Personal finance expert Amanda Holden, author of the book How To Be A Rich Old Lady
On today's episode of WNYC's new popup advice show, Tiffany Hanssen leads a conversation about managing your money, with personal finance expert Amanda Holden, author of the book How To Be A Rich Old Lady. Listeners call in with their advice and experience with saving, investing, debt, retirement and more.
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Tiffany Hanssen: Welcome to Please Advice, a pop-up advice show from WNYC. I'm Tiffany Hanssen. During this hour on Mondays, Tuesdays, and Wednesdays- and this week only, today also- we are talking with experts, authors, advocates, and others to get their advice on all sorts of topics. Today's subject is personal finance, and we would love to hear from you. Do you need advice on getting your personal finances in order? We are here.
Are you unsure whether or not to pay off a student loan debt before you start investing? Maybe you're curious about mutual funds or exchange-traded funds. You need some help deciding which one is best for you. We would love to get your questions about investing in your future. You can call us; you can text us 212-433-9692, 212-433-9692.
Of course, maybe you have some advice to share. Do you have a great method to track your spending? Maybe you've got some advice about how you developed your own investment strategy, some good tricks and tips for saving money. Call us, text us 212-433-9692. Here to help us get a handle on our personal finances, ostensibly get a handle on it, right, Amanda? Is Amanda Holden. She's the author of the personal finance guide, How to Be a Rich Old Lady. Amanda, thank you for being here.
Amanda Holden: Thank you so much for having me.
Tiffany Hanssen: Absolutely. All right. First, I want to just talk a little bit about financial advice in general, because I think for a lot of people, as soon as I said that, their stress level just went like doink, and now we're all freaked out about our money, and we're stressed out that we're not saving enough. Pick an avenue, right? We're super stressed out. I'm wondering how you describe, or what approach works best for you when you know that people are actually hearing what you're saying and they're not just settling into the stress.
Amanda Holden: Sure. First, what I would say to that person is that if you've got stress or anxiety or trauma around money, that it's real. It's really real. We exist within a system that is designed to produce poor outcomes. Anything that we can do to take some of that shame and push it out and externalize it to the systems that are designed to keep us down, that's a great start. Just be kind to yourself, knowing that it's really, really difficult to learn, but there are teachers out there who are not here to shame you, but are here to empathize with you and also teach you in a way that doesn't make you want to clog your eyeballs out.
Tiffany Hanssen: Because I would imagine that how we approach these conversations and how we approach getting advice, receiving advice about our money life, actually has a real-world effect on the financial consequences, right? If you're stressed out about it, you're probably-- I'm speculating; correct me if I'm wrong- you're probably not even getting the best financial outcome for yourself because you're just caught in that stress. It does have a real-world impact how we come at this.
Amanda Holden: Absolutely. Trauma, stress, they can influence a lot of behaviors within us. For example, one would be avoidance. Addressing that avoidance first and foremost is an act of getting your finances together. Whatever may help you address that avoidance could be a very good first step.
Tiffany Hanssen: How do you suggest that people take in financial advice, whether they're getting it here today or whether they're getting it from their uncle [laughs] or whoever, right? It's advice, right? It's not an edict. You shouldn't use it to flog yourself for doing something wrong. It is just another bit of advice that you can use to weigh your decisions, correct?
Amanda Holden: Sure. I would not even use the word advice. I would use the word education. You can pay for financial advice. For example, you could hire a certified financial planner to help you build a financial roadmap, but short of hiring a licensed financial professional, I would treat everything you pick up along the way, including from educators like me, as just that. Like you said, it's just education. What you need to do then is filter it through what makes sense to you and to always have your hackles up and to be, I don't want to say distrustful, but-
Tiffany Hanssen: Discerning.
Amanda Holden: -be discerning of anybody that you're taking education or advice from.
Tiffany Hanssen: You are, first of all, listening to Please Advice. It's a pop-up advice show here from WNYC, and we are talking personal finance today. Do you need advice on getting your finances in order? Maybe you have some advice to share. You can call us; you can text us 212-433-9692. We're talking with Amanda Holden. She's the author of the personal finance guide, How to Be a Rich Old Lady. Amanda, we have David in Stuyvesant Town. Hi, David.
David: Hey, thanks for taking the call. I feel like everyone kind of points me in a different direction. I did some estate planning recently, and they said, "Okay, and to resolve that, that's when you'll talk to your CPA." I was like, "Oh gosh, well, I was hoping you would advise us on this." Then a CPA will refer you to a financial planner, and then a financial planner sometimes will refer you back to a CPA. That stuff has always confused me a lot.
Tiffany Hanssen: Thanks, David. All right, David's getting passed around, it sounds like.
