Our listeners send in some great questions, and today we are going to tackle five of them. We answer five questions about down payments, debts, IRAs, 401k fees, and investing during a chaotic period in the stock market. You asked, and we answered your five questions!

 Question One

 Hey Guys- My fiance and I are getting married next month, and we are trying to get our finances in order as we plan to buy a house. We are looking for something in the $300K range in about two years and will have minimal savings following the wedding. However, we also have about $100K in student loans, with varying interest rates from 4.5% up to 7.6%.

 With proper budgeting, we think we can save about $70K over those two years. Would it be better for us to save all of it for a 20% down payment and closing costs? Or should we use the first $30K to pay down the highest rate student loans and use the other $40K for a 10% down payment and closing costs, knowing that we will have a higher interest rate, PMI, etc.?

 The first thing you need to do is consolidate your debt and refinance any student loans you might have. Lowering your rates and monthly payments will help you make ground quicker. If you go with a variable loan that extra percent off your interest rate will help you gain 2-3 years of progress.

Don’t overextend yourself. Rent until your loans are paid off before you even start thinking about buying a home. Your debt will factor into getting your mortgage loan. As for a smaller down payment, without 20% down you will basically throw money away with PMI.

Question Two

Hey guys- I’m currently trying to save for a house with my partner, and while she has a substantial amount for a deposit, I have near to nothing. We really want to buy something in the next year and a half. I might mention too that I have a bit of credit card debt….($8000)  I earn abut 1400 a fortnight. I know it might be a broad question but what do you suggest I do to be able to get on top of everything? Do you think it is smart to take out a loan to consolidate the credit card debt?

The short answer is yes. Take out a loan to consolidate your debt. The interest rate will be so much better than the credit card interest you are paying. There are many companies that can make the process painless like Sofi, Lending Club and Prosper just to name a few.

If you plan on taking out a loan remember that there is a loan origination fee that will be a percentage of the loan amount. It will be different between companies. Do the math and be sure the fee is worth the amount you will be saving in the long run.

Question Three

Hi- A little background on myself… I am 25 years old with my career being in Chicago, IL. I am working to get to the point where I am saving 15% regularly through 401K, the match, and Betterment IRA. However, you all talk a lot about retiring earlier than the old school 60 years old and such, which sounds amazing. Ha.

My question is: With the goal of continuing to add more money into my accounts as my salary increases and retiring as early as possible, is it better to invest my money into a Betterment Roth IRA or Betterment General Investment Account?

Pros? Cons? Thoughts? Suggestions?

If you are planning to retire early,

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What features do novice and experienced investors get from Wealthfront? How does Wealthfront stack up against the other Robo-Advisors and what sets them apart? We’ll be answering these questions and more in our Wealthfront Review.

 Luckily (or skillfully) we got an interview with the Wealthfront CEO Adam Nash. After doing our research, chatting with him for nearly two hours and then doing a metric ton more research we’ve got a pretty good idea of where they stand in the Robo-Advisor space. Wealthfront has more than earned their spot at the table.

Remember the epic rap battles with the East Side vs the West Side? Sharks vs Jets? In the Robo-Advisor space that’s Wealthfront vs Betterment. Wealthfront is a San Francisco startup with a boatload of funding and Betterment is an NYC startup with an equally large boat filled will funding.

If you’re on the east cost you probably know more about Betterment, if you’re on the west cost, the same is probably true for Wealthfront. We’re based out of NYC (ok, fine, Hoboken) so you’ve heard us talk more about Betterment. Now it’s time for you to learn about what’s been happening on the other side of the country.

Robo-Advisor’s are competing for my money?

If you’re as excited as I am that there is another serious competitor on the scene, this review is for you. In this review we’re going to break down the good and the bad sides of Wealthfront as well as suggest where it might be able to fit into your portfolio. Hint: It might have something to do with the free part.

A Quick Look

Wealthfront’s pricing and feature set is very straight forward.

