Money Rehab with Nicole Lapin - “I’ve Never Invested Before and All My Money Is in a Savings Account. Help!”

Episode Date: October 17, 2024

If your money is just sitting around in a savings account, chances are it could be working harder for you somewhere else. This is the exact situation facing the Money Rehabber Nicole talks to today. When they go a level deeper, Nicole discovers how anxiety around investing is also at play. If you’re feeling skittish around investing or just feel like your money could be doing more, this is for you!   $ Take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Visit: http://chime.com/MNN  $ Looking for the perfect holiday gift for your coworkers, friends, and everyone in between? Choose Nicole’s favorite wine, Justin. Get 20 percent off your order for a limited time with the code “MONEY20” at http://justinwine.com/  $ Ready to find a financial advisor that’s right for your financial goals? Get matched with a trusted, vetted financial advisor at: http://moneypickle.com/MNN  All investment strategies involve risk of loss. The information shared in this podcast is for informational and entertainment purposes only. Listeners should do their own research and consult a financial advisor before making any investment decisions. See terms for additional details: https://moneynewsnetwork.com/terms/ 

I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start, or even too complicated, if, say, you want to put your summer home in Maine on Airbnb, but you live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you.

I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no

maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits

apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. If your money is just sitting somewhere in a checking or savings account, chances are it could better benefit you somewhere else. This is the exact situation facing the money rehabber I'm about to have an intervention with. She wants to make her money work harder for her, and right now she is not set up for success. When we go a level deeper, we discover how anxiety around investing is also at play here. So if you're feeling skittish around investing or just feel like

your money could be doing more for you, this one's for you. Laura, welcome to Money Rehab. Thank you so much. I'm so excited to be here. I've been a big fan for a while and I love everything that you're doing. Oh, thank you so much. Well, you're the reason that I do all that I do. So thank you. And thank you for reaching out. You DM'd me with a question originally about a rental property, but then you also sent me other information that I actually think is way more important to your financial life right now. Do you want to know what specifically caught my attention? Tell me. You said, I have too much money in my savings that I should be investing, but I didn't start making real money until the last two and a half years. Girl, what? That's how I felt. Okay. Well, how much do you have just sitting in savings?

Well, okay. Well, how much do you have just sitting in savings? Right now I have around 40 K just sitting and that's in my savings. I also have like my checking that are more of like the like six month kind of stuff that I did not include actually. Um, but my 40 K my savings and primarily that was because I was moving and I ended up like having to sell my car. because I was thinking I might have to buy a new car to get all wheel drive because I was moving out to the mountains. And then all the sales stuff that I just did moving, it kind of built that up. And then I wanted to kind of have that there. If I wanted to buy a new property, I'd have a down payment. If I wanted to get a car, I wouldn't have to finance it because of interest rates being so

high. But now I've kind of settled and I'm trying to figure out like what I should be doing with it. How much is in the checking account, which is my list? I know, I think I only have 8k in it right now. But that's kind of what I use to pay like my monthly bills and all of that kind of stuff. Cause I don't have credit card debt except for like my monthly one, but I pay it monthly. And then I paid off all my student loans last year. So yeah, that's kind of where I'm at in terms of debt. Cool. If you're paying it off monthly, by the way, it's not credit card debt. It's just, okay. I agree.

And it sounds like the 40 K is in a high yield savings account? Yes. It's in a 5% high yield savings account. Okay. You sent me a lot of background information on your financial life. You are so, so thorough, lady after my own heart. Let's fill in the rest of our money rehabbers with your story. Your money is not just in a savings account. You also have $90,000 in a 401k. Awesome. Is that the only investment account you have? Do you just have a brokerage account where you invest some or just the 401k account? So just the 401k and then my employee stock purchase program. So I have primarily ESPP in there, but there's like a tiny bit of restricted stock. And then I got brave and I sold my ESPP