Amanda Holden: Yes, it does sound like that. That's why having an educational base is so important because even our financial professionals, for example, a tax professional, might not have all the answers. For example, here's just a really simple example. You want to know what is better: investing money in a Roth IRA or investing money in a 401(k), but even a tax professional cannot necessarily answer that question because it requires an unknown variable, which is what are going to be tax rates in the future, which is something that even a tax professional doesn't know.
Tiffany Hanssen: All right. Funny you should talk about Roth IRAs and 401(k)s because we have a text here that says, "I left a corporate career last year to pursue a creative endeavor, so I have not contributed to my 401(k) in some time. Am I better off converting that money into a Roth IRA, especially since I'm making much less now?"
Amanda Holden: This is a great time to consider moving that money into a Roth IRA. You nailed something really interesting and important. Now, before I keep answering, I do have to say-
Tiffany Hanssen: Yes, we'll do it.
Amanda Holden: -at this point, I cannot be giving personalized financial or tax advice to you, but just generally speaking, I answer these questions from an educational standpoint. What we have in the American retirement system is multiple different types of retirement accounts. One type is what I would call traditional or tax-deferred. You don't pay your income taxes upfront, but you will pay them later. Then the other is this Roth style of taxation where you do pay your income taxes upfront, but you won't pay taxes ever again.
When might be a good time to pay your income taxes? Like our caller said, in a year when you are earning a very low amount of money, because we have this marginal income tax rate system where lower amounts earned result in lower income tax rates. By converting money from traditional to Roth, you are having to pay taxes on that money, but you can pay less if you are a lower earner than if you are a higher earner. In a year where maybe you're not working could be an interesting time to consider converting. Otherwise, I would say keep your life simple and just keep traditional with traditional and Roth with Roth.
Tiffany Hanssen: You talk about this as a process of education. What's a basic way for someone to start, at least just gathering some information? I haven't started investing yet. I haven't made a plan. I don't have a spending plan. I just need to gather some information first. What's the best way to start educating ourselves?
Amanda Holden: I hate to plug my books so early in our time together. I did write a book. It is primarily on investing. I come from investment management. That is my background. Working in finance, it did make me want to die inside, and so I quit. I started my own financial literacy business, primarily teaching women and those left out of conversations about investing how to invest. My book is called How to Be a Rich Old Lady, and it is a great starting place.
Tiffany Hanssen: No, I was just going to say, so what I'm hearing you say, though, because of your background, is buy this book, but really look for advice from people who have a background and are credentialed and know their stuff. In other words, don't be getting your advice off TikTok.
Amanda Holden: I feel so torn on this question because there are a lot of people doing really great work in democratizing the conversation on social media platforms, but it is also true that so much financial advice, it really requires much more explanation than a 30-second TikTok. For example, let's say you hear somebody say, "Oh, put money into a Roth IRA and then that money will compound and grow at a 7% rate over the next however many years." We are missing a lot of very key details even in that statement.
For example, it is not a Roth IRA that generates any sort of rate of return. If you just put cash into a Roth IRA, it is earning a 0% rate of return because that is what cash in your Roth IRA probably earns. It requires actually purchasing investments with that money, which are investments in the stock and bond markets. It is the stock market that is powering the returns inside of a retirement account.
Also, something like saying, "Oh, a 7% rate of return over time." That is a very airbrushed version of reality. 7% may be an average. It may materialize; it may not. What we also know about the investment markets is that they're up, down, all around. It's good to really take the time to actually learn what it is that you're doing and act as if your financial future depends on it because it does.
Tiffany Hanssen: David in Thomas River, you've got a question here about IRA's, 401(k) business. Hi David.
David: Hi everybody. Unbelievably, I am turning 73 next year, and I have a traditional IRA that I did not contribute to in decades before employers started putting money away for people. I also have a 401(k) from a job I ended over 10 years ago. My wife is earning over half a million a year. I guess I'm retired because no one will hire me. Next year I have to take withdrawals from these. The question really is, do I convert? Which you say, well, that's too many variables, but the question is, do I have to take a year's worth all at once, or can I take them monthly? There you go.
Tiffany Hanssen: Good. All right. Thanks, David. I think it comes down to how is David going to be paying himself?
Amanda Holden: Your required minimum distribution from your retirement plan, it can be taken on whatever cadence makes the most sense for you. It sounds like you would like to do so monthly, and you're more than welcome to do that.
Tiffany Hanssen: A question here from a texter who says, "Is there a formula for determining whether it makes better financial sense to rent or buy?" Ah, the age-old question. This texter says, "My spouse and I are looking to purchase a condominium to live in. This is our retirement. We could afford a $10,000 monthly mortgage payment and a $200,000 down payment. We could rent similar accommodations for $7,000 to $8,000 a month. Our health is good. We hope to live in the condo for 15 years. Rent or buy?"
