a new car versus keeping the one you have?

The sense of chaos is totally justified. So consider those feelings officially validated, Sean.

Would you say there are any exceptions to this rule?

Not only have we not previously seen the scope and complexity of the current tariffs, for just one example, but the way new policies are being talked about implemented, rescinded, reintroduced, etc. All of that is very unique, too. So not only are the policies themselves unusual and exciting, not necessarily in a good way, but we don't know what's really going to happen when.

Yeah, I have a Honda for that very reason, as you mentioned, longevity. And my first car was also a Honda. But that said, we don't know what shape Tiffany's car is in.

So, Shannon, do you think it's worth waiting to buy a new car considering everything going on? Data from the Commerce Department shows that spending on cars jumped after news of tariffs broke, so it looks like some people are already rushing to buy cars. I'm also seeing some news that the supply is on the thinner side. So what are your thoughts?

Yes, you did.

Shannon, that's a crazy amount. I remember I bought my second car, the Honda, during the pandemic and car prices already started increasing and I paid for a used car almost half that amount. So I can't believe that it's hiked that much.

That's so interesting because before I bought my car, I was thinking to myself, similar to this listener, should I wait? Because, you know, the costs of cars were going up. And had I waited, I may be paying double the price now.

And that all makes for some confusion and stress, whether you're just a casual news watcher or an economist or podcast host at NerdWallet.

So tariffs aside, are some seasons better than others to buy a car?

The listener also wants to know whether it works out cheaper to wait three years or finance the car over 60 months. What are your thoughts here?

I personally feel like there are a few kinds of chaos going on right now. So on one hand, we have everything around tariffs. We've talked about that a few times on the show now. They're on, then they're off, then they're on again. And then the second element of chaos is the stock market. And some of that is tied to the tariffs. But again, we're having just these really wild swings.

And I will add that we do have an auto loan calculator on nerdwallet.com and we will include it in the show description.

What role does shopping around play in the process? I personally put tons of research and time into choosing a car and at times it felt like a full-time job, to be honest.

What are some high-level ways that listeners like Tiffany can think through their decision about when to buy a new car or wait?

And then, of course, we're watching for how all of this is affecting prices and inflation. And a few months ago, inflation was coming down. But now who knows what's going to happen? Liz, does all of this seem about right?

I love that suggestion, Shannon. So I recently actually did that so I could have a clear idea of where my car was and not end up with, surprise, this is broken bills.

Now, before you head out, Shannon, I'd love to know how you typically approach buying new cars. Yeah.

Absolutely. The economic policies, whether it's the tariffs or things that impact government spending, such as doge cuts and the spending bill, these all have the potential to have significant impacts on the economy, both immediately and for months and potentially years to come.

I can attest to the car sitting in the driveway as a remote worker. Saves you a lot of money. Yes. Shannon Bradley, thanks for coming on to answer Tiffany's question and hopefully help someone out there with a similar question.

And that's all we have for this episode. Remember, listener, that we're here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Join us next time to hear us answer a listener's question about retirement account prioritization.

Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeart Radio to automatically download new episodes. And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and it might not apply to your specific circumstances.

This episode was produced by Tess Vigeland and Anna Helhosky. Hilary Georgie helped with editing. Nick Kurisamy mixed our audio. And a big thank you to NerdWallet's editors for all their help. And with that said, until next time, turn to the nerds.

Merely talking about these things can move the markets, and we're seeing the stock market react pretty quickly and dramatically to those things. In the short term, these policies and merely talking about them can impact investments and how we spend and save. In the midterm, they can also impact prices and supply.

And down the road, on a broad scale, they could change global trade patterns, industry, domestic and abroad, labor markets, election outcomes, and so much more. And that's just at a high level. At a household level, it could change your home buying or vacation plans this year. the work you're doing in five years from now, or what your children decide to be when they grow up.

It feels like we're at a tennis match, Liz, with our heads bobbing from one side to another, and then we get bonked on the head with a ball. The whiplash is really tough to deal with.

Oh, seriously, Elizabeth. I think if you're someone who watches the headlines, whether for work or just because you want to stay informed, it can be very overwhelming. And I think many of us hold the sentiment that at least some of the policy changes or communications surrounding them would be laughable if they weren't so serious.

And some days that whiplash will have you just throwing up your hands and really that's a good time to get outside and go for a walk.

I think it's a big deal. I mean, there's a chance we look back at this 20 years from now and see it as less of a big deal. It honestly depends on where all of the policies ultimately land. But as we're living it, the real-time experience and potential impacts are significant.

I think what makes this moment different from what we've experienced in the past is both the drama of the actual policies, so the tariff amounts and who they're targeting, for instance, but the chaos surrounding them. And when you put those together, we haven't experienced anything like this before. In some ways, we really couldn't have.

Technology has really enabled this chaos to the extent that we're seeing. Now, more than ever, the entire world can be informed of the whims behind the actual policies. If the president or other policymaker's happen to be reactive and vocal, we're going to ride their roller coaster whether we want to or not.

And I'm Elizabeth Ayola. This episode, we're looking at whether tariffs and other factors mean it's a good time to buy a car or not. But first, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money.

So while the impact of actual policies could be significant, we're also dealing with this additional layer, which we've seen can move markets and shape behavior.

And it feels unnerving all the time as well. Yeah. So our traditional advice for people and what you hear a lot is to tune out the noise. Focus on the long term and the fundamentals of good personal finance management. That's what everyone is saying.

But for those of us who don't have a hole to crawl into and come out of when the dust settles, can you walk us through some ways to cope with all of the noise happening if we can't tune it out?

Elizabeth, I think the traditional advice still definitely holds. It just has become more difficult. There's a lot more noise. So you want to tune out the noise that has no real potential impact, but you don't want to entirely plug your ears. And parsing the noise without impact from the potential impact is just so very difficult right now. Regardless, the fundamentals hold.

In times of economic stress, the best advice remains to shore up your emergency fund, manage your debt responsibly, and don't get reactive with your investments.

Well, I must say that people are not asking me what to do with their money, but I know what I'm doing with my money. I have personally been reviewing my budget more frequently, cutting back on unnecessary expenses like Instacart, Uber Eats. Can you believe I canceled my Amazon Prime? Proud of you. Thank you. Thank you. And also just upping my emergency savings.

I've also increased the amount I'm contributing to my retirement accounts. And to Liz's point, I do spend time reading the news, but spend the most of my time focused on what I can control.

The things that worry me as an individual aren't always the same things that worry me as an economist. And honestly, it's that difference that makes my job challenging. As an economist right now, the thing I'm concerned about is long-term effects on global trade relations and the place of the U.S. economy within the world.

