Chap GPT Said So - But Does It Apply To You

Two hundred million people a month turn to AI for financial advice. The answers they get are technically accurate, carefully hedged, and almost completely generic.

In this episode of Couchside Conversations, Wealth Advisors Stacey McKinnon and Kevin Rex ran a live experiment: they asked ChatGPT to surface the five most common financial questions people search for, then answered each one themselves without seeing the AI’s responses in advance. What emerged is a study in the difference between information and advice, and a reminder that the most important financial questions are never really just about money.

Questions This Episode Answers 

These are the questions real people are typing into ChatGPT, Google, and Instagram every month. We’ve addressed them directly below. The full conversation, including how the AI answered each one, is available in the transcript further down the page.

Am I saving enough for retirement, and is it too late to catch up?

The short answer is: it depends on what you want retirement to look like, and the starting point isn’t a benchmark — it’s a spending number. Stacey uses a straightforward rule of thumb: decide how much you want to spend annually in retirement, multiply by 20 (or equivalently, target a portfolio that lets you withdraw 5% per year), and that’s the number you’re working toward. A $3 million portfolio supports roughly $150,000 in annual spending; $4 million supports $200,000. ChatGPT’s answer cited age-based benchmarks — three times your salary by 40, six times by 50 — that tell you nothing about your actual expenses, your housing situation, whether you have kids, or what you want the money to do. That’s the difference between a benchmark and a plan.

How do I take care of my parents and my kids and still build my own wealth?

This is the sandwich generation question, and it’s as much about time as it is about money. Kevin’s first instinct is to understand the full picture: what do your parents actually have, what do they need, and what do you want for your kids? Those answers drive the number. But the single most underrated piece of advice in this episode is to have that conversation with your parents before a crisis makes it urgent. Families who talk about finances in their 30s have options. They can plan, save, structure, and prepare. Families who don’t tend to find out the hard way in their 50s. You can’t borrow for retirement, but you also can’t retroactively create a plan you never had.

Should I stay in my career or make a change, and can I actually afford to?

There are really two questions embedded here: one about fulfillment, one about finances. On the financial side, the basics matter — what are your fixed monthly costs, how much runway do you have, and what does income look like in the new path over a five-year horizon? But Stacey pushes further: people in this situation are usually either unhappy with the work itself or feel like they’re not making enough to live comfortably. Understanding which problem you’re solving changes the answer entirely. A career change that pays less but offers growth and satisfaction may be a better long-term financial decision than staying put, especially if the numbers support it. And knowing your full financial picture, including what a partner contributes, what you actually spend, and what a transition period costs, is how you make that call with confidence rather than anxiety.

Should I pay off my debt first or start investing?

Kevin uses 7% as a practical threshold: if your debt carries an interest rate above 7%, pay it off before you invest, because you’re unlikely to reliably beat that rate in the market. Below 7%, there’s a case for holding the debt and investing the difference, particularly if your employer offers a 401(k) match, which is an immediate guaranteed return. The nuance both advisors add: this is also an emotional question. Some clients hold a 4% mortgage but can’t stop thinking about it. Paying it off may not be the optimal financial move, but if it eliminates a source of chronic stress, it has real value. Knowing why you have debt in the first place matters too. If overspending is the pattern, eliminating debt without addressing the habit just resets the cycle.

Should I buy a home or keep renting, and how do I know if I’m ready?

This is the question where Stacey and Kevin pushed back hardest against conventional wisdom. In high-cost markets like Southern California, the math has genuinely shifted: when you account for mortgage payments, property taxes, insurance, and maintenance, all of which have increased significantly, renting and investing the difference can produce more wealth over time than owning. That wasn’t true for most of the past 40 years, when a bull market in both real estate and interest rates made homeownership a powerful wealth-building tool. It may not hold going forward. The other factor: younger generations are more mobile, waiting longer to marry and start families, and less interested in being tied to a location. The price-to-rent ratio is a useful tool, if it’s above 20 in your market, renting often makes more financial sense. But equally important: stop treating homeownership as a proxy for success. It isn’t one.

