Transcript
WEBVTT
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And welcome back to Pastor Plek's podcast.
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I'm your host, pastor Plek, welcoming you to another show that you are going to truly enjoy.
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Katie Sass, I'm so glad you're here to join us.
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I'm so glad I'm here.
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Yeah, and then also back once again is Jake Ridley, a financial planner with Astoria Wealth Management and really grateful to have you back.
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Love your perspective, love your perspective on all things money managing, and we're going to get right into it.
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The big question on my heart, which should be on yours, if you're all about capital campaigns and getting loans when is the Fed going to cut some rates?
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Jake, tell us the answers.
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We don't know, but most people think towards the end of the year.
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Um, today we just had an inflation reading that came in a little bit lower than what was expected which is good for those of you like sounds like yourself yeah.
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Well, the church is trying to get this loan and we need, you know us to have raised enough capital, the loan rates low enough that when we go in it's like one big happy.
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So the good news is, yeah, the end of the year is kind of the consensus of when they'll start lowering rates, kind of.
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The bad news maybe for you is it's not going from five back to two.
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It's going like five to 4.75.
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I feel like this has kind of been a train wreck.
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It's like you just can't look.
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This has kind of been a train wreck that it's like you just can't look away.
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It's been a long it's been a long long time, but you know that's the Lord, right he he, do you not?
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feel that way sometimes, or am I just like the outsider that?
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Oh, I just totally see it.
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Like God gave.
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It's not like we had to really do anything other than be here so I can receive it.
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It's difficult for us to wait, but it's all part of it we need about now.
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All goes according to plan with loans and everything.
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We just need about another $140,000 or so-ish yeah, give or take $140,000.
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I thought you were referring to the Fed being a train wreck.
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I was like we're really going to get into it, but the Fed being a train wreck, I was like we're really going to get into it, but the Fed is a train wreck.
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I don't even know who we're talking about.
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Okay, real quick.
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Talk to us about Jerome Powell, Jake.
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I just want you to know that this is my expertise Financial planning and finances and budgeting.
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This is my area Like wheelhouse, crush it.
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I know a ton about it.
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Yeah, so talk to us about who Jerome Powell is and why we should care.
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He's the Federal Reserve chairman and the Federal Reserve sets interest rates why do they have that power first off?
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Okay, it's ask you that, oh gosh, why do they have that power?
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It's to maintain stability right in the financial system but is it stable?
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Is there stability?
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Well, that's the argument right.
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But you know, one of the takeaways from history of the Great Depression was that the Federal Reserve was too tight.
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They weren't allowing people to borrow money as fast as they should have.
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Which lower interest rates does that?
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People borrow money more frequently the lower their interest rates are.
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But hold on On lowering interest rates.
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Doesn't that affect a bank and how much money it can make?
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So it's like really regulatory, yeah, but they keep their spreads pretty because they lend out money.
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So in theory, yes, but there's all sorts of practical reasons why that makes sense.
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So the bottom line is it's just the speed at which people can borrow money which can stimulate the economy.
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People build houses faster because people can borrow money, and we saw this during covid, right, interest rates dropped to basically zero and you saw housing prices go through the roof, right.
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That's because people could borrow at much cheaper rates, so it was a lower monthly payment than it otherwise, right, you know, would have been right what yeah?
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go ahead, so lower rates.
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That was the reason houses were being sold for like double than what they.
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That was a big reason.
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Yeah, because they knew that the people buying could get more money.
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Yeah, totally.
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I mean most people when they go to purchase a house, look at the monthly payment right.
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Yeah.
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And so the lower the monthly payment.
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So interest is a big component of the monthly payment on your mortgage, and so if your mortgage payment is lower, that means you can buy a bigger house, right.
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And so that means you can buy a higher-priced asset because interest isn't as high.
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Right.
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So it can inflate the values of things.
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That's one of the reasons I mean work from home was a big reason yeah.
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And people need to invest in their house, and now I have a home office that I have to.
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Yeah, there's lots of different reasons, but that's the general rule.
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The lower the interest rates are, the higher asset prices go.
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Assets meaning homes, anything you've got to borrow money for which is most things, even cars.
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You sell cars.
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Right.
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Shoot the prices.
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Use cars Increased in value Right During COVID when that doesn't happen.
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That doesn't you always think once you drive that car off the lot it's going to lose value.
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No, it turns out it's going to appreciate it Right, At least in that time frame.
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All right.
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So when we talk about the things that the feds will get, inflation is one, Is it jobs is the other.
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Stable employment is one of their mandates.
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Yeah, and so yeah, but they can be in conflict.
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It's a tough mandate that they have, but the bottom line is they're supposed to keep things.
