How to Reduce Your Car Insurance (And Save Thousands)

Transcript:

On this episode of the Personal Finance podcast, how to reduce your car insurance and save Thousands. What's up everybody?

And welcome to the personal Finance podcast. I'm your host, Andrew, founder of Master money.co. And today on the personal Finance podcast, we're going to talk about how to reduce your car insurance and save thousands. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co/newsletter.

And don't forget to follow us on Apple Podcast, Spotify, YouTube or whatever podcast player you love listening to this podcast on it. If you want to help out the show, consider leaving a five star rating and review on Apple podcast, Spotify or your favorite podcast player. Now today we're going to be diving into step by step exactly how to save more on your car insurance.

I am going to go through the 10 steps that you should think through if you want to save more money on your car insurance. Then we're going to dive into once you save those dollars, you need to make sure that you are funneling them towards something that actually brings you value. And I'm going to talk about exactly how to do that step by step and how much money, even a modest amount of savings can grow into by the the time you retire over the long term.

Then we're going to be answering some of your questions on a money Q&A in the second-half of this show. And we will be answering a bunch of your questions that have come in. We have tons of emails coming in. Again, if you want to get a question answered, you can join the Mastermind newsletter and respond to those newsletters and we will get them answered there.

Also would love to hear from you in the comments down below. We are considering doing live phone calls here on the Personal Finance podcast where you guys can call in and get your questions answered live. Naive. And so that is something that we are considering. If you would like that, if you think that is something out of interest, please comment down below and we will get the Mastermoney hotline going so that you guys can get the ball rolling on that.

And so this is a really actionable episode and every single person out there should be evaluating their car insurance every single year. In fact, in Mastermoney Academy, we make sure that our members are doing this on a yearly basis because this could save you hundreds of dollars and we've had tons of members already saving hundreds of dollars inside a Master Money Academy.

So I'm going to give you the framework on how to save money when it comes to your car insurance. Even talking through how to negotiate your car insurance, how to get that bill reduced. We're going to get through tactical things on how to scan through your bill and to make sure that all the line items on your bill are going to be a need and not just a nice thing to have.

And then we're going to talk through what to do if you have an older car and how to reduce your car insurance as well. So this is an episode that could save you hundreds of thousands of dollars over the course of your lifetime. And so this is incredibly valuable for each and every single one of you. So we're going to jump into a break and we're going to dive right into it. Let's get into it.

So step number one is you need to shop around and compare quotes. Now this is a self-explanatory, but the problem is most people don't even do this step. A lot of you out there right now are listening and saying to yourself, actually, you know what, I just renew my car insurance every single year. I just take whatever my insurance agent gives me.

And let me tell you right now, that is the wrong approach. And if you've been doing that for a long period of time, you are leaving hundreds if not thousands of dollars on a yearly basis on the table. This is one of those things that every single year when it is time to renew your car insurance, you need to make sure that you are shopping your car insurance.

I cannot stress this enough because this is going to make a huge, huge difference and you need to be strict about this. You need to make sure that you are doing this and setting a calendar time to do this every single year. So for most people, I would make sure that you just set up a calendar invite to yourself to ensure that you have this as part of your money routine and you can look and see, hey, when does my car insurance renew?

Do I need to make sure it's just auto renews and or do I need to go and shop this insurance? Now there is a number of different marketplaces that you can go out to. Number 1 is you can find an independent insurance broker who can go shop your policy to a bunch of different carriers. This is a great way to get started, especially if you know someone locally who can do this.

Finding that independent insurance carrier is a great option. Number 2 is we have a link down below in the show notes that can also help you shop your insurance. You're going to get 3 to 5 quotes just by utilizing that link. And so this is a quick way to do this online without even having to call someone. So I highly recommend that you do both options.

First, you call up an independent insurance broker, give them your information, but also use the link down below. And you're going to get quotes from tons of different carriers. And I would just price this thing out to the carrier that makes the most sense for you. Now we're going to talk about some of the things you can do to get this bill reduced as we go here.

But those are the two things that I would do first. So we have a link with money.com. They have a tool that allows you to shop with a bunch of different carriers that is going to help you through this process. So at least fill out your information is completely free, you have nothing to lose. And so check that link out below. But you need to shop this on a yearly basis 'cause that is where the real savings is going to happen.

