Unlocking the Secrets of Smart Debt Management with Joe Garrisi

How do you manage debt? It's a tricky subject. Prepare to untangle the complexities of debt management with Joe Garrisi, the brains behind Backwards Planning Financial, who joins us for this insightful conversation with today's guest host, Dan Berkholder. From the popular debt snowball approach to the more nuanced strategies of debt avalanche and consolidation, we'll illuminate the path to financial freedom for you. And hey, we don't just stop at theory—we'll give practical insights into managing credit card debt, including the pros and cons of balance transfers.

Ever toyed with the idea of paying off your mortgage early and wondered if it's a smart move or a financial faux pas? Don't fret, we've got you covered. With a hypothetical 30-year mortgage valued at $400,000 and the possibility of a Roth IRA contribution, we built two scenarios for you to consider. You'll be amazed at what investing the difference in a Roth IRA can bring in. Hint: it's a whopping $400,000 extra, and why the tax-exempt status of a Roth IRA shouldn't be overlooked.

We dive deep into the realm of compound interest, balance transfers, and credit card strategies, helping you steer clear of the pitfalls and making the most of the benefits. As we unravel the concept of Backwards Planning Financial and the Rule of 72, you'll discover how to minimize risks and optimize returns. This is not just another financial advice episode; it's a roadmap to successful debt management, bursting with practical advice and strategies.

Talk to Joe Garrisi about managing your wealth.

Sign up for Barbell Logic.

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Start banking with Private Family Banking. You can reach Private Family Banking Partner, Chuck DeLadurantey at chuck@privatefamiliybanking.com, call him directly at 830-339-9472, or download his e-book HERE. 

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Transcript

Speaker 1: 0:01

This episode of the Hard Men Podcast is brought to you by Salt and Strings Butchery Order your custom beef bundle. Today, it's also brought to you by Private Family Banking helping Christians take dominion through privatized banking. And finally, today's episode is brought to you by Backwards Planning Financial building multi-generational wealth with Joe Garrisey.

Dan Berkholder: 0:24

Well, welcome to this episode of the Hard Men Podcast. I am your guest host, Dan Burkholder, and today I have a returning guest, Joe Garrisey. Joe, welcome back to the podcast.

Joe Garrisi: 0:37

Thank you. Thank you very much for having me again.

Dan Berkholder: 0:40

So, mr Garrisey, if you didn't meet him last time, he was on the Hard Men Podcast. Mr Garrisey was a captain in the army. He drove tanks, so he showed me some of the ammunition that tanks fired. I mean, it's pretty sweet. He is also the owner and president CEO of Backwards Planning Financial. What is your title there? You just own it.

Joe Garrisi: 1:05

I'm the owner and senior wealth manager.

Dan Berkholder: 1:06

Yes, Senior wealth manager. You can find more information about Joe and the services he provides at BackwardsPlanningFinancialcom, and in our last episode on finances, it generated a lot of attention and received some great feedback from you guys. One of the areas of finance that generate the most questions, though, is around debt. Debt being pretty much the foundation of our modern economy, it's almost inescapable. Most of us have to use debt in some form to just simply live. Joe, would you say that's accurate?

Joe Garrisi: 1:43

Yes, absolutely.

Dan Berkholder: 1:44

Yeah. So we're a debt economy. Everybody has to use debt in some form, unless you're very blessed. But even then you may want to use debt. We'll find out. You may want to use debt even if you're financially blessed. So, in my meetings with Joe about my own personal finances because I am a client of Joe's debt is a major factor in managing finances for the future, and Joe and I thought it would be helpful to you all if we discussed all things debt, including how to get out of debt, different types of debt, even answering some questions about when it might be beneficial to use debt or even keep debt. So in this episode, we'll be talking about how and when to get out of debt. And so, joe, I think it would be helpful to start with the most common principle that has been popularized today by the likes of Dave Ramsey's on getting out of debt the debt snowball.

Joe Garrisi: 2:38

Absolutely, you're correct. I think this is the most widely known and used method of getting out of the debt, or getting out of debt. I'd like to describe what it is, what it's best for and when it's not efficient compared to other different methods, and why. Of course, there's no method that's right for everyone. So it's appropriate to understand what you're trying to accomplish, to know how to get there. That's the whole theme of backwards planning is understanding what you're trying to accomplish.

Joe Garrisi: 3:12

So the debt snowball. What you first do is I like to use Excel is do a line item for every single debt of every kind If you have multiple student loans or multiple credit cards, every single line item. First of all, name the debt, on what kind or title it is, the balance of it, the minimum payment and the interest rate, and then do a sort by balance. The debt snowball sorts by balance. That's the main premise of it, and what they do is say, okay, make sure you're making a minimum payment on every single one one, because it's the honorable thing to do and it's good for your credit score and et cetera. But when you are able to make extra payments, make that extra payment on the debt with the smallest balance. Once that's paid off, truly celebrate with you and your spouse on that. Take that payment, snowball it, roll it to the next smallest balance. When that one's paid off, roll it to the next small. It balance over and over again until your debt is paid off. And so this is just brute dollars owed.

Dan Berkholder: 4:25

Yes, not taking into account interest rates or terms or anything like that.

Joe Garrisi: 4:30

Okay, Any of it. If the smallest debt is a 0% interest, doesn't matter. Pay off smallest debt. Literally that may sound a little crazy, yes, but we'll get to that in a little bit. Yes, smallest debt.

Dan Berkholder: 4:44

So you've got you've got people that have mortgages, student loans, a car loan and credit card debt, and so it could be like the student loan that is deferred interest right now is the smallest, and the recommendation in this scenario would be to pay that off first. Yes, okay, all right. Yes, but there are. So, but I'm kind of giving this a character chair a little bit, but there, this is good, it's a strategy to get out of debt.

Joe Garrisi: 5:11

If you have no strategy. That's worse when you're just kind of throwing money around and etc. This at least has a plan that you can use. Now. Here's the benefit. Many people you know debt is truly oppressive. It absolutely weighs down upon the back of our head and it's constantly there and what this does is releases you emotionally from it as soon as possible. In other words, if you can cross a line item off, hey, we get to celebrate. One of the debts is paid off. This will cancel line items the fastest. That's its benefit.

Dan Berkholder: 5:44

So this is taking the principle of concentration of fire. Yes, and you're like we're going to just shoot everything we got at the smallest one and then start going through them. Okay.

Joe Garrisi: 5:52

There you go, not if I use military term, not what's the most high value target. This is what's the smallest balance of the debt.

Dan Berkholder: 5:59

Period. No, I suppose it's really helpful to build confidence, yes, and to have a feeling like, okay, I'm starting to take things back in control, because, really, people that use the debt snowball, or people that have also snowballed into debt, you know they've accumulated a lot of debt and so it's probably really helpful to get some wins on your belt.

