Should I Sell My Car At A Loss?! – Money Q&A

Transcript:

On this episode of money Q and a, should I sell my car at a loss? We're going to get into it.

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 be diving into four of your questions on money. Q and a, if you guys want to submit your question, make sure you sign up for the mastermind newsletter by going to master money.

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Now today we are going to be diving into four of your questions. And these are really, really good questions that we're diving into today. The first one is we're going to be going through, should I sell my car at a loss? This person purchased a car and they are looking to either consider, you know, downgrading their car and buying a car in cash.

But if they did do that, they would have to sell their car at a loss. The second one is associated with real estate investing. Which is, should I invest in tax liens and or deeds? The third question is how do you invest your non taxed dollars? So this person actually is able to, uh, earn some non tax dollars and they want to know how to invest those dollars.

And then lastly, how to manage your finances overseas. If you live overseas, how do you manage your finances in that situation? What are some tips that we have here? We're going to go through all four of these questions without further ado, let's get into it. All right. So the first question is, uh, one where I'm going to kind of go through some of this context here and talk through, um, what this person is asking on this question, then we'll kind of dive into, uh, exactly what they're looking for here.

So this person specifically, um, went out and they bought a new car and they bought a Chevy car in September of 2023. And the reason for this is because their family had long term issues when they would buy used cars, they buy used cars, and it seemed like they'd get a limit and they'd have a bunch of issues and the repairs would cost more than just buying a new car.

New car and not having to deal with it, which I completely understand because if your experience with used cars for a long period of time has been something that has been a negative is pretty difficult to want to go back out there and try to do it again over and over again. So it makes sense why you would actually go out there and buy a new car.

Uh, based on some of those conditions. But the good thing is you really seem like you are very much financially stable in terms of how you think about this process, because you are looking at this situation in a way where you can still hit all your financial goals. And still be able to afford the monthly payment, which looks to be a 470 monthly payment.

So you have this payment in hand, but it looks like this car payment is truly bothering you. You feel like you made the wrong decision and it's one of the things that you feel personally that you made. Uh, the wrong decision, even though, honestly, so far after, you know, reading through your question here, I think that there's nothing wrong with having this car if you want to have this car, but we'll talk through that here in a second.

So here's your specific question. Essentially, I am now 10 months into my purchase of my new vehicle. I do love the car drives well and has been reliable so far with pretty good mileage. However, I have not put nearly as many miles as I once expected. My monthly payment is 470 and it is a 72 month contract.

You feel like it's a huge mistake on the length of this term and high monthly payment. Fortunately, I am able to make the monthly payment each month and still reach my saving and investing goals of saving at least 30 percent of my income and make payments toward my student loans each month. I am using the avalanche method, which is absolutely fantastic.

But all that said, I don't like the feeling of having something I don't need. I recognize that my car has depreciated value significantly. I also recognize and accept that was this the best financial decision? No, probably not. But now I want to evaluate my options and see what I can do about it rather than feel embarrassed or helpless about it.

I went to CarMax and the dealership offered me a negative equity of 3, 000 to 4, 000. I'm considering just eating the cost of the negative equity so I can purchase a used vehicle, hopefully a Toyota or Honda for 10, 000 or less with 100, 000 miles on it. Since currently my mileage is so low, should I pursue this option or wait a little longer until I have more equity in the car?

Apologies for the lengthiness of this question. I just want to make sure. To give you ample context. I've had many nights of feeling silly or stupid about making a decision like this, but I have since realized and accepted. I'm not perfect when it comes to finances and I'm trying to learn and improve each day.

Thank you for all of your help, Andrew. So this is a fantastic question. And I wanted to take a little bit of time to go through your context on this question, because I think it's really important for a lot of people to understand you are a person. From what I'm reading here, who really thinks through these decisions.

And I absolutely think that's amazing. That is so amazing that you actually think through this process and really you're calling this a mistake here. I don't think you actually made a mistake here. You can afford your financial situation. You are able to invest your money. You're able to start paying down debt.

And so I really don't see a massive, massive issue here so far, at least with the context that you've given me, right? But if it's something that's keeping you up at night, and if it's really bothering you, then we can talk through this. So the first question I want you to ask yourself is, do you value this purchasing decision?

It sounds like it's something where you thought you'd be driving a lot more. Maybe you value it less than you originally intended to. And so if you do not value this vehicle, or if you do not value this car whatsoever, But you want to keep it because you like having a newer car with lower mileage and you don't want to have to deal with maintenance issues later on.