Now, if you go and just call up, say State Farm or you go and call up Allstate, all of a sudden if you're just renewing with those carriers, then you're not getting your policy shopped around where these independent brokers when can go to a bunch of different carriers and shopping around. Then if you want to go to some of the big guns like State Farm or Allstate or some of the other ones, then you can go ahead and do that just to make sure you have the full coverage.

Now, this process on a yearly basis should take you less than one hour. And all of a sudden quotes are just going to come into your inbox and give you the ability to be able to compare those quotes. You can get a quote with a link below in 10 minutes. You can get a quote with an insurance provider by just giving your information in 10 minutes.

And then you just evaluate each of those quotes that come in. Now, when you're talking to that independent insurance broker, you want to make sure that you give them all the information that you need. And you got to make sure you get enough coverage for your needs #2 is this is for folks out there who potentially have an emergency fund already in place or a larger emergency fund in place.

If you are someone who has six months or more in your emergency fund, then this could be an option for you to get your overall car insurance reduced. And what I'm talking about here is to raise your deductible. So if you don't know what your deductible is, it is the amount that you agree to pay out of pocket when your insurance kicks in after a claim.

So if you get into an accident and the damage is $3000 and your deductible is $500, you pay the 1st $500 and the insurance carrier is going to pay the rest of this. Now the higher the deductible, the lower your overall payment. So how would this work and how would this actually help you save money?

Well, first you could raise that deductible and increase the amount that you're paying if an accident were to happen. And in that case, you can take the difference, whatever the difference is that you would have been paying to the insurance company. And you can put that into your emergency fund as, hey, a car accident or a car damage fund.

And so as long as you have enough to cover the deductible there, then you were going to be a OK and then you're going to be in the green going forward. So what I would say is if you are doing this and you want to raise your deductible, you can take these extra dollars and funnel them into something like your emergency, you funded a high yield savings account.

And then from there you can take those extra dollars and just continue to save maybe 2 times your deductible or three times your deductible. Then you're covered for decades to come. So you don't really have to worry about that. And if you're a safe driver, this could be a great option for you. Now, what are the pros of raising your deductible?

Well, the pros are it can meaningfully lower your annual premium around 10 to 20%. So if you're paying $4000 per year in car insurance, this could lower it 400 to $800 per year. And so if you increase that deductible, you can see where the math could work out in your favor.

Now the risk that you're taking here is that you got to have enough in your emergency fund to cover the deductible just in case you don't get a net positive happening because you get in an accident, you maybe you rear in somebody or you get into some sort of accident, Then you want to make sure you still have the cash on to cover it. And then while you're making that savings, you can actually automate the savings into your high yield savings account.

If you have a bucket that is for car accidents or car repairs, that's a great spot to put these funds. It makes sense if you are a safe, low risk driver. For example, I am known as a driver who is like a grandpa. Everybody calls me a grandpa when they drive with me. I always drive the speed limit.

I have never gotten a speeding ticket in my entire 37 years until this recent year where I finally got 1 and it was something that I could not believe my streak was broken. I was trying to get a lifelong streak of never getting a speeding ticket and I just wasn't paying attention one day when I was driving. But for someone like me who really never has issues, never gets an accident, I think this is something that makes a lot of sense.

It also forces you to self insure for smaller incidents, which is actually a smarter financial move in most cases. Now, there are cons and risks to this, so I want to make sure that we point those out before you go and just increase your deductible #1 if you get into an accident, you are on the hook for larger out of pocket expenses.

So you got to make sure you understand that risk. And if your emergency fund is thin, say you have a $1500 emergency fund or a $2000 emergency fund or maybe just have two or three months in place. And I would not do this yet until you have enough in your emergency fund. The power of having an emergency fund is you have savings that can happen just like this.

So you could think of a rate of return of having that emergency fund. You could be saving, you know, 10 to 20% on the amount of money that you would be saving in a car insurance thing. And these are some of the factors and the numbers that are not always factored in when you have cash on hand. This is why you want to have cash on hand for protection, reducing anxiety.

But in addition, you can save money in areas just like this. So a rule of thumb for this is only raise your deductible to amount that you are comfortable with. If $1000 wipe out your emergency fund, you do not want to be spending that much. This is not worth it to optimize that trade off. So instead you want to make sure you're looking at it that way #3 is if you are looking to save on car insurance and you can't find a savings from the first two options, even though you absolutely should be able to, then you can also bundle your policy.

So a lot of insurance carriers are, they're going to have renters, maybe they have homeowners, maybe they have other policies that are in place like pet insurance or whatever else. And if you bundle your policies together, a lot of times they will give you additional savings. So a lot of times when I have done this in the past and I've gotten quotes for this, it is anywhere from 5 to 10%.