* Everything below $15,000 (for LMM fans) is managed for free. Ideal for the beginning investor.

* Minimum balance is $500. Instead of charging a rather high percentage fee for beginning investors, they set the low bar at $500 and once you’re in it’s free as per point #1.

* Tax Loss Harvesting for everyone. Not only will they capture your losses to offset taxes on your gains, everyone has the potential to benefit here. Even the $500 investor.

* Advanced features for accounts above $100,000. With features like Direct Indexing you stand to make quite a lot more through economies of scale than you would below that price threshold.

* Portfolio Review is the optimization tool you’ve been dreaming of. Want to avoid some capital gains on your existing investments while slickly transferring that money over to Wealthfront for better management/diversification? That’s what Portfolio Review is – more on that later.

* Path – Financial Planning Experience. Path connects to all of your outside bank and brokerage accounts to give you an accurate and real-time view of your finances. Their PhDs handled complex calculations on the backend to show you how saving and spending impacts what you will have in retirement.

* Wealthfront’s Portfolio Line of Credit. Portfolio Line of Credit is available for any Wealthfront client with an Individual or Joint Wealthfront account valued at $100,000 or more. You can request cash up to 30% of the current value of your Wealthfront account and they you’ll receive it as quickly as 1 business day.

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We all need and use money nearly every day of our lives but do you know where it comes from? Today the guys cover payment history, the creation of money and how it affects our economy.

 The IOU Economy

 You can’t talk about the creation of money without first talking debt. As most of us might think, money was created to make paying for things easier, but that is not the case according to the book Debt by David Graber. The exchanging of goods was always based on debts from the beginning.

Let’s say a caveman needed some berries. He wouldn’t go to his neighbor with two goats and try and trade for five bags of berries. Instead, they would give two goats expecting the other person to repay them at a later time. Their economy was not quantified by money but debts to each other. Think about it as using ious like a currency.

The use of money came about during war, and new empires were being created. There needed to be a way for soldiers to buy the things they needed in other lands without owing a debt.

A Brief History Of  The U.S. Monetary System

In the United States, dollars used to be backed by some amount of silver or gold, but now money is not supported by anything except faith.

Let’s start with the Panic of 1907, a financial crisis that took place when the New York Stock Exchange fell almost 50%. In the course of the three-week period market collapsed, stock prices tanked, and there was a massive run on the banks.

The Treasury provided over $30 million in aid to the situation, and with the help of J.P. Morgan and others worked to channel money from healthy banks to weaker ones bring confidence back to the financial market.

The aftermath of the Panic prompted the created of the Owen-Glass Federal Reserve Act in 1913. You guessed it; the Federal Reserve System was created. The Fed is NOT government owned but a federally sponsored banking cartel. It’s stock is held by member banks, and it’s licensed to lend money into existence.

At this point, we were still backing out money with gold, but one disadvantage of a gold standard is that the size and health of a country’s economy are dependent upon its supply of gold, not the resourcefulness of its people and businesses.

So, in 1933 Roosevelt takes US citizens off the gold supply. The Fed seizes all the gold, and exchanges are for 11 billion dollars in currency out of thin air. Yes, it’s like magic.

After the wars, U.S. keeps increasing dollars to gold ounce ratio until Nixon closes the gold window in 1971, which removes the monetary system’s last physical limit. All global money is unbacked. Now nothing requires U.S. Dollar to remain the reserve currency, and anything does not back it.

How Money Is Created

It is pretty simple. The Fed creates money out of thin air in exchanged for government debt (bonds and notes). Let’s say Company X is asking the Fed for ten million dollars. All the Fed has to do is add a booking entry and POOF! A check is written out to the company, and the Fed get a bond.

Only 3% of our currency is paper money and coins. The rest is all just bookkeeping. The U.S uses this debt-based money system so when money (debt) is created interest needs to be paid. To pay this interest, the money supply has to keep being expanding to perpetuate the modern banking system.