You can absolutely do that in this situation. There was nothing wrong with you hanging onto this car where a lot of people might go out there and they'll say, Hey, yo, you're in debt. You have student loan debt. Go sell your car. Go take the extra money. Put it towards something else. I don't see it that way completely because you're making your payments and you know you're going to pay off your student loans on time and you have a cadence of exactly when you know you're going to pay those off.

Then it's something where I don't really see a huge issue with you having this car. Now it sounds like it's bothering you. So on the other side of the coin. Number one is you can keep it. You can either hang on to it for a little while longer. You can maybe add some equity to it later on down the lines.

You're not taking a loss, which is going to take some time because usually the first two to three years are when they depreciate the most, or you can start to consider selling the car. Now the pros to selling the car would be that you. Obviously take away that monthly payment, which is something that if that's bothering you, or you want to take those dollars and put it towards something else, you think you want to accelerate your path to financial independence.

There's nothing wrong with that whatsoever. The con is the immediate financial hit of three to 4, 000. Now that's not a huge deal for you. If you have a bunch of money in savings and three to 4, 000 is not going to be a massive deal. You just got to think through the opportunity cost of that three to four thousand dollars and kind of see where that lands.

It's about a year's worth of payments, roughly. So you would actually be paying a year's worth of monthly payments up front. And so that's one weighted thing I would do is see, try to figure out, hey, what is this car going to be worth in a year if I make one more year's worth of payments? And would I still have negative equity?

And or should I just make those monthly payments for the next year and then see if it's break even because you'd be in the same exact situation as you are now, but you'd still be driving a newer car for another year, and you'd have time to search for a used car if you plan on selling this. So that's the first thought is up front.

I would say, Hey, these payments are going to amount to about nine months to 12 months if I took the negative equity right now. So why don't I think through that first? And go through that option. Now, you said initially you went to CarMax. Another option here would be to sell it. If you did find out you want to sell it, you could sell it yourself, meaning that you could sell it on Facebook Marketplace or whatever other online broker is out there that you could sell it to where you didn't have to sell that CarMax, even though CarMax does give good prices.

Uh, but you could go out and you could try to sell it on your own for, you know, what you have left on the note. And so you would, You know, get a cashier's check from that individual, you pay off the notes, and then you'd be done without having to take any negative equity that make this decision a lot easier if you actually went that route.

So one thing you could do is list your car online and see if you get any bites for the amount that you owe, because that is another great way to, you know, get out of this situation. If you don't like this situation, And then you can go out and find another used car somewhere else. So that's option two.

If you're going to sell is you can go to CarMax and CarMax again is absolutely great, but they're going to buy it for a little less than they can sell it for. CarMax has really low margins, meaning they sell these cars for really low margins. Like we are taking a car there actually tomorrow. It's a car max because they gave us the best deal and I'm actually going to go sell it to them instead of the open market.

So car max is great. That is a great place that you originally started, but at the same time, there are other options out there. Now, the biggest consideration is obviously you're wiping out those monthly payments. Those monthly payments could be gone and you go find another car. Now, if you decided to sell and you decided to go find another car, I like your line of thinking of finding like a Honda or a Toyota, and there's a bunch of different things that you can do there.

Because if you go and find a Honda or Toyota for 10, 000, where you can go out and pay cash possibly, and, or you're able to get that car for a much lower monthly payment, that's a great option. So you can go out there and I've done a video on this, and I don't know if I've posted the second one yet at the time of recording this, but I've done a video on finding a car.

A Toyota or a Honda under 10, 000 and I've done one under 5, 000 on social media at MasterMoneyCo if you don't follow me and what I talk through is, hey, you can look nationwide for these vehicles and you can do a nationwide search and say how many cars are under 100, 000 miles for the specific model I'm looking for.

And they cost less than 10, 000. And the reason why you want to do a nationwide search instead of a local search is it is very easy to ship a car. Nowadays, you can go out and ship a car for like, you know, 500 to a thousand dollars, depending on where you are and how far away it is, the closer it is.

Sometimes it's cheaper. Sometimes it's not actually, but it's really not a big deal to ship a car. And so in a lot of situations, you can buy a car online and you can go nationwide searches and you can find really, really good deals on Honda's and Toyota's. And in that video, I used a Honda Accord, I think is my example originally.

And when we went through it, we found like a 2012 Honda Accord for 5, 000 with less than a hundred thousand miles on it. And so those are the types of deals I'd be looking for. If you're going to do something like this, because you could do it pretty quickly, probably pay cash. Cash is the best way to kind of go about this.

And then moving forward, then you can have that car for as long as it needs to take. And if it needs repairs, the repairs aren't really that expensive on some of these vehicles. But all that to say is that you did not make a decision that in my eyes is something that unless you have really high interest debt or if you have credit card debt or something like that, you did not make a decision that in my eyes, you made a mistake.