I have seen people tell me in Master Money Academy that it has been high as 25% savings when they bundle policies together. So it's going to depend on your insurance carrier. A lot of times it depends on how long you've been with that insurance carrier. But bundling discounts are real. And if you are going to pay for the insurance anyways, making sure you also get quotes for that insurance everywhere else.

But if you are going to pay for that insurance, it may make sense to bundle it together. So you can get an overall savings of anywhere from 5 to 10%. I think that's the realistic mark is 5 to 10%. Typically when you bundle your insurance together #4 and this is something you have to do, and this is part of the negotiation process, is once you get these insurance carriers to give you quotes.

I want you to ask about discounts. So insurance carriers are really just going to volunteer discounts to you. Instead, you need to make sure that you were asking about discounts. Now, if you have an independent broker who you are working with, a lot of times they will tell you about those discounts to help you get the lowest overall price.

If they don't, you might want to find a different independent broker. But let me give you a couple of different examples of what those discounts could be #1 is a good driver discount. So you may have heard of this with a bunch of different insurance carriers where if you haven't had an accident for the last three to five years or any tickets, anything like that, then you could get a good driver discount.

There's also a good student discount. I know State Farm does this. I know there are other carriers out there that do this, that if you are a good student with a GPA above a 3.0 plus they will give you a discount on car insurance. There's also a low mileage discount. So if you're someone who doesn't drive a lot and you only go from point A to point B and then back home and you're not a big driver or you work from home, this is great for you work from home folks.

Then a low mileage discount can help you reduce your overall insurance as well. So this is 7500 to about 10,000 miles per year. That's what that would qualify for a defensive course driving discount. So you can actually take a defensive course with some carriers and they will give you a discount there.

There's also military and occupational discounts. So if you are military or you are first responder, anything like that, make sure you ask about those discounts. Paying full discounts is a good one to save a a few percentage points as well. If you are paying, you know, six months ahead of time or one year ahead of time, that is a great idea.

Now, how do you make sure that you pay for for this if you're someone who is trying to figure this out? Instead, you make the first payment and when you make that first six month payment, you just treat this like a bill and force that savings into a high yield savings account every single month. But you get the discount ahead of time. So you just save the cash. Boom, then you get the discount ahead of time.

So that is something I recommend for a lot of folks is if you do pay every six months or if you do pay on a yearly basis, you can actually just treat it like a bill and send it to your savings account. Then when the time comes for that insurance to be due, the money's just there. And then also paperless and auto pay. Obviously for a lot of folks, it saves us like 3 to $5 a month, but it is something that you can do overall.

So make sure you're asking for all those different coverages, all those different discounts. And then after you ask for all those, ask are there any other discounts? Because that's very important and they will tell you about all of them. Also, I would highly recommend you can go and research online and see with a specific carrier do they offer any other discounts that are out there.

So I think that's a great one too #5 is I want you to review coverage on older vehicles. If you have an older vehicle. This is something most people need to make sure they are doing because if your car is worth less than 4000 to $5000, dropping comprehensive and collision coverage may make financial sense.

So what is comprehensive and collision coverage? So collision coverage pays to repair or replace your car if you're involved in an accident with another vehicle or another object, regardless of whose fault it is. That's what that coverage is for. Comprehensive coverage. Coverage covers damage from your car from events that are not a collision.

So you can think of someone vandalizing your car. You can think of someone, you know, a fire or a flood or if there's a hurricane or a tornado, any of that kind of stuff. If you hit a deer, those types of things are going to be what is comprehensive coverage. Now both are optional.

If you have an older vehicle, So if your vehicle is pretty old and you are driving around that hoopty and you're proud of that thing, these are optional coverages to hold. And if you have a big old emergency fund and you are someone who has been driving your car for a long time because you're a real wealth builder, you're a millionaire next door, then this could be something that could be very, very powerful.

Now, there's pros and cons to this. The pros to keeping your comprehensive and collision coverage is that it protects from large unexpected repair bills. That is 1 pro. The second one is comprehensive, is relatively cheap and covers a wide range of risks.

So a lot of times it may just make more sense to have it and carry it. I like to carry insurance that is cheap typically because it just gives you Peace of Mind and is just an additional emergency fund if something were to happen to you in life. And then it's worth keeping if the car has significant value, obviously, but if your car does not have significant value, then we may not want to keep it.