What can AI actually do well when it comes to financial advice?

Stacey and Kevin aren’t anti-AI, they use it themselves and expect its capabilities to keep improving. Where it earns its place: surfacing information quickly, explaining concepts clearly, and giving people a starting framework when they have no framework at all. Where it falls short: asking follow-up questions, understanding values, knowing what a person actually wants, and translating general principles into decisions that fit a specific life. The five questions in this episode all got directionally reasonable answers from ChatGPT. None of them got the answer a good advisor would give, because a good advisor knows the person asking.

Transcript

SPEAKER_00 0:00

200 million people a month get their advice from AI. But it is very fascinating to me how AI doesn't always know the right questions to ask. It kind of takes somebody who has knowledge to prompt it to get the answers that you need.

SPEAKER_02 0:14

If a client asks you, can I change careers? You wouldn't be like, well, take your six to twelve months of expenses and multiply it. Like, like you would be like, let's talk about this.

SPEAKER_00 0:23

It doesn't really know you. I know what they want, what they care about, what they value, the things that are important to them. I understand their financial picture and whether they can make that leap or not make that leap.

SPEAKER_02 0:33

I think AI is a very good starting place. The fact that these questions keep coming up, these are the top, this is nothing what I had imagined. Why do you have that debt is really important? Was it a one-time issue? There's deeper conversations that need to be had.

SPEAKER_00 0:44

There's all these other factors that if you just followed that advice, it doesn't quite take into account people's like unique individual situation. This week on Cash Eye Conversations, we're gonna do things a little bit differently around here. We had this idea where we would ask ChatGPT what are the top five questions that people ask it for for financial advice, but we didn't want to know the questions or the answers in advance. So we're gonna have our team member, Jessica Hull, ask us the questions. Kevin and I are gonna answer. Because something that's profound that we've discovered is the amount of advice that people are going to. AI, Google, and Instagram for. The statistic is actually 200 million people a month get their advice from AI or actually more like hundreds and thousands from Google, which is just wild to me.

SPEAKER_02 1:42

Yeah, I mean it's an incredible tool. And I think the usage is only gonna go up, but not without cautions, right? I think that's what we're gonna talk about.

SPEAKER_00 1:49

Well, it's really interesting because it does provide like a lot of quick advice. We use AI and different things that we do in our personal lives and our professional lives. So we're not anti-AI, but it is very fascinating to me how AI doesn't always know the right questions to ask. And it always it kind of takes somebody who has knowledge to prompt it to get the answers that you need. And so we're just gonna we're just gonna see if maybe our answers are a little different than what the technology would give.

SPEAKER_02 2:18

I love it. Yeah, I feel like getting information is great, getting advice, maybe not so much, but we'll see.

SPEAKER_00 2:23

We'll see. And we actually really don't know the questions that are gonna be asked. All right, let's see.

SPEAKER_02 2:27

I was trying to guess, like, okay, what's it gonna be, but we'll see.

SPEAKER_00 2:30

We'll see. All right, Jessica, go for it. Ask us the first question.

SPEAKER_01 2:33

Okay, Stacy. First question. Am I saving enough for retirement? And is it too late to catch up?

SPEAKER_00 2:38

I'm assuming this is somebody that's maybe in their 40s and asking this question of, am I saving enough for retirement? I think one of the things that's really hard for people in their 40s is that they're kind of in this mixture of I want to live my best life, I want to go on trips, I want to raise my family, I'm spending a lot of money, but I also acknowledge that I'm halfway through my working years and I might want to retire one day. So one of the rules of thumb that I go by just in my personal life is I pick a dollar amount that I need to achieve, and then what's 5% of that would be the income that I would receive in retirement to actually spend. So as an example, if I needed $3 million to retire, that'd give me $150,000 in spending. If I needed, if I got $4 million to retire, that's $200,000 a year in spending $5 million, $250,000 a year in spending. I assume Social Security will pay my taxes. So I actually back into it by asking the question, how much a year do I want to spend? And then that dollar amount is what I need to achieve in order to get there.