Instead, what I see here is someone who's really financially conscious and you bought a depreciating asset and it might just be bothering you in some way, shape or form. And if it is bothering you, there's nothing wrong with kind of making this move and selling it and then just moving on to a different financial decision.

But if it's something where you're comfortable and happy with the vehicle, there's nothing wrong with making those payments and continuing on. Now, if you are going to sell it, Just to summarize, I would either continue making payments to see if you think it's going to be worth about what you have left on the note in the next six to nine months.

If you continue making those payments, because the negative equity loss would be one thing I would try to avoid. And then during that timeframe, If that is the case, I would also try to sell it either, uh, you know, one to 2, 000 more than you have on the note so that, you know, if somebody tries to negotiate, you can take off 1, 000 or 2, 000 and or you might be able to make a little money in this car instead, um, and then roll that money over to your next vehicle that you want to pay for in cash.

I am all for paying cars in cash. I think that's the number one way to buy a car is in cash, but most people are not able to buy cars in cash. Let's get real here. And so if you can't have an, you know, just a lower monthly payment, what she's talking about here is having it over the course of three to four years.

So I like four years as the max. And then making sure that you are just driving that car for longer periods of time. And so that's kind of how I think about buying vehicles is making sure that you are really thinking through that process and making sure that you were buying them. Right. So I think it is fantastic that you were thinking about this process, but I would try to avoid selling it at a loss at all costs.

If you are going to sell it, I think there are other ways where you can either put it up for sale, continue making the payments for the next couple of months, because if you take a three to 4, 000 loss, that's about nine to 12 months of monthly payments. Anyway. A little bit less maybe. And then you can go ahead and see where your equity lands.

And so there's a couple of things that you can do there, but I love that you're thinking through this process and I think it's absolutely amazing. And please reach out to me with any other questions that you have, because the way that you're thinking through this is the right way and that's great.

Question two is, I know you have a background in real estate and was wondering if you had any experience or thoughts on buying tax deeds slash liens. I'm fairly well versed in residential rentals as I've worked in new construction build to rent model, but in today's economy, it's a fairly pricey. Pricey buy, especially here in Florida.

I hear you on that and my husband and I have a good deal of capital and we like to use it for more than bond and mutual fund related holdings and have wondered the potential risks or drawbacks of trying to acquire real estate via this method. So this is a great question. Now, this is not something I've ever purchased before.

I've never bought tax deeds or liens. I've looked into it very, very heavily in the past, especially when I was buying a lot more real estate because I'm looking always for different ways to buy real estate. And really the people who do this specialize in this and are very, very good. Now, tax deeds and liens are a process oriented way of investing in real estate.

This is not a quick way to acquire properties unless you're doing a high volume. It's going to take you some time before you can actually get ahold of these properties because you're dealing with government. And you're going to have to go through this very, very slow process. Now for the listeners who don't know what a tax lien or a tax deed is, a tax lien is when property owners fail to pay their property taxes and the government places a tax lien on property.

That property and investors can then purchase these liens at an auction, essentially paying their taxes in exchange for the right to collect the debt plus interest from the property owner. And now a tax deed is that the property owner does not pay the taxes. The government can sell the property itself at a tax deed auction and investors can then purchase these properties often.

At a significant discount, which is why a lot of people are enticed by doing this. Now, there are benefits to tax deeds and liens. I'm going to go through the pros and cons of this. The pros are you can have really, really high returns if you actually figure out how to do this right. So tax liens can offer like really high interest rates and sometimes they can exceed, you know, 10 to 15 percent depending on the state.

And then purchasing tax deeds can also lead to you being able to acquire the property at a fraction of its market value. And it helps you diversify if you're investing in real estate and you're usually doing the rent to own model. Uh, this just kind of helps you diversify. You can get more properties and you can actually continue that model and or rent them out, whatever you want to do, or flip them.

You know, there's a bunch of options. Once you get ahold of these properties, it's kind of depends on what your expertise is and what you prefer to do. But there are a lot of risks and drawbacks to this strategy. And the risks are what had. led me to kind of really think about this process. One is due diligence, meaning, you know, me, I really want to know left, right, up and down exactly what is going on with every property that I buy.

It is a little bit harder to do this with these tax liens or deeds, because you need to understand the property's condition. You know, a lot of these folks have additional liens and encumbrances on these properties, but the problem is a lot of these are sold as is. When I started investing in real estate, they were still doing it at the courthouse steps.

Now, a lot of these are online, um, but I got to see the tail end of it. They were only doing it for the last couple of months on the courthouse steps. And then they got this whole online system that they do it on now. So I got to see it for a couple of months in a row. And watch them actually auction this stuff off.