Day to day, I'm watching things like inflation and the impact to the labor market, and I anticipate we're going to see some uncomfortable changes in both of these areas. But bigger picture, I'm concerned that the approach to economic policies under this administration could undermine the strength of our economy longer term. This is...

less of a sure thing than higher prices due to tariffs, that will happen. But it's a big concern of mine. And then what worries me as an individual is what I think worries most of us. What does the market volatility mean for my retirement? How will tariffs impact the cost to maintain my car? Because I really love my car too. So that's a big one.

If the worst case happens and we do enter a recession, who around me might lose their job? Is my emergency fund big enough? And can it ever be? I think these concerns are pre-universal.

Yes, I have many of these too, Liz, so I feel you. So is there anything I can absolutely 100% ignore?

I would agree, Sean. And if I didn't work in the news business, I'd try to avoid the headlines as much as possible.

I think the answer to that might be different for everyone. In an effort to stay informed, you may be putting yourself under undue stress. So I think the key to knowing how much information to consume is weighing the costs of that information. And that involves first understanding why you're paying attention.

Is your goal of listening to have more informed conversations, to make better financial decisions, to get amped up and mad when things are chaotic? I don't think anyone really wants that last one. But at some point, there are really diminishing returns where the more you know, the fewer benefits you're getting from it and the worse you feel.

So I think it's useful to ask yourself, how much do I really need to know? And how soon do I need to know it? These things are happening around us so fast that staying up to date in real time is a full-time job. Trust me, it's my job. It's your guys' job too. So maybe you throttle your consumption by setting boundaries about what you consume and when and where you get it from, for instance.

Well, for me, it's all about controlling that flow of information and primarily controlling the sources of information. Personally, my warning bells go off when I'm seeking economic news or information and I'm met with high emotion delivery. For that reason, I really don't use much social media as a source for this information.

Generally speaking, if I come across a talking head on social media and they're discussing the latest in financial or economic news, It goes in one ear and out the other. It's just one of my coping mechanisms. Sometimes the same can be said for television news too. Because when I listen to highly emotional responses, my heart beats faster and I get worked up too. And that's not helpful.

So I try to get my info from multiple sources. I personally prefer reading to video. And I always scan for the facts rather than the analysis. For the analysis aspect, I do follow some experts in economics, policy, supply chains, and the like. primarily on LinkedIn and Substack. And I know LinkedIn is social media, definitely not the sexiest of social media.

But the thing I like about it for this is you have immediate insight into the background or the credentials of who's offering their opinion. And that just makes it more of a conscientious consumption.

Thanks so much for having me. Up next, we answer a listener's question about whether it's the right time to buy a car. But before we get into that, a reminder to send us your money questions. Are you wondering how to recession-proof your investment portfolio? Maybe you just experienced a big change to your personal and financial life and you want some help adjusting.

It's all good for now, but for at least one of our listeners, it might be time to get into the car market. But they're wondering about the effect of tariffs on that decision.

Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com. In a moment, this episode's money question. Stay with us. We're back and we're answering your money questions to help you make smarter financial decisions. This episode's question comes from Tiffany in Colorado who sent us an email. Hello, nerds.

I've been driving a 2009 Honda CR-V with 136,000 miles. This car has been great to me, but it's starting to require more repairs. I invest in my 401k and I'm working on increasing my emergency fund. So my goal was to keep it for the next two or three years, then purchase another car. But of course, now I have to weigh in the tariffs.

Chances are both new and used cars will be significantly more expensive in a couple of years than they are now. If I purchase now, I will need to finance for a longer period of time, probably 60 months for a used car. I know that that's not ideal and I will pay more in interest.

But will I end up spending less than if I were to wait three years, pay more for the car, but finance for a shorter duration? One note, I do have excellent credit. I would love your nerdy input as I go through this decision tree. Tiffany in Colorado. Now to help us answer Tiffany's question, we're joined by Shannon Bradley, an authority on auto loans and no stranger to this podcast. Hey, Shannon.

Excited to have you and talk through cars today. All right, Shannon. So this listener has an important question about the timing for car buying. So let's start by broadly discussing how tariffs could impact car prices over the next few years.

Should listeners be letting tariffs influence their car purchasing decisions, especially considering how erratic tariff news has been?

That's what I gathered from her question as well. It does sound like Tiffany is also working through financial priorities because she mentioned contributing to a 401k and also building up her emergency fund. Where does a new car typically fall in order of financial priorities?

Thank you for joining us today. So before we start, I just want to say a couple of things that often get forgotten when we're talking about investing. First, investing usually comes second to some other goals. If you're having a hard time paying for necessities or you don't have an emergency fund, it's really important to focus on those things before we even start worrying about investing.

Second, instead of scrimping, try to increase your income. I didn't start investing until I was in my late 20s. And that's because one, I didn't work at NerdWallet yet. So I literally didn't know anything. And two, I was making around $25,000 a year. So I didn't have much expendable income. And when you don't have extra income, it's really hard to prioritize investing.

And it just might not even be a good idea to do that. When I started making more money, it was suddenly a lot more possible for me to invest for retirement. If it's possible for you and you want to be investing more, look for jobs that will pay you more or look into side hustles. But cutting back on your streaming services probably will not save you enough money for retirement.

And finally, if you don't have the money to invest now, that's totally fine. Some people have serious money anxieties, and others just don't have the cash. Whatever your reason is, don't stress too much about it. Just keep learning, and when you're able to, you can start investing. So why do we invest? What is the point of all this? The answer is that it's because we like money. And that's OK.

There's no shame in admitting it. I like money. Most people like money. It's because money isn't just money. It's not like Scrooge McDuck diving into pools of money and buying Maseratis. It's not that. It's about not being stressed about your money all the time.

And it's about being able to buy everything that you need and some stuff that you want comfortably without having money stress take up all of your energy. Money allows us to thrive instead of just survive. And investing helps you make more money than you could ever possibly make just by working at a job. So OK, what actually is investing? This whole process is very strange.

Investing is the process of money that you already have making additional money for you. And this works through what's called compound interest. Compound interest means that your gains get a little bit bigger every year. And that's also why starting when you're younger gives you a huge advantage and more money in the long run.

So let's, for example, you just start at that little number one in the box up there. Say you buy an investment for $100. If it goes up the average stock market return of 10%, it could then be worth $110, meaning that you've made $10. then that $10 that you earned also starts earning compound interest on top of the $100 you initially invested.

That doesn't sound like much of a profit, but imagine if you were doing it with way larger amounts of money over a way longer period of time. Now, that 10% is an annualized rate, which means that you're not going to get 10% every single year. In all likelihood, some years you're going to finish up, some years you'll finish down.

But over the course of decades, when you average all that out, you tend to get about 10%. The way you actually start investing is through an investing account. And there's a couple of different types. But the type of investment account you have is actually really, really important because a lot of them have some pretty significant tax benefits that you want to take advantage of.

So you've got your 401 s, and these are offered through your employer. You add money to it, and sometimes your employer matches it. So it's basically free money. If you have a 401 , you'll likely choose your investments from a pre-selected list or a fund that will automatically adjust itself over time. This means 401 s are typically very hands-off.