Joe Garrisi: 6:18

Absolutely it's. They're frustrated, they feel like they're not in control, and so to take a hold of, take responsibility of where you are and your future and to get a win that you can celebrate absolutely is important to give you emotional energy to keep going. Actually, my favorite of one of the aspects of all of these debts, when I'm talking to parents, is to say, hey, let's put this in like a thermometer type scenario and put it on the fridge. I actually suggest parents tell their kids say hey, kids, we're going to use this as a learning tool. Mom and dad weren't great here, but mom and dad are taking charge and so we're now going to be responsible and purposeful in what we're doing. And when we don't go out to dinner or et cetera, we're going to come back and cross off a line item by an extra 50 bucks. Hey, we're going to show the kids of what we're doing and teach them by example on what we're doing, but we're having all the line items. The important thing about the debt snowball is ordered by size.

Dan Berkholder: 7:23

Okay, ordered by size. That's the bit that's the most important principle, and so, before we get into more methods of how to get out of debt, let's talk about one of the principles of debt, and that's from the scriptures, is proverbs 22, seven. This is the most commonly used scripture proof text against getting into debt at all, and it says that the borrower is the slave to the lender. The borrower is the slave to the lender, and a common hermeneutic to get out of debt before all financial moves. That's usually what it's used for and in a sense it is warning. It's a proverb.

Dan Berkholder: 8:02

So this is a truism. This is not necessarily a command, but there this is true. Like, like Joe you had said, getting into debt is oppressive. You can feel it on your back, you're carrying around this debt, you owe somebody something, but this proverb isn't saying therefore, debt is sin. Therefore, all debt is sin. Some debt could be sin, but that debt in itself is sin. It's not saying that. This proverb is making a statement, not a command.

Dan Berkholder: 8:34

So I guess the reason that I want to bring this up is because I think that in some, some circles, there's this stigma, especially in certain faith traditions, in Christianity, that debt in itself is sinful, and so you took out a mortgage. So there's some lack of faith or something like that. There's something wrong with you for having to do that, and I think that that's a common and incorrect understanding, but it is a true principle, because there are different types of debt. So the first type of debt that I'd like to talk about is a uncollateralized debt, and this, in one sense, is actually very, very true that the debtor is the slave to the lender, because the thing is, when you don't have any asset, that's being collateralized. Now I'm getting in over my head, joe, as far as the terminology.

Dan Berkholder: 9:30

If there's nothing, you're borrowing again. So, like with a mortgage, when you take out a mortgage you have a home. So if you default, if you can't pay your mortgage, they take your home, they don't take you. They don't take you and say now you have to work off your debt as a literal slave. That type of debt, uncollateralized debt, is very, very dangerous and there are diff. I mean, even though we don't have literal slavery today in the United States, this still happens to people.

Dan Berkholder: 10:00

I know just pastoring Joe, that I've helped people out of some pretty sticky situations with payday loans and with title loans and things like that, to where you can just go in with a paycheck and they will give you money, and it's exorbitant interest rates.

Dan Berkholder: 10:16

It's definitely usury, I mean. So some of these interest rates are over 30% interest and it really does make these people into slaves, because when you have that higher interest rate, it begins to build very, very quickly, and if a person is going to a payday loan place, you don't have a lot of cash anyway, and so then to start going into the hole, it starts a death spiral and it really does enslave people. And so I just wanted to bring that up as one of the principles of debt is that not all debt is necessarily just straight evil from Satan. But uncollateralized debt is very, very dangerous. So if you have a mortgage you shouldn't go under church discipline, like, necessarily that's not the case because it is a collateralized debt, but I just wanted to assuage your conscience if that was something that might have been bothering some people in the back of your mind. So, to summarize the snowball method, it seems like it's a very big emotional help, right?

Joe Garrisi: 11:19

Yes, exactly.

Dan Berkholder: 11:23

What about other strategies for getting out of debt?

Joe Garrisi: 11:27

Another one. There's multiple. Another one that has been around for a long time is called the debt avalanche. Now this method starts with the same, similar Excel spreadsheet. Instead of sorting it by size, you sort it by interest rate. You start with the highest interest rate first. It's kind of like the principle of let's say, you're going for a walk out in the desert I've literally done this. I'm going for a walk and you slide down the hill because it's shale and etc. And you fall into a cactus Literally have done this and you have multiple wounds on your arms and legs.

Joe Garrisi: 12:05

Which one do you stop first? Do you stop the one that's bleeding slowly, or do you stop the one that's bleeding fast, bleeding fast? Obviously, we have limited blood. I like my blood. I wanted to stay in my body. So we stop the one that's bleeding the fastest because we want to keep our blood. Same principle financially Stop the one or get rid of the one with the highest interest rate. So, dollar for dollar that's bleeding you the most money out of your bank account. So when you have an extra payment, of course again make minimal payments on everything. That's what's honorable, that's what we signed up for, and then take your extra payment on the highest interest rate. And then they don't use the term snowball, they use the term avalanche, but it just really means take that payment when that debt is paid off, move it to the next highest interest-rated debt and on down until they're all gone.

Dan Berkholder: 13:04

This does seem like a more efficient method to me. That's why I brought it up. I actually hadn't read the debt debt avalanche part of your notes Before the episode, but I'm like this snowball thing just always had me curious. Because if you're, if you're, if you have a 13% loan and you've got a 3% loan, why would you pay off the 3% loan before the 13% loan? That doesn't seem to make a lot of sense.

Joe Garrisi: 13:26

Yes, yes. Well, you're thinking logically. Yes, so so this will not cross-off line items as fast as the debt snowball, but it will get rid of all of the debt Faster. So less dollars tell total completion of debt elimination. And there's actually software out there that will compare these two. Free software, there's multiple of them where you can put in all your debt, put all the interest rates and see which methods faster it's. It's just math, in other words.

Joe Garrisi: 14:04

So this method eliminates debt faster, but less Emotional positives in the beginning. So it also depends on what you need, right. There's none that everybody needs the same thing, right? Some people need some wins because, hey, let's think of the person that was recently in a payday loan. That sounds horrific, as bad as far as you can get bad in the financial world. So you know what they need some wins. Let's get them positive, because our mindset, how we think about it, is very effectual. But you know, thoughts have chemical reactions inside of our bodies. So getting positive on what it and then go after what's efficient, depending on where people are.

Dan Berkholder: 14:41

No, that completely makes sense. You know one of the things you know, speaking of debt, it is actually important to pay off debt. That is that is very important to be able to pay off debt. I mean both an exodus, it says it says anything borrowed should be paid back, and in Psalms, it says the wicked borrow and don't pay back. So you have the righteous paying back what's borrowed and but the wicked borrow and don't pay back. I eat the United States government.

Dan Berkholder: 15:09

The idea of debt forgiveness Currently floating around the USA in the case of student loans right now is unjust according to the Bible and it's foreign to the biblical principles of debt, and so I just wanted to say that it is, you know, whatever strategy you end up using out of these four that we're gonna be talking about, paying off debt is a good idea. In fact, it is a command that anything borrowed should be paid back. So, whether you're, you know you need some emotional wins. You're just like I, just need to win on my belt. I've been in those situations, man.