like the last time it deposited or became available. I forget how that works, but basically I sold it immediately. And then I was like, oh no, what do I invest in? And then I was like, okay, I'm just going to like throw into Apple stock, just to see what happens as kind of like a trial. So that's where it's all sitting right now. But correct, I do not have any compounding accounts or anything like that. Was it CDs, but I don't have any stock stuff outside of that. And I don't say this as an excuse, but I grew up with a family that came from a different country and I'm from a different country. And so my parents always instilled in us, save, save, save, buy a house. You need a house. That's your priority. And so like stocks were never a conversation we had because my parents just didn't have the excess income to do that. So now I'm in a totally different financial situation and trying to learn it as I go. But I totally get nervous and I can be my own worst enemy when it comes to that. And I'll like freak out and panic and not do it. So that's why I was very excited to talk to you today. Well, I get that. I also, my parents also came from a different country and it was also like, just use cash, buy everything in cash, buy like a house in cash, keep cash in the house, you know, don't take on any debt, all sorts of stuff.

Well, just to clarify, so a CD would actually be through a bank, not a brokerage account. There are some brokerage CDs. But I think what you're talking about is a general brokerage account where you can invest in index funds, for instance, which would be my pick versus going into individual stocks. As awesome as Apple is and how that could just, a good store of value over time and will likely grow. Having something that is an S&P 500 index fund. Do you know what that is? Yes. Yes. So isn't that like the conglomeration essentially of all the big Fortune 500 companies and you could just get like a baby bite of each of them. So it's spread across, right? Yeah. It's a good way to think about it.

I learned that from you. Yay! That's awesome. Yeah. So the S&P 500 is an index of the 500 biggest companies. And so you get basically a little piece of that. Apple is in it too. So you would get exposure. NVIDIA is in it. So when you see NVIDvidia is up uh that gets a lift in the s&p 500 index fund which is just basically buying the market and it's really hard to beat the market and so it sounds like you need an account well where is that apple stock by the way um i have it with e-trade the brokerage because i get that for free from my company but is that account connected to the ESPP no or you cash that out and then put it in e-trade exactly they're well they're both in e-trade but I cashed it out and have a separate brokerage account that the apple stock is in

oh so you have a brokerage account under your name? Yeah, I guess I do then. Okay. I guess when I look in the app and it's just like my work stuff and then that, I always consider it the same thing. But yeah, they are separate brokerage accounts that I have. Okay, cool. So your high yield savings account is 5%, which is better than zero percent right um but it's not exactly what you could be making in the market which is do you know what historically it's seven percent it's like eight to ten percent uh okay and so it's it's a good it's a good bit more

that's historic of course like there are down years and recessions and whatnot. But if you're keeping it in there over time, putting your blinders on, then that's what you should be making if you were investing not as a day trader, but long-term investments like index funds or ETFs. So I think for you, you need to decide if it makes more sense for you to put some of your nest egg in a place with higher yields like the stock market. My producer told me though that you were scared to invest on your own. Yes. I've literally researched what are the core ones that are like free brokerage accounts and blanking on it on the spot right now.

But similar to E-Trade, but they're like the free options that a lot of people use to invest in the S&P 500. I think most of them are free. Okay, then I stand corrected. But I started that process and then I got so overwhelmed and I was like, oh no, E-Trade just feels the safest because I'm familiar with it and I like the app. And so that's why I just did the Apple stock. And then I got nervous and put it on pause and just shoved it to the side.

So how much Apple stock do you have right now? It's only like 2K. OK, so not much at all. I'm curious to get to the root of where this fear comes from. Um, I just don't want to do it wrong. You know, I don't want to be like, Oh shoot. I needed that to do X, Y, Z. Um, and so it's like a matter of figuring out how much I want to put in. I just get overwhelmed by it. Cause it's foreign to me. I've listened to like so matter of figuring out how much I want to put in, I just get overwhelmed by it because it's foreign to me. I've listened to like so many of your podcasts too.

And like, it's like, I'm almost there, but I just get scared. I just, I want to make sure I'm making the right decision. I think we're all in the same boat on that one. Let's go back to what you have to work with here. Hold onto your wallets. Money Rehab will be right back. live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high-quality local

co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly, I guess that's the best way to put it. But I'm matching with a co-host, so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card

debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime.

Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bank Corp. Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits.

Terms and conditions apply. Go to Chime.com slash disclosures for details. And now for some more money rehab. You told us that you doubled your salary, so killing it. Give yourself some credit, Laura. What you should do with your money is really going to depend on taking your goals and then reverse engineering from what those goals are. So for a lot of people, a big financial goal is owning a home. You already own a property that you're renting out. So your

primary residence is a rental? Yes, exactly. And you said that you were thinking about buying in Denver with your boyfriend and you said you'd do a house nup if you're not married by then, by the time you buy, which is awesome. Can you explain what a house nup is for any money rehabbers who don't know? Yes. And I have to shout out the real estate agent that I met. She was like, I would recommend it. But basically, it's a prenuptial agreement, but a house nuptial agreement.

So it's basically a document that you put together if you're going into buying a property with a boyfriend, a friend, whatever, a family, and you put this document in place prior to moving in so that if anything were to happen, you have it itemized exactly what your plan is if you were to decide to either sell the property, break up, hopefully not the case, but it's just there to protect both parties and protect your money and your investment in the home. I'm really glad that you're doing that. There are a lot of women in particular that get screwed on stuff like this. So really awesome that you're thinking about it. So, okay. That's the real estate plan. You

mentioned that you and your boyfriend are also planning on getting married. Yes. Do you want a wedding? Gosh, I don't. He does. Huge point of contention. But my parents, ironically, I always wondered why they never had a wedding. They got married in a church with like six people present. My mom didn't even wear a dress. She wore like a suit, a cute white suit, I must say. And so I was like, that's so crazy. Like I love a wedding dress. I want the big thing. Now that I know how much they cost, I'm like, absolutely not. I have no desire. I would rather put the money into a property or a honeymoon and actually not all the money into a honeymoon because good Lord, it'd be like Paris Hilton traveling the world the cost of weddings these days um so yeah that's a conversation that we are actively talking about

so I think there's probably gonna have to be a compromise both ways so there will have to be some money put into that because I know my parents do not have the money to get me to pay for a full-blown wedding yeah and how do you guys feel about kids he's an only child thank god so I never really wanted them because I nannied and knew how hard it was and then when I met him I started being like well I'd kind of be sad if I didn't so one maybe if it works out, because it's not always guaranteed that you can. And that would probably be two max. So that's kind of where my head's at with that. So I think these are the types of things that you want to reverse engineer from, like, what are the goals? So two kids, a wedding, a house in Denver, I think it's becoming more mainstream to talk about retirement planning, which is great. And I love that. No one wants to talk though about budgeting for kids or a wedding because that's a bill that's going to come before retirement. So typically for folks,

I recommend budgeting with the three E's, which means putting 70% of your overall budget into putting 70% of your overall budget into essentials, 15% to the extras. So all the fun stuff, going camping, if that's what you guys do in the mountains, I don't know, eating out, 15% to the end game. And for the end game, I think you're missing some low-hanging fruit potentially as an opportunity to invest beyond your 401k. You shouldn't just liquidate your savings. You do need an emergency fund if, God forbid, something happens to the awesome job and salary that you have right now. If you are months away from retirement, which I do not think you are, it might make sense to have more than just your emergency fund in savings. But for somebody like you with this really long time horizon and this flourishing career who makes a bomb salary and already

owns a home, it might make more sense for you to put more in the market right now. Do you mind me asking how old you are? I don't mind that. I am 32. Okay. So typically a starting point for a portfolio, like in a vanilla portfolio with an asset allocation is to put your age in bonds. So you're 32. That means 32% of what you invest would go in bonds and 68% in stocks. You could do 30 and 70 if you want. When it comes to which stocks you pick, you know I love S&P 500 index funds. There's SPY, VOO are examples. You can't just go into E-Trade and type in S&P 500 index funds. You need the address or you need the ticker symbol. But there's actually a mistake I see people make here often. They'll buy a lot of different S&P 500 index funds because