IRAs, on the other hand, are investment accounts that you open up yourself. IRAs can be opened online through brokerages and actually at a lot of large banks, they also do that. So it's likely you can open up an investment account just through your bank. Unlike with a 401k IRAs, you'll have to choose your own investments in those accounts.

You may have heard about a thing called a Roth IRA or a Roth 401k. And it's good if you know the difference. So with a Roth, you pay taxes on your money now, just like any other money that you earn. And then the money you have invested inside that account grows tax-free and you can take it out tax-free in retirement. With a traditional IRA or 401 , the money you contribute today is pre-tax.

So that is, you get to deduct it from your income taxes this year. So it's like a nice little treat this year. But then when you cash it out in retirement, you will owe income taxes on it. This is really, really important. I've seen a lot of people make this mistake. Your investment account is not an investment. So a Roth IRA, a 401 , not an investment.

If you have a Roth IRA, that's great, but that doesn't mean you're actually invested in anything. So you fund your investment account, and then you buy investments from there. But I've heard of people opening a Roth IRA, putting in a bunch of money, and then wondering why it didn't grow over the last 10 years. So you have to purchase investments for your money to actually grow.

And if you don't do it, you'll miss out on all of those years of growth. So very important. And there's a couple of different types of investments that you can choose from once you open and fund your investment account. So you've got stocks. I'm sure everyone's heard of that. These are shares of ownership in companies.

And the way you make money from them is if they go up in value, and some pay you a cut of the company's profits on a regular basis. Then you've got bonds. This is when you loan money to companies or the government, and they pay you interest. Funds, now these are very exciting because they're basically just baskets of stocks and bonds that you buy all at once.

A fund is still a stock or bond based investment, depending on the type of fund that you get. And there's a lot of different kinds, such as like index funds or exchange traded funds and mutual funds, but they're all collections of investments that you buy at one time. And I think funds are pretty awesome because if you own a stock and that company goes out of business, you lose all of your money.

But if you invest in a fund that covers 100 stocks and that same stock goes out of business, your investment is buoyed up by the other 99 companies. So again, all of these investments, stocks, bonds, and funds, you buy them from your investment account, and then you own them in there. So let's talk about the stock market. It's this weird, nebulous term that's kind of hard to understand.

But the stock market is just where people buy and sell investments, but now people just trade investments online. The stock market is made up of several what are called market indexes. Now, these are basically just predetermined lists of companies. And the performance of that overall list can tell us a lot about the health of the US economy.

For example, the S&P 500, something you probably have all heard of, that's just a list of 500 of the largest publicly traded companies in the US. and it includes companies like Apple and Amazon. When we say the stock market is down today, that means that on average, most of those companies aren't doing well.

And you can't invest in the literal stock market, but you can invest in funds that include all the same investments. These are called index funds because they track a market index. Again, if you have an S&P 500 index fund, it should perform pretty closely to how the S&P 500 itself is actually performing. The S&P 500 goes up 10% a year on average and 6.5% after inflation. This is just an average.

So some years, the market goes up more. Some years, it goes down less. But when done well, investing can potentially mean doubling your money every few years for doing basically nothing, which is my favorite way of earning money, by doing nothing. It's great. So let's talk strategy. This is all about the way that you invest, when you put your money in and when you take your money out.

Passive investing is where you buy that S&P 500 index fund and you keep adding money until you retire. It's very boring, but it's effective. It can give you that 10% return on average over the long haul. But a lot of people want to make more than that 10%, and they do so by actively buying and selling stocks, crypto options, and other high-risk investments.

They try to predict when they'll be low, then they buy them, and then they turn around and try to sell them when they're high. These people are called active traders or day traders. So only 20% of active traders make money over a six-month period. That is not a lot of people.

There have been a lot of studies over the years that show that active investing is a way less lucrative fashion than boring old passive investing with that index fund. Plus, active investing is a lot more work. You have to do all kinds of research, and you keep an eye on the markets.

And you can hypothetically earn more by actively trading versus passively earning the same amount as that historical return of 10%. But most people end up making less when they actually try it. That's because people are really bad at predicting things. And in order to make money on the overall stock market over the long term, you have to be really good at predicting things all the time.

So maybe you make it big on one stock, but the odds of that happening again and again are very low. Let's put all of this information together, the accounts, the actual investments, and the strategy. Here's how financial advisors suggest you prioritize your money when you're starting to invest. The first thing you want to do is you're not actually going to invest at all.

The first thing is that you're going to have an emergency fund. This is money that you won't actually put in the stock market. And that's because when your money is invested, its value can change day by day. Say you have $1,000 and you want to use it for an emergency fund, but you invest it.

When you have to fix something on your car suddenly, you go to check your money, and its value could be $600 instead of $1,000. And that's not good. If you put it in a high-yield savings account, you can access that money at any time without risking its value. Plus, right now, the interest rates are really high. So your money could be earning 4% to 5% just by sitting there.

Next, you want to get that 401 match if it's available to you because it's free money. After that, it's a good idea to look into IRAs. Both IRAs and 401ks have what's called a contribution limit, which is just the maximum amount of money you can put in each of them every year. If you're able to max out an IRA, then it's good call to move back to your 401k.

And the reason you switch around like that is because of the way the tax benefit works. It's likely more beneficial to invest in an IRA or over a 401k if you've already gotten your match, if you have to choose between the two. Then if you max out your 401k, you can move to a standard brokerage account.

Confession time. How much debt are you carrying right now? If you don't want to share the details, can you at least confirm it's not trillions of dollars? Well, the U.S. government cannot say that. It's currently more than $36.2 trillion in the hole. And today, we're going to hear how that happened, how serious it is, and what it means to our personal finances.

And when might it make sense to choose one retirement account over another based on the investments available?

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it might not apply to your specific circumstances. This episode was produced by Tess Vigeland. Hillary Georgie helped with editing. Nick Karasimi mixed our audio. And a big thank you to NerdWallet's editors for all their help.

That is not where you want to be. So how did the debt get to $36.2 trillion, Anna?

So who owns the debt and what is the debt made of?

Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. Sean will join us in the later half of this episode where we're answering a listener's question about investing in their 401k accounts and whether it's cool that an insurance company is in charge of managing it.

Can you explain more about the difference between the two?

You just mentioned foreign countries. So which ones does the U.S.

I think it's safe to assume that the national debt will grow, but what do economists' projections show?

Ana, does the government ever pay off its debt?

But first, our weekly money news roundup where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague, Anna Helhofsky, is here to talk about the large financial hole the country is in and what it means for all of us. Hey, Anna. Hey, Elizabeth. We're going to be answering two listener questions today.

Well, I've seen the debt ceiling back into the news lately. Can you explain how it's different from the national debt?