Now cons and risks of actually keeping and holding on to this is insurance companies will only pay up to the actual cash value of the car. So if you are carrying this coverage and you are paying more for this coverage over the course of let's say the next two years than the car is actually worth, this may be something where you want to reconsider.

And if your car is worth $3500 and you are paying $600.00 per year on this, then that's just something where maybe you know you'd be better off not paying it. And then after the deductible, your payment shrinks further. So a $3500 car with a $1000 deductible means your Max claim is $2500.

So just some cons to hanging on to that. And I think that's really important. Now there is a rule out there called the 10% rule. And the 10% rule states that if the combined annual cost of comprehensive and collision is more than 10% of your car's current market value, it is generally worth dropping.

And I think that's very, very important to note because if you check your car's value on Kelley Blue Book or Edmunds first, then you can do the math on this. And, and a lot of times there are even calculators out there that can help you with this to make sure you run the numbers and do do the math. All right, number six is to improve your credit score.

A lot of auto insurers use your credit score as a deciding factor to see if you are in the good range, if you're in the excellent range and meaningfully can reduce your premium overall. So improving your credit score helps you with loans, it helps you with your insurance and it can help you with a number of other things. That's why we say it is a six figure money decision and really a 7 figure decision in the long run because you can save so much more on all these different areas.

So making sure your credit score is in the right spot and taking action to improve that score is going to help you overall. When it comes to car insurance #7 is usage based insurance. So programs like Progressive, Snapshot or State Farm has a Drive in Safe program which I take part in, or all states Drive Wise can track your driving habits and safe low mileage drivers can save anywhere from 10 to 30% through these specific programs.

So I would ask if you have any of those 3 providers or if there are other providers out there, I would ask if there is any usage based insurance coverage policies that can help you reduce your overall car insurance. These policies are very helpful if you are a safe driver or if you don't drive a lot. A lot of times they'll give you a little device or a lot of times they'll use your phone now and they can track, you know, how you drive, how far you drive, all these different things.

And this can help you save a lot because these are real numbers that are going to help them ensure that you are actually not driving, you know, certain distances or you are actually a safe driver. And so I really like these programs because they can help you save a good chunk of money on your car insurance. Now we are only through seven different options.

You can already see that if you do not do this stuff on a regular basis, you're probably overpaying for car insurance. You're probably overpaying for how much you really are driving or what you're actually doing #8 is to remove unnecessary add-ons. This is where the negotiation is going to come into play.

This is where you're going to need to make sure that you are reviewing your current car insurance bill and reviewing the quotes and policies that are coming across your desk so that you can make sure that they don't have unnecessary add-ons. So things like roadside assistance, Well, if you have roadside assistance already or you don't need it and you just want to call up AAA or some company and you want to take on the risk yourself, that is 1 where they can add on some extra money.

GAP Insurance is number 2. So if you have a newer car and it has GAP Insurance in place, it covers the difference between what you own and what you owe. So if you drive off the lot with a new car and you did not put 20% down, GAP Insurance is probably something you want to carry. But if you did put 20% down, you don't need GAP Insurance. So you don't have to have that coverage in place.

New car replacement coverage, that's another one that is a lot of times on there. Accident forgiveness is a fourth one. So you've seen this with a lot of different policies. If you feel as though you want to make sure that you want to take on the risk yourself, that is OK. But accident forgiveness prevents your rate from going up.

If you get into one accident, it prevents it from going up dramatically into just helps you with that overall. But if you have never been in an accident or don't plan on getting in an accident, that could be something that you could take on that risk. But again, there's pros and cons to each of these and it depends on how much risk you want to take on uninsured or underinsured motorist coverage.

So this one is actually worth keeping for most people because if someone hits you and has no insurance or not enough to cover your damages, this fills in the gap. So for most people, you know, there's a lot of idiots out there who don't have insurance. Until you want to make sure you probably hold on to this one, I wouldn't recommend taking it off unless you really want to take on the risk and you have tons of cash on hand.

And then there's medical payments or personal injury protection. This covers medical expenses for you and your passengers, regardless of who is at fault, and so that can be very helpful. If you have strong health insurance this may not be necessary, but in no fault states it is often required by law.

So you need to check your law and your local state to make sure you go through this. Now the exercise is simple. You just go line by line on your coverage and make sure all those things are absolutely necessary for what you are trying to accomplish. The number 9, this is one that most people don't know about and if you live in a apartment complex or you live in a community that has either a garage or they have covered parking, if you move to a lower risk zip code or if you start parking in a garage instead of the street, you can notify.