And the reason why I would go to those auctions is I just wanted to see what the process was and how this works. And then I would talk to other investors to figure out exactly what they're doing. And some of them would specialize in it. Some of them were brand new to this. And that was the interesting part of this.

So due diligence is very difficult. And what I knew a lot of people would do is you're not supposed to go to the property before the actual auction, but people would go like the day before they'd post these pretty quickly. And you'd have like just a small amount of time to go see them if you wanted to, before you went there, but you're not supposed to go.

So. I know people would like go to the properties and trespass and try to get inside or look in the windows, that type of stuff, just to try to get a feel for how this works. Now, I would never condone doing that, but if you do a drive by at least you definitely need to be doing a drive by if you can see the property so that you can try to do some of that due diligence.

Now, the other risk to this is redeemed liens, meaning that with tax liens, property owners may actually pay off their debt, including interest, which gives you a return, but does not result in you actually getting the property. So you can get somewhat of a return, but people can actually pay off their stuff.

There also can be a lot of legal complications where you're going to have some other issues with people. But if you're used to dealing with those headaches, it may not be that big of a deal, but there could be disputes over title or former owners challenging the sale. And then the competition, obviously auctions can be competitive.

Now I'm going to give you some steps on how I would do this at least and how I would think through this and really probably one of the best ways to do this and this is kind of how I would think about it is I would try to do a JV first meaning I would try to find somebody who knows what they're doing with this kind of stuff and do a joint venture and it kind of have some conversations with them to see hey can you help me and streamline this process for me so that I can actually find a proper that may work for me but the first thing I would do is Consider doing a joint venture.

If you feel like you're comfortable enough with the process to be okay with going through this, then I would a, you're in Florida. So I would research state laws. Florida is a great state to own property in because a lot of times if you're an investor, it's, it's just a little easier to be an investor in Florida than it is in some other states.

Uh, but I would look at some of the state specific laws and kind of talk to some of those folks and understand the procedures in your state because they vary significantly from state to state. So if you're not in Florida, like For example, you're in California, it's gonna be much more difficult in that process than it would be here in Florida.

So you just got to understand that kind of stuff. And then I would attend auctions if they have any live auctions in your area. Some places still do them live. Some people do them online, but I would watch the online auctions and Set up an account and watch those online auctions. If it's online, if it's on the courthouse steps still, I don't know how many other areas still do it on a courthouse steps.

Uh, but if they do still do it on the courthouse steps, I would go to those auctions physically and start to watch them and start to get a feel of what's going on. And I would try to go religiously until I was kind of ready to invest and talk to some of the people there, talk to some of the investors, see if you can get some information from them as well on how this process works and just have conversations and network over there.

Also, I'd go to local real estate meetups and see if there's anybody else, you know, who does auctions and then just start to have conversations with them as well. Ask them questions, see if they are willing to help, maybe do a joint venture on a minority position. Um, there's a lot of things that you can do there and try to think through that process.

And then as these properties come up for auction, I would start to do drive bys and just start to look at them a little bit, do a little bit of that due diligence and see if there's ways that you Start to figure it out. If you've built a number of properties, you know, what kind of goes into some of this stuff.

And so I think you are, you know, steps ahead of the number of people who would just want to jump into real estate in this way. I would not jump into real estate by doing this, but since you have experience, I think it is a very interesting opportunity. And then I would set a budget, making sure you don't go over that budget that you have for each property.

Uh, specifically when you see some of these properties. Sometimes they list them low, uh, and that they get bid up. So you just have to have a budget in place if you're going to bid. And then obviously bidding wisely is very, very important. This is not a competition. This is a business transaction. And so, uh, usually the ones you walk away on are some of the best investments you can make because you are walking away from a bad deal.

So a lot of times just thinking through that as well, I would kind of go through those steps. So I would try to talk to as many people as I could who do this. One, maybe try to joint venture with one person on the first one, just to see how the process works. Then from there, I would try to kind of go through this process and see if it's really something I want to do.

And I would basically paper trade it. I would try to do it as auctions pop up. I would say, here's what I would pay for this property. Here's what I would bid up to. Let's see what happens here that I'd go to the auctions or watch them online and kind of paper trade them. And then from there, then I would go through that process.

the entire process. Obviously, you have to run your numbers. You have to know your numbers backwards and forwards. But you know that as an investor, you're sounds like you're a successful investor. And so you make all your money on the buy. And so making sure you buy them right is really important. Now, figuring out a way to figure out what's wrong with the property and when you're bidding on it is the Difficult part.