Dan Berkholder: 15:42

I can remember trading on the stock market and having a series of losses, and I'm like you know, I just need to win. Like a small one would be great and just taking the easy thing and the small thing, you know, taking small bites, you know that's how you eat a whole elephant is just one bite at a time, right, and so whatever method you use, it is a righteous pursuit. I guess I'll say that. So what I? What other Strategies are you know of these four? What's the next one that you would like to review?

Joe Garrisi: 16:11

So I want to talk about debt consolidation. That is, using a term earlier, re collateralization. In other words, what is the surety or what are you putting up, that if you don't pay the debts, the debtor can come and collect right the house as an example? They can come and collect that. So you can move debt around to different Collaterals. And because some collateral is more guaranteed to be there, more sure to be there, the interest rate on that debt is lower. You talked about unsecured debt, credit card debt as an example. That's unsecured. There's no collateral other than your good name. Well, that's got a high interest rate, couldn't? Maybe they don't trust your good name? Compared to a house, they can go and collect. Whether you're good name or not, they'll come take that house. So you can move debt around. And so what you can simply do is look at your different collateral again. Start with Excel spreadsheet I love Excel, excel spreadsheet and put your different pieces of collateral on there, all different line items, and you can go to Banks or etc. To see if you can get a loan from those different Collaterals and what would the interest rate be. Compare that to the interest rates you have and can you move it around. As example.

Joe Garrisi: 17:29

One of the biggest and obvious is to move debt at high interest rates Over to the mortgage on your house. Now there, there's a few different ways to do that. One is simply do a refinance. Refinance that. The primary negative here is the cost. You got to go through a full Closing cost again. Normally it's added to your mortgage, so it's not out of pocket but within. What you can do is you can say, hey, a cash out refi, literally what we're talking about. Say, you refinance the mortgage and I want to check, mr Banker, for x amount and you use that check to pay off high interest and it's. It's moving that debt from your car or your credit card or your student loan or whatever it is, and moving it over and recaliat, realizing it to your Primary mortgage.

Joe Garrisi: 18:24

Now there's multiple benefits. One you would only do this if you have a lower interest rate. Number two You're stretching out the payments, probably to a longer time period, so the monthly payment is less. There's a relief some of the pain on your cash flow. If your cash flow is very stressed, this is one of the way to get some relief on there. But if you give money to a 501c3 ie look at the other podcast for some ideas. If you itemize, if your primary mortgage qualifies your, your adding interest, that can be a tax deduction Versus interest. Currently that is not a tax deduction. Like your car and your credit card and your student loans and etc. Those interests are not tax deduction. Your primary mortgage probably is, so you're actually getting an additional discount by a lower interest rate and a tax deduction.

Speaker 1: 19:19

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Dan Berkholder: 20:15

Well, we know that a robust society depends on getting this right.

Speaker 1: 20:21

Success in building and passing on personal wealth. Let's be mature, responsible leaders with the resources God expects us to turn a profit on To love our children and children's children's wealth and to be able to make a living out of it, and to be able to make a living out of it and to be able to make a living out of it. That's what we do with the resources God expects us to turn a profit on to love Our children and children's children. Well, joe garrison, with backwards planning, financial integrates, investments, debt insurance, tax strategies and legacy planning in a holistic approach, coaching his clients to act wisely, you can do better than you received. You can affect your family trajectory and maximize your efforts to set up long term fruitfulness. Impactful counsel to help you form and implement your financial plan. Click on the link in the description for Backwards Planning Financial and contact Joe today to get started.

Dan Berkholder: 21:18

So what does the length of the term of your loan? How does that affect? Because if you're, let's say, you've got a shorter term loan, that's a higher interest rate, say it's a 7%, and we're doing like pre you know interest rate craziness. So and you can take that 7% and you put it into now a 30 year loan at 4%. Yeah, you're paying it off over a longer period of time. So couldn't the debt be more expensive?

Joe Garrisi: 21:46

So depends how you define expensive. And we're actually leading into the fourth one just a little bit, which is a holistic method. There's the precursor of taking everything else into account and looking at it holistically, versus the first two methods and this one are silo focused. You know, hey, ignore everything else in life and just focus on debt and the elimination of hardcore. Get out of debt despite the rest of our plan.

Dan Berkholder: 22:13

In other words, yeah, I was just curious. Like if you had a 7% interest rate but it's going to be paid off in five years and then you put it into, all of a sudden you're wrapping that into a 30 year mortgage at 4%, you're going to pay more in interest over time, am I right?

Joe Garrisi: 22:27

More dollars in interest, but you want to take the time value of money into account, because some of those dollars are paid five years from now. 10 years from now versus a dollar today is worth always more than a dollar tomorrow because you can invest it, assuming you do something positive with the difference in time, in other words.

Dan Berkholder: 22:47

Even with inflation. Taking that into account, you're actually freezing the value of your dollar in 2023, right now. So you're freezing the value of that dollar now which, as we've seen inflation erodes the purchasing power of your money. That's why, you know, a lot of us younger guys will look at our parents and they're like, yeah, why don't you just buy a house? I mean it's, I worked hard, I worked a full time job and I was able to buy a house.

Joe Garrisi: 23:10

Like well, yeah, your house was $30,000.

Dan Berkholder: 23:12

You took a 30 year mortgage on it. Well, now you're paying it with 2023 money.

Joe Garrisi: 23:17

Yes.

Dan Berkholder: 23:17

You know it's a different game, so that is an advantage.

Joe Garrisi: 23:21

Yeah, yeah, absolutely so. So. So recolateralization you don't have to do it with a primary mortgage type of thing. There are debt collection services out there that are honorable, that you can collateralize or move your debt into one like student loans. We'll just talk a little bit about student loans. That's a whole podcast we can go into another time. But student loans, you could. You could refinance them into one student loan so you have one payment simpler, easier and many times lower interest rate than what you have out there. So you're making things simpler and you're making things at a lower interest rate cause you can do that with credit card debt. There's there's collateralization services out there. You know typical credit card debt is somewhere between 15 and 25% there on average and the debt collateralization services I've seen around seven ish out there. So you know that's better.

Dan Berkholder: 24:15

Oh, wow. So so they essentially they pay off your credit card loans while pay, pay them off and then buy the debt. Yes, and so now you owe this collateralization service instead of your credit card. Yes, and so you can centralize your debt into one spot at a lower rate, hopefully.

Joe Garrisi: 24:29

Correct, Absolutely so simpler and cheaper. So you know that's wonderful. And then you're not doing the full refinance costs on a mortgage, Right? So you got to look at multiple methods to see what's best. Now another idea coming back to the house.

Joe Garrisi: 24:44

So there's primary mortgages, talking about the home you live in, but there's also called secondary mortgages and these typically are called HELOCs, which is an acronym for home equity line of credit or HELOC. What that means is you have a second position. Positions are based on order of priority that get paid if you default. So if you default on the loan, the debt collector comes and says we're taking your house, they pay off the first first and they pay off the second second. So the second has higher risk that they're going to get their money back. Well, if they have more risk, they're going to pay a higher it. You're going to charge you a higher interest rate, Right? That's always how debts work, on the order of the debt. So HELOCs are normally please hear, normally. There's a whole other thing we can talk about. First position HELOCs. Too much time for today. So the home equity line of credits we can go into.