Amanda Holden: That's unfortunately not a question that I'm going to be able to answer, but if you even just Google New York Times rent versus buy calculator, that is a really--
Tiffany Hanssen: Oh, there's a calculator.
Amanda Holden: Oh, there is a calculator that you can use. I also do have a chapter in my book in thinking about the trade-offs. That being said, I don't think it's the worst idea in the world to do a little bit of house hacking and to invest in a property if that is something that is available to you. As we know, buying a property, it's really so expensive for so many people right now. If a great opportunity is available to you, then I would consider taking it. That being said--
Tiffany Hanssen: Because it's an asset?
Amanda Holden: Because it's an asset and even more than an asset, it's a place where you can live. I think having these types of hard assets, especially as the world is becoming more complicated, it's a real luxury and is worth considering. That being said, if you are doing most just straightforward rent versus buy calculations, for example, should I buy a house or should I invest the money in, for example, the US stock market via an S&P 500 index fund, what you almost always find is that it's better to invest the money in the stock market.
If you are a strictly numbers person; often it makes more sense to invest. That being said, future stock market returns are not a foregone conclusion. We are using assumptions based on the past. If it doesn't work out for any reason, you are still then in a situation where you need to find somewhere to live, especially into old age. Really, when you boil this question down, this is a question of how am I going to afford to live somewhere when I no longer have an income?
Tiffany Hanssen: Anne in Suffolk County. Anne, I think you have a question that kind of dovetails on this. Hi.
Anne: Yes. Hi. Thanks for taking my call. My husband and I are retired, just retired, and we're selling our house on Long Island. I am a real estate broker here, so we should probably come out with when it's all said and done, $800,000 all cash. We want to move to Pennsylvania because their taxes are much lower and downsize the size of the house. We have 250,000 of our own money in the stock market. My question is, we probably are going to have to spend 500 to downsize on a house all cash in Pennsylvania. The 300,000 excess that we should have, what would be a safe investment tool to put it in, in order to draw interest that can help us with our living expenses since we only are living on Social Security?
Tiffany Hanssen: Anne, I think I got it. You got it, Amanda?
Amanda Holden: I got it.
Tiffany Hanssen: Okay.
Amanda Holden: In general, there are--
Tiffany Hanssen: Thanks, Anne. Sorry. Thanks, Anne, by the way.
Amanda Holden: Thank you, Anne, for the great question. Good luck on your move. When we are investing money, what we're really talking about is stocks and bonds. Those are the two primary asset classes, or capital markets-style investments that we're investing in within a retirement account or outside of a retirement account. Stocks in general are higher risk, but they're also higher reward. We expect a higher rate of return over time, but you've got to ride through some really dramatic moments in the markets.
Bonds are a little bit more stable, whether government or corporate bonds. These are the types of investments where you're not going to quadruple your money overnight, but they are paying a steadier rate of interest. In general, with general financial planning theory, the idea is that you're moving into these more stable bond-like assets over time. For retirees, it is generally recommended that you're doing some combination of different asset types, bonds and stocks, but probably more in this kind of more stable category.
Now, there are all sorts of other products you could consider. For example, I could very much see an insurance salesman selling our dear caller into something like an annuity, but I would be really, really careful there because the fees are exorbitant. Anytime we are in a situation that I would call as delicate as this, it's a really great idea to meet with a certified financial planner. I recommend using a flat-fee certified financial planner.
Tiffany Hanssen: Anne made an interesting point about a "safe investment." Is there such a thing as a safe investment, truly? Truly safe? I don't even know what that would mean. What would that mean?
Amanda Holden: What a great question. Because this is so important to understand about investing is that investing is taking a risk to try to generate a return. Risk and return, they are two sides of the same coin. You really don't get to have one without the other. Any investment that could grow 20% in the next year could also lose 20% of its value in the next year. Anybody that tells you otherwise, they're probably trying to sell you into something. They're probably trying to scam you.
Tiffany Hanssen: The scam flags go up.
Amanda Holden: It does. Yes.
Tiffany Hanssen: The scam flags go up. Talking about risk, by the way, this is a little bit of a can of worms here, but I think maybe we can address the risk part of this. What's the best low-risk way for the average person to make money from the AI revolution? Now we're determining that someone would want to invest in this. If they can, low risk way to do it?
Amanda Holden: There's no low-risk way to invest in AI, no.