SPEAKER_02 3:40

Yeah, I think that's a great starting point. But then what my mind goes to is well, what's inflation gonna be? What's your healthcare cost gonna be? Like, I think people base it off of what am I spending today? What do I want my retirement to look like? What is travel gonna be like? How many kids and grandkids am I gonna have? So, like the question of just like how much do I need is so basic as far as getting that answer. But I think your starting point, I think, is spot on. That it's if you're spending 5% of that balance, the likelihood of you outspending it is is small. And also you that gives a little bit of room. Your portfolio should earn more than 5% on a pretty consistent basis. So it allows for some small inflation at least.

SPEAKER_00 4:17

Yeah, inflation adjustments, or I think your point about like what do you want the money to do for you is a good one. I don't have kids, I don't need to leave anybody in inheritance, so maybe my number is going to be a little differently based on that because I don't like kind of want to spend all my money. I'm I'm like the die with zero person. You have three kids, you probably want to leave them something, I'm guessing. But your answer might be different because of that, too, which is a which is so fascinating.

SPEAKER_02 4:41

Yeah, and something that just jumped in my mind. We the house my wife and I own, like we have a single story, we plan on living in it forever. Like our goal would be for caregivers to come in, we never leave. My parents have a tri-level, and their plan was always to sell their house. And so that's another piece of the pie that you know they may have to use. Either they're spending it on rebuying, going to a senior living center. Like we don't know exactly, but there's other pieces versus just savings that come into play as well.

SPEAKER_00 5:06

Yeah, you bring up a good point. Sometimes people use their house as a retirement plan, which I generally advise against because you have to live somewhere. And when you sell your home, you pay capital gains, taxes, you have other expenses. In a world we live in today, even downgrading doesn't really get you very much.

SPEAKER_02 5:22

Downsizing is more expensive than staying put.

SPEAKER_00 5:24

I probably would recommend focusing on building a portfolio, whether that's 401k, IRA retirement monies, or taxable monies, or Roth monies, or maybe the perfect trifecta of all three, a balance of all three, because that way you don't ever in a situation where you're forced into selling your home. You only sell your home if that aligns with, you know, healthcare needs in a single story or something else.

SPEAKER_02 5:46

But you also bring up that that point of where are you saving? So if you're saving all that money and it's in an IRA, you have less spendable money than if it's in a trust. I wonder if AI is smart enough or if it's asking follow-up questions, like the prompts you put into it, you have to ask, where should I save? Like it's not just one question of am I saving enough for retirement to get a specific answer for your personal life.

SPEAKER_00 6:06

So I I had the marketing team print off the answer for us. You wanna wanna read it?

SPEAKER_02 6:10

Oh, I see that.

SPEAKER_00 6:11

All right, okay, let's see. Okay. Here's the answer. By age 40, you should have saved roughly three times your annual salary for retirement. By 50, aim for six times. If you're behind, maximize your 401k contributions, 23,500 in twenty twenty-six. Take advantage of catch-up contributions if you're over fifty and consider delaying social security to increase your monthly benefit.

SPEAKER_02 6:37

It's pretty generic.

SPEAKER_00 6:38

So fascinating. You and I just talked about so many personal scenarios my life, your life, kids, retirement, home, single story, tri-story.

SPEAKER_02 6:48

Um what's your income at 40 versus 50? Like, I mean, your your typically income increases over time. So six times at 50, I wonder if that's taken into consideration, is very different than four times at 40.

SPEAKER_00 7:01

Yeah, there's nothing about values in here. It just was dollars. Fascinating. All right. Are you ready for the next one?

SPEAKER_01 7:06

I think so. All right.

SPEAKER_02 7:07

This is fun.