And that's the unknown. So I would have cushions for everything. So when I'm running those numbers, I would have cushions when I would try to think through, okay, well, I think it's going to cost this. I really don't know. So what is my percentage cushion for every single property? If I get myself in trouble here.

Because there are major, major issues that some of these properties have. I've seen people bid on properties and all of a sudden they have a sinkhole on them, or they've had foundation issues, or there's a lot of other different things that could happen. And so just thinking through that stuff is, is really, really important up front for anybody listening who has never done this kind of stuff before.

So it's, you know, it's the research, the due diligence. attending auctions, budging it out, and then the execution would be that the final step is what I would think through when doing this. So I think it's an interesting opportunity if you're very experienced, but you got to be experienced to do this kind of stuff.

This is like advanced level real estate investing in my eyes, and it's not something I ever wanted to do only because the risk associated with it. But if you have cash on hand that you're willing and Okay. It's impossibly take a hit on, but you could also have a huge gain on, then it's something where if you're in the wealth accelerator level, then that would be a great option to potentially look at if you are experienced in real estate and it sounds like you can build.

And if you can build, then, you know, maybe you can get some of this stuff at lower costs. So could make a lot of sense in some specific areas that, uh, you are really, really interested in investing in. Also, this can also make sense in areas that are rapidly growing fast. So if there are areas that. Uh, you know, of that are just really, really accelerating in their growth.

And you have a sneaking suspicion that it's really going to take off. Um, that's another option as well, because you can get some of these properties at a lower price, cause it's really hot right now. And then you might be able to take over some of those properties and still make a profit, you know, on appreciation place.

So that's another option as well. Uh, it's just kind of my thoughts on it and how I would look at it. Initially, this is definitely a niche thing, but is there any way you could one day possibly do a podcast segment on investing with non tax dollars? I asked this because my husband and his close friends have been out of the military since 2020.

Well, thank you guys so much for your service. And since getting out, they all jumped into school using the GI bill. So school is paid and they get BAH money to pay bills, basically monthly. And they work at the veteran center through school. Uh, As a work study. And since it's a veteran benefit, their pay is also not taxed.

These guys would love to learn the best way to start investing with those non tax dollars, because they make a lot of money with school, their veteran job and disability, but they're scared to invest it since it's money that is not taxed. I'm sorry if that doesn't make sense. I'm trying to explain it the best I can.

You're doing a great job. Thank you for your time. I love your show. Your energy is phenomenal, and I hope to meet you one day in person. Take care. Well, thank you so much for the question. I think this is a wonderful question. I'd be happy to kind of go through this with you all and thank you to your husband and his friends for their service and congratulations.

It sounds like you are also going to be pursuing school full time here shortly, so that's absolutely fantastic, and I think it's amazing that you guys are thinking about this. I think it's really, really cool that you guys are really, really going through this process now for people who don't know what the GI Bill benefits are.

This money is basically treated differently than regular taxable income. And so what happens is you don't pay taxes on this income when you receive it. But if you invest those dollars, the earnings that your money makes may be subject to taxes. And so this is the first thing I want them to understand overall is that it's not like your money is actually going to get taxed.

It's the earnings. Earnings on that money is what would get taxed. That's the new money that your money creates is actually what would be taxed. And so here's how I would think through making the most of these funds. Number one is obviously making sure you have your emergency fund in place before investing anything.

You should have that emergency fund upfront. And I like to have six months of expenses in that emergency fund. I think it's the most powerful way to do this. Some people will say three. I am a six month guy. I will always say six months. I think that additional cushion is really, really important for a lot of people.

So first having that cash on hand, having that emergency fund in place is going to be really, really important. And now this should be in a high yield savings account. It should be in a place that has earning interest. Cash is no longer trash. And so you could put it into a high yield savings account.

There's a bunch of them out there. Ally bank is like at the time recording. This is like four and a half percent. But there's places like Wealthfront and Betterment who have even higher interest rates and a high yield savings account, but just find one that works for you. I'm not associated with any of them, and it really, I use Ally only because they have savings buckets, but there's a bunch of them out there that you really can use, and it's not a big deal which one you choose.

If you want to rate chase, you can do that. If you want to find the highest interest rate or find one with a decent interest rate, that's been around a long time, that has another great option, but putting your emergency fund in there is great. You can also look at, like, I just saw chase had three months CDs for a really high interest rate, like 5 percent or something like that.

So just kind of shop around, look for what you need. The problem with CDs is you'd have to do a CD ladder, being able to pull that money out when you need to. But overall, I'd look at a high yield savings account first. Secondly, here's a cool thing that you can do. And if you're not familiar with it, your boy loves a little thing called the Roth IRA.