Tiffany Hanssen: All right. Well, there you go. All right. We have another text that I've been wanting to get to here because I want to shift a little bit maybe and get a debt question in here. "Had a number of expenses associated with my mom's declining health, and suddenly I had over $40,000 in debt. Had to work through an agency to create a payment plan. My credit is ruined. I would like to know if a personal loan with low interest rate is best." She's currently, he, she, I don't know actually, the texter is currently paying $700 a month.
Amanda Holden: Sure. First of all, I'm so sorry to hear about your mom, and you did right.
Tiffany Hanssen: It's challenging. Any way you slice it.
Amanda Holden: You've ended up in a situation that so many people are going to relate to, and if they haven't dealt with it now, they probably will be dealing with it. Just know that this isn't the end of the story and that you are going to get this debt paid off, and you're doing the right thing by being on a payment plan. You could certainly look to make, for example, a balance transferred to a 0% card or to get a lower rate in a personal loan to pay off that debt, but just do be very aware of any of the fine print with any of these tools or products and what it might mean beyond whatever is the, for example, introductory period in a balance transfer.
Tiffany Hanssen: We had another texter here say the same thing, how you feel about consolidation loans.
Amanda Holden: They're fine. I think that especially if you see a light at the end of the tunnel and you know that in a couple of years you can get this thing paid off and you find the right product for you, then use it. For example, with some of these loans, or for example, with a balance transfer credit card, if you add to that balance, then you're going to be paying a sky-high rate of interest.
Just again, read the fine print. The most important thing is having the plan to pay it off. I don't get this sense from the person that wrote in earlier, but I just do want to shout out bankruptcy as an option. There's so much shame around bankruptcy, but for some people, especially if you are under a mound of debt that you will never be able to get out from under, then don't be afraid to pursue this option. Corporations are filing for bankruptcy all the time because of debt that they took out.
Tiffany Hanssen: We are talking with Amanda Holden, who wrote the book, How to Be a Rich Old Lady. It's a personal finance guide. We are, of course, talking about personal finance. If you're looking for advice, if maybe you have some advice that really worked for you, we'd love to hear it as well. 212-433-9692. We are going to get back to the conversation. One thing that you do address in your book, Amanda, is an opinion about credit unions. I want to talk about that when we get back, but we are going to take a quick break. You're listening to Please Advice here on WNYC. I'm Tiffany Hanssen. We'll be right back.
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You're listening to Please Advice, a pop-up advice show here at WNYC. I'm Tiffany Hanssen. Today we're talking about personal finance with Amanda Holden. Amanda wrote the book, How to Be a Rich Old Lady. Amanda, before the break, we were talking about debt. We have another texter here who says, "I am a single male in his mid-30s, good salary as a physician and $100,000 in savings from a recent home sale. I have $300,000 in student debt."
Speaking of debt. "I also have some money in my 401(k). Do I pay my loan or keep making payments to my Fed loan, which has a 5% interest rate, and then beyond that, how to invest?" I think this gets at a real central question, which is about paying off debt: when to pay off debt, if you are paying off debt, when can you start investing? I'll leave it to you to untangle that.
Amanda Holden: Sure. First of all, thank you for going into debt to be a doctor for us. My hot take is that medical professionals should get school for free, but that's probably--
Tiffany Hanssen: Oh, there's a whole show in itself.
Amanda Holden: That's probably another show. In general, anytime we are debating this debt versus invest question, we start by looking at interest rates. I heard that you have a 5% interest rate on your federal student loan, and so that's the interest rate that you are paying. Then we compare that to what we could expect to earn investing. You've probably heard all sorts of numbers. I used 7% earlier.
The US stock market historically has earned about 10 or 11% on average, but with a diversified strategy, I think something like 6% or 7% is a bit more reasonable for projections into the future. That's what you could expect to earn. When we compare those interest rates, what we earn versus what we pay, what we see is we can outpace the interest that we're bleeding out in our debt when we do invest, when we're at something like a 5% or a 6% or maybe a 7% rate.
That being said, the interest rate comparison is not the only one. I think it's also important to examine how the debt makes you feel. You did not say this, but if you, for example, felt like the debt was really weighing on you, you could really feel it on a spiritual level, then--
Tiffany Hanssen: Which happens.
Amanda Holden: Which absolutely happens, then it's okay to say, "Whatever about the potential interest I could earn. I'm also guaranteeing that I save myself on a certain amount of interest when I pay off my loans." It's totally fine if you want to direct any extra money toward your student loan payment. Again, especially if it feels like it's weighing on you, but maybe that's not how you feel. Maybe how you feel is, "You know what, I got to make these payments to Sallie Mae or whoever it is. It feels just like another bill, and I don't want this debt to stop me from building my own thing."