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They're supposed to grease the wheels of the economy and make sure that money is continuing to flow through the economy, that things don't seize up it seems to me.
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This is the part that I don't fully understand.
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It seems the only lever drone pal has to pull is the um interest rate yeah, and that's a huge.
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That's a debate on.
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Is this really?
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Or is inflation coming down because the fed raised interest rates?
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Or is it just because supply chains so it's definitely not as simple as interest rates go up Like it's not?
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that the world doesn't work that simply, it just seems like it's just such a you've got one job.
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It's a blunt instrument.
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It's a very blunt instrument.
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It feels like yeah, I've got this big sledgehammer and give it a whack.
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Well, I feel, got this big sledgehammer and give it a whack.
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Yep, I feel like they're just having a bad day and let's just make it suck for everybody else.
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Yeah, that's how some would take it, that's for sure.
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All right, okay, let's talk about this, because we're talking about money, especially when things get tight, and retirement.
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We talked about this a little bit last time, and the big question that many people have is is it okay to save for retirement, katie?
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What do you think?
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Why would it not be okay to save for retirement?
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I'm just curious.
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You need to spend it all YOLO.
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I don't know what would you think is when I say save for retirement?
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You're like thumbs up on that.
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Well, the live recklessly side of me says don't save for retirement, just live for like.
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You don't even know if you're going to be alive at 50.
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Like you have no idea, right.
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And so why would you save so much money to live well as an old person when you don't even know?
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When you can live well as a young person.
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You could live well right now because you're alive.
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But then you know the wiser, more logical side of me that doesn't.
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It's not as loud.
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Right as my live recklessly.
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side Says well, do you want to live in a cardboard box when you're 60 years old?
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Yeah, so how does Ryan, does he help manage that?
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for you.
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He's a saver.
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Okay, and you're the spender, yeah, and how does that work out?
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You know, he's just like.
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I don't touch the phone, I don't you just like hey, give me my.
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Do you do it by the cash system?
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No, Um we.
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What's his name?
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Ramsey.
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Dave Ramsey Dave.
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Ramsey yeah, we appreciate him, but he doesn't.
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We don't do the.
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We have credit cards.
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He's anti-credit card.
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We have a credit card, but we pay it off every month.
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Sorry, it's okay.
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Yeah, so I think that's how most of us Well, I don't say most of us, that's how at least I operate Talk to me about what most people should be doing, and I know most people is probably the worst thing to say, but, generally speaking, here's what the majority of people do.
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Generally speaking, you want to be saving 10% to 15% to maybe even 20% of your income towards retirement and retirement being your 401K, 403b, individual investment accounts.
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You know, inside of those accounts there are investments, and so most people a target date fund is a pretty good option.
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A target date fund is it'll ask you what date do you expect to retire, and so if it's 30 years from now, then you'll pick the target date 2055 fund and, uh, again, the general rule of thumb is the younger you are, the more risk you're able to take and the more and risk and return are linked at the hip yep so the more risk, which is volatility, the more it goes up and down, the more return that you'll make, and so that generally means a portfolio of stocks.
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So stocks are ownership shares of individual companies in the US and a target date fund will have tens of thousands of those companies inside of it.
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Fund will have, you know, tens of thousands of those companies inside of it, and when you're young it's more stock heavy to the tune of you know even 100 stocks, zero percent bonds, and then they reduce the stock and bond or they reduce the stock exposure as you get older, right, and so if you're retiring 2055 and we get to 2045, the fund used to be 90 stocks 20 years ago.
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Now it's 60 stocks, 40 bonds.
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So all that to say 10 to 15.
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If you're young, you know 25 or 30.
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That's a good rule of thumb to start saving when you talk bonds and I know I'm about to get out of my depth um, but when you talk bonds, are you talking about like bonds, like obviously government bonds, but like city bonds, like I'm gonna buy the municipal yeah, detroit bonds total.
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So bonds as a whole include everything from the government lends money in the form of bonds to companies, to municipalities, like you mentioned, and that's what's considered the bond market right.
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So it's made up of all of those.
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So you're real quick.
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Yeah, um, ava would like you to know and that's what's considered the bond market Right.
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So it's made up of all of those Real quick yeah, ava would like you to know that she's four.
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Okay, I appreciate that, ava Okay.
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She's been telling me, to tell you that for the last 10 minutes.
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Ava, are you four years old?
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Oh, that's very exciting.
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I love your shoes too, Ava.
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Those are some good looking sparkly shoes.
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Like the whole time she's been circling me.
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She's like will you tell them I'm four?
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Will you tell them I'm four?
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Did she just turn four?
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She turned four on Monday.
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Hey congratulations.