And if you've been listening for a long time, you know, I talk about the Roth IRA a lot. Some people have emailed me and said, stop talking about the Roth IRA. Never. So anyways, when it comes to the Roth IRA, the cool thing about this is since you already have the money in hand, like if they're worried about your growth being taxed, you can put your money in a Roth IRA, your money grows tax free.

And you can pull the money out tax free. And so because of this, because usually you're taxed on the money already, but since you have not been taxed on the money, a Roth IRA will provide you with zero taxes whatsoever. It is an amazing account for this type of situation, because you don't pay taxes on the money you earned.

You can put the money in the Roth and the Roth will grow. And when it grows, you won't pay taxes on the growth of that money. So number one, if you want to pay 0 in taxes whatsoever, a Roth IRA is an awesome option. Another awesome option is a health savings account. Now a health savings account is something that most people think it's for only health care expenses, which it is for health care expenses, but a lot of people are now using them as retirement accounts, which is the way I use it.

So you can put money into a health savings account and you will get a tax deduction or you won't pay taxes on that money. The money will grow. And you can pull the money out tax free as long as you have a qualified medical expense. The thing about this qualified medical expense though is there is no expiration date on when it had to occur.

So you could have a medical expense right now and by the time you turned age 70 you can reimburse yourself for that medical expense. There is no expiration date in terms of when the medical expense had to happen and so you could have All these medical bills built up from way back in the day that you can reimburse yourself for that you paid for in cash out of pocket.

And then you can reimburse yourself for later on down the line in retirement when you want to have an income coming in. And so it's a really cool workaround and hack to be able to have an additional retirement funds and save money on taxes. So those are the two I look at first. Now there's also things like a brokerage account.

You can go to a taxable brokerage account. Open it up like just a normal one at Fidelity or Vanguard or wherever else. And you can open that taxable brokerage account. And the only taxes you'd be paying is when your money earns money. So say you bought like an index fund, for example, you know, last year, the S and P 500 did 20 something percent.

And so let's say you put a hundred dollars in and by the end of the year, it's 120. You don't have to be paying taxes on the 20 that it earned. The 20 percent that it earned. You would not be paying tax on your original a hundred dollars that you put in. That's already done. There's no taxes on that money.

And so you won't be paying future taxes later on. So don't be nervous about that part. It's only the money that your money earns, the new money that you're creating, that is where the taxes are going to be paid. And so that's how I would kind of think about that and think through that process as well.

There's a number of different ways to do it, but the Roth and the HSA are awesome options. You can also go to taxable brokerage account. You'd just be paying taxes on the money. Your money earns with the taxable brokerage account. Or an IRA or a 401k, any of that kind of stuff. So there's a couple of different rules there.

And so I would think through, Hey, first, what are my goals? What I really want to do. I would choose the right accounts. And then from there I would start to automate and set up automatic transfers into those accounts that I want to start investing in and then starting to, you know, build out my portfolio.

I know I like index funds and ETFs. That's what I enjoy investing in. Uh, we have a, Course called index fund pro that teaches you exactly how to do it. Like I said, go step by step on. Here's exactly what I do and this is how it's done. So if you're interested in that, check it out. And so it's one of those things that I think overall, you can do a lot of really cool stuff with this money because you didn't pay taxes on it and you can really see some cool compound interest as well.

So Roth IRA is where I would start, but do it based on your own personal money goals and then kind of see Exactly where you land, but that's where I would look first and then kind of diversify from there. So awesome, awesome option here. So execution plan for me would be, you know, emergency fund, Roth IRA, HSA, brokerage account.

And then beyond that, you can go real estate or other stuff as well. So that is the way I would go with it. And congratulations on thinking about this. And I cannot wait to see what you guys do here in the future. All right. The last question is how to think about your finances if you're living overseas.

So this is a wonderful, wonderful question. So. I am a huge fan of your podcast. Well, thank you so much. I, and by the way, guys, I never get tired of hearing that. So I cannot thank you guys enough for, for sending these messages. And these there are such kind messages. I appreciate it. I have been listening to you for the past few months.

I usually listen to you for hours every single week on my drive. Well, thank you again. I'm a recent college graduate and I have been in the workforce since February of this year. I'm 22 years old and I'm driven by financial independence, retire early by the time I am 50 love that. And I love traveling, eating good food and doing fun and new activities.

My parents grew up poor and they have been hustling hard to put me and my siblings through a secondary education. I am super thankful for that and I want to have FU money so that I can soon support them in the future as they are getting closer to their 50s. I am in the U. S. right now as a non resident alien and that makes things tricky when it comes to taxes, savings accounts, etc.