At a minimum, each year, enough new money must be loaned into existence to cover the interest payments on the previous years. Each and every year, it must grow by some percentage. By design, it’s exponential,

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Everyone wants to make money, it’s usually what turns people on to personal finance. Today we’re going to teach you how to make more money in the sharing economy – on your own terms.

 Uber brought this concept mainstream and as a result, it’s sometimes called the Uber Economy.

 The idea at its core is that there is slack in our economy – resources that are not being utilized. Your car parked in the garage. Your brother’s carpentry skills. The free time of a math honors student.

 The goal of the sharing economy is to monetize this slack and provide income to those who would have otherwise been beholden to a 9-5 schedule and boss. Now, you can get paid for work and pick some people up during you drive home to make a few extra bucks.

 The best part about these sharing economy jobs is that often money doesn’t directly change hands. It’s all handled digitally which allows for you to focus on your task at hand and for your clients to focus on the work you’ve completed.

 Uber is just the most discussed service in this new economy. With it, you can get in your car, turn on the app and wait for taxi requests to come in. If you’re ready, you accept someone’s request and you’re off. It’s also important to know the difference between Uber, and its biggest competitor, Lyft.

Laura and I have used AirBNB very often when we go on vacation. We’d rather stay in a local neighborhood and get the feel of where we’re visiting than the impersonal feel of a hotel. It’s pretty awesome because you can get a big place with keys to enter and leave as you please for a fraction of the cost of a hotel.

The only thing you have to give up is having a stranger enter your room while you’re not there to fluff your pillows. I always found that a bit creepy so we’re happy to pay less for that not to happen.

There is also a lot of money to be made renting your home out on AirBNB. If you’re going to be away on vacation or a business trip you should absolutely make some money on your place while you’re gone. AirBNB is an awesome service for that and they automatically insure your place for up to $1mil in damages so there’s nothing to worry about.

With Handy you can signup for handy-man type work around your neighborhood. Have free time on a Saturday? Install someone’s ceiling fan. Learned plumbing from your Dad? Install a bathroom sink for someone close by.

Since you set your prices and compete against other people’s quotes it’s recommended that you start low, get a few successful jobs under your belt and then increase your price.

Complete odd-jobs via TaskRabbit like picking up groceries, waiting in line for a new iPhone, cleaning someone’s home or helping them run a party. According to peers.org, the average TaskRabbit hourly wage is $48 an hour.

Perhaps the most interesting job was that of a professional “looker”. There’s a need for people who are buying things across the country and can’t be there physically to have an impartial 3rd party verify its condition.

With WeGoLook you can either hire someone or be hired to do just that. Take pictures of a car someone is looking to buy for them, or, hire someone to go check out a rental home you’re looking t...

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We have all asked ourselves at some point, do I need life insurance? You’re young and healthy, nothing is going to happen to you, right?

 Sorry to be a debbie downer, but the reality is anything can happen to you at anytime. Will someone suffer financially once you’re gone?

 Will your family be able to afford mortgage payments and other living expenses? Funerals are really expensive, will they be able cover the cost?

 If the answer is yes to any of those questions, then it’s probably a good idea to look into an insurance policy. Life insurance will help replace your income so your family can meet important financial needs if you are no longer around.

 This week we have Francois de Lame from PolicyGenius on the show to answer our questions about life insurance.

Who Needs It?

You’re Married

Most people start to think about life insurance when they get married because they are starting a life another person and building a future together.

If something happens to you, will your spouse’s income be enough to pay off debts and cover living expenses? If you are the breadwinner, your partner could find themselves in a really bad financial position if they are left with good amount of debt- like a mortgage or students loans, for example.

You Have Kids

For most families two incomes are necessary to make ends meet. If you died suddenly, could your family continue their standard of living on one spouse’s income? Would the plans for your children’s future, like going college, be affected?