Especially when you consider that that interest rate or the money that you're earning on your investments it's not only going to be growing during that period that you're paying off your debt, let's say it's five or 10 years, but potentially for decades beyond. In 20, 30, 40, 50 years, I don't think that you would regret figuring out a way to do some investing while paying off your debt as well.
Tiffany Hanssen: Before we leave this, I just want to have you address the more human aspect of this, which is that debt weighing on people. To someone who wakes up in the middle of the night at 3:00 AM every day and is just so weighed down by debt, how would you advise them to, can you change your thinking on it? Should you change your thinking on it? What would you say to that person?
Amanda Holden: Very similar to what I said earlier is to do everything in your power, not to internalize that shame. I think it is absolutely outrageous that we have designed a society in such a way to burden what are essentially children with non-dischargeable debt, right? Student loans are the only types of loans that you cannot erase through bankruptcy. Why would it be the case? Why in a caring society would we do that to students, but not to corporations? Again, take any of that shame that you may have from the debt and place it where it actually belongs, which is in a system that is indebting children.
Tiffany Hanssen: We are eventually going to get to my question about credit unions, but we've got some folks weighing in on the AI thing with a couple of concerns. One, about how it's going to affect personal finance, and then two, about a potential bubble on AI. If we talk first here about how it might affect a single person's personal finance situation, this texter says, "I've been reading too many AI doomsday scenarios. I'm worried about the idea of autonomous agents hacking our financial systems. Is it time to stockpile some good old-fashioned cash for an emergency, as in withdrawing from investment accounts to put under a mattress?"
Amanda Holden: I think it's always a good idea to be prepared for the worst, whether it's about AI or something else. That means having accessible cash.
Tiffany Hanssen: What is the adage? It's like be prepared for the worst and expect the best or something like that, right? You just have to assume the worst is going to happen.
Amanda Holden: Sure. In terms of our personal economies, a recession is always coming. We just don't know when. In terms of our personal finances, yes, I would say have some cash somewhere safe that you can access if the worst happens. Also, just keeping money perhaps in a highly accessible bank account or two in cash, not applied to the investment markets. We're going to get there, but because investment markets are naturally precarious, that is your only return--
Tiffany Hanssen: AI or otherwise.
Amanda Holden: AI or otherwise. You're only making a return in the markets by taking some amount of risk. Let's put the investing piece on hold because when you're asking the question about where or how am I going to be affected by AI in terms of my personal finances, the biggest risk is your income. It's your income. If what you needed to do was to hear me say, "Here's one thing or two things that you should focus on in the next year or so," I would say focus on your income because you can't compound returns on money that you're not earning.
Personal finance is only helpful to a degree, but the most important thing is whether or not you're going to have money coming in. It's really, really scary. I think that we should be not battling this problem on an individual level, and we should be doing it on a collective level, but that's what I would focus on if I was trying to think about my own personal finances.
Tiffany Hanssen: Real quick on the AI bubble.
Amanda Holden: Yes, that's the other piece. Right now, things are feeling a little bit bubbly out there. So many of us are invested in the US stock market via something like an S&P 500 index fund. All that is, is basically one big basket of investments, in particular, its stocks, and you are investing in the 500 basically largest company stocks in the United States. AI companies have gotten so big; eight US tech companies have gotten so big, their stocks have now ballooned to a size that it dominates these funds. Basically, even though you're invested in 500 companies, 8 US tech stocks now make up 40% of that fund. You may not be as diversified as you think you are.
Tiffany Hanssen: As you think you are.
Amanda Holden: It is absolutely a concern. Actually, even just thinking back to your earlier question about should you follow the advice of influencers or finfluencers online who are telling you, "Just buy an S&P 500 index fund." What I can tell you is coming from professional investment management, it would never be recommended that you only invest in the US stock market. You want to consider diversifying in whatever way makes sense to you, whether that's into international stocks, into small stocks, into bonds, into real estate, into other hard assets, whatever it may be.
Tiffany Hanssen: Finfluencer, there's something I haven't heard before. All right. We're adding to my vocabulary. Excellent. Want to get back to something you mentioned earlier about flat-fee certified financial planners. Texter, just saying, "How do I find those people?"
Amanda Holden: I would just start probably by Googling. I can also direct you to different services. Domain Money is one; Hello Nectarine is one. I would start there. Hello Nectarine is kind of interesting. It's a company started by a friend of mine. What he did is he saw the world of financial planning as being quite inaccessible because it is because it's expensive, and that is somewhat by design, not because financial planning should be inaccessible.
I'm doing my best to bring education to the people that are often left out of these conversations, but because in order to make personal financial recommendations, somebody has to know your total financial situation, and it does take time. Through Hello Nectarine, you can hire a pay-by-the-hour CFP, which is just a much lower-priced entry point if you're just looking to bounce some ideas off somebody for an hour.
