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Hey guys, are you ready for some money rehab?

Wall street has been completely upended by an unlikely player, GameStop mean and should.

I have a 401k?

Because you don't do it.

No, I know, girl.

You think the whole world revolves around you and your money.

Well, it doesn't charge for wasting our time. I will take a check.

We got an old school show.

You recognize her from anchoring on CNN, CNBC and Bloomberg. The only financial expert you don't need a dictionary to understand, Nicole Lappin. Today's episode all started with money rehabber Jen. She wrote in asking for advice for her bestie, Chris. And may I just say, I love that. That is an excellent bestie. The best bestie, if you will, because friends don't let friends fuck up important financial decisions. And Chris does have a big financial decision to make. He's just recovering from a difficult divorce, which we, by the way, decided to cover in another phone call because that's a whole other barrel of monkeys. In this conversation, we talk through how to handle a big inheritance that's coming to him. He's thinking of buying a house all in cash. But should he? Jen and Chris, I'm so excited to have you welcome to money rehab.

I am so excited to talk to you.

Really excited. Hello.

Hello.

So, Chris, you are going to be the star of the show today, but I want to start with you, Jen. Jen, you reached out to us initially. Can you tell me why?

Chris and I are good friends. However, he is about to come in to some money, an inheritance, if you will, and thinks that he wants to just go put it all down on the house. I feel like you're going to tell him that might not be the best choice and that we should talk it out.

I love talking it out. So you mean you want to pay cash for a house, Chris?

Yes, I do. And I'm nervous about it because it's probably the largest purchase that I will ever make. But I like the idea of not holding a mortgage and essentially just paying, like, the taxes for the. For the property, because, I mean, once the property is paid off, it has its value. So if I had to borrow against it, I could.

Okay, let's put a pin in that for a second. Let's take a step back. Can you tell me a little bit about this inheritance? I mean, to figure out your financial roadmap, it would be really helpful to know how much you're anticipating receiving and when.

As of right now, last that we spoke to the lawyers, about 338,000 once it gets converted to US dollars. Half of my family is from England, and so we owned hotels and different businesses. And so now that my grandparents have started passing away, this was left to all of the grandkids.

And you are in what state now or what state will you be receiving the money?

Ohio.

Because the reason I ask is that they are states with inheritance tax. Have you looked into this? The federal government doesn't have an inheritance tax. Ohio isn't one of the states that has inheritance tax. But have you talked to an accountant about it to see how much you're actually going to get?

I've only spoken to the lawyers and then their estimates with the break. It's not an estimate. That's. We're just waiting on a final sign off. So that was once it goes through the conversion, that's how much that I should have. My brother's receiving the same amount as well.

Okay. Yeah.

I mean, the sterling of the pound is very strong. Where are you planning on buying this house?

It was either going to be in either, like, Beaver Creek, Ohio, which is near red Patterson Air Force Base, which is the largest air force base, I guess, in the United States, or centerville. But my kids go to school in Beaver Creek, so I'm trying to stay within Beaver Creek.

So you're looking at houses around, what, 300 grand in Beaver Creek? 250.

Around 200, yeah, 250 on the high side, 250. Like, minimum, up to 275, 295 max.

There are some scenarios that. I don't hate this idea, but I need to know the rest. Do you have debt?

I am debt free now, but I wasn't always that way. And so, like, with me getting divorced, like, now that I've paid off all of my, all of our debt from divorce, and I don't pay out of money anymore, it. I don't carry, like, a revolving debt. But my credit. My, my credit. No, no credit cards now. Um, I do have a car payment, um, which I'm planning to pay off by April. Not separate from inheritance.

And do you have a current mortgage?

I do not. I rent because. So when I. When I got divorced, I didn't know if I wanted to stay in Ohio or move someplace else, so I decided to rent until I figured things out.

That makes sense. Do you want to stay there?

I'm here. Like, I'm here because this is where my kids are, and I get to be a part of their life every day, and so that's why I'm here. I stay in Ohio. Do I want to stay here? No.

How old are your kids?

Soon to be twelve. In, like, five days. Ten and seven.

Okay. So you have eleven or so years, if they're gonna go to school there, that you want some sort of presence there. You don't want to move them out of Ohio?

Yes.

So you need some sort of place to be based on whatever custody you worked out to be near them in Beaver Creek?

Correct.