Joe Garrisi: 25:40

So what you have to do to get a HELOC? You have to go and apply. Please hear the application. This is not guaranteed, Even if you have equity in your home. Normally they need to start at 20% equity. So if you have a $100,000 home, for easy math, and you owe $80,000 on it, you cannot get HELOC because you can only get a line of credit on what's more than 20%. So if you owe $70,000 on $100,000 house, you can get a HELOC for 10 grand up to the 80% number. So what you do is you go to a bank that you apply lots of banks do this shop around for different rates. They will look at your debts, they will look at your income, they will look at your credit rating, they will do a full evaluation on you and decide if they want to give you a HELOC. Even though the collateral is a stable asset, it is not a guarantee.

Dan Berkholder: 26:37

So why would someone do a HELOC versus a refinance? Just a whole mortgage for refinance.

Joe Garrisi: 26:42

Cheaper upfront costs.

Dan Berkholder: 26:44

Oh, okay, all right, because there's no closing costs.

Joe Garrisi: 26:46

No closing costs. Plus, what if they got an interest rate fixed in our previous administration? So they got a 2% or a 2.5% and current rates are at 7%? Do you think you want to refi from a 2.5% to a 7%? No, no, please don't do that Right. Just to recolateralize some debt, you're going to shoot yourself long term that way. Keep that glorious 2.5% debt. That thing's wonderful. So maybe they need a HELOC because they have some 15% credit card debt and they can go get a HELOC for 8% Okay, that's definitely better than the credit card and they get to keep their low mortgage primary interest rate at 2.5%. That would be an example of why to go get HELOC.

Dan Berkholder: 27:30

Okay, no, that makes a lot of sense, especially if, in that scenario, you need $10,000, you don't have to refinance your entire home have a higher interest rate. You just have a $10,000 debt against your home in that situation, that's at a higher interest rate.

Joe Garrisi: 27:45

One of the things really quick is you will, in getting a HELOC, have to do an appraisal roughly 500 bucks, depending on the cost of the house and etc. But you will have to pay upfront out of your pocket for an appraisal before you know that you're granted the HELOC. So you're risking some money upfront because if you're not granted the HELOC you're out the appraisal fee. You do not get it back.

Dan Berkholder: 28:09

But you know how much your house is worth, so there's that you should. Yes, yeah, I don't know if it's worth the $500 in that scenario. So the last is this, the last strategy that you have holistic planning.

Joe Garrisi: 28:24

No, I've got one more aspect of the. This is a commonly not known or not commonly known aspect of home loans. I've done this myself. This is called a recast. This is not something that mortgage companies want to tell you about, because what this is doing is, let's say, hypothetically you go and buy a house today, finance the whole thing today, and you get a 7% interest rate, hypothetically. You know, compared to just a couple years ago. You're crying that's horrible. But if you look a few decades ago, that's still low. But you get a high, get an interest rate at 7%, hypothetically, and then interest rates come down two years later and you're like I locked in a 30 year 7%. If I want to refinance this, I got to pay full closing cost, which is thousands of dollars over to a bank or financial institution to redo that. That's horrible. Well, you can see if you can do a recast. Not all banks do this, not all loans are allowed to do this.

Joe Garrisi: 29:28

It is wise to know before you buy, caveat emptor of what kind of loan options you have. Recast means you go to the financial institution that holds your loan. You ask them I want to recast my loan. Let's say interest rates are now down to 4% and you bought a 7. You can move your 7 to a 4. You keep the current length of your loan. Let's say you bought a 30 year loan and you're two years into it, so now you have 28 years left. You maintain the 28 years left, going back to the refi. Whenever you refi, you restart the length of your loan, restart that 30 year time clock over again With a recast. You do not. You literally hey, let's move this sucker down to current low interest rates. When I did it it was $1,000. That's all I paid and I saved a point and a half this sounds too good to be true.

Joe Garrisi: 30:28

It's glorious. This doesn't make sense, Joe. It's glorious.

Dan Berkholder: 30:31

Why didn't you tell me this when I refinanced my home a few years?

Joe Garrisi: 30:34

ago. Sorry, we didn't know.

Dan Berkholder: 30:35

Because I just wanted a lower interest rate. Come on.

Joe Garrisi: 30:39

Good goodness, yeah. So the reason why I didn't want to tell you is because you're not paying full closing costs. They want the closing costs.

Dan Berkholder: 30:47

Joe, I'm serious. This is really actually difficult to believe. So you're telling me, for $1,000 is what. I'm sure it's different depending on the bank. They just said okay, we'll just lower your interest rate.

Joe Garrisi: 30:57

Yes, that's it.

Dan Berkholder: 31:00

I mean because even when you're refinancing, I mean you're shopping around trying to find better interest rates and banks are competing and you negotiate your interest rate. At least I did. And in this case, you're just going to the same bank and saying, okay, drop it now and I'll give you a thousand bucks or whatever. It is Okay, all right. So this isn't too good to be true. It's not no, if your bank offers it.

Joe Garrisi: 31:23

If your bank offers it, if you have the right kind of loan, so you can ask upfront when you're buying your loan today hey, does this loan have a recast option for the future? That would be a wonderful thing if you were in a high interest rate environment like we are today and it's possible that interest rates are going to drop like probable in the future, to go and do that and so you can go get the home that you're desiring, because home prices generally only increase for the most part, they only increase. Go get your home, make sure it's affordable and then drop the interest rate when interest rates drops. Now, as far as I know, you can only do this once, so don't do it when you got a half a point difference. Make sure it's worthwhile and a difference because, like I've done a recast on my personal loan, I'm not doing it again, can't? I'd have to refinance to get the option again.

Dan Berkholder: 32:23

So you know it's interesting. One of the things that I hear because a lot of people are interested in moving to Ogden is that they don't want to buy a house right now. Let's say they're renting or something like that and they're just waiting for the housing market to crash. And so I'm not a financial advisor, so I don't get financial advice, but I do say a housing event like we experienced in 2008, 2009 is pretty rare.

Dan Berkholder: 32:48

It's probably not going to happen too, frequently, especially with some of the investment strategies of like BlackRock, where they're buying up single family homes.

Joe Garrisi: 32:57

That's right In mass.

Dan Berkholder: 32:59

Yeah, big money pouring into single family homes. It's not in their interest to allow something like that to fall. So this is a really good tool then when people are going out and shopping in this environment, because you do have housing prices that have seemed to stagnate for a moment, like plateaued, and as soon as interest rates drop again if they do, it would logic would follow that the housing, the real estate market would continue to go up and so you might actually be in a. I mean it could be a good time to buy. I don't know the future, but with this as an option with a bank man, it might be a pretty good idea. There's something to keep in your back pocket.

Joe Garrisi: 33:40

Oh yeah, absolutely. As a general principle, I don't care what we're talking about. I like owning versus renting Almost always. It's very rare that renting can be better long term than owning. I realize things happen. I've rented in the past where we've lived and stuff like that. But I am blessed to own and so that's a fixed payment and so when interest rates rise and cost goes up, my payment's fixed. So when my income goes up and my payment's fixed, I've got more room for other pieces.