I have already calculated my base Monthly cost. Like you said, everyone should know their numbers. I love that part that you're actually taking action on. That's a fantastic. And my job right now does not pay very well. So my gap is only about 100 to 200 a month. That's a okay. You are just getting out of college.

You can do a lot of stuff with 100 to 200 a month. I just accepted a new position where I'll be getting a better wage and benefits and they offer a 401k plan and profit sharing plans. Very cool. They won't be matching my 401k. Unfortunately, I But I recently tried applying for a high yield savings card, but I am not eligible because my status in the U.

S., which sucks, I have also been researching travel hacking and want to travel overseas this year badly. I would love for you to discuss financial tactics for people who are non residents living in the U. S. Would also love to hear how you break down how you decide your investment portfolio to look like.

This is a really, really good question. So first of all, thank you so much for listening and thank you for the wonderful question here. There is a lot of things to think through when it comes to working overseas. And we get these questions a lot. A lot of times we get us folks who are living overseas and they're trying to figure out their tax situation and stuff like that.

But first of all, I want you to kind of. Think through and understand your tax status. For people listening, non resident aliens are typically subject to different tax rules. And so you have to understand your tax obligations. I would consider consulting a tax professional who specializes in non resident taxation.

I think that's really, really important because you don't want to do that wrong. And it's a little more complicated than I think most people realize. And so first I would either find an accountant who Actually specializes in this stuff. They'll be able to help you through a lot of this type of question also, and there'll be in your corner.

So first of all, that's number one, what I would do now. I know you don't have much of a gap here. And so if you can find one who will help you through this process, especially if you have a little more gap with your new job, that's going to help tremendously. Cause the last thing you want to do is, you know, give your entire gap away to an accountant.

So that's one piece. Now, if you don't want to pay for an accountant, if you're still early on your journey and you're like, I just don't have the extra funds to pay for an accountant, then what I would do. It's just kind of get really well versed on those tax laws because they're going to help you a lot in your situation specifically.

Now, when it comes to setting up your finances, things like bank accounts, for example, is sometimes it can be challenging to open certain accounts, but many banks can offer savings. And checking accounts to non residents. So you want to look for banks that are known to be friendly to international customers.

So there's banks like Marcus by Golden Sacks. I think that goes across worldwide. Uh, Discover is one that can go in a lot of different areas as well. That's one to look at. Um, Ally Bank. Is one. Let me see if Ally Bank actually does this, because I'm not sure where you looked after your high yield savings count.

Um, but let's just that's another option as well. So Ally Bank does not open accounts for non resident aliens. So I would look at some of those that are friendly with someone like TD Ameritrade if they have something like, um, high yield savings accounts, maybe. But what also you can do, and this is a fantastic option, is go to a place like Fidelity if they'll do it and Fidelity has.

SPACs accounts. So things like their SPACs fund, which is just basically a higher interest. It usually follows bonds and it's just a higher interest place to keep your cash. And so for SPACs, S P A X X, that's another option. If you can get an account with Fidelity, usually it pays a little bit more. It has an expense ratio.

Um, so you got to watch out for that. But usually it pays closer to like what a high yield savings account would pay. So like the performance of SPACs over the course of the last year is 5. 09%. And so that's another option as well. But I would look for a high yield savings account first, if you could, and then go that route.

But some of the brokerages are going to be more likely to kind of help you out. But like I said, I think Marcus is a good one. I think Discover could be a good one also that you could look at, because usually they're worldwide. And those could be a couple options that you could see. Now, building a credit history in the U.

S. can be tricky. So I would consider. If you want to credit history here, uh, if you feel like you're, you're going to eventually be here and stay here, then what I would do is consider applying for a secured credit card to start building credit like chime, for example, is one that is on the show all the time.

You could check them out, but looking for a secured credit card may be good. There's some other cards like the American express global transfer. that allow you to actually use your credit history from another country. So if you have a credit history from another country, looking at the American express global transfer, isn't a great option for the folks who want to know is like some of the cards we talk about.

Uh, if you want to support the show and do that, usually we have a link down the show notes. If we don't, if you go to the personal finance podcast. com, we have a credit card link up top there, and that helps support the show as well. If you're looking to support the show, which thank you guys so much for using our links.

We are affiliates to some of these credit card companies and really, really appreciate it. Uh, now when it comes to investment accounts, so that's kind of how I think through credit cards is is starting to build up a credit history first and then being able to kind of transfer that and then from investment accounts, firms like Fidelity, Charles Schwab, TD Ameritrade, these ones have fewer restrictions and offer a wide range of investment options.