Okay. Do you have an emergency fund?

It's low, but, yes, I do.

Cool.

How many months, approximately?

I can go four months right now, if not not working at all. So that's. That's like, my rent, car payment, like a budget of groceries, about 300 a month. So it would be, like, very slim, but I could. I could do four months. Exactly.

And beyond that, what do you have in terms of investments or other savings or other retirement accounts?

So I have my 401k through my company.

How much is in there approximately? Do you know?

Last I checked, it was like 47,000. It was $47,100 and some change. And then I have, like, just, like, everybody in the pandemic, you feel like you became, like, a stockbroker. So I. Like, I have some. Like. Like, I've invested in, like, certain companies, like the Vanguard group. I do. Like, I have an investment with them of about $1500 total that I've invested with them. And then I probably have, like, $800 in cryptocurrency.

I mean, when did you get that cryptocurrency? It could be way more than that.

It was. It was within the last year, so it's not way more than that yet.

All right. And those are your investing accounts. You have an account with Vanguard. Hopefully it's not all in one stock.

No, I diversified.

Yeah, you do. Look at you entering money rehab, like in intermediate level.

You know what? I don't. You know, this. This sounds so silly, and you're gonna think it's silly, but a long time ago, like, Chris Rock had, like, a comedy special, and he used to just talk about diversifying your portfolio, and so that's it. I don't know why it stuck with me, but I'm like, I know I can't have my money on what's what.

I love that so much. Listen, if you learn from me, from Chris Rock is even better. Honestly, wherever you picked up that information, I'm stoked. Hold on to your wallets, boys and girls. Money rehab will be right back. Now for some more money rehab, you have the skeleton of good financial elements in place for yourself right now. Why would you want to buy a house outright and put the majority of your inheritance into that house versus putting most of that money into investing? Is there a particular reason?

I guess it's. I just feel like that's what you're supposed to do, I guess, like, the old fashioned part of me is like, I'm supposed to use. Everyone's supposed to have a home. And so I also like, because I've been renting so long, I kind of wanted to have a place. I wanted to have, like, my own roots and start, you know, be a part of my community. I know you can be a part of your community in an apartment, but.

No, I fully get it, by the way, you know, a house. Buying a house is not a completely financial decision. There are a lot of emotional ties to building or buying a house or paying for it outright, if you can. I mean, as somebody who grew up, you know, moving around a lot and being housing challenged and having housing insecurity and food insecurity and all of these types of things, and having, you know, a lack of roots or a lack of certainty, I fully get that there is not a price tag you can put on that security, and knowing that no one's going to take that house away, and knowing that the bank's not going to come I mean, my childhood house was foreclosed on, and I remember that day when everything was out in boxes, and I never want to experience that again. So I fully empathize with that desire. It sounds, though, that those roots are only going to be planted, so to speak, for the next decade or so. While your kids were in school there, if you had a crystal ball after that, and they're all in college in different places, would you peace out?

Yeah. If they're all in, like, different parts of the country or the world, yeah, that would be a wrap.

So if you told me that you are going to raise your kids, be part of that community, run for friggin mayor of Beaver Creek, like, die there, have a whole, like, area in the graveyard, then I'd be like, hell yeah, get that house. Get that house. And I'd be cool with it. And I would take account those emotional issues and say, you know what? That's as good a reason as any. And if you're going to sleep better at night, that's really, really valuable. It might not be getting you the best bang for your buckley, but it's really, really important. And it's important to you. However, you're saying that you're going to be there for a period of time that, you know, at the end of that, you're going to have to sell that house unless you had another idea for it.

Probably. Probably would have just sold it. Yeah.

I mean, it's really not the best mindset to go into a big purchase, especially of a house. Thinking about selling it. It's not great to go into a relationship thinking about getting divorced and the contingency plan. It's not great to go into a job thinking about leaving. Right? This is not good. Listen, I'm not about, like, woo woo juju stuff dictating our financial life, but come on now.

I never thought about it that way. I just always thought about it as an investment. Like, because I thought of it because homes, especially now, like, how it's put out there, like, you need to have a home. And everyone's, you know, it feels like everyone's just trying to, like, buy up as much property as they can.

Who. Who's everyone? And who's told you this?

So, like, folks, some, like, there's a couple. A couple of people that I follow on, like, Instagram or, like, he's a property investor and he's like, I bought this property and this is, you know what I'm personally going to keep it for. I have friends that are buying property, so I thought that's what you do.