SPEAKER_01 7:09

Okay, Kevin. Next question. How do I take care of my parents and my kids and still build my own wealth?

SPEAKER_02 7:17

So I think this is gonna kind of be the theme. My mind didn't go to money right away. My mind went to juggling just the complexities around the needs my parents have, the needs my kids have. Uh, but yeah, there's there's all these different buckets. Assuming we don't know everyone, like some parents are fully set and they don't need any help and support financially. Other parents are gonna be in a position where are they moving in? Are you paying their bills? Are you covering their caregiving? The one thing I think that we see a lot in our job is the sandwich generation. It's it's doing all three at the same time is so overwhelming from a time commitment standpoint. How do I coach baseball? You know, go check in on my parents, make sure that you know the gardening's getting done and the food in the refrigerator isn't spoiled, and then also like growing the business and growing your career through, you know, looking at the last question four times at 40, you know, six times at 50, like doing all of that is is a lot. So I think from my standpoint, it's you know, you want to love and care for your parents, but taking care of yourself and your family and making sure that you're on track for your own personal retirement, that you're caring for your kids in a way that's creating memories and you only have what, say 18 summers with them. So time's flying by there. Um, so yeah, I think my my answer is really figuring out where are your parents at, what are your goals for your kids? Do you want to pay for college for them? Do you want them to go to private schools? Do you want them to you know be able to go to camps or or not? And that changes the numbers so drastically. So it's not there's no answer, I guess. What specifically?

SPEAKER_00 8:47

Like you have to first decide on what the lifestyle goals are, and then you have to back into the number. And sometimes you have to change your lifestyle goals because of the number, right? But like knowing those numbers, I think, is the core of it. What I find is more stressful is actually when um people don't talk to their parents about their financial situation. Like we live in a world where finance is so private and it feels like taboo to talk about these things, but what ends up happening to somebody in the sandwich generation is they all of a sudden are surprised by the situation and it was kind of too late to do something about it, right? If they would have started talking to their parents about their financial situation in their 30s, maybe they could have come up with a savings strategy or a plan or understood how to get equity out of the house to be able to cover expenses and costs. Like let's say they were in a not as good of a situation. Like I think that my advice is that these conversations with parents need to happen sooner so that they ultimately don't affect you and your kids and your life in that way. And I I think time is a very valuable resource. So the sooner you can solve for this, the the better.

SPEAKER_02 9:52

Yeah, the more you can do, the earlier you start. I I I'm starting to see it with two, where kids have moved away, adult call them kids, the adult children. Parents live isolated. Well, what have like are they gonna stay there and get support? Are they gonna move near their son or their daughter? Or like so, like you like to your point that planning ahead is so important to understand what do they have, what what do they want. Yes. But now the question goes to what do your parents want, what do you want, what do your kids want? Like now merging all those values. I I think you hit hit the nail on the head. Time and starting early and having transparency. Maybe you don't need to know every single detail of what your parents have financially, but are they on the right path of saying we don't need support or we're in trouble? Like we're gonna need a lot of help.

SPEAKER_00 10:34

Yeah, and and don't just say YOLO and go for it, because I don't think that that's gonna really help anybody. All right, you ready for what uh chat's answer is? Okay, okay.

SPEAKER_02 10:45

You can you can answer it or it says prioritize in this order. Build an emergency fund. One, two, maximize your employer 401k match. It's free money. Three, help parents and kids from what's left. Remember, you can't borrow for retirement. Set clear financial boundaries with family members and consider having honest conversations about what you can and cannot afford to contribute.

SPEAKER_00 11:11

I feel like that's a little like cut and dried. What do you think?

SPEAKER_02 11:15

It's it's in the right direction now. So I mean we gotta give AI credit. Like it's in line with what we mentioned, like taking care of yourself first and then having these value conversations. But like I don't know where to go from here.