I'm pretty sure we will. Thanks, Anna. You got it, Elizabeth. Up next, Sean is back to help answer a listener's question about whether it's worth contributing to a 401k without an employer match and without a lot of investment options, or if it's better to do a brokerage account on their own. But before we get into that, a reminder, listener, to send us your money questions.

Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com. This episode's money question is coming up in a moment. Stay with us.

To help us answer Vicky's question on this episode of the podcast, we are joined by investing nerd, June Shem. Welcome back to Smart Money, June. Thanks so much for having me again.

And this first one is asking for a bit of an explainer. They wrote, Hi, nerds. Could you attempt to explain how we got into trillions of dollars of national debt? When was the last time we were in a surplus? Who exactly are we in debt to? Thanks. So, Ana, where do we even begin with this subject? It's really hard to wrap my brain around that figure I mentioned earlier, $36.2 trillion.

Vicky says that the insurance company can change the fees at any time without notifying the people who are actually in the plan. And to me, that doesn't sound right. What do you think is going on there? Because it's my understanding that retirement plans have specific disclosure requirements.

But can you think of any drawbacks of investing in a 401k for retirement versus a brokerage account? Yeah, there definitely can be drawbacks.

And on the flip side, what might be some of the benefits of investing in a brokerage account over a 401k account?

How does the government rack up that kind of debt?

So 401k accounts are sometimes critiqued because they may not have as many investment options as something like a self-directed Roth IRA, for instance. But as Sean pointed out, we have over 20 different options in our 401k, which seems like a lot. Is that normal or are we just spoiled at NerdWallet?

I mentioned is really helpful if you find yourself using your card at online retailers. When those retailers have your card info stored, it's even easier to spend and making yourself wait a while before you actually make the purchase can help. And on that note, if you can opt to not save your credit card info on those sites you frequently visit, that can make a big difference too.

If you have to go get your card from the other room every time you want to transact, it forces that slowdown period. And remember when a shopping spree meant contending with other shoppers and finding parking? Well, one reason we did it less often was because it wasn't so easy. So make your credit card transactions just a bit more difficult.

You can also optimize the spending you are doing by choosing the right card. If you're going to use a credit card, make sure the things that you're buying can be paid off with each billing cycle and use a card that offers rewards like cash back.

If you have a very specific financial goal for the year, I'd recommend checking out the content over at NerdWallet. And this isn't just a shameless plug. I do it all the time. That savings calculator you mentioned earlier, I just used it last week to compare some rates that I was getting paid on various savings accounts.

So the content at NerdWallet, I can give you a few of my favorite tips on this podcast. But if you're looking for very specific pointers on a very specific financial goal, you can find it there. My ethos personally for money and more really is to consistently strive to do better, to give myself grace. I'd suggest that as a sort of all-encompassing approach to financially healthy 2025.

So wherever you are on your personal finance journey, make decisions and take steps to do a little better than you did before. Sometimes you'll be able to take big steps and grow, like by opening a CD with your tax refund, for example. But some days, just saving a couple dollars on your grocery bill will be the extent of your progress. And that's okay.

And when you meet setbacks or unexpected expenses, because you will, be nice to yourself and just keep moving.

All right, Sarah. Thanks for having me.

There's always room for improvement, especially when it comes to savings. You can always save more. The top-sided regrets involved saving in 2024, or the lack thereof. 29% of Americans regretted not saving for emergencies, and 27% regretted not saving for financial goals last year.

Some of those regrets I'm going to keep to myself. Probably a wise decision. I did do a lot in 2024. And financially, that included paying off my master's degree and selling a home to move halfway across the country. So there were some big financial milestones, but also room for improvement.

I think there's always some room for improvement when it comes to our finances, even if we don't necessarily have regrets.

Hopefully not a lot. Well, actually, most of us have money regrets for the year. 69% of Americans say they had financial regrets for 2024. And those range from not saving enough to overspending on a variety of categories.

To your point, we're going to do what we can to help that out, but it was the youngest generation that was the most likely to have such regrets. 89% of Gen Z compared with 80% of millennials, 73% of Gen X, and less than half, or 46% of baby boomers had money regrets for 2024, which... If you think about it, it makes some sense.

Baby boomers are at the life stage where they're most likely to be financially secure. And I don't know, there's something about getting older where I just feel like maybe you let go of things that other people would normally regret when they're younger.

And it gets easier. I still have money regrets from 1998 or so. Yeah.

And then having more money as you get older helps too.

Well, you Right. There's always room for improvement, especially when it comes to savings. You can always save more. The top cited regrets involved saving in 2024 or the lack thereof. 29% of Americans regretted not saving for emergencies and 27% regretted not saving for financial goals last year.

It's a labor of love, though, I know.

Overspending was another category that accounted for a large share of regrets. One-fourth of Americans regret overspending on entertainment last year. 14% regretted overspending on travel. 13% overspending on housing costs. So that's you, Sarah. Yep. And 12% regret overspending on an event, like a wedding or a celebration of some kind.

When it comes to the spending, particularly, there are a few different approaches you can try. I think the classic advice for overspending on specific categories is setting a budget limit for that category. Maybe I can spend $100 weekly or biweekly on entertainment. And by biweekly, I mean every two weeks. Another way to approach it is limiting the number of outings.

If your entertainment budget is getting blown because you like to dine out five nights a week, cut it down to three. Or maybe only spend on the problem category on weekends or something like that. The idea with all of these is that you're setting up guidelines and boundaries for yourself.

Right. Well, moving from the rural Midwest back to a fairly urban place in North Carolina, my spending on dining out kind of went out of control for the first few months because I was just in heaven with all of the takeout. And I've had to rein that in and really set those guardrails for myself and limit myself so I don't just go nuts.

Right. I wish we could parse this data by credit score because I am sure there's some perfectionists out there who regret not making it to 850 from 825, which, by the way, is still very, very good. We know that 21% of Americans, so about one in five, regret not improving their credit in 2024.

I think the best advice or the best way to boil down advice about maintaining your credit or improving it is just being consistent. Consistently making your payments on time every month and consistently keeping your credit utilization low. Improving your credit can take time, but if you can apply that consistency, you're taking the right steps.

When it comes to credit utilization, there's really no hard and fast rule, but using no more than 30% of your available credit is a good level to aim for and less is even better.

You're absolutely right. We had a very similar discussion last year and the hype around New Year's resolutions is real. And I agree that they are way overrated. You know, I'm sure there are people who have great success with this annual approach to goal setting, but I'm with you, Sarah. I'd rather make lifestyle changes or goals throughout the year without all the fanfare.

Hey, I'm here for daily goals too.

Yes, I think that the annual approach is very all or nothing. And it's easier to give up when you screw up a little bit. But I like that weekly approach because you can just pick it back up next week.

Well, this is kind of related to what you were saying earlier about automating credit card payments. You know, one thing that's really worked for me personally is automating transfers into my savings account. So twice a month, immediately after payday, a transfer goes from my checking account into a savings account. Automating that even a little bit makes it so much easier.