Dan Berkholder: 34:12

Right, yeah, and I know one thing that I've this isn't going to be a podcast about owning versus renting. But some people say, well, what about property taxes? You have to pay property taxes when you own. It's like, well, you actually do pay property taxes when you rent. It's just built into your rent.

Joe Garrisi: 34:27

It's always passed down.

Dan Berkholder: 34:28

Yeah, yeah. And then there's the speculative nature of folks who say, well, if I rent, that means that I don't have all of these expenses towards home ownership, I didn't have to put it down to town payment so I can put it in my investment account and I will out earn my house. Well, yeah, it might, but the risk-reward ratio probably doesn't work out in your favor in the long run. It depends on the person you know. You talk to a guy like Joe and he'll tell you I'm not a financial advisor, I'm just a guy.

Joe Garrisi: 34:58

Oh good, oh good, yeah, yeah. So the fourth, the fourth main header here is holistic planning. This is one we alluded to just a few minutes ago. This is the one that we open our blinders and not just look at debt, but we also look at our investments and our savings in our job and looking at a holistic picture to see what's most efficient across everything. That's the holistic principle here is looking at all of it.

Joe Garrisi: 35:29

So I've got an example here that I've done some pre-math for folks. I get this question all the time, which is Joe, I'd like to just kill debt, like I'm going to hyper-focus on killing debt, and when I'm out then I'm going to invest. And, joe, I'm going to have a lot more money to invest. It's like great. And so I want to talk about the time value of money and that principle here. Okay, so I want to give you some assumptions here, because I've done the pre-math on this and you can go to a financial calculator and do the math anywhere on this piece.

Joe Garrisi: 36:04

So let's assume that a home loan is at 5%. Should you make extra mortgage payments or invest the difference? That's the question here. So let's assume a 30-year mortgage, because that's what's most often 30-year fixed mortgage and let's say the house is financed $400,000. You didn't make a down payment, that's what you financed. And let's assume also you have the ability to contribute to a Roth IRA and that's a whole long variables and et cetera, how to do that, but we can talk about that at another time.

Joe Garrisi: 36:39

The reason why I bring that tool up is because the growth on a Roth IRA, if used properly, is tax-free or, more exact, is tax-exempt. And I say this semi-jokingly. But how much tax-exempt money do you want later on? To me, the answer is there's not enough. I want everything tax-exempt, please. Yes, yes, we cannot control taxes. One of the variables we cannot control is what are the tax brackets and the tax rates going to be at various kinds of taxes? It'd be really nice to have your income tax tax-exempt, ok.

Joe Garrisi: 37:13

So coming back to our analogy 30-year mortgage, $400,000 balance. Let's assume that your income source is stable. Let's assume that you have your emergency fund already funded and there's a proper amount to that based on the volatility of your income. Let's also assume your catastrophic risk planning is done like hey, if someone dies or gets disabled, your estate planning is done, so assets go to the right people in the right time on when it's appropriate. Ok, that your assets are titled correctly, so you avoid any unnecessary taxes or unnecessary legal fees.

Joe Garrisi: 37:50

And assume that you plan on living in this home long-term, because there's all kinds of jobs that bounce people all over the place, like military officers, as an example. They rarely stay in any place for more than a couple years, type of thing. So let's assume all of these pieces and what I'm trying to help hopefully that you're getting is this is not a one-size-fits-all answer. There's lots of variables before you decide to do this. So the principal and interest payment on this loan is $2,147.29. If you make an extra monthly payment from the very beginning of $1,020 each month, you will pay it off in 15 years. Ok, so that's a total monthly of $3,167.29. You save the interest on 180 months. That combined is $204,000 in change.

Dan Berkholder: 38:53

OK, that's how much money you save by paying it off early.

Joe Garrisi: 38:56

Yeah, you don't pay $204,000 in interest. Ok, that sounds like a big deal. That's a massive deal. Ok, but if we're focused only on a microcosm at debt, I want to look at all of it, because there's folks that say I only stop there in my mathematical understanding of what's best for me.

Dan Berkholder: 39:15

So folks like Dave Ramsey continuing.

Joe Garrisi: 39:19

So let's take the same monthly amount right $3,167.29. And let's take the same time frame of 30 years. So option A is turning this into a 15-year loan and then taking the full payment that $3,179.29, and investing it in the market, growing at an average of 8%, trying to be conservative, ok, properly diversified and et cetera, et cetera. Compounding monthly, right. How often are debt and investments compounded? The gross dollars you would have at the end is $1.1 million. Ok, you paid off your debt in 15 years and now you've got $1.1 million.

Joe Garrisi: 40:04

I mean, who doesn't want that? That's amazing. Ok, most people go my dreams to be a millionaire. Well, we need more than that to retire today. So that's option A. Option B don't pay off the mortgage early, don't pay a single dollar extra on the mortgage, and take the $1,020 a month that you were paying extra and invest it into a Roth IRA. That's the only difference. So at the end of 30 years, in both options, the mortgage is paid off and you have a lump of money. The mathematical question is which method has more money? Because you both have a paid off mortgage and it's option B, you will have over $1.5 million. It's an additional $400,000 for not saving an additional dime, just saving differently on what you're doing.

Dan Berkholder: 41:08

Just paying your mortgage, nothing extra, and taking that extra payment and putting it into a 401K.

Joe Garrisi: 41:14

Roth IRA, roth 401K I'm using Roth tools here because those are tax-free growth as an example, right, that type of thing. Okay, so you know. The question is, and so I asked Mr and Mrs Client, which is more honorable at the end of 30 years, to have your home paid off and have 1.1 or to have your home paid off and have 1.5?

Dan Berkholder: 41:34

Well, and one important thing I think it's worth mentioning are reiterating, with Roth. So that $1.5 million, when you withdraw it, how much in taxes are you paying? Because I know that's a big problem for folks that are retiring right now as they go to withdraw from their traditional 401K and all of a sudden they're hit with taxes. So how much of that 1.5 million from Roth are you paying taxes on?

Joe Garrisi: 41:59

Nada.

Dan Berkholder: 42:00

So it's not just that you made extra money. Yeah, you know, because in the other scenario you saved how much? $200,000? But that's just taxed money and you have nothing at the end other than you didn't pay this money. And so in this other scenario you have $1.5 million of money that will not show up on your taxes. That's a taxable income.

Joe Garrisi: 42:26

So let's go back to option A, where we pay off the mortgage and then we invest $31.67.29 a month. You cannot put $31.67 a month into a Roth IRA. The IRS doesn't allow it. The maximum you can do today is $6,500 per year per person. So if you're married, that's $13,000. So if you're married the option B, that $10.20, you can put all of it into a Roth IRA. So option A not only do you have less money at $1.1 million at the end of 30 years, but a good portion of that $1.1 will be taxable. Now there's other options out there. There's more scenarios. This is just some basic understanding. Like Joe, I could put that money into a Roth 401K. Yes, you could. Maybe you don't have the option of it because not all places have Roth 401Ks and et cetera. Maybe you're already maxing out your Roth IRA rate. Yes, there's lots of scenarios. So this is basic understanding. You want $1.1 or you want $1.5, with no extra dollar aside.