they want to diversify. But S&P 500 index funds are pretty much all the same. They'll buy a lot of different S&P 500 index funds because they want to diversify, but S&P 500 index funds are pretty much all the same. They're slightly different in terms of fees and allocations, but you really only need to pick one S&P 500 index fund of the variety that's out there. And lately, with the S&P 500 index funds getting so consolidated with some of the really big companies like NVIDIA, I also have been personally diversifying with more index funds that track other types of companies like the Russell 2000, which is basically a bucket of 2000 of the smaller cap companies. So cap is short for capitalization. I'm going to take a breath for a second. How does that sound or feel? It sounds good. Like it makes sense for sure. I guess in terms of the age and bond, so that 32-68 split, is that based off of like the 15% end game?

Is that based off of like the 15% end game? Yeah, exactly. So I would start with something comfortable. Like what would be 15% of what you're bringing in right now? I guess I would probably say just my base because that's what I made this year. So let's say that would be 20 grand, but that would be prior to taxes 401k and all that it would be at least 15 by the way if you want to go go more like i'm not stopping you but i think we just start somewhere and so when you were saying to do the 15 of the take home right okay so that would be it sounds like your emergency fund is already taken care

of. Your debt is taken care of. I think that just having a, having a number to start would be a good place to get started and you can have that amount automatically deposited. So it feels like the same as your ESPP where it's like coming out of your paycheck and you're not seeing it. Yeah. So I guess that would be around 750 a month. Okay. How does that feel? I think it feels okay, honestly, because I do put like a, it's 30 or 40% into that high yield. So I try not to touch it. And so that would probably just be coming out of that. Instead of putting it all into the high yield, it would have to transfer that over to putting it into investments. So I probably could do more now that I'm saying this out loud. Yeah, it sounds like it because I think you have like plenty in your high yield savings account.

Yeah, I do. You can even probably put some of that into a CD, but I'm assuming that those rates are going to be relatively the same. It's all going to be around 5%. Bonds are also going to be around 5%. Something that I look into too is bringing your portfolio back to home. I see people with investing anxiety prefer to spend their money on physical things like a house, a car, things that you can touch and see and feel. But you can invest in companies that make those physical things as well. And you could buy an Apple iPhone, which I'm sure you have, right?

Yeah. You can buy Apple stock, right? So like you could look around and see what products you use and you love in your house. Like if you love your phone, you love your computer and think that those are great companies, you can invest in that company that makes that thing instead of getting the thing. We have some merch that says stocks are greater than stuff. I think you're at a point where you're now understanding that and you're ready to take advantage of the power that stocks and compound interest can give

you because buying that thing is only going to go the other way. It's not going to appreciate it. It's certainly going to depreciate in value. What I would do is not just invest, though, in one stock that is generally risky. Like if one company disappears into thin air, crazier shit has happened. So I would look up a fund that contains that company and you can look up those funds and how they've performed over the last five years or so. You can do that on Yahoo Finance or whatever finance site you geek out on. But really easy to find. Apple is in those S&P 500 index funds that I told you about. But if you have another company that you love, I don't know, Lululemon or whatever that you think is going to do well because you've watched

it as a consumer. Most of our economy is driven by consumer spending. So when you see something like that, or if you want to buy yoga pants or whatever, and you're like, do I need more yoga pants or Lulu? And then I would just check and see what fund includes that specific company and maybe consider that as an investment. I like that because that makes me feel like I'm being more strategic with it. Former accountant, I can't help like the risk adverse in me. It just like falls out. And like you said, the anxiety across the board with just life in general. So this is no surprise. Yes. Anxiety is no stranger. Unfortunately. Hold on to your wallets. Money Rehab will be right back.