Tiffany Hanssen: To your point about creating conversations around this, we have Ryan in Harlem. Hi Ryan.
Ryan: Hey, how's it going?
Tiffany Hanssen: Good.
Ryan: A question. I had kind of two. One, Amanda, hi. What's one small habit or maybe like a ritual you've seen work really well to make money talk feel normal amongst my friends? Maybe once that door's open, how do I think about growing my money in a way that lines up with my values?
Tiffany Hanssen: Great. Two great questions, Ryan. First of all, helping create money conversations with your pals.
Amanda Holden: Thank you for calling in, Ryan. I think taking any sort of easy entry point, we're all complaining about money all the time, and so jump on it.
Tiffany Hanssen: I'm going to say yes and a lot of people, you start talking about money, and they just button it up. They don't want to talk about it.
Amanda Holden: Not everybody's going to be open to it. That's for a lot of reasons, some of them totally valid. I think coming together with other people who are wanting to talk about this, have a book club, have a How to Be a Rich Old Lady book club, and try to get the conversation going. Every group of friends needs a finance friend, right? I feel like we all take--
Tiffany Hanssen: A finfluencer.
Amanda Holden: A finfluencer friend. Every group needs one friend who's going to be bugging everybody to make sure that they're getting their 401(k) match. Ryan, it sounds like maybe you should be that person.
Tiffany Hanssen: Ryan, I feel like you're probably going to step up here. Ryan, I forgot your second part of your question. What was it?
Ryan: Just once the conversation's open, how do you continue to talk about making money that lines up with your values?
Tiffany Hanssen: Oh right. That was it. Lining up with your values. Good question.
Amanda Holden: It's a really great question, and it's probably the question that I am getting more on book tour than any other. I am having so many people asking me about the ethics of investing because what we're talking about is investing in a profit-producing system; that is what the stock market is. Often profit is gained through some pretty nefarious measures. So many people are now looking at their 401(k)s, and they're saying, "Why am I investing in the corporations that are threatening the very future that I am purportedly working toward?"
Unfortunately, a lot of investing is just inherently unethical, right? Because oftentimes the profit motive can be unethical. Now, there are some simple things that we can do to not invest in the waste of the waste. For example, you could invest in an index fund that invests in the stock market, but that strips out weapons and oil, for example, those types of corporations.
Tiffany Hanssen: I've seen that on-- I don't know where I've seen it, but it'll say the environmental fund or whatever. It's basically like a collection of what? Funds that align with my--
Amanda Holden: Maybe green energy companies. When you're investing, you can play offense, or you can play defense. With defense, we call that negative screening. You're screening out what you would maybe consider to be the most offensive corporations, but when you're playing offense, you're proactively investing in corporations or companies that you think are doing good or projects that you think are doing good. Playing offense is a little bit more risky. You're often taking a little bit more risk, whereas negative screening is adhering to this more kind of passive model of investing, but just trying to eliminate some of your exposure to some of the worst corporations.
Tiffany Hanssen: We've gotten some calls on this, and it was actually in my list of questions to talk to you about, which is we're talking about people who have money. A lot of listeners are paycheck to paycheck. They're working in the gig economy. They're working in a creative industry where they're not making very much money. Where when we're talking about investing or even making an emergency fund, which I know you think is really important for people to do, they're saying, "Yes, right. I have nothing at the end of the week. I am down to the nubs." What do you say?
Amanda Holden: That I believe them, that I believe that there's not more that they can do, that there's not more that they can cut from their strategy, and that there are very serious limitations to personal finance advice. What we actually need is collective solutions to make this society a more just and beautiful place to live. A lot of these solutions are only going to come through collective action. Personal finance is helpful to a degree. What I don't want people to do is to be getting scammed by the finance industry.
So much of the reason that I am still in this place that I am teaching personal finance, is because I came from the finance industry and I know how it operates. I see it as just another industry that operates in many ways, like a shakedown scam to be navigated for consumers to navigate, kind of like healthcare. What I actually believe in, what I know we all need, is collective solutions that we need to be banding together and working toward.
Beyond that, what I would say to a person is that, "Yes, you can't save money that you don't have." If the only thing that you focus on is trying to figure out a way to try to earn a little bit more so you can just sliver away just a little bit to build your financial security, that's all you have to work on now.
Tiffany Hanssen: One of the things I think for those folks who are really struggling when they hear, for example, an emergency fund, and let's say it may or may not be possible to siphon off a certain amount for an emergency fund, and they think, "That's why I have credit cards." Credit cards with high interest rates; it can feel like a slippery slope. Is there any other alternative, or not really?