So those are the ones I would look through. Fidelity, for example, like seems like they have everything. You could even call them up and just talk it through with them and say, Hey, here's my situation. Can you help me through this? And Help me pick some of the best accounts and ask them for high yield savings counts.

Ask them for all the pieces they can do, because you can actually do your full banking at somewhere like Fidelity, where they have like options to do checking and savings. They have credit cards, they have all kinds of stuff there. And Fidelity's stuff is usually pretty good. Um, so that's another option I would definitely think through as you start to have that conversation.

So I would look at that for investment accounts. And you can also talk to them about retirement accounts as well, any that you don't have. Now, when it comes to travel hacking, we have a couple of travel hacking episodes, but travel hacking is a fantastic way to kind of think through this if you want to travel overseas.

And so starting to build up that credit score first is going to be important. And then once you do that, then you can start travel hacking. We have episodes coming up shortly on how to travel hack. Now, the second part of your question is I love to hear how you think about building your portfolio. We have an entire episode.

We're going to be Doing and putting this out because I get this question all the time. I'll give you a short answer though for this is a lot of times I am a huge, huge proponent of the U S economy and I think the U S economy longterm is just going to continue growing. Why do I think that? Well, go look at the S and P 500 and look at the top 50 holdings in the S and P 500 and then go look at the entire international funds and look at the top 50 holdings in the international funds.

I would rather. Hold the top five in the S and P 500 than the top 50 and the international fund. And the reason for that is there's just so many strong, solid companies here in the U S. And if you go through that list, you're going to say, wow, this is absolutely amazing how strong these companies are. So I am bullish on the U S economy.

And I will be for a very long time because some of the most solid companies in the world are here in the U S. And so, because of that, I have a heavy weight in U S companies. And typically my portfolio is built off either the S and P 500. Or the total stock market is the baseline of my portfolios for the most part.

And usually that is the cornerstone of what I am doing. When I'm investing in those, there are index funds or they're the ETFs, depending on what type of account I have. And it really doesn't matter between the two of 'em, it's, it just depends on how I wanna structure it and where my actual brokerages and that type of thing.

But outside of that, I am trying to simplify as much as possible. To me, the less funds. The better. So I have no more than two to five funds in any one portfolio. And typically there's like one to two, two is usually the max I typically have. Sometimes I'll have a couple more, depending if I'm trying to get a little cute with it, but for the most part, I try to simplify it as much as I possibly can.

And so that's kind of how I think about it is I build it based on either the S and P 500 fund, or I'll build it based on the total stock market fund. And so between those two, those are the cornerstones where they're usually like 80 to 90 percent or more. And then outside of that, then I start either adding in bonds, international funds, those types of things.

But really, I don't even get a ton of international exposure only because the companies that are within these funds have so much international business going on that it really doesn't even seem necessary to me in a lot of scenarios. And so, uh, that philosophy for me came from the simple path to wealth with JL Collins.

Where he only owns just one fund, which is the total stock market index fund and VTS X, and that's all he holds is just one fund because you're owning one, a piece of every single stock in the entire U S stock market. So, uh, that's how I think about it. And then we're going to do an episode dive in like deeper into the exact stuff that I'm doing, uh, because we get this question constantly now.

And so that's one we'll definitely be doing coming up soon, but making it simple is really important. Automating it is the most important to me. And so making sure you put all your money on autopilot. We do have a course coming out on this. So get ready cause it's coming. Um, but we're working on money on autopilot and I would like to get a small group of people who are interested in money on autopilot to kind of reach out.

And I'm going to get a small group of people to test it before we actually release it to the public. So, uh, that's another thing that we have coming up. So if you're interested in that, shoot me an email and we'll be able to do that. And then I would kind of think through it that way. So that's how I think through on the second part of your question.

That's how I think through that stuff is just making sure that I know. What my risk tolerance is, and then kind of going from there. And my risk tolerance is a high amount of stocks right now. At least at this point in time of my life, uh, I am really, really heavily into stocks. So that's where a lot of my portfolio lies on my investment side.

And then we obviously business portfolio is separate, which we have a bunch of businesses now that we're buying the real estate portfolio and all that kind of stuff. So there's all separate. Um, and so I think it's super interesting to be able to kind of build wealth in that way and really assess your risk tolerance.

It's actually simple in principle. But it's complicated if you don't automate everything. So you got to make sure you're automating everything so that you can make this a really, really easy thing. And that's why I believe anybody in this world can build wealth. Well, thank you guys so much for listening to this episode.

I truly appreciate you listening to us today. I hope you have a wonderful week. And again, if you guys have questions, please reach out to me because my entire goal is to bring you all as much value as I possibly can. So thank you again for listening to this episode, and we will see you on the next episode.