SPEAKER_00 11:26

Yeah, I don't I'm not sure. Even on the 401k side, like what are the other factors that are relevant to this person? Do they have a business? Are they gonna have an equity event later in life? Do they have a spouse that's gonna be able to give an inheritance that's gonna cover it so they don't need to do the 401k anymore? Because and they can actually afford to take care of their kids. Like there's all these other factors that if you just followed that advice, it doesn't quite take into account people's like unique individual situation.

SPEAKER_02 11:52

But then each one of these points needs additional questioning. So, like, what does an emergency fund look like? How much do I need to have in my emergency fund? So obviously maxing out your 401k. If people can do that, they absolutely should, and then help your parents and kids from what's left.

SPEAKER_00 12:05

It's like I think they have to eat, right? Maybe that should go on first.

SPEAKER_02 12:12

Yep, I don't know. It's yeah, it's definitely I love it.

SPEAKER_01 12:16

All right, Jess. Next question, Stacey. Should I stay in my career or make a change? And can I actually afford to?

SPEAKER_00 12:24

Oh gosh. Interesting that that's a top question that's being asked on Chat GPT because like there's so many other factors. Like, is do you like your career? Is it fulfilling to you? Does it bring happiness? Does it cover your bills? Are you able to save? Do you have career opportunities? Do you have growth opportunities? Are you in a place where you like where you live? Like there's so many other factors that like questions I want to know. Like, why didn't that person ask that specific question? That's fascinating.

SPEAKER_02 12:52

That person, that like you said, so many people are asking that. That's interesting. What is the job market for the career path that you're on? I think really matters. And then the second part of it is can I afford to do that? What a loaded question that is, right? It's like what are they looking for? Like yes or no? Like I mean, like, like how much have you saved? How much do you need to live off of? What is your lifestyle? Like, you know, have you do you have that emergency fund? Do you know what your bills are? Most people don't even know what they spend on a monthly basis. Like you ask someone how much you spend at Starbucks, like most people don't know. There are there are those that know every single detail. But like the starting point is getting an understanding of your overall financial picture. Yeah. But I love that they do tie in, like, clearly they're unhappy or they're seeking more opportunity, but then also they're so they're they're not informed if they're financially stable enough to do it. Like there's a lot of emotion and pain, I think, behind this question.

SPEAKER_00 13:42

Yeah, I want to know like what's their live housing cost? Because if their housing cost was $5,000 a month, which includes like utilities, property tax, insurance bills, then they probably need to continue trying to make close to $15,000 a month for all the other needs in life and taxes and all of that. And so, you know, are they achieving that? If they do leave their career, does their partner or spouse in the picture? Are they not in the picture? Is this all on them? Or is like somebody else involved that can take a little bit of the brunt if they really need to make a career change? The other, the other thing that I would mention though, too, in this is like maybe the one of the questions they're actually asking, there's always a question out of the question, you know, is like, how do I know if I'm in a good career? And to me, the definition of a good career is that you like going to work every day, but you also have growth opportunity. And I think that if somebody asked that question, um, I would hope that a prompt would ask, do you have growth opportunity? Do you have career opportunities? Is this something that you enjoy? And is this something where it's not just about what you have today, but you also have different things in the future that could change your life and lifestyle depending on what your values and goals are?

SPEAKER_02 14:48

Yeah, I think people are either unhappy because they don't like the work they're doing or they're not making enough money to make their lifestyle comfortable. Yeah. So they're seeking those two things.

SPEAKER_00 14:56

Yeah, I agree. Okay, let's see what the answer was. Okay, here's the answer to the question. To determine if you can afford a career change, calculate your monthly expenses, multiply by six to twelve for a savings runway, factor in any income gap during transition, and consider a long-term earning potential of the new path. If your new career uh pays less initially, model the five-year trajectory, reduce discretionary spending before you make the leap.