You just don't even have to think about it. You don't have to remember. But if you're like, well, okay, but how do I find the money to save? You might try swapping out one thing that you're spending money on monthly and directing that money into your savings instead.

Maybe that's a streaming account that you signed up for and forgot about or are no longer watching your favorite show on or a subscription box that has lost its novelty. You know, cancel that and direct the $20 or $60 or whatever it is into your savings every month instead.

Spending wisely is spending with some thought, right, and attention. Slowing down and being mindful of your actions is really where you can make a difference.

Whether you filled your cart at an online retailer and enforce a holding period before you hit that checkout button, or if you're just more strategic and thoughtful about your shopping trips ahead of time, the more you can think about your spending, the more you can make those small changes that add up over time.

Sean, I know you're headed to the UK soon, and as a London girl, it would be wrong for me not to give you recommendations. So here are some must-see spots. You must go to Kew Gardens because you're a gardener's shortage for a bohemian hipster vibe. You gotta go to Camden for top-tier markets, cafes, and coffee shops. South Back Center for an artsy, eclectic experience.

So now that we've discussed down payments and closing costs, Abby, how can we actually fund buying this home? What are the options?

In that case, do you think it's worth people waiting, maybe if they have a lower credit score, waiting and improving their credit score before trying to apply for financing?

All right, so the listener also wanted to know about borrowing from your 401k to buy a house. So what are your thoughts on that?

Down payment assistance. That is something I am not a homeowner like you two, but there was a time during the pandemic when I was looking into buying a home and I did look at the down payment assistance programs. So can you break those down for us, Abby? What is it and how does it work?

That's a lot. So we know that there's more debt, and when prices rise for goods, homes, services, et cetera, then debt continues to rise. The higher the debt, the more difficult it is to repay. What are you seeing with payments?

Abby, when I was researching all of these options, one thing that I felt was overwhelmed because there were so many options and so much information. Do you have any tips for how people can maybe start the process without feeling overwhelmed of researching?

I'm with you on that. You guys know I love a Facebook group. The Facebook groups that I've poked around in as well, lots of people express regret over not realizing how expensive it was going to be to own a home. So I second that in terms of doing the class. And I think this is a good segue into the rent versus buy question that the listener had. So what are your thoughts on that, Sean?

What are your thoughts on renting versus buying?

I prefer the idea of renting during this phase of my life. And I am focused on maximizing my retirement savings. So all the things you guys said, it just reaffirms my decision right now to not want to own a home. I love calling up my landlord. The other day, actually, my water heater broke and I was without hot water for, I don't know, maybe a week or two.

But the point is, I didn't have to replace that. And I know that was expensive. So my landlord was in charge of that.

Oh, my God. How did you know? That was one of the things, too, because I was like, I might not like Texas and I might need to move and I don't want to be stuck with a house. So that was part of my reasoning, too.

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Hilary Georgie and Anna Helhosky. Hilary also helps with editing. Nick Karistamy mixed our audio.

And a big thank you to NerdWallet's editors for all their help.

And then you have to see the London Eye because you're a tourist and why not? And of course you have to take a pic in front of Buckingham Palace or the trip never happened.

Did the report detail any of the reasons why late payments are increasing?

And now you're indebted to me and have to bring me back a key chain and Kit Kats because I gave you those excellent tips.

What is going on there?

Now for some advice. Sean, have you got that CFP hat at the ready?

So we know that delinquencies are rising. What are some of the potential consequences of delinquencies?

When someone starts falling behind on payments, what should they do first?

Is it ever a good idea to use savings or retirement accounts to catch up on debt payments?

Whenever people are in a tricky spot with their finances, they may get desperate, and that's when predatory lending and scammers seem to appear. Any advice for spotting the warning signs for those?

And I'm Elizabeth Iola.

Thanks for that, Sean.

Up next, we answer a listener's question about home buying considerations. But before we get into that, a reminder, listener, to send us your money questions. Do you want to know how to diversify your stock portfolio? Have you been wondering about how to budget effectively to reach a new financial goal? Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD.

Or email us at podcast at nerdwallet.com.

To help us answer Nikki's question on this episode of the podcast, we are joined by mortgage nerd, Abby Badak-Doyle.

We're always keeping an eye on economic indicators, and there's been a pattern lately that's not looking too good. Recent data shows that debt delinquencies are trending upwards.

Abby, so I have a question for you. I am in a mom's group and I see a lot of people asking questions about how they can get into buying a home, even though they're on an extremely tight budget. So some people say they're barely making ends meet, but they're still looking for a way to buy a house. So what would your kind of thoughts be on that?

And what about people who are worried about PMI? Because I hear that all the time as well, that, well, if you don't put 20%, you're going to have to pay that PMI. Is that a myth to you?

Of the business owners who are making it, shout out to y'all, the average makes under $100,000 a year. Owning a business also doesn't automatically mean that your business is going to be worth millions either.

Now, while it may be true that you're unlikely to become wealthy just by earning income from a 9 to 5, the part that people miss is that if you consistently invest that income in, let's say, stocks, bonds, mutual funds, and low-cost index funds, you can become wealthy in a couple of decades.

I want to say congratulations for having that extra money in your budget because I am also a mother and my son is seven. And when he stopped going to daycare, I could have thrown a party for that. So I'm glad you guys have that extra income. So based on all of your priorities now, which one of the ones that you mentioned would you save

best aligns with one, your long-term financial goals and also what feels the most pressing?

And if you don't mind me asking, how much do you guys have in your emergency savings at the moment?

Pressure. Most people who become millionaires in the U.S. do so by contributing to a retirement account consistently over time. I also am going to say an analysis by 401k provider Fidelity Investments found that in Q3 of 2024, 544,000 of the 24 million participant accounts in the 401k plans had balances over a million dollars. Case in point, you can become a millionaire working a nine to five.

I like that you said you feel like you're on track for your retirement savings. So what makes you feel like you're on track? What are your goals? And how are you kind of measuring your progress?

I guess to answer your question about what you should prioritize, obviously only you guys know that, but I will say that some general options in terms of financial priorities that we usually share at NerdWallet is first of all, like Sean said, ensuring that you have a sufficient emergency fund. Then it would be paying down high interest debt, which it doesn't sound like you guys have much of.

The next thing would be saving for retirement and you're already doing that and you seem to be on track. And then you could consider putting money into college funds first. for your kids, which you guys said was one of your priorities too. You can try to achieve multiple financial goals at the same time.

I think sometimes people get hung up on having to do one thing at a time, which is fine if that's what you want to do. But it is possible to allocate some of that extra income that you now have to saving for retirement and also allocate some to a college fund for your kids and also save some towards your house renovation. So it doesn't have to be one or the other.

Well, I'm going to jump in here because I love talking about FIRE, but I know that's not the exact topic, but it makes me think of Coast FIRE. For anyone who's not familiar with FIRE, it's, you know, financial independence, retire early. But essentially with Coast FIRE, you save aggressively and then you do get to a point where your investments can grow enough to cover your retirement needs.