Joe Garrisi: 43:25

Yeah, amen, amen. I want $1.5. But you've got to have a backwards planning focus. How I slipped that in there. You've got to have a long-term focus on efficiency, because tomorrow comes for most people and so when it shows up it will be nice to be in a better position on that. Now there are some risks because in option A, when you have a 15-year mortgage, if you signed up for a 15-year, let's not just say you're overpaying, let's say you signed up in the beginning for a 15-year, your monthly payment is bigger than if you signed up for a 30-year. So there's a risk because sometimes economy shut down, we lose our jobs, industries change and incomes change and so if you have put your home on the hook for a larger monthly payment and you can't make it because income goes down, they will take your home. So you put the home at risk during that time. Now obviously it's paid off faster, so there's less risk after the 15 years. So there's no perfect is where I'm going.

Dan Berkholder: 44:31

No perfect on that, yeah and there's no guarantees that the stock market will continue to go up, that the housing market will go up, that the economy will continue. These are all questions, that's right.

Joe Garrisi: 44:41

Start a farm.

Dan Berkholder: 44:46

But it's so funny, joe, when you and I were talking about my personal assets. The thing is, what you're doing here is so simple compared to the level of depth that you're going into. Even in my very basic I'm a pastor. I'm not like I'm not some trust fund guy or something like that, where I'm owner in multiple businesses but the depth that you go into and this holistic planning is incredible. I mean, I feel like I'm fairly in the know as far as investments. I know what a Roth is, I know what an IRA is, I know what a 401K is, all that. But some of the things that I had to have you repeat yourself a few times and re-explain things because of the tools that are out there that I didn't even know about, similar to this recast refinance tool that's the stuff that you know is actually quite incredible, one of the things that's important to consider.

Dan Berkholder: 45:45

I'm going to get on my soapbox for a minute and talk about managing your debt. Managing your finance as well. We'll talk into. I think we're going to go into the next section about maybe some forms of debt that you might want to use, maybe some that you want to hold on to, some that you want to prioritize. But in Luke 14, jesus says suppose one of you wants to build a tower, won't you first sit down and estimate the cost to see if you have enough money to complete it? I mean, you would be a fool to start out. You know, obviously, building a tower and you get halfway done and you run out of money, and so a wise man would calculate that. So when you're using debt, when you're using these strategies whether it's a snowball method, the avalanche method, using tools like refinancing your house what you want to do is take in the cost ahead of time. That's why your backwards planning financial is so important, because you actually start at the end and then you work your way back. You have a longer term vision, even though there's still risk involved. One of the dangers is that you refinance your house. Let's say, you go to a 15 year mortgage I'd considered this at a time but your monthly payment goes up so much, so much higher that you're right. There is, all of a sudden, if I lose employment, if in 2020, for some reason, the church you know giving went down and all of a sudden my salary decreased, it exposes me to a lot more risk. So I may have a tower that I'm building that goes unfinished, as in they repossess my home, you know. And so it is important to have this, this long term vision, and one of the things that you also do, you're doing for me I joked about this I'm like I am high risk, like I love high risk assets.

Dan Berkholder: 47:27

That is my favorite. It is so sexy to have you know 100X, 1000x, 10,000x returns on different assets, and so I'm like you know what, all in, baby, send it, full send. And one of the things that you provide for guys like me is safety net, is risk management, where, in the long run, what's going to happen with a guy like with my proclivities of high risk gambling, sort of investing and things like that is that eventually you lose, and when you lose, it could be catastrophic. And so what you're providing for is I remember you talking to me like well, if the stock, when the stock market, crashes, this is what your asset, you know, this is what your portfolio is going to look like, and so we're going to just plan for that, because it's going to happen eventually, whereas me, on my own, I'm probably not going to be calculating that in it's like it's going up, baby, it's always going up, it's going up forever.

Dan Berkholder: 48:25

You know and that's the trader's perception, right Is, the current trajectory is the way it's always going. If it's going down, it's going to the bottom. You know, if it's going up, it's going to the top. So tell me about this. You've written in the notes a rule of 72. What in the world is that?

Joe Garrisi: 48:41

This is a way to understand growth of interest and how it affects your products. So rule of 72 says you divide the number 72 by the interest rate of your money growing and this will tell you how many years before the money doubles. So for a very simple math, if you're averaging a 7.2% rate of return, it will take 10 years for your money to double. If you're averaging a 10% rate of return, your money will take 7.2 years to double. So it's a way to understand the compound interest effect on money.

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Dan Berkholder: 50:39

Very interesting. That's a really helpful tool. It does show like man I can't remember the quote like the most powerful force in the universe is compound interest. Somebody said that it's absolutely false, but anyway, the principle is really interesting because, you see, this is where guys like me get in trouble, right as you see the 100x gain.

Dan Berkholder: 50:59

You know, like Tesla has been on just a rampage for years and years, and so you're like all right, we're going to go all in, I'm going to buy long term leaps options, call options for Tesla then, and we're just going to go at it, you know, because they're going to keep going up, because I'm going to I could get thousands of percent returns, not realizing that 7.2% over 10 years doubles your money. So you're really taking a time equation in that, as really the powerful, the most powerful value in investing is time.

Joe Garrisi: 51:31

What you may have been referring to a moment ago was Albert Einstein called compound interest the eighth wonder of the world.

Dan Berkholder: 51:39

Oh, okay, there you go. Well, I was mixing my quotes.

Joe Garrisi: 51:41

I mean the point still stands.

Dan Berkholder: 51:43

But yeah, the eighth wonder of the world. Yeah, it's compound interest. No, that's really good. So, speaking of compound interest, what about credit card debt?

Joe Garrisi: 51:51

Yeah, this is nasty stuff, this is dangerous stuff, but when used well, provides wonderful flexibility.

Dan Berkholder: 52:02

By the way, didn't we just hit $1 trillion in consumer credit card debt? Yeah, yeah, that's a lot of credit card debt?

Joe Garrisi: 52:08

Yes, it is.

Dan Berkholder: 52:08

Wow, could you imagine I should have been a credit card company?

Joe Garrisi: 52:11

That's what I should have started, not a media company. If you don't care about being honorable.

Dan Berkholder: 52:16

Oh user. Yeah, that's true. I would have had to not charge interest to Christians.

Joe Garrisi: 52:20

So never mind. So credit card debt. First of all, should you have a credit card or not? Right, that's a big question. Should you have a credit score or not? Let me rabbit trail into that for just a second. Credit scores are effectual in many dynamics of life. They will affect the cost on your car insurance. They affect if you can get a loan in an emergency. Can you get a home loan easily at lower cost? All effect by your credit score? Let me add a little something that wasn't quote unquote in the notes up front. Can you help your kids? Always thinking long term I love long term. How to help your children? Well, you can put your kids and their social on your credit cards. Start giving them, assuming you're making your payments. Start giving them and you know what. Hurt them. No Getting positive marks in building.