SPEAKER_02 15:24

That's pretty good. Yeah, it's it's not a it's not terrible again. It's it's on the right path. I think that it's just it's so shallow and so like surface level. Like there's so many other questions that you need to ask. And that's the one thing I think that AI doesn't do. It's to your point of okay, well, what's the real meaning? What are you trying to achieve? Like some people don't need to make more money, they just want more fulfillment. So maybe the financial piece isn't as important, but that's all it's really touching on is that piece.

SPEAKER_00 15:50

Yeah, it doesn't really know you. So it's like it that's the other thing I think when we work with our clients, and they ask us these questions. We've I've had a lot of clients ask me this question. I know like what they want, what they care about, what they value, the things that are important to them. I understand their financial picture and whether they can make that leap or not make that leap. And so it's very fascinating that this is one of the top questions, which A says that people are unhappy in their work. Yeah, but B, um it's uh it's interesting because if you made the leap just based on what chat gave you, um that there could be some dangers and red flags in those seas.

SPEAKER_02 16:25

Well, I know you and I've seen you do this. If a client asked you, can I change careers? You wouldn't be like, well, take your six to twelve months of expenses and multiply it. Like you would be like, let's talk about this. Like, what what is wrong? What is what are you seeking? What do you want? Like, what is it opportunity? So it's it's just there's no interaction back and forth. But I mean the numbers and the math, like if you just wanted to have a robot, I guess it makes sense.

SPEAKER_01 16:48

All right, let's go to the next one. Okay, Kevin, next question. Should I pay off my debt first or start investing?

SPEAKER_02 16:57

To me, that one's easy. I I think debt, depending on good debt, bad debt, how much the interest rates are, even credit cards, I mean, uh those that's a no-brainer, but like student loans, other debts, the interest rates are so high. Yeah, it just if you could guarantee that the investments are gonna outperform the interest, now we can start having a discussion, but that's not the world we live in right now. There's too much uncertainty in the investment markets, there's too much unknown. You can guarantee a return by paying off that debt. So I think you need to have an emergency fund, you need to have access to capital. So it's not only payoff debt, you do need to have a bucket set aside. But I'm a 100% believer in payoff debt first before you start building your wealth.

SPEAKER_00 17:37

I would probably too, if I was talking to somebody, create like um some metric we can go off of. So let's say it was 7%. If you have debt that's under 7% interest and the monthly payment is affordable, I'm probably not rushing for that. If it's over 7%, you need to pay that off first before you ever start investing. The reason that I use 7% as an example is that um i i if you have debt that's more expensive, but your investment returns are only 7%, you're actually losing money every month. You're not actually benefiting yourself because your debt costs are higher than your investment returns. I think at something debt that's 7% or under, you might be able to actually target investment returns that you could achieve what we call an arbitrage of like a little bit better returns in the debt. And so maybe it makes a little bit more sense to hold on that debt. The other factor though is like how do you feel about debt? Right. And that's a question that we ask our clients all the time is like sometimes people have 4% mortgages, but they can't emotionally handle that they have mortgage debt. And in that case, sometimes it's better to pay off your mortgage for the mental freedom. Just to be clear. Yeah, the financially it's probably not the best decision, but emotionally it is, and I think that one of the things that we try to do is just gauge where someone's at. Like, do they need to have the emotional benefit, Trump the financial benefit, or the financial Trump the emotional? And I think that that's unique for every single person.

SPEAKER_02 19:08

Yeah, how many times have we said, look, this the numbers will tell you to do this, but we know you, and we also know that you hate this payment or you don't like seeing that debt, or like every time that bill comes in, yeah. So you're gonna get more benefit out of doing that. The other thing I think that we need to talk about too is where are you saving? So if you get a match at work in your 401k, then maybe it's beneficial and you should actually put at least do a little bit there first and then pay off debt. So I think this question is very much do I do this or this? And oftentimes it's gonna be a blend. Pay down some of the higher interest ones, don't touch the ones that and then save some so that we're gonna match. Yeah. So I think it's important to understand what's the situation, how much do you already have saved, how much you know do you need how old are you? Are you approaching retirement? Are you just starting out in your career? So I think all of those factors change the advice that we would give.