And it allows you to, like the word says, coast to retirement without having to save so aggressively. So to answer your question, it doesn't mean that you necessarily stop saving, but maybe you don't have to front load as much as you are. And for a little personal anecdote, I can relate with you guys because I started saving for retirement late and I was obsessing over not having enough as well.

As someone who is a small business owner and a 9 to 5-er, I want to say that there are benefits of doing both simultaneously. If you want to increase your cash flow, you can save and invest more money by doing both. And I was able to hit some of my savings goals quicker as a late bloomer to investing because I had extra cash to max out my 401ks and contribute to a SEP IRA.

So I was working, taking on all these side hustles in order to put as much as I could into retirement savings. But at a point, I started forgetting that because my number, I don't know, was around like, oh, I need $2 million or something to retire how I would like to. And I started to think, oh, my God, I need to save $2 million. But I forgot that compound interest is working for me.

So after some time, that's going to kick in and it's going to help my money to grow. So all that to say, I think, as Sean said, maybe sitting down with a CFP and having maybe a more clear number of where you're trying to go within the different scenarios can help. And just also letting the stock market do what it does and hopefully let your money grow over time can be really helpful.

So and then also maybe exploring some of the anxiety that you're having around the uncertainty, because I realized that was a big issue for me as well. Four, in some ways, was maybe not so much about the amount of money I had, but more about the fears I had about not having enough money that was driving me to over-worry about it.

But so important, so important. I used to be so afraid of retirement. And even I took me so long to start saving because I was scared to do that daydreaming because I thought it was going to make me realize how far behind I was. But it actually was such a motivator because I got to think about what I want my life post-retirement to look like.

So I would totally say even you guys doing that together on one of your dates where you have like your goal sharing or talking about money to just sit down and allow yourself to daydream.

And even doing that maybe before a meeting could help you bring more to the meeting with the financial planner about what exactly you want that retirement to look like so they can help you with the numbers element of things as well.

I do. Thank you so much for being so gracious, Sean. Okay, okay, okay. But before I bow out, I am going to add that owning a business is not for everyone. So sometimes it's better to take that time and those resources and pour them into lobbying for a raise or developing high demand skills and making yourself more valuable in the job market.

And here's our brief disclaimer. We are not financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland. Hilary Georgie helped with editing. Nick Karasimi mixed our audio. And a big thank you to NerdWallet's editors for all the help.

That extra money you make can be put into smart investments that help you grow your wealth without having to become a boss.

Oh, thank you for letting me, even though it felt like I was talking on fast forward. Thank you.

All right, Sean, it's your turn. I hope you take a deep breath because you have 100 seconds. All right?

And three, two, one, go.

50 seconds.

And I'm Elizabeth Ayola. This episode, we talk with a married couple about how they manage their finances together. even when they don't agree on what they want to do with their money.

But because I'm going to give you, I want you to finish, so go ahead. Tell us.

Okay.

Yes, but it was all good. So I love this argument, Sean.

As a balanced human and one who has both a Roth 401k and a Roth IRA, I have to agree, kind of. So I do agree that the Roth IRA limit isn't alluring enough for the rich auntie lifestyle that I hope to live during retirement and that the higher Roth 401k limit is more incentivizing.

But that said, I feel like you're overlooking a huge part of the argument, which is that Roth 401ks can be limited when it comes to your investment options. So with a Roth 401k, you're at the mercy of plan administrators when it comes to your investment options. And that might comprise mutual funds, typically a target date fund, and they usually have set expense ratios.

However, with a Roth IRA, you can shop around and that can save you money long term and take your retirement savings further.

I will take that rebuttal. But let's not forget that everyone doesn't have access to a 401k. So for those who don't, a Roth IRA may be as close to tax-free withdrawals that they'll get, even if it is overrated, Sean.

It might be. And because I just have to get the last word in, I'm also going to say, as an aspiring FIRE participant, Roth IRAs can be superior for people who retire early and want to take penalty-free money out of their account to live their best lives.

Fine, you win.

We're about to get into this episode's money question segment, where we hear from a married couple about how they manage their money together and work through tough money conversations.

Maybe you're having a hard time keeping track of your money and are wondering which budgeting method might be right for you. Or you just got hit with a big car repair bill and are wondering if putting it on the credit card is such a bad idea. Whatever your money question, we nerds are here to help. Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD.

I think that's my default, Sean. As a recovering oversharer, I am well-versed in realness.

Alrighty, let's get to this episode's money question segment. That's coming up next, but you got to stay with us. We're back and we are answering your money questions to help you make smarter financial decisions, hopefully. In this episode, we're joined by Naomi and her husband, Andrew, who have some questions for us about how to prioritize the new breathing room they have in their budget.

I love that you guys are on the same page because as Sean said, that can be difficult for some couples. So are there any areas where you maybe disagree or you don't necessarily align when it comes to how to spend money? I know you mentioned short-term goals. So maybe can you expand on that a bit more?

I stay ready, Sean.

So owning a business isn't the only way to build wealth. It grates my nerves when I see social media influencers or business owners tout this idea. I mean, that isn't the only way to become a millionaire. All right. So first of all, about one in four businesses fail within the first year. And I'm not saying this to be a negative, Nicole, or discourage people from starting a business.

I love that. I want to circle back to this idea of you guys maybe disagreeing a bit around your short-term goals, and especially because you mentioned debt being maybe the main driver for that. And you also mentioned a very good point, which is sometimes there is what is called in the financial world, good debt and bad debt. So what are you guys' ideas of what good and bad debt are?

So if we can see if we can get you to reframe and maybe align in that regard.

So Sean, do you want to maybe first go into what good debt and bad debt is, especially within their context?

I have a bunch of seedlings growing in my greenhouse right now. Tomatoes, hot peppers, herbs, some annual flowers. I always feel so invigorated by spring and I just love to spend all of my free time in the garden this time of year.

You know, my budget has been holding pretty steady so far this year, but it is about to go through some big changes. I recently paid off my car, which I'm very excited about. That frees up a few hundred bucks each month, and I'm about to start renting out my house in Washington and splitting the cost of my partner's mortgage in Portland, so we're both about to be spending less on housing.

Is that for domestic only?

But it's important to know, too, if you're planning on doing international travel, neither would port abroad. Correct, Barbara?

Kay, that makes me wonder about your retirement in general. When you talk with your partner about your retirement, what comes to mind? What do you discuss for potential plans?

Mm-hmm.

Between those shifts, I'm planning to evaluate how I can make the most of this money each month Day to day, though, my spending hasn't changed a lot. I'm mostly still trying to reduce my discretionary spending amid the economic uncertainty we've been seeing. What about you, Elizabeth?