By your insurer and sometimes they will reduce your overall insurance because you park in a garage. So for all my people out there who only parked their cars in the garage and didn't know this, make sure you call up your insurance company. Just ask will they give you a discount if you park in the garage and you can prove it to them by, you know, showing that it's parking the garage.

That is just an easy discount, an easy phone call to make. And some places will actually give you a discount on this, which is pretty cool. And then lastly #10 and this is the most important probably overall, it's just maintaining a clean driving record. You know, making sure you don't go above the speeding limit and get tickets, making sure you're not running red lights, making sure that you are one of those drivers that doesn't get into accidents.

There are people who get into accidents pretty frequently and people that don't. But if you can maintain, you know, a good driving record, any tickets that come up, go ahead and try to contest those tickets if especially if you disagree on what is going on there to bring your safe driving rate down because the single highest leverage move for most people out there is shopping around renewal time.

That is the single most important thing that you can do. But also maintaining a good driving record is going to help you just automatically have a lower overall insurance premium. Now, most of us need to do these things because most of us are feeling the pain of car insurance right now. We feel the pain of what is going on and how that has been increasing like 30% over the course of the last couple of years.

It is mind blowing how much car insurance has increased over the last couple of years and so doing these steps can really, really help you. Now most people who walk through these steps are going to see some realistic savings on hand here. And when you see this realistic savings, I want you to decide, well, where does this money need to go?

Does it need to go towards my emergency fund? Do I doesn't need to go to my savings buckets? And there are going to be a number of things that you can do here. Let's say for example, you save 200 bucks per year. Well, if you'd save $200 per year just shopping around at renewal time, this can be super helpful for most people. And a moderate savings is going to be about $400.00 per year.

Well, $400.00 per year is a great difference, especially that's funding a 529 plan that is funding, you know, your future retirement. And we're going to show you how much this can grow to in a second $600.00 per year is solid. And if you are exceptional at this, you can save 800 to $1000 per year just by shopping this around.

Now the average American pays around 1600 to $2000 per year for car insurance. So saving 5 to $600.00 is realistic for most households, especially if you've never done this before. If you've never compared costs, use the link down below. Make sure you compare those costs because that is going to be a great way to have annual car insurance saving.

So let's see how much this can grow to because there is a real time value of money when you have the savings. And if you take the savings and put it towards investments, put it towards future, you look how amazing this could be. So let's say for 200 bucks per year and we'll put this chart on the screen at $200 per year.

In 20 years you could have saved $11,455 at a growing at a 10% rate of return. 30 years 32,000 and 40 years $88,000 per year. Now $400.00 per year savings in 30 years. If you automated that money and just transfer that over to investments, you'd be saving $65,000 / 30 years and $177,000 / 40 years.

At 600 bucks it'd be 98,000 / 30 years and 265,000 / 40 years. At 800 bucks, $131,000 / 30 years and 354,000 / 40 years and the last day of $1000 per year, you'd be saving 57,000 / 20 years, 164,000 / 30 years, and $442,000 / 40 years.

If that doesn't motivate you to try to save $1000 per year in your car insurance where you can have half a billion dollars more in retirement, I don't know what will. And making these tweaks over and over and over, it's just 1000 bucks a year. Listen to me. That is less than $100 per month that you can get savings from. And if you can get that savings and you invest those dollars instead and put them in a low cost index fund, or you put them in a stock that you believe in, or you put them in an asset that you believe in, or maybe you save it in a rental property and you can get a 10% rate of return every single year.

Historically, that's what the S&P 500 has returned. If that's the case, then you are going to see a difference of a half $1,000,000 / 40 years. That is mind blowing going to me just by taking an hour every single year to ensure that you would lower your cost and then automating that contribution into your investments.

That's all you got to do. It's a 2 step process, but you got to go through all these steps we just talked about to make sure that you can save enough cash on hand. So most people out there are like, well, why would I do all this work to save 500 bucks? I just showed you why? Because it will absolutely change your financial trajectory long term.

So that's step by step, exactly how to save money, save yourself thousands, if not hundreds of thousands of dollars over the course of your lifetime when it comes to car insurance. And imagine if you do this with all your bills, all of a sudden you're saving yourself millions of dollars if you automate the difference into investing. And that's what we want each and every single one of you as wealth voters to do.