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She's like she wants everyone to know.
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Well, that's good, hey everybody out there.
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Ava is now four and she's been thumbs down on the bond market and I don't really know why.
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A bond market.
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Bond market so you buy into.
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Detroit is raising money for something.
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Why do we care about what Detroit's doing?
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I don't know.
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I just threw out a crappy city Because they pay you money.
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Yeah, you lend them money and they pay you interest.
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Detroit does.
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Yeah.
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The whole bond market does, the whole world does.
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Yep, so you give them.
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I've never even heard of a bond market.
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I know that's why we're here.
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So let's say, you can buy a school district right or buy into a school district whatever proposed bond.
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I think you invite me on to the least listened.
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Last time we were talking about pastor opting out of Social Security and now we're into the bond market.
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All right, sorry, into the bond market.
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Nobody really cares about it, but I find it fascinating because it's one of those things I just found out about and now that's all I can think about, so it went down in value the most it had ever gone down in value the bond market did in 2022.
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And that's because the interest rates went from zero to five, which you would think, well, that's good, right.
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Higher interest rates better, that's great for new bond.
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I mean, that's great for bonds that are new, but you're sitting there holding a bond that is got a one or 2% interest rate, and now there's a 5% interest rate bond dangling out there.
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You're one or 2% drops in value, and so that's why 2022-.
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Can you get out of a bond?
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Yeah, you can sell it.
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It's just like it's like a stock.
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Yeah, you can sell it and take a loss and so 2022 was the worst bond market in history, going all the way back to the 1700s.
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So that's why.
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That's why Okay, that's why I've heard Don't do bonds, yeah.
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Okay, all right, we'll get off.
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You have the best questions.
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Well, I don't know that you're going to think it's cool or not, but so I am.
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I work for a company called Monet now and it's like a hair care, like beauty company.
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Do you know?
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Have you ever heard of it?
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No, okay, this is good, because I didn't want you to like, have that look on your face of like, oh, where are we going?
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Does it have a reputation?
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Oh, oh well well, you know, it's one of those like multi-level marketing okay, got it.
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And so some people like hate it and some people but like, get off, get out of here with them, but it's not, it's not actually the product.
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This is an elaborate pitch well, so they really called you in here for with this.
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Yeah, go ahead so they just started this thing where, like you can uh, if you like get to a certain rank in the company, you can have a share of the company.
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But it's a private company.
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Right.
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And so, like when Ryan first heard of it, he was like this is stupid, like you can't have a share in the company because it's not a public company.
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But like they're using it as like a bonus program, so like but like everyone within the company is like no, it's real like, and so every quarter, depending on like, how many shares, you can get up to two shares in the company.
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Like it's like a almost a billion dollar company are you able to cash out?
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um, well, you get your.
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You get like ten thousand or four, I don't know.
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You get like $10,000 or $4,000.
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I don't know.
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You get like thousands of dollars every quarter if you're at a certain rank.
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Nice.
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Depending on how many shares you have, but I don't know if that's money, like you're getting paid money, or that's how much a bond is, or a share is.
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No, you now own a piece of that company.
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And so now you're entitled to the profits of that company.
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And so if monet generates a million dollars in revenue, you know, in a given time period, yeah, and it costs them eight hundred thousand dollars to generate that revenue.
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So now there's two hundred thousand dollars of profit, then you get a share of that profit.
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And so they've got to decide whether there's probably some agreement or some stipulation on they can either issue a dividend or they can reinvest that profit back into the business to grow it more.
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Right, does that make sense?
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So you should get some cash flow.
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There should be some cash that gets generated off of it, which is called a dividend.
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But to his point, on selling it, that would just depend on if there has to be a buyer.
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But there doesn't have to be an outside buyer.
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There can be inside buyers.
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Wanting to take over the company or get more property.
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Just want more shares.
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Yeah, more shares all right, so back to this retirement thing tell me about?
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is it okay to save for retirement?
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That's the big thing like?
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Is that hoarding, when you should just give that money away and trust jesus or what?
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wait, give it away.
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Why would you give it away?
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To Jesus, because he's got, isn't that what the Bible says.
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So wait?
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You're saying don't save your retirement.
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I'm asking the question.
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You're saying give your retirement, why not?
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give it?
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I'm just asking the question here Because some people eat their retirement, some people give their retirement, some people save their retirement.
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So yeah, I've that it.
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You know, I've heard christians wrestle with whether it shows a lack of faith for saving.
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If saving for retirement shows a lack of faith, that you're not trusting god for provision 30 years right now, or what, whatever okay, and so then they would say well, saving for retirement is is bad so they don't see that as like you're just being wise with your Some don't.