I mentioned that because at this stage where you are, it can be really helpful to dream a little bit and talk deeply about what you think is realistic so that you can begin to map out what extra expenses you might have in your retirement. Because you will probably have some expenses that will go down.

Like you mentioned, you're getting close to paying off your mortgage, but you may have to pay for additional health care. You may have to pay for travel. And all those things are important to talk through and make a plan for.

Yeah. Barbara, how do you approach that with clients? What do you think Kay should be considering here?

Thank you.

Right. Barbara, I want to circle back to one of Kay's first questions, which was when it's okay to pull back and if it is. What are your thoughts, based on what you've heard so far from Kay, around whether Kay might be in a place to do this or just in general, whether it's best just to keep save, save, saving away?

So what exactly was hiding in those cobwebs? And did you learn anything insightful by cleaning them up?

So really digging into the numbers then.

Got it. Okay, I know we've run through a lot of information over the past 20, 30 minutes or so. How are you feeling at the moment? And what do you think your next steps might be?

And Barbara, do you have any final thoughts for Kay or anyone else listening that is planning their own retirement savings?

Well, Barbara, Kay, thank you both so much for joining me on this segment of Smart Planning.

And remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. You can follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. Here's our brief disclaimer.

We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. This episode was produced by Hillary Georgie, who also helped with editing, Nick Karisamy mixed our audio, and a big thank you to NerdWallet's editors for all their help.

And with that said, until next time, turn to the nerds.

You know, I'm always curious about how people manage their money and their budget on a really tactical level. So what tools do you use to manage your budget?

I'm pretty similar. I use a piece of budgeting software that gives me a granular view of my spending and saving and investing, but I don't check it every day because I also do the pay myself first method. I have my savings and bill payments largely automated so I know that I have my finances covered without much day-to-day maintenance.

For people out there who are looking for budgeting tools, we have an article full of options, and you could also test our NerdWallet app. We'll put links in the episode description for both. Moving along, a spring cleaning item that comes to mind is refreshing financial goals.

Some people may be totally amped to set new financial goals around the beginning of the year, but others may need a few months to get into the swing of things, and that's totally okay. Spring can be a good time to set goals, as symbolically it's a time of newness and growth, The seasons start shifting, nature awakens, plants begin blooming. Can you tell I'm a gardener? I can tell, Sean.

Well, anyway, spring is a great time to set or revisit your financial goals. Check in with the progress that you've made on your goals so far this year. We are somehow over a quarter of the way through 2025. So if you had a goal of regularly contributing to a Roth IRA and maxing it out, are you approximately $1,750 of the way to that goal?

If you haven't been able to make as much progress as you would like towards your goals, ask yourself whether they are still attainable or if you might need to pivot, and if they still align with your values and long-term vision. Some people may be rethinking their goals or pivoting due to all of the economic uncertainty happening right now,

Maybe you were planning to take a big vacation later this year, but now you're pulling back to focus on saving, for instance. Or maybe you're moving up your timeline to buy a car. So, Elizabeth, where do you stand with your financial goals for the year?

See, this is why we get along. I'm also focused on the long-term strategy when it comes to my investing. Things might be scary now, but this is the price of investing. And I still have many years until I need the money in my brokerage account or 401k. So I'm keeping my regular monthly contributions going. My big goal this year is funding my wedding and honeymoon.

Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.

So I'm going to be allocating an even greater percentage of my direct deposits into my wedding fund now that I'm about six months from the big day.

Sometimes fear of death is a good motivator, Elizabeth. It is. And I know estate planning has many moving parts, but you can start by ensuring that your documents are up to date, assuming you have them. That includes your will, powers of attorney, advanced directives, or trust documents.

As a quick refresher for those who haven't done any estate planning yet, it doesn't have to cost a lot of money. Our nerds have put together an estate planning checklist that we'll link to in the episode description. And there are online platforms like Rocket Lawyer that offer templates that you can fill out, print, and get notarized if needed.

If you have a complicated estate, you can hire a professional, and that could cost anywhere from hundreds to thousands of dollars.

I do have an estate plan, but I'm due to revisit it. I haven't looked over my will in a few years. And since then, my financial situation has evolved. And as I mentioned before, I'm getting married later this year. So now is a good time to make sure that the plans I have set in place are still what I want.

And setting up your beneficiaries is shockingly easy. You can do it just by logging into your accounts in a matter of minutes. No need to get an attorney involved at all. Estate planning aside, reviewing your insurance policies is another smart spring move and something that can help protect your finances. Do you have adequate life insurance coverage, especially if you've got kids?

Maybe you recently started a family and haven't gotten around to getting life or disability insurance. Auto insurance and homeowner insurance are other types of insurance you might want to review, too. Costs have been going up, so shopping around is your best bet to save money.

Same, but in the meantime, I might sneak off to the garden to see how my seedlings are doing.

But before we get to that, listener, I've got a question for you. What's your money question? That financial thing that keeps you up at night or that goal you just can't seem to make progress on?

To start off the episode, though, we're going to chat a bit about spring cleaning your finances. But first, we want to acknowledge the news has been pretty wild lately, especially around trade policies and the economy. We designed this segment to be helpful no matter what's happening.

And a reminder that one of our goals on Smart Money this year is to talk with more of you live on the podcast to help you with your money questions. So if you want to hang with Elizabeth and me and get a bit of nerdy wisdom, let us know. One more time, leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD.

All right, let's get to our new segment, Smart Planning, coming up next. Stay with us. Many of our listeners are looking for professional advice on elevating their wealth. So we invited another financial expert onto the show to take a deeper dive into listeners' financial questions and provide smart strategies for building and leveraging their money. Welcome to Smart Planning. Let's begin.

This episode, we're talking with Kay, a listener with some questions about how to gift savings bonds and how to prepare for retirement. Kay, welcome to this segment of Smart Planning.

To answer Kay's questions, I'm joined by Barbara Ginty, a certified financial planner professional and host of the Future Rich podcast. Welcome to Smart Money, Barbara.

So Kay, to start, I would love to hear about how you feel about your finances. If you could describe your financial situation in one word, what would it be and why?

That is great to hear. Why do you feel that way?

That does sound very stable to me. Can you go a little bit more in depth into your financial life generally? Where do you think you might still have some room for improvement, even though things feel stable and pretty good overall?

But if something big breaks between the time we record this and when you're listening, remember you can check out our Thursday episodes or the NerdWallet News Hub for the latest updates and to see how it affects your finances. Copy that, Sean. It's time to get your financial house in order. Deep clean that budget and get the dust off of those goals.

So you wrote into us with a question about gifting savings bonds. Tell us about that.

I am wondering about something that no one really wants to talk about, which is taxes. Barbara, would Kay or the nephew be on the hook for any taxes when this gift is given?

And where might the taxes arise?

Well, Kay, any other questions around these savings bonds? I know you had just a pretty tactical question there. So I think that we've covered most of it. But yeah, what are you thinking right now?

