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An anonymous caller has always put her large purchases on zero percent APR credit cards, but something\u2019s been nagging at her. Is she walking on thin ice with this strategy?<\/p>\n
Von is confused why he keeps hearing that Roth accounts are better than traditional if they both lead to the same mathematical result. What\u2019s he missing?<\/p>\n
Molly and her husband are well on their way to financial independence, but they feel unfulfilled with their careers. Can they afford to plunge into student debt with a 50 percent pay cut?<\/p>\n
Former financial planner Joe Saul-Sehy and I tackle these three questions in today\u2019s episode.<\/p>\n
Enjoy!<\/p>\n
P.S. Got a question? Leave it here<\/a>.<\/p>\n _______<\/p>\n Anonymous asks (at 01:55 minutes<\/strong>): Is using a zero percent APR credit card to cover large expenses a good strategy? I\u2019ve been doing this for years, but I\u2019m starting to wonder if there are risks I haven\u2019t considered.\u00a0<\/strong><\/p>\n For example, instead of saving cash for a vacation and paying for it upfront, I open a new credit card with a promotional zero percent APR offer, typically lasting 15 or 18 months.<\/p>\n I charge all my vacation expenses to that card and then pay it off gradually over the promotional period. The way I see it, I\u2019d rather invest my money today and pay for expenses later. Since these credit cards offer an interest-free loan, it seems like a no-brainer.<\/p>\n Sometimes I keep the card open; other times, I close it, depending on factors like annual fees or the rewards program. I\u2019ve used this approach for years, and it\u2019s worked well for me. It\u2019s helped increase my credit score to over 800 without much downside.<\/p>\n I don\u2019t have a mortgage but I do have a car loan. Otherwise, I\u2019ve been financially responsible. Are there any dangers to this strategy that I\u2019m not seeing?<\/p>\n Von asks (at 21:27 minutes<\/strong>): I\u2019m struggling with the implication I\u2019ve heard in several episodes that a Roth retirement account is better than a traditional one if tax rates remain the same. Can you elaborate on your stance?<\/p>\n I\u2019ve heard you discuss the benefits of Roth accounts, emphasizing that withdrawals in retirement are tax-free, including the gains. This seems to imply that paying taxes upfront (Roth) yields a better outcome than paying taxes later (Traditional).<\/p>\n But mathematically, this isn\u2019t true if tax rates are the same at the time of contribution and withdrawal.<\/p>\n Here\u2019s an example:<\/p>\n As long as the tax rate remains constant the net result is identical in both scenarios.<\/p>\n Have I misunderstood the point you\u2019re trying to make about Roth accounts, or are there more nuances to this question that I haven\u2019t thought about?<\/p>\n Molly asks (at 33:56 minutes<\/strong>): My husband and I are considering major career changes that come with a 50 percent plus pay cut. How do we approach this huge adjustment and continue saving toward financial independence?<\/p>\n We\u2019re both 39 years old, with two kids (ages 2 and 6). I\u2019m considering a career in nursing and he wants to go into teaching. We believe these careers will be more fulfilling and allow us to spend more time with our family, But we\u2019d both need additional degrees.<\/p>\n Here\u2019s a snapshot of our financial picture:<\/p>\n We can live off $4,000 monthly for basic expenses, with room for extras like vacations. If we stayed on our current path, we\u2019d reach financial independence relatively soon. However, we don\u2019t plan on fully retiring. We\u2019d just like to slow down.<\/p>\n How do we navigate these decisions while staying on track for financial independence? What are strategies to maximize our savings and benefits as we shift into these lower-paying careers?<\/p>\n And should we take out student loans? The costs are $25,000 for an accelerated nursing program and $10,000 for a teaching degree.<\/p>\n \u00a0<\/p>\n \n Thanks to our sponsors!<\/p>\n Shopify<\/strong><\/a> Policygenius<\/strong><\/a> NetSuite<\/strong><\/a> <\/div>\n\n
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