Even if you’re planning to have children soon, you’ll want to buy life insurance now before the pregnancy. Prices can go up. Getting a policy will insure they can still have the future you saved for even if you are not around.

You’re a Single Parent

If you are a single parent and don’t have life insurance stop reading this and look into getting some right away. With so much responsibility resting on your shoulders, you need to make sure you have insurance to protect your children’s future.

Although it is super important, only about 4 out of 10 single parents have life insurance. The ones that do usually need more. As the sole breadwinner and caregiver, your children depend on you and only you. What would happen if you were no longer around?

You’re a Stay-At-Home Parent

Just because you don’t get a paycheck every week doesn’t mean you don’t make an important financial contribution to the family. Besides taking care of children, there are so many other important tasks and the value is often underestimated.

Average cost of daycare in NYC tops $16G. It’s the largest annual household expense for many families leaving them struggling to find affordable care. Without the stay at home parent around, the cost of living significantly increases for the other parent,  Life insurance can help your family preserve their quality of life.

You’re Single

Most single people don’t need life insurance because no one depends on them financially. However, don’t wait too long to get a policy. It’s much cheaper to get a policy when you’re young and healthy. In the insurance world, the older and less healthy you are, the more you pay for insurance.

If you are providing financial support for another family member like a aging parents or a sibling you may want to consider life insurance when you’re single.

How Much Do I Need?

Figuring out how much life insurance you need is different for everyone. It depends on your personal and financial situation. There are three main drivers that affect the amount of coverage you need.

Family Size– How many kids you have and thei...

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Whether you believe it or not, we have all heard the age old saying money can’t buy happiness, but there certainly is a relationship between your personal finances and your happiness. Maybe it’s time to change your mindset.

 People who earn a more are often happier than people who live in poverty, but it’s not just about the money itself. It is about providing insurance that you and your family can live a comfortable life no matter what life throws at you.

 Many of us think we only need so much to be happy, but you have no way of knowing how much you’ll need at some point in the future.

 Today the guys talk about how to change your mindset from “how much I need” to “how much is possible”. It doesn’t mean you have to constantly think about money or compromise your other values and interests, but you can simply think differently about your money. It’ll start to shift your choices.

 Unless you can predict the future, you do not know what you will need or want beyond today. Building your financial resources will help you deal with life’s uncertainties. Money takes time to grow, so you need to start now.

 Even if you have a job that pays well, the chances are it doesn’t pay quite enough to create financial independence. Your job is your job but building financial wealth is something else.

 Show Notes

 LMM Community: Join the conversation!

The Millionaire Real Estate Investor: Thomas’ latest read

Lapsang Souchong: The whiskey of teas

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 It’s been too long since we’ve done a five questions episode. Today we talk about lotto, stock games, APR, diversification, and student loans.

 Five questions are back! We answer questions we get through e-mail and the LMM Community.

 1. What would you do if you won the lottery?

 Thomas doesn’t want money he didn’t earn so if he somehow won the lottery, he would hand it over to various charities. Andrew actually did buy tickets, $20 worth. He thinks winning the lottery would ruin his life because it would take away his drive and his purpose.

 He would keep his job and just stick the money in US Treasury bonds which are one of the safest investments you can make. Even with the low-interest rate on bonds of about 2%, taking the lump sum of the recent Power Ball would still earn $1.2 million per month.

 2. Do you recommend any on-line stock simulator games for those new to investing?

 Motley Fool has a good one. Most games focus on the dollar value but Caps, the Motley Fool game, removes that and base wins on percentage gain instead. The community is very active too, and it’s a good place to research stocks. People do reports and even blog about their picks.

Investopedia has a simulator, and you can track stocks in Google Finance where you can create folders for your picks and track them over time.

3. I have $9,000 in credit card debt and a 15 month 0% APR. Should I take out a loan through Lending Club to pay this off?