Perfect. So let's go and we're going to jump into the Q&A next. Oh, and by the way, we've just launched a new class inside of Master Money Academy. It is a mini course that shows you how to negotiate each and every single bill. And we are launching a different bill every single week right now. So would love to have you join so that you could check out that mini course if you want to.

Again, the link is down below in the show notes if you want to join Master Money Academy. And if you get stuck anywhere, you get to ask me questions on the weekly coaching calls. All right, let's jump into some of the questions that you guys sent in. All right, so let's jump into the first question. The first question is I have a large RSU position that makes up roughly 40% of my overall portfolio split across 4 O1, KS and brokerage accounts.

I know I need to diversify intelligently over many years to avoid spiking my annual income. I'm 41, and I plan to retire between 52 and 55. My projections show roughly 100K annually at a 4% withdrawal rate. Assuming my RSU stake rose at an average market condition about 7% over that time frame, should I strategically sell out of my RSU position and reinvest in low fee index funds or sell and invest in real estate rentals?

My hunch is index funds, but I'm curious about real estate given the diversification and tax benefits it could offer as a high W2 earner. Fantastic question here. And this is something I think a lot of high earners are dealing with. When you have Rs US, you're going to see a big concentration with your overall net worth in those Rs US, especially if they are valuable in the way that you are setting this up.

And so for most people out there, I'm going to give you kind of the framework or the breakdown that I would think about this in. Again, if you need to contact an advisor or you need to contact, you know, your CPA to make sure it fits your situation, that's what I would absolutely recommend that you do. This is not financial advice. This is just kind of me talking through your situation and what I would do.

But at the same time, here's exactly how I would think about this. Now, your, your instinct is probably right. If you're a high W2R, giving real estate a real look could be very beneficial for you. Now, index funds win in a number of different ways. They win for simplicity, they win for diversification, and they win then for time efficiency.

If you don't want to spend a lot of time on rentals or you don't want to spend a lot of time on real estate, then it may not be the asset class for you. But for someone targeting retirement in 11 to 14 years, those things matter a lot. And real estate is not just a lifestyle choice, it is a legitimate tax strategy for wealth building.

And so we want to make sure that if we have a high W2 income, we find ways to unlock different ways to unlock wealth. Well, how do we do that? One, we can do with an LLC and have a side business which real estate helps us do. And two, we can invest in real estate to get some of those tax benefits. Now, your RSU concentration is something that is a real priority.

Because for me specifically, if I had that much concentration in an RSU, unless I really believed in the company and you would know better than I would about what company you are invested in and what the financials look like potentially and what the stock looks like and all those different things. But if I had 40% in a single company, I'd probably be awake at night.

I'd be sweating bullets. I would not want to have that much concentration in one specific company. Instead, I would rather move my dollar dollars somewhere else to get a little more diversification. Now, again, you know the company better than I would and you can say to yourself, well, I think this is going to grow dramatically. If you're in some company like Google or if you're in a company like Meta or some of these big magnificent 7 companies, well, maybe then you think you're better off by utilizing these Rs US.

But there are strategies where you can still get additional diversification, especially as you begin to approach retirement. So a disciplined multi year selling schedule is one thing that I would consider and spreading sales across different tax years that can help you dramatically when it comes to thinking about your Rs US.

And that could be the right move. So I would work with ACPA or the financial planner to model this out, especially if your Rs US are a big, big number because they can help model this number out for you and give you more indication on exactly where you need to go. Because you could, if you do this the wrong way, it could push you into a higher tax bracket.

And their fees are going to be worth their weight in gold just to make sure that doesn't happen. And so that's one thing I would definitely consider. Now, index funds, in my opinion, are the clean, reliable path, meaning they're low cost, low time commitment. You don't have to worry as much. They're easy to model. They're easy to predict what is going to happen.

And a three fund or a total stock market portfolio, in my opinion, are just easy ways where you don't have to worry. You don't have to think about your properties, You don't have to think about putting on a new roof. You don't have to think about renovations, all those different types of things, but the tax upside with real estate is genuine.

You can force depreciation, you can accelerate depreciation. You can get different values when it comes to real estate. You can also gain cash flow and cash flow is a big thing when it comes to investing in real estate. I really would not invest in real estate just for tax benefits. You also need to make sure that you have the cash flow on hand because a well purchased rental is going to be very important.