Makes sense. I totally understand why you would feel that way. A lot of those folks on Instagram, FYI, do have their own motivations and agendas around that. And we've been told for many, many years that a house is a good investment. I mean, we've been told from a lot of old school financial experts that that's the american dream, right? That, you know, Grandma bought a house when it was 50 grand, and then grandma sold the house when it was 250 grand. And that's an amazing investment. And this, like, better than going to a casino. Now, what folks forget when they talk about housing in that way is inflation. So when Grandma bought that house and it was 50 grand, Grandma was also paying $0.05 for a movie ticket. 50 grand when grandma bought it was not the same as 50 grand when she sold it. In this sort of fictitious scenario that, you know, people talk about as why housing is a good investment. Plus, grandma probably put a hell of a lot of money into that house. Grandma's. I'm just making this up. Grandma's basement may be flooded. Grandma had to replace the roof.

Grandma needed to hire a bunch of folks to do all sorts of random shit because it broke. And you know what? You look in the mirror and you're the landlord, so there's no calling a super when there's a flood or there's whatever. Grandma got put a lot of money in there that grandma. That's not accounted for in this fairy tale story of why housing is such a good investment. Housing is not a good investment. Across the board, the largest study ever done over time by the folks that do the case, Shiller index, which is a big housing index, show that housing, when accounted for with inflation, does not keep up with the pace of how the stock market grows. So adjusting for all of these things and a. Yeah, adjusting for feeling swayed by different anecdotes, right. You feel swayed if you hear somebody on Instagram or if you hear a friend who bought a house for 100 grand and sold it for a million bucks, you think it's understandable that that's commonplace, right? I mean, just in the same way as, God forbid, if you know somebody who's somebody died in a plane crashed, then you are biased in that way against what the data shows.

To think that that's more likely to happen, it's just human nature. It's totally understandable. But when you're dealing with this size of purchase, I would encourage you to look at the numbers, or I'm happy to tell you the numbers of what it actually is versus what you've heard. And by the way, just because it's been done a certain way, just because, let's say your family did it, or just because you think that that's what it means to be a good father or good man or whatever it is, this is your life. Only you have to wake up in your life. So the fact that you should do this, maybe you should. But you have to ask yourself, is this right for Chris? Maybe it's right for some other folks, maybe it's not right for you, but there's no shoulds at all. So I would just say, forget that part. There's a lot of different ways to grow real wealth and generational wealth without having a house, all of your money tied up in bricks or wood or whatever the fuck houses are made of. Clearly, I'm not a home builder, but to have all of your money tied up into that, could there be a scenario?

So bottom line, doing that is not the best financial move. If it's the best emotional move and if it will save you in therapy bills and help you sleep at night and whatever else, then I fully get that it's just not the best way to grow that money, to grow that windfall. That's what you call a big hunk of money that you're getting. The best way to grow that money is by putting it in the market, by investing it and having that grow over time. You want to account for inflation. Inflation is growing at about 3%. So if you put your money in the bank, in a checking account, or in a savings account, and you're getting what, less than a percent, that's not going to even account for inflation moving forward. So the stock market over time will give you about 10%. And if you -3% for inflation, it's about 7% inflation adjusted over time. If you're looking at this purely from a financial perspective, that's what the numbers show. So if you want to grow that hunk of cash, the best option is to, if you want to even buy a house and get a mortgage, mortgage rates are still really low and then use some of that money to put in the market to grow.

Just get out of your head that housing is a good investment. For today's tip, you can take straight to the bank. If you have a buddy who needs some money rehab but isn't doing anything about it, email us@moneyrehabicolapin.com. dot I would love to have you guys on the show. Like I said, before. Friends don't let friends fuck up important financial decisions. So whether you have a friend who needs some money. Rehab. Or you're just asking for a friend, I'm inviting myself to crash your best friend power hour. Your new financial bestie right here.

Reporting for duty. We spend money, money, money?

Rehab is a production of iHeartradio. I'm your host, Nicole Lapin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG money rehab team. Michelle lands for her development work, Katherine La for her production and writing magic, and Brandon Dicker for his editing, engineering, and sound design. And as always, thanks to you for finally investing in your self so that you can get it together and get it all.

You spend money, money? You spend.