If you roll a balance over to a 0% APR card, there is a fee. Even with zero interest, you have to make the payment each month, or it triggers the interest. Pay off that $9,000 as fast as possible, ideally, before the 0% runs out because no loan is going to give you 0% interest. For more on APR check out this guide.

If you can’t pay it back within the 15 months, then Lending Club is a good option.

4. I have an IRA with Fidelity. What should I do to diversify my investments?

The Fidelity account you have has a high expense ratio. Even a 1% fee over thirty years of investing means a loss of more than a quarter of your investments. Fees are a killer. A 1% fee doesn’t sound like much, but over time, it is.

A better Life Cycle Fund would be with Vanguard because no one beats their fees. If you don’t want to do a ton of research and compare funds, Betterment is the way to go.

5. I know it’s important to pay off debt before investing but is that still true if my student loan debt will be forgiven in twenty years?

The interest is high at 6%, and while you’re on the income-based repayment plan, your income will (hopefully) increase over that time. Because interest is one of life’s biggest expenses, pay it off. Build your emergency fund up to six to twelve months worth of expenses and then start killing the loans.

Thanks for the questions everyone!

Show Notes

LMM Community: If you want personal answers to more money questions, join us in the Community.

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It’s the time of year to reflect on the past twelve months and set goals for the new year. What does figure skating have to do with it? Tune in to find out.

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Want to level up your life? Steve Kamb from Nerd Fitness joins us to discuss turning your life into a game.

 We’ve discussed the ways being physically fit and financially fit are similar. Steve Kamb learned that when he started Nerd Fitness. His health improved alongside his finances. He turned his life into a video game with himself as the protagonist. Now he’s written a book on how we can do that too, Level Up Your Life.

Nerd Fitness

Steve was working a sales job he hated and wasn’t very good at when he saw Tim Ferris’s book, The Four Hour Work Week. In the book, Ferris details how to start a very small company that solves a problem that a lot of people have.

Steve was becoming increasingly interested in fitness and if there is a problem a lot of people have, (aside from money problems. LMM will handle those) it’s being unfit and unhealthy.

As with any good side hustle, you need to find a niche. There are a lot of fitness sites out there. There aren’t a lot of fitness sites geared toward people who love video games. Steve bought his domain at Hostgator and sat on it for a year. He didn’t know the first thing about building a website.

After a new job, Steve decided to make the leap and start really working on Nerd Fitness. He quit his job with about eight weeks of runway money and 3,000 subscribers.

He wrote an e-book that sold enough copies to keep the lights on and he worked a series of odd jobs to fill in the gaps. He was right to make the leap. Within six months, the site was generating $2-3 a month.

Motivation Is Not Enough

The problem with motivation and willpower is that they’re fleeting. We’re all motivated in the new year to save money, lose weight, quit smoking. We all have the willpower to resist the cookies in the beginning. How motivated are you in February? How many cookies did you eat in March? Steve advocates putting systems in place that will help you succeed.

He wanted to spend less time watching television and more time working on the site, so he got rid of cable. He would eat the entire bag of chips in one sitting so he stopped buying chips. People are lazy, we really are!

Of course, you can leave the house at 9:00 pm to procure the chips, but you probably won’t. No motivation or discipline needed for this strategy. You have a system in place that supports your goals.

Anti-Fragile

Antifragile by Nassim Taleb teaches that not all chaos is bad. There are three types of things; fragile things that break when you drop them, sturdy things that survive the fall intact, and antigragile things that get stronger from the impact.

Steve applied this to fitness. Throwing the unexpected, the chaos, at your body strengthens it and makes it grow. The same theory can help improve your life too. Pushing yourself beyond your comfort zone makes you a stronger, better person.

Steve drew up a list of things he wanted to accomplish, a bucket list and published it so his readers would help keep him accountable. He made conquering the list a game. Every time he crossed something off, he awarded himself points and moved to the next thing on the list.

Success Through Habits

Thomas is a big believer in the power of habit too.

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