Dan Berkholder: 53:16

Sorry, son, you have a 326 credit.

Joe Garrisi: 53:20

Don't do that.

Dan Berkholder: 53:23

Wait, so you can put them on your credit card. Yes, no.

Speaker 1: 53:25

Yes.

Dan Berkholder: 53:26

There's no age requirements. No, just put them. How in the world does that work?

Joe Garrisi: 53:30

Because they have a social.

Dan Berkholder: 53:33

So I put them on my credit card and keep making the payments, and then they will have a credit score when they're 18, and it actually matters, that's right. Wow, I had no idea, joe. Where was this? Well, here it is.

Joe Garrisi: 53:45

It's a way to freely help your kids start off in life. There's zero cost to you on this, dollar-wise and et cetera on that. Now, if you go and not make your payments, you're going to have the exact opposite effect You're going to destroy their credit score and they're going to have all kinds of effort to repair it. So don't do that. We should be honorable and pay our credit cards anyways, type of thing. But so there's a free thing that you can do to help your kids launch easy or into this painful starting for young adults right now. On that, OK, so I use multiple credit cards but I pay them off in full every month. I prefer using cash for small businesses. That's the other side trail on that type of thing.

Dan Berkholder: 54:29

I actually Credit card fees take a lot of businesses.

Joe Garrisi: 54:32

They do, they do.

Dan Berkholder: 54:33

As much as 5%, right yeah, more even.

Joe Garrisi: 54:36

I actually. Yesterday I put a pair of shoes in to get repaired at a small local shoe repairman and I paid him in cash and he gave me a very sincere thank you because he saved credit card fees on that. Yeah, there's actually some businesses that will reduce cash cash discounts there used to be gas stations Cash discount cost versus credit card discount. As to affect yes, those credit cards do cost. Now, one of the wonderful ways is to set up your credit card to pay what is called the statement balance. That's a legal term that says the full amount that is due, so you don't pay any interest, is the statement balance. You can set up your credit cards to draft that statement balance every month, so therefore you don't have to remember oh, what was the date? Oh, I missed it by three days. I now have a late payment on my score when I intended to pay for it. Now I have interest on the balance. Right, credit cards can easily. And the fees, yes, they can easily get dirty on you, but if you set up the full statement balance, it takes some relief and worry about that. Now, of course, you've got to keep enough money, cash flow, in your bank account to pay that. You've got to watch that. But let me give you a scenario here. Let's say you have three different credit cards with a balance on them and you're not able to pay them all off Because life happens.

Joe Garrisi: 55:58

This has happened to me in the past. I guess a little rabbit trail for a quick little personal story. I have been in the past where taxes had to be paid on the credit card, had to get a cash advance. That was not fun. Credit cards got maxed, tires were bald and the wires were sticking out, dangerous to drive. We were a one car family because we could not afford two cars. So my wife would take me to work and then go to her work and then pick me back up. And we were one car family. We needed tires and so I had to go get another credit card just to buy tires. So what I'm trying to say is life happens. I've had some medical things, et cetera.

Joe Garrisi: 56:35

Credit card debt is not necessarily a dishonorable situation. Life gets in the way and it's a wonderful way to have a backup. I'm really glad I could put tires on the car so I could drive safely with my wife around. I've had that. So I had multiple debts on the credit cards. This is literally what I did to get out of those debts. So, hypothetically, you have three credit cards with a balance on that. You cannot pay on that.

Joe Garrisi: 57:02

So what I want to talk about is a strategy using a balance transfer. A balance transfer is the right to move a balance from credit card A to credit card B. That's recolateralizing like we talked about. Yes, it is, we're recolateralizing to another credit card. But what that second credit card most commonly charges is a 3% upfront fee. It's a transfer fee On the balance you transfer.

Joe Garrisi: 57:36

Then normally what's most common out there is a 0% interest for 12 months. So you're not paying interest for 12 months. Only if here's the big whammy factor If at the end of 12 months you've paid that off entirely, not one penny left. If you have the smallest amount left, they will go to the beginning of that 12 months. Start charging your interest during that tire time, compound it to that tire time and give it to you as a glorious present for not paying off your debt. It's wonderful, it's evil, yes, so be careful.

Joe Garrisi: 58:14

What I tell my clients is if you're interested in this, at the 11 and 1 1⁄2 month mark you need to have bills and whistles and sirens and all kinds of things on your calendar. Ding, ding, ding. Pay attention to this. So let me go back to my scenario. You have three credit cards, all with a balance, and you want to do a balance transfer. The best way to do this is if you have a fourth with a zero balance.

Joe Garrisi: 58:41

Yes, I just told you, with multiple credit cards, to get another one. Yes, I did. Ok. So go get another credit card and move the balance on A over to this one. You just did. Hopefully you get enough space to move it all. Now. Credit card A is empty. Move the balance on B to A. Hopefully you can move it all. Now B is empty. Move C to B. So what you did is you started with three cards with balance and you ended with three cards with a balance. They just shuffled around to each other. You added a 3% fee to all of them for the balance you transferred, but now your interest is zero for 12 months and you can make some progress, because if you're at 25 or something just brutal, it's hard to make progress, man no kidding, I had no idea that this was an option.

Joe Garrisi: 59:35

Yes, yes, this is commonly not known.

Dan Berkholder: 59:37

I haven't had credit card debt. I also use credit cards, though, because of some of the benefits. I don't know if you're going to get into the benefits of credit cards as far as cash back travel credits, things like that.

Dan Berkholder: 59:51

Yeah, I mean. So recently I took a trip to Wisconsin. My sister-in-law actually flew to Utah, drove my family with my wife to Wisconsin to visit family. I flew there and then drove them back. Hotels, flights, all covered with my travel credits that I had Wonderful, so it was something around $900 that I did not have to pay, just based on points for my credit cards.

Joe Garrisi: 1:00:20

What most companies most companies I'm talking 99.9% of companies, because credit cards are so prolific do is they just assume you're going to use a credit card and so they've increased the price of the thing you're buying by a credit card fee. So they just already increased it. Very rarely can you go today with cash and reduce the price. Oh, small businesses maybe you can do that, but most of the time you can't. So you're paying for the fee anyways.

Joe Garrisi: 1:00:46

Let's say it's a 3% fee, hypothetically, and then the credit card gives you a 1% back. So you're paying 3% and you get one back. Well, it'd be nice just to not pay the 3. But that's for the most part not an option type of thing. So you take the 1%, you bank it into points or cash back or lots of different things, and you can use that for travel and et cetera. If you didn't use a credit card and paid cash everywhere, you would just be paying the 3% fee without getting the 1% back. So those of us that use credit cards and pay them off every month, we're getting 1% our money that those cash users are not.

Dan Berkholder: 1:01:23

Yeah, and you know what, joe, this is really quirky of me. I also like being able to buy stuff and not having to pay for it out of my bank account for 30 days.