SPEAKER_00 19:55

You already have investments, so like that might be okay, and you just need to focus on the debts because it's you're you're in good shape. Yeah, actually understanding the numbers I think allows you to authentically and um truthfully answer this question.

SPEAKER_02 20:08

Yeah, but I think in general, and I think we'll see this from Chat GPT or AI, I think payoff debt is gonna be the consensus. Typically, you should pay down your debt before focusing on investing.

SPEAKER_00 20:18

Well, let's see.

SPEAKER_02 20:25

All right. So prioritize high interest debt, especially credit cards above seven to eight percent, you nailed it, before investing, since the guaranteed return of eliminating 20 plus percent interest outpaces average market returns. Once high interest debt is cleared, invest while making minimum payments on lower rate debt like student loans or mortgages. Always capture your full employer 401k match first, that's 50 to 100% instant return. Can I nail that? Together, yeah, we made it work. And and and I think that all makes somewhat of intuitive sense. It's it's but then also I think factors that play in. If you're someone that's gonna pay off your debt and then just put more debt on, like you're you're gonna get stuck in this roller coaster. So there's habits that get involved. Why do you have that debt is really important? Was it a one-time issue where your car broke down or your you know, washer and dryer broke broke or whatnot? Or are you someone that just spends too much? And those are there's deeper conversations that need to be had around that.

SPEAKER_00 21:19

You don't want to keep getting in trouble. The other thing that I didn't mention, and this didn't mention either, is it some debt you can write off the interest rate? Yep. So you might think this is a eight percent home mortgage loan, but it's deductible up to 750,000. So you can actually write off some of it. So it's actually not really 8% interest, and maybe it doesn't make sense to to eliminate that. There's a other factors like do you actually get to itemize deductions on your tax return and things like that. But but I think that these are these are all questions that have to be asked to give the right answer. Absolutely.

SPEAKER_01 21:52

All right, last one. All right, last question, Stacy. Should I buy a home or keep renting? And how do I know if I'm ready?

SPEAKER_00 22:00

Oh, the rent versus buy saga. It's so interesting because like I think in the last five years, this has been like completely flipped on its head. It's a it's probably one of the first times in history where like I don't think that that answer is a clear answer, mostly because I think it depends on where you live. So when we look at Southern California and people that are in this local area, they can actually make more money in the long run by renting and saving what they would have spent on a house, whether that's you know, a mortgage expense, property taxes, insurance, home maintenance, like it is actually possible that you end up wealthier by renting and not owning in today's marketplace in Southern California, which I think is just so fascinating.

SPEAKER_02 22:50

Very different than the past 40 years.

SPEAKER_00 22:52

Totally.

SPEAKER_02 22:53

Yep. And I think one of those shifts, and you I think you hit on it too, where owning used to lock in your costs. You're like, I know what I'm spending. I have a fixed mortgage, I know what my expenses are. Rent was kind of all over the place. You could have someone increase your rent, you could get kicked out. I don't think that's the case because all of us thought we had fixed costs on our homes. How much has our insurance gone up? How much has our home maintenance gone up? How much has our utility have they gone up? So your fixed costs of you know, maybe the mortgage has stayed the same, which is amazing and a big piece of it, but that's changed. The other thing, too, is that just demographically, younger generations are waiting longer to get married, they're waiting longer to start families. My parents, their my aunts and uncles, like they were gonna have a job and that was gonna be their job for 40 years. Like they knew that they were, you know, they settled down, like setting up what is it called, setting roots or whatnot. Like that's not the case anymore. People want to travel the world, they don't know if they want to live in the same location forever. So when you buy a home and you're you know now fixing yourself to a location, you're now gonna be subjected to the market's fluctuations if you ever want to move or sell and and and now holding it as a rental if you don't live there creates a whole lot of other, you know, kind of headaches that may go into that, which we've touched on in other episodes. But so I think, yeah, I think you're right. It used to be hands down, buy you own, you're not paying someone else's mortgage, you're paying your own mortgage. But with just the the housing cost going up, that has changed.