For those of you who don't know, we actually have a real estate investment calculator. I will link it up in the show notes below if you guys want to check that out. I think it's 19 bucks. It's just a spreadsheet that takes you the exact steps you need when it comes to evaluating a real estate deal. If you're a Master Money Academy member, it's free inside Master Money Academy and you can check that out too.

But there's also a couple of downsides. And the downsides are tenants, it's the maintenance, it's managing contractors, it's managing a property manager if you have somebody managing your property. But it's also liquidity risk real estate, as you can see right now, at the time I'm recording this, I'm recording this at a time where there's a lot of liquidity risk.

People are having a hard time selling their homes. And when you have a hard time selling your home, this can make a drastic difference in what you do and how you make moves. And so for most people, I think that diversifying into stocks and real estate is a good move, especially in the age of AI, ownership is a really important thing to have.

But if you do not want to deal with that kind of stuff, it may not be the best for you. And so if real estate appeals to you, I would consider allocating a percentage toward that and having conversations with your CPA and having conversations with anybody else in your corner to see if that is a viable move for you.

And you can free up a percentage of your RSU 1020% towards that so that you can begin to invest that direction. And then you can divest from being so concentrated in one single company. So I would lean towards, you know, if it was me specifically, I'd lean towards index funds probably as my primary vehicle to divest.

I would then go into real estate as a high W2 earner like you are. I would then go into real estate as a high W2 earner. But I have experience in real estate. I understand what I'm getting into every time I invest in it. And so that would be something where you could test it out, see if you like like it with one property and then kind of go out from there.

So for sure, congratulations on being in this situation. Congratulations on being tracked to retiring at, you know, early at 55. I love that you're projecting that out. I love exactly where you are. And that's what a true wealth putter does. You have those projections in place. You are making the right moves.

Absolutely fantastic stuff there. So great question. Let's jump into the next one. All right, question number 2 is Andrew, I took your Investing for Beginners class and finally opened up my Fidelity account and started my first investment. Yay. Well, that is fantastic and thank you so much.

And for anybody interested, we do have an Investing for Beginners master class. It's on Tuesdays and Thursdays and we will link that up in the show notes down below so that you can check that out. It is a class that is about an hour long and it takes you through exactly how to make your first investment absolutely free to use. So if you want to check that out make sure you do.

I transfer money into my Fidelity brokerage account and it shows as available to trade but not settled cash. When I try to buy I get a warning about a good faith violation. I interpret this as I can buy but I cannot sell this until the cash settles. Is that correct? Because I want to invest $1000 a month and don't want to incur any violations.

So number one is your interpretation is correct here You can buy with unsettled funds but if you sell those shares before this the cash settles then it triggers a good faith violation. GFV is also have a say this and since you have no intention of selling, you have nothing to really worry about in your specific situation.

If you're a long term investor, this doesn't really matter. What settlement actually means is when you transfer the money into the brokerage account, it typically takes about two to four business days before the money actually settles in your brokerage account. And so this is one of those things to just be aware of when you start to move money over. And if you're going to, you know, invest $1000 per month, you can just automate that.

And it's really easy to just schedule your bank transfer, you know, around a day that you are going to know that you have cash on hand or you can just do it the same day every single year. And Fidelity has a thing, and we talk about it in that investing for beginners class where you can just automate that contribution and it can automatically invest in whatever you are looking to invest in.

So let's say you wanted to have a 6040 portfolio, you can automate $600 into something like, you know, an S&P 500 or whatever else you're looking at doing based on your research. And then you can do 40% in bonds or whatever else you are looking at investing in. And so those can be automatically done without you even having to go back in there and investing.

Those dollars can all be automated now. And I think it's a really, really powerful way to to look at building wealth. So really, really good question again. And this is I think a very powerful thing that you're doing is getting started. So congratulations on getting started. That is absolutely fantastic. And I commend you for getting the ball rolling at 1000 bucks a month is no joke.

That will compound into something fantastic over the course of of the next few decades if history repeats itself. So really, really good stuff there and congratulations on doing that. Let's get into the third question. I am 20 years old, a junior in college pursuing a nursing degree, and I graduate in spring 2027.

I have $17,000 in savings, make about $200 per month during school great, and have $11,764 in student loans. At 5.5% to 6.53% interest, I don't have to start repaying until 12/12/28. Should I start investing in index funds now or focus on paying down my student loans first?

I know you say high interest debt comes first, but this feels like a unique situation since my repayment is still years away now. This situation is more unique than most and your instincts to think about this carefully is absolutely correct because most of the time paying down debt before investing is the clear answer.