Speaker 1: 1:01:32

Yes, I understand.

Dan Berkholder: 1:01:33

Because I get to hold on to the money longer so that I get my 1% interest rate in my bank account.

Joe Garrisi: 1:01:40

Yes, Now, if you really want to get an extra nerdy aspect, when you buy something with a credit card, the credit card company fronts the money to that organization, to that business, and then, when it comes time for you to pay their credit card monthly fee, that's when you actually pay for the thing you bought earlier. So you're getting days of interest for free on your money in the bank. So your bank is growing. Yeah, that's what I mean.

Dan Berkholder: 1:02:07

Yeah, well, but the amount is typically small. Yes, because yeah, but there are high interest checking accounts, savings accounts and things like that.

Joe Garrisi: 1:02:17

That's correct.

Dan Berkholder: 1:02:18

Yes, Something to consider.

Joe Garrisi: 1:02:19

Yes. So let me come back to the balance transfer. There's a risk here. Let's say you only had three credit cards and can't get a fourth. Just because you're debt to asset ratio and et cetera, Joe, I can't get a fourth. Could I just still shuffle them around? Well, when you have a credit card that you did a balance transfer on and you buy something else on it, let's say you transferred over $5,000 and you put a $500 charge on that card and you go to pay the statement balance, that $500. They do not take it from the money you just charged. They take it from the 0% because they credit card companies would rather you start growing interest immediately on that $500. So the snakes, it's careful. So this is why do not charge extra and why I want you to start with a zero balance, so you don't have that confusion.

Dan Berkholder: 1:03:18

It's FIFO accounting. It's FIFO accounting, right First in.

Joe Garrisi: 1:03:22

I wish it's. Basically whatever is better for them is what they do. So it is a wonderful way to reduce the interest rate. But let me come back to my scenario of 11 and 1 1⁄2 months. Bells and whistles are coming off and you move three card cards around. You made some progress, but you haven't paid any of them off, because life happens, because it does. We can't control everything. So you come to that, joe, I have a balance on three cards. I'm about to go and get interest Back to the beginning.

Joe Garrisi: 1:03:52

What do I do? Do the same thing again, do the domino effect again, move credit card A over to a zero card. You're going to pay a 3%, but would you like another 12 months at zero, or do you want to repay 25? Compound it no, so you can domino them again. And you can keep going around and around and around until they're paid off. And so what you're doing, if you're able to accomplish that is you're moving a let's call it an average of 25%, because that's pretty common in credit cards to a 3.

Joe Garrisi: 1:04:31

And then, when you use that in a holistic manner, do you want to pay off a 3 or do you want to grow it at 8? Well, it depends on risk and stability of income and all kinds of other scenarios out there. You're right, if your income is not stable, then it would be good to pay off the credit cards because that's a big risk and etc. Could you recolateralize that into the primary mortgage? Let's say you can get the interest rates come down, you get a 3% there. Hey, that could be a tax deduction versus credit cards are not in, etc. You know, is the credit card used for business? Well then, maybe the interest is a is right, awful, potentially, if you own a business for that. So there's all kinds of other factors. There's no one-size-fits-all, but it's good to understand options that are out there that you can use.

Dan Berkholder: 1:05:20

Okay, joe, I'm just gonna say I'm glad that I've got you in my corner, because you All of this is is is a lot of this is very new to me. I'm actually really surprised. Did you have anything that you wanted to say about student loans?

Joe Garrisi: 1:05:35

Well. So student loans right now are all federal student loans, not private student loans are are deferred on zero interest. You know what are the interest rates going to be. You can't just look at your statements To see that, because it's all good to say zero, but you can call the financial institutions and See what the interest rates are going to be and when they turn on and when those monthly payments will be, and then take that into account In a holistic manner is my preferred method. Hey, what's the highest interest rate? Compare that to probable growth on investments compared to other debt that you have. And you know Student loans if you have a low enough income, the interest on some of that can be a tax deduction.

Joe Garrisi: 1:06:15

There's all kinds of ifs, ifs in there. But so look at that in a holistic manner to see what is proper to do. You know because there are some benefits if you work for a charitable organization for long enough, that the debt can be Written off quote-unquote. But be careful on that because most commonly that you will have to pay tax on what is written off. Don't get a big old surprise on a tax bill. So, understanding the rules on student loans, there's a lot of stuff that's out there in multiple methods on pay and repay and income driven, and there's too much to go over for today on that.

Dan Berkholder: 1:06:53

Holy moly, that is a lot, joe. Is there anything else that you wanted to close with before, before we wrap this up?

Joe Garrisi: 1:07:01

Yes, sir, a story on one of my favorite phrases, a Favorite Latin phrase, and that is caveat emptor, which is a phrase for Latin. That means let the buyer beware. The a phrase came originally and you can look this up. This is to me it's fun understanding where things came from. In 1603 and Chandler versus Lopez in England, when a man bought a Bezos stone, which were at that time thought to have healing powers and etc. On that, these stones were thought to cure poison and leprosy and measles. We know they don't, but that was where they were thought of. The buyer didn't receive any cures, surprise, surprise, and he sued the seller. The court ruled that the seller didn't warranty the Bezos stone that would it provide cures. So, in other words, be careful where you buy, what you buy, who you're buying it with. It's a common principle. Fooling this money is soon parted right. Caveat emptor.

Dan Berkholder: 1:08:07

Yeah, and that's why I hired Joe Garrison to be my holistic Planning, financial planning guy, and so if you would also like to talk to Joe, go to backwards planning financial calm. You can reach him there. I Thank you for for all that you do for the guys at the church here and for me, and for the wisdom that you share it. This is great, because one of the things that we're trying to do is is to pass on an inheritance To our generations. That's, that's my whole strategy. Well, why I talk? Why I talk to Joe, why I care about, why I care about debt and income and investments and taking time to do it?

Dan Berkholder: 1:08:48

Because I've realized that you know what, when you're trying to pass on an inheritance, you're passing on more than just wealth. But wealth is one of the things that you you're passing on, and that means that you have to treat your, your money, like it's not yours. In a way, you have to manage it for your generations, and so guys like Joe will help you to do that and Give you a long-term view of the use of your finances in a wise way, give you some wise counsel. So I would really encourage you guys to go and talk to him there and I this is where I'm supposed to say Eric's tagline, and I get it wrong. Every time it's like there's usually some like rock music that comes on and it's like this is the hard man podcast stay frosty, act like men.

Dan Berkholder: 1:09:38

Anyway, awesome, thanks Joe for thanks Joe for coming on awesome, thank you.

Joe Garrisi: 1:09:42

It's a pleasure and honor. Thank you.

Speaker 1: 1:09:46

Thanks again for listening to this episode of the hard men podcast and special shout out to our patreon supporters. If you're not yet a patreon supporter, you can join today for as little as five dollars a month, and that definitely helps keep this work going. We are Glad to partner with you for content that builds a new Christendom and reclaims biblical masculinity. At the same time, you can check the show notes for the link to become a patreon supporter of the hard men podcast today. Stay frosty, fight the good fight, act like men. I