And now for some more Money Rehab. And now for some more money rehab. future husband wants to spend on a wedding since he's really driving that. How are you guys splitting it? If you are, it sounds like you're not getting outside help, which I can fully relate to. How much money you want to have by the time you retire, whether or not you want to buy a big mansion as your 50th birthday present to yourself or go on a big trip. Whatever you want to do, I think sometimes the antidote to anxiety is to put a number on it because sometimes we think it's out of reach or it's not attainable, but we don't really know what that looks like. And once we figure it out, sometimes it feels less scary than it was when it was a mystery in our minds. So if these goals have longer time

horizons, you have more time to weather the ups and downs of the stock market because it goes up and down. The general 8% to 10%, again, is over time. So you have to just leave it in there and put your blinders on. This is not like, okay, you're going to make this amount tomorrow. This is over a long period of time. And the longer time you have, the more your money grows. So if the goals are shorter term, I would say slow and steady investment options, bonds, CDs, your high yield savings account, much better fit. You can liquidate that more quickly.

So I would say, yeah, figure out how much money your future self is really going to need and then figure out how investing vehicles will give you the best chance to get there and really think about the time horizons for it. For wedding planning stuff, I don't know if it's in the next few years, those would be in vehicles that you could liquidate more easily. You don't want to go and sell your Apple stock essentially to pay for your wedding. That's what I'm getting at. No, not at all. Definitely not. That makes sense though. Yeah. I think that the 15%, like just wrapping my head around that on a monthly basis is super helpful because it's giving me a number to kind of start with and just see how it feels. And then just growing from

there, because like you said, I have the nest egg and it's solid. So it's like, it gives me a lot more freedom to what I'm doing month to month. And I'm very lucky for that. So I, yeah, I need to get more serious about it. And I think that makes sense. I mean, you're lucky, but you're also good. You're good at your job. You're good at getting rid of debt. You're good at doing your homework. You're good at sending financial documents. You're good at so much. It's not just love. Thank you. I appreciate that. You've definitely helped because I did start elsewhere with another financial podcast. And had I followed those rules from the beginning, like no chance I would be where I was today. And I think you said it in one of your podcasts where you were like, if I can get free money from a credit card, why wouldn't I, if I'm going to be

spending the money anyway. And I could not agree with that more. And that was the biggest irk I had with following other podcasts and hosts or whatever. And so that to me was like, oh, it feels like inauthentic because that's not how I live my life. Like I will never be that person. And I'm also not religious. So that kind of played into it as well. So, you know, it was very awesome when I found you. And I was like, great.

Like someone who's like relatable. They know what they're talking about. And like, they actually are speaking to regular people, not people that are bringing in like millions a year. So it was really awesome. So thank you. Thank you. I hate Dave Ramsey too. So I wasn't sure if we'd have to cut that. So I'll try lightly. It's, it's. It's just some of that stuff really, really upsets me and boils my blood. I try to be as honest as possible with what I've gone through and the fits and starts, and it's not always been easy. And I've needed help, and that doesn't mean that I'm bad or dumb. And I think we just all go through hard times. And I think, you know, philosophies that he espouses of like no debt, you know, zero credit score are just not realistic when like life shit happens. It's going to like, you know, anyway, you could go on and on and on about this.

But I'm really, I'm so, so proud of you. And I'm so proud of the progress that you've made. Truly. I can just see the possibilities here. You're like set up for mega success. What do you think we need to do to make you make your first investment? Well, now I know the amount. So that was like a big thing. I have the brokerage account, like you said. So I feel like I just need to figure out which ones to invest in, which I've got my options written down here. So S and P you said S P Y V O O. Yeah. I V V I V V. Yep. And figure out which one I want to put that into. There are other ones too, of course, do your own research, but really see which one makes sense for you.

Look at their expense ratios. But generally, I'll just say like all of the S&P 500 index funds are relatively similar. So you're not making a mistake. Like the biggest mistake you could make is just not doing it. You're never as young as you are today. So today is as good a day as any. Let's fucking go, Laura. Yeah. I'm excited. I love it. Money Rehab is a production of Money News Network. I'm your host, Nicole Laffin. Money Rehab's executive producer is Morgan Loy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be

honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.