Amanda Holden: To taking out debt when you need it? Sometimes we're--
Tiffany Hanssen: Again, you're laying out cash for this, but pet insurance for an emergency that I might encounter with my dog, or there are all of these kind of-- I think of them as micro insurance plans now, which in theory gets you away from the putting it all on the credit card situation. I don't know.
Amanda Holden: Some insurance is great and necessary, and some insurance is pretty bogus. Unfortunately, there's not a real universal or blanket answer I can give to that. I would say ensure where you can. Certainly--
Tiffany Hanssen: As far as the debt and credit card emergency fund,--
Amanda Holden: If it happens, it happens.
Tiffany Hanssen: If it happens, it happens. Also, don't beat yourself up about it.
Amanda Holden: Please.
Tiffany Hanssen: We're going to get back because I threatened to do it now a couple of times. Credit unions, you have strong feelings on credit. We've gotten a couple here. The texter says, "Can your guest please explain the pros and cons of credit unions versus a bank?"
Amanda Holden: Sure. In general, our big banks, our big commercial banks, your Wells Fargo, your Chase, your Bank of America, these are corporations that are beholden to their shareholders. Their goal as a bank is to make a profit for the shareholders, whereas credit unions do not follow this model. I believe that the way that I describe a credit union in the book is like a credit union is like Wells Fargo's hippie aunt from Portland.
As a person from Portland, Oregon, I can say that. The idea is that they are not-for-profit, and any, for example, interest you pay on a loan with a credit union, that money is being recirculated to the members of the credit union. For example, instead of funding Chase Bank's next fossil fuels project, that you would be funding your neighbor who runs the laundromat down the street.
Tiffany Hanssen: All right. The book that Amanda just mentioned is her own. It's called How to Be a Rich Lady. We are talking with Amanda Holden about personal finance today. We are looking for your questions. If you need advice, and also if you have some advice that you'd like to share, you can call us. You can text us 212-433-9692. This is Please Advice. It's a pop-up advice show here at WNYC. I'm Tiffany Hanssen, and we're glad you're with us. Stick around. We got more coming up.
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Glad you're with us here for Please Advice. It's a pop-up advice show from WNYC. I'm Tiffany Hanssen. We are talking with Amanda Holden, author of How to Be a Rich Old Lady. We're talking personal finances today. Call us, text us with your advice that you'd like to share, or maybe you're looking for some advice. 212-433-9692. Amanda, let's just dive back in here with Tom in Ocean County. Hi, Tom.
Tom: Hi. Wonderful program. I wish you a lot of success and longevity.
Tiffany Hanssen: Thanks.
Tom: Now I forgot my question.
Tiffany Hanssen: I can tell you it starts something you have overdue medical bill billed by both the provider, and there we go.
Tom: Yes, exactly. Exactly. There was big complications, surgery, cancer treatment, all kinds of stuff. One medical bill slipped through the cracks. There were multiple insurance companies, and I guess it was a co-payment or something like that. Didn't get paid. There were maybe three bills from the insurance company and two from a collection agency. Which one is better to pay? Do I pay the provider? Do I pay the collection agency?
Amanda Holden: Gosh, without knowing a little bit more information about the situation, I'm a little bit hesitant to answer that question. I would say, probably pick the one from the collections agency.
Tiffany Hanssen: Also, sorry you're having to deal with all this, Tom, but I think, yes, Amanda, collection agencies have a sense of urgency about them when those letters are coming to you, and they should be addressed the first, generally speaking.
Amanda Holden: I think so.
Tiffany Hanssen: We have a texter here who's taking some issue with my pet insurance. Just to be clear, I wasn't saying anything negative about pet insurance. I'm just saying it's out there as an option for people. A texter says, "For the record, pet insurance saved me nearly $10,000 in cardiac care for my dog for real," this texter says. It can help some people when the rubber hits the road.
Amanda Holden: No, and be insured, right? It's a great way to protect yourself on the downside.
Tiffany Hanssen: Also, I should note, Amanda, that we do provide transcripts of these shows. For folks who are like, "I didn't catch what she said," you can go to wnyc.org/advice. You can see all of our segments. We do have transcripts. Takes about a day or two, but you can find them there, and you can go back and look over the advice that Amanda is sharing with us today. Ellen in Manhattan, looking for a little advice. Hi, Ellen.
Ellen: Hey, how are you doing?
Tiffany Hanssen: Good.