SPEAKER_00 24:12

And I I think the thing that drives me a little bit crazy about this is that there's this narrative of the American dream being that you are successful if you own a home. And I think that that really gets to people. I feel like it's like an emotional pull that says, I'm not gonna be successful unless I own a home. And I I hope we can break that at some point because I actually don't think that home ownership should equal success. It's not A equals B in this scenario. I think that you can be successful in a lot of different areas, and maybe if renting gives you more financial freedom to go do the things in life that you love, like that could be a successful life. And so I think this renting versus owning a home scenario is gonna be location specific, person specific. It's kind of the theme of every like answer we've given is like there's so many factors that go into what's the right answer for an a specific individual.

SPEAKER_02 25:05

Yeah, when you own, you have to fix everything yourself. And I also think like like my dad or my you you talk like the a pipe breaks, a light goes out, like he's doing it, like he's fixing it. None of my friends are fixing anything, so so there is something to renting and being able to just be like, hey, there's something wrong, can you come fix this for me versus having to take on that responsibility? And I think again, the younger generations appreciate that they want to spend their time doing other things, not so much being in the house working on that property. So it's definitely changed the outlook. The other factor I think to take into consideration, we've had a bull market in interest rates for 40 years from the 80s till 2022, give or take. And like you could buy a house, it's going up in value, you could pull equity out of that house, you're lower, you lower your payment by refinancing. Like, what an environment to generate wealth by owning a house and having it be an asset that you could leverage and pay for school or pay for other parts of your lifestyle. My opinion, I don't think that's gonna be the case going forward. I don't think we're gonna have an environment where you can buy and own a property that's gonna keep going up and you can just keep pulling money and having it be a part of your bankroll. We saw so much of that through the 80s, 90s, and early 2000s. So owning a home helped create wealth. It may or may not be the case going forward.

SPEAKER_00 26:20

Yeah, this is not the 1970s real estate market anymore. This is the 2020 real estate market where even, you know, we talked about this on prior episodes too, whether it's owning your own home or owning investment real estate, the returns just aren't quite there like they used to be.

SPEAKER_02 26:33

Yeah, and the affordability of it. I mean, starter homes in the 80s in this area were $200,000. A starter home now, you're lucky if it's under a million, it's gonna be a million one, million two. And so a very different, you know, environment to be a homeowner in.

SPEAKER_00 26:48

Totally agree. Okay, let's see what what Chad said. All right. Uh you may be ready to buy if your monthly mortgage payment, including taxes and insurance, stays under 28% of gross income. You have a 20% down payment saved, you plan to stay at least five years, and your total debt to income ratio is below 43%. Building buying builds equity and offers stability. Renting preserves flexibility and liquidity. Run the price to rent ratio for your market. If it's above 20, renting often makes more financial sense. Fascinating.

SPEAKER_02 27:22

Yeah, I I just I think AI is a very good starting place. Like, I like I'm I and it's only gonna get better too. So, but the fact that these questions keep coming up, these are the top, this is nothing what I had imagined. Like I thought it was gonna be like, should I buy SpaceX? Or like, yeah, are we going into like when's the stock market bubble gonna burst? Like it's it's all about actually more on lifestyle questions than what I would have thought.

SPEAKER_00 27:45

Totally. Oh, this has been such a fun experiment.

SPEAKER_02 27:48

It was good, it was definitely fun.

SPEAKER_00 27:49

I think we both took a little risk of like, let's see if we can do it. I think we did it. I love it.

SPEAKER_02 27:54

Yeah, it was fun.

SPEAKER_00 27:55

Thank you for watching another episode of Catch Eye Conversations. We'll see you again soon.

SPEAKER_02 27:59

Wow.