A lot of times this can be the clear answer for most people, but if your loans are not yet accruing repayment obligations and your interest rates are relatively moderate, not high interest by our definition, and maybe one or two could be, then you have time, youth, and earning power within your career ahead so you can understand what your loans are actually doing right now.

We just did a episode with Robert Farrington. If you didn't hear that, go back and check that one out. That is the new guide to all of your student loans right now. So make sure that you check into that because I think that's really, really important. But your subsidized loans are not accruing in interest while you're in school, and this is genuinely free money from the government.

So I really would not worry about that, that one. But your unsubsidized loans, especially if they're at the 6.53% rate, those are the ones that have a guaranteed return if you pay them down. So if you don't have another spot you want to put these dollars, you could go for there. But you are starting at the age of 20.

And the case for compounding this money, especially when you're on a fine line like this, is it's really worth thinking about investing your dollars. In fact, every single dollar that you invest over the course of the next 30 years is going to be worth $10. And at the age of 20, we have something called the Wealth Voter's Matrix.

And if you go and check out the Wealth Voter's Matrix, it is going to tell you based on your age, how much will this money compound based on every single dollar you spend. Now for everybody else, the quick math is at a 9% rate of return, if you got that, every dollar you invest in 30 years is going to be worth $10.10 X.

Currently where you are at right now, it's actually $10.06. That is the math that you want to know. But for someone who is as young as you are, you can really get this money going and compounding over the long term. And so I think nursing is a stable in demand career. It's going to be around for a very long period of time.

And I think that is one of those things that has a strong starting salary. So if you are looking to get this paid down, you can start to get your money invested right now. Those dollars are going to compound overtime and you can really get the ball rolling. If it were me, I'd probably begin investing my dollars unless you just really wanted to get rid of some of that data, especially if any of it was above that 6% interest rate.

And that's a OK with me. You're going to get a Guaranteed Rate of return by paying some of that debt down. You're not in a bad debt position. You're in a debt position that is a OK currently and if it gets larger or you think it's going to get larger, then maybe that is something where you just want to pay it down to get rid of it. Now here's a couple of things that I would suggest is 1.

I would make sure that I maintain a healthy emergency fund. So making sure that you have $17,000 saves, you are in that strong position. Do not drain it and keep at least that six months on hand. Then I would chip away at the unsubsidized loans. Even 50 to 100 bucks right now can really make a big difference and make a big dent.

And the overall amount that you're paying, especially if it's at 6.53%. And then I would open it up. You know, for me specifically, I love the Roth IRAI would look at a Roth IRA to get some of that compound growth and look at some of the investments out there that you were interested in. And then once you graduate and land your first nursing job, you can attack those loans aggressively once you get to that point in time.

But missing out on some of those key dates is really, really important. And so I would build the emergency fund. I would get my dollars invested. You can chip away at some of those loans if you want to. And then from there, then you can start to really attack them once you get your first job. But the bottom line is you don't have to choose right now completely.

Instead, you can truthfully make the decision later on down the line. All right, well, that is it for this episode of the Personal Finance podcast. If you guys like these episodes where we give you a ton of value upfront and then we answer your question in the back and let me know down in the comments below. And if you are someone who saves money on car insurance by using that car insurance tool, let us know down in the comments below.

Would love to hear some of the ways that you save money on car insurance as well. Again, we want to use the comments section on YouTube, Spotify and wherever else to make sure that we are helping each other out. That's what we want to do is help each other out as much as possible on the wealth building journey. And these comments are the perfect spot for that. So appreciate every single one of you listening to this podcast episode and appreciate you being here today.

If you want to get a step by step financial plan, you want to reduce your stress and anxiety around money, and you want to make sure you are building wealth going forward, then I would highly encourage you to join Master Money Academy. Master Money Academy is the community of wealth builders who are all working towards is building wealth. We give you the 25 step program that shows you exactly how to build wealth.

In addition, when you get stuck on any step whatsoever, you get to ask me questions. And a lot of you, if you're struggling, you're stressed and you are worried about your money, this is going to give you a lot more peace than you currently have right now. You can absolutely transform your financial life. All you need is to have a system in place and we give you the system in place.

And if you get stuck, I'm always there to help you out. So again, thank you so much for listening to this episode. If you want to join Mastermind Academy, check it out down below. We have a 7 day free trial for podcast listener so would love to have you in there if you are interested. Thank you again so much for being here and we will see you on the next episode.