Ellen: Great. My question was, I thought it was really interesting because I was just talking to my husband about this, this morning, about having an emergency fund. I actually do have, I don't know, like $1,000 stashed away, but A, how much would you suggest to have put away, I don't know, in the bottom of a drawer, like 1,000, 2,000, 5,000, if one can afford it, obviously. Also, I know this sounds a little loony, but in what form would you suggest it? At one point, dollars, or would you actually think maybe having a gold bar somewhere might be helpful? I know that sounds apocalyptic, but just wondering.
Tiffany Hanssen: Ellen, thank you so much for that. I appreciate it. Thanks for the call. Ellen, she's looking to know how much. Is there a calculator for that? Are you going to tell me there's a calculator for that?
Amanda Holden: It's actually a hard question to answer.
Tiffany Hanssen: Oh, interesting. Okay.
Amanda Holden: Because I don't know what your emergency is going to be. I can give you what is--
Tiffany Hanssen: Right to the point here, this person spent $10,000 on cardiac care for their dog.
Amanda Holden: Right. You just don't know. In general, the biggest risk that we all run is losing our job, perhaps unexpectedly. That is why a lot of advice around an emergency fund focuses on what type of money would you need to help fill that gap? For example, it is often recommended that you work up to six months of really stripped-down expenses, just getting food on the table and just paying your rent, paying your bills, and having that set aside in cash. If you tally that up, that's actually a pretty big number.
Building up an emergency fund, it is often the first financial goal, but that doesn't mean it's easy. It often takes a lot of time to build up the type of cash that I think a lot of people would feel really comfortable sleeping at night with. I like the $1,000 number. Start there. Keep, yes, some amount of that in cash at your place. We can talk about also potentially owning a gold bar or a silver bar. I know that we're talking about it a lot right now. Gold and silver is very, very expensive right now. There are costs of owning a gold bar. You probably also need to insure it and secure it in your house. Think of that as well.
Tiffany Hanssen: Tom, who had that question for us about the medical advice and which debt to pay first, we have a listener who says his advice or her advice, their advice is to pay the provider. They will inform collection agency, ask to lower the balance first. I work for the provider. Little smiley face.
Amanda Holden: Great.
Tiffany Hanssen: Translate that. What does that mean for somebody who's not understanding like, "Wait, the provider tells the--" What is going on there? What's the circle of life there from provider to collection agency?
Amanda Holden: Sure. Maybe I'm also not totally clear on whether these are the same bill or they're two separate bills. If it's all the same bill, then yes, this makes sense. You can go through the provider, who will then take care of it with the collections agency.
Tiffany Hanssen: Let's talk with Alan in Montclair, New Jersey. Hi, Alan. How are you?
Alan: Hi. Thank you so much, and best of luck with what's a great new program. My question is about a house that I love, that's an old house, and it's a two part. One about how to decide or figure out how I can stay in this house, which is too big for me, but I love entertaining, and how to do that. The second part, which maybe comes first, is I'm going through a divorce, and I want to keep the house for at least two more years just because I love it. It's an anchor. I have a garden and patio. How do I do the math of figuring out how much it's going to cost me to stay in the house, including costs down the line?
Tiffany Hanssen: Alan, thanks. There's some calculations that need to happen here.
Amanda Holden: Sure. I think it's just about putting pen to paper and looking at how much you're spending now and then also accounting for the cost of inflation in the future. That means being really, really honest about all costs of owning a home. Something that I find that people often don't do is they're often not truly serious with themselves about the costs of maintenance. That is why, to refer to our earlier question, it is often better not to maintain a big old house with a bunch of property taxes and so many costs of owning.
Tiffany Hanssen: Speaking of unexpected costs or emergency costs, a house can certainly bring that up for folks in a hurry.
Amanda Holden: I think one of the ways that we do this is we also talk with other people who are in similar positions and compare notes about what their costs are to try to get a more generalized picture about what the total cost will be in order to project them into the future.
Tiffany Hanssen: Again, friends, if you've missed some of Amanda's advice, we do have transcripts at wnyc.org/advice. It does take us a couple days, day or two here, to get the transcript posted, but you can find it there if you missed something that Amanda said, or you could buy the book, How to Be a Rich Old Lady. We've been talking with Amanda Holden about personal finance today. Amanda, thank you so much. This was so great. We answered a lot of good questions.
Amanda Holden: So many technical questions.
Tiffany Hanssen: So many technical questions. We did get some pet questions. I want to remind listeners, by the way, if you are looking for some pet advice, coming up next Tuesday, we're going to have a veterinarian in here. We're going to ask some questions about your turtle, I don't know, dogs, whatever it is. You are listening to Please Advice. It's a pop-up advice show here at WNYC. I'm Tiffany Hanssen. Hey, we got a first week under our belts. We're going to be back next week: Monday, Tuesday, Wednesday. We sure do hope you join us. Thanks so much.
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