Personally, I love a good spring check-in with my finances. My summers tend to be so busy that I like to use this time to make sure that I'm on track with my financial goals. and find a place or two to make some adjustments. So, Elizabeth, where do you think folks should start?

Well, I want to shift gears a little bit and talk about some of your retirement questions, Kay. You mentioned a little bit about this earlier, but give us a picture of how you've been saving for retirement and where you think you might need some guidance.

And Elizabeth.

And if you want to send us your question, you can send it to us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. If email is your preference, you can also pop us an email at podcast at nerdwallet.com.

We're back in a moment with more questions and answers. Stay with us.

We do. So while you guys are eating barbecue, if that's your thing and having fun with family, enjoy this episode.

Sean, you're a homeowner. When you bought your house, how did you make sure you got the best deal on your mortgage?

Kate, where does the idea of a 20% down payment even come from? And I imagine that sounds intimidating to me, especially with home prices these days. That might be tough to do in this economy for some people. It is tough to do because 20% of a home price is

That's a fair point, Kate, considering how costly home maintenance can be. That leads me back to the listener's question around budgeting for a home. How can people determine how much house they can afford? Well, an affordability calculator is a great step.

Now, listeners, I have used that calculator and I must say it was pretty handy. So once people have used the calculator and have the numbers in front of them, how can they decide whether to make a larger or smaller payment if they're on the fence?

So Kate, aside from a down payment, aren't there other costs first-time homebuyers need to budget for? Oh my goodness, there certainly are.

So that definitely sounds like a lot more than just a down payment for sure. And I'm so glad that you mapped that out so that listeners can budget for all those other costs. I also wonder about other expenses that are easy to overlook, like moving, for example. I personally moved last summer, but it definitely was a major cost.

Very, very smart. So Kate, what if the listener checks their budget and they realize they do not have much to put towards saving for a down payment? Now with rising inflation and higher mortgage rates, some people might feel home ownership is just out of reach.

And let me tell you, I love free money. So that is a good plug. Right. All right. So the listener also wants to know what the upper limit on their monthly post-tax income that they're paying should be. What answers do you have for them?

So some potential homebuyers, Kate, may have entered 2025 excited about the prospect of buying a house since inflation was, I'm going to highlight was, trending downwards. And we seem to be reaching the light at the end of the tunnel. With things changing a little, should homebuyers be discouraged with current trends we're seeing?

Should they be trying to buy now in case the market potentially gets worse?

Kate said it best, guys. No need to panic buy. So what else should people know about home buying in 2025? This is a crystal ball for everybody.

I hope this is some sort of silver-ish lining for prospective homebuyers. Before we wrap up, we have a surprise listener question.

Hey, Sean, we've been focusing on how to buy in 2025, but what tips do you have for us on selling, Kate, so we can answer Sean's question?

That sounds like an ideal situation and a great example of good customer service equating to repeat business. Now, what about commissions if you choose to use an agent?

Well, that's definitely on brand for you, Sean. And I'm glad that you did your due diligence.

So I once did work with a broker when I was looking at homes, and I found that I spent quite a lot of time communicating with them and spending time with them. So with that said, what are some things that people should look out for when they are choosing a broker?

And I'm Elizabeth Ayola. On this episode, I talk with mortgage nerd, Kate Wood, to answer a listener's question about how much house they can afford as a first-time buyer.

I also wanted to know about the actual broker. So what qualities and characteristics should I be looking for when I'm choosing a broker to work with?

That's helpful.

And when someone is presented with the loan options from a broker, how can they ensure that the loans they're seeing are the best ones out there? Because a broker may not show you loan options from every lender available, right?

So I think a lot of folks might not fully understand the role of a mortgage broker. Can you explain what a broker does and also how they fit into the home buying process as a whole?

I certainly feel more empowered as someone who is not a homeowner yet. And I'm sure a lot of the listeners do as well. With that said, for listeners who want to learn more about finding a mortgage broker, we're going to link to an article all about that in the show notes.

All righty. We're about to do a timely pivot to a listener's question on how to budget for home and mortgages. Writer Kate Wood is going to help us answer that.

Maybe you're feeling a little lost, like you don't even know what your financial goals should be, or you're trying to break yourself out of a bad financial habit, but just can't seem to do it. Whatever your money question, we nerds are here to help. Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD.

Let's get to this episode's money question segment where we take on one of your questions about how to budget for a down payment on a house and a mortgage payment. That's up next. Stay with us. We're back and we are answering your money questions to help you make smarter financial decisions. This episode's question comes from a listener's email and is about home buying. Here it is.

Hi, NerdWallet team. First time home buyer here. How do we best budget for a down payment and mortgage? And what should be the upper limit on our monthly post-tax income that we are paying? Now, to help us answer this listener's question on this episode of the podcast, we are joined by NerdWallet Mortgage's writer, Kate Wood. Welcome back to Smart Money, Kate. Thank you so much for having me.

All right. So the listener has a two-part question. Let's tackle the first half to begin with. They want to know how best to budget for a down payment. Now, I'd be curious to hear what your thoughts are, Kate, especially with how much the housing market has changed over the past few years. Sure.

When you mention a larger down payment, it takes me back to the pandemic times when I was considering purchasing a property and it was a seller's market. I remember larger down payments being a theme and a tip shared by realtors that I work with at the time. Would you recommend people aim to save 20% down payments?

And I'm Elizabeth Iola. On this episode, we answer a listener's question about what kind of returns they can expect from their investments.

But before we get into that, we're at that special part of the show, the moment where we ask you to take a minute and think about where you need some nerdy guidance with your money.

And a reminder that one of our goals on Smart Money this year is to talk with more of you live on the podcast to help you with your money questions. Yes, we want to hear your voice. So if you want to hang with Sean and me for a bit and get some nerdy wisdom, let us know. One more time, leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD.

We are back and we're answering your money questions to help you make smarter financial decisions. This episode's question comes from Mary, who wrote us an email. They wrote, Hi, I have a question about investing. About six years ago, I made my first attempt at the stock market without fully understanding what I was doing and definitely without the benefit of your podcast.

At the time, I opened two accounts with Wells Fargo, a Welsh trade account and a Welsh trade IRA. Currently, I have about $6,000 in the IRA, which is separate from my work 401k, and around $3,000 in the Welsh trade account. I honestly have no idea what's going on with my Welsh trade account since I initially invested.

It's in a mutual fund, and the $1,000 I contributed back in 2018 has only grown to about $2,000. Is that a decent return? And if not, is there a way to move these funds into a better account or investment strategy? Thanks again, Mary.

So let's first talk about what kind of growth is realistic to expect from an investment. Now, in general, what kinds of expectations can or should people have about their investments, Sam?

I'm so excited to be in the co-hosting seat and listeners. My hope is that you aren't throwing virtual tomatoes at me. I plan to give it my best. I love talking about money and it's an honor to help people navigate their financial decisions.