Introduction: Welcome to the Fiscal Firehouse, a podcast
dedicated to promoting financial literacy to firefighters.
I'm your co-host, John Beatty, executive board member of Local 1309, a lieutenant,
and also a certified financial planner.
With me, I have the other co-host of the fiscal firehouse, Louis Barella, executive
Board member of Local 1309 ambulance driver, and want to be financial expert.
Together, John and I hope to bring clarity to the world of personal finance,
specifically relating to firefighters.
Firefighting is a difficult job making sound.
Financial decisions shouldn't be.
In today's episode of the fiscal firehouse, John and Louie tackled
the difficult topic of debt.
John and Louie talk about the emotional responses associated
with debt, including fear, anxiety, shame, and even hopelessness.
Your two hosts debate the concept of good debt versus bad debt.
Is there such a thing?
John and Louie will demystify how credit scores are calculated and
actionable items to start improving your financial future today.
Lastly, John and Louie discuss in their opinions the biggest risk factors for
firefighters getting and staying out of debt, the dreaded truck payment.
Without further ado, let's kick it over to local 1309 studios and the
recording of the fiscal firehouse.
Jon: Welcome back to another episode of the Fiscal Firehouse.
Louie: Don't call it a comeback.
We've been here.
we've been here.
all along.
Jon: We come
Louie: Yep.
Yep.
Jon: That's right.
I'm your co-host John Beatty With Me, as always.
We're in his best.
Michigan Blue, my partner in crime, Louis Barilla.
What's up, lb?
Louie: Oh, dude, it has been a summer for both of us.
I mean, we did not want to take a hiatus.
That was never our plan.
But I mean, life comes at you fast.
You've been crazy busy at the training center, Had family
stuff, all the summer stuff.
Summer's hard.
Like summer is really hard.
I'm learning that now that I have three boys who are active and
have things on their schedule.
I think every day during four day I have something going on.
that's just how it has been in the summer.
Jon: Yeah.
you've been at it as well.
And man, I've never been so happy to, have public school kickoff tomorrow.
we need some routine at the Beatty household.
I love my kids, but they are, they're driving me crazy.
Louie: to go
Jon: It's time to go back.
It's time
Louie: back.
I get that.
I think I, I was telling Caitlyn just recently, I'm looking forward to the fall,
not because we have things planned out, but because we don't have things planned.
out.
Jon: Oh, slow down a little bit and
Louie: summer's fun, but man, it wears on You like having stuff
every four day, like there's always something going on and it's like, we
didn't have time for a lot of stuff.
Like, just for hanging out, relaxing, doing this podcast.
Even like, I know we tried a couple times to get something on the calendar.
and It was just tough.
So I'm excited.
Looking forward to the end of summer, the beginning of fall.
and I'm super excited to be back doing the podcast again.
I know we've had some good stuff that we have lined up that we want to talk
about, so I'm excited to be back.
Thanks for bearing with us to all of our fans out there.
Both of you guys.
Jon: Yeah.
There's at least there's one subscriber.
Yeah.
Thank you.
Thanks for that.
but it, yeah, Louis said it best as always.
this is something that we've taken a lot of pride in and we wanted to
try to keep up the momentum with releasing at least one episode a month.
But, yeah, summer came and went and we just didn't get ahead of the curve.
So in the future, I think we'll probably preload some episodes so
we can continue on, on kind of a monthly drop, which is just nice.
So, without further ado though, we will, we'll kick it off and,
we're gonna mix it up a little bit.
And today, what are we gonna talk about?
Lb
Louie: This is gonna be the debt episode.
Everyone's Favorite most exciting episode, most exciting topic to talk about.
Is debt.
Right.
So
Jon: love it.
Love it.
And what's your, I think it was your uncle, what was this saying about debt?
He, the man with the most debt wins or something.
What was that, did that come from a Brother Barella
Louie: episode?
I don't know if that was, I feel like there was something about that I have
another uncle, he was a former Denver firefighter, retired Denver firefighter
who always said happiness is paying cash.
He was very anti.
Jon: Oh, okay.
Okay.
So
Louie: there's a lot of anti debt feelings in my family too, which
is probably where I got some of it.
Sure, sure.
And, and we'll kind of talk about that.
But you know, John, I think the first thing we need to do is talk
about the feelings surrounding debt.
Because I'm sure people are starting this podcast right now, hearing that we're
talking about debt and they're like, I
Jon: snooze alert, they shut this thing off.
Ah.
Louie: And that's because there's a lot of like negative feelings about debt.
There's a lot of hard feelings, there's a lot of shame.
There's a lot of regrets related to debt that people have taken on
or can't pay back quick enough or.
Maybe have even defaulted on.
and that makes it hard to talk about.
So I think that we want to do this episode not to make you feel
guilty, not to make you feel like you're alone or you're on an island.
This is something that a lot of people struggle with.
It is hard to live in this society without this feeling that you need
to have debt or that, that it's an okay thing or it's a good thing.
So we wanna talk about that.
We wanna talk about those feelings surrounding debt.
We want to talk about why it could be bad.
We want to talk about if there's such a thing as good debt, and maybe some of
the traps that are easy to fall into so that you can avoid them in the future.
So don't feel bad, don't feel guilty.
We don't want you to feel like you're the, only person listening
to this that's struggling with debt.
Like this is something that Americans struggle with in general.
And so we want to give you some knowledge in order to be able to navigate the
pitfalls of debt because most of us, at one point or another have.
Fallen into one of those traps, right?
Jon: Yeah, that's well said.
And that's one of those things that, debt, really, it'll go across
all socioeconomic divides as well.
Mm-hmm.
Not just people that are on the lower end of the socioeconomic spectrum, but
even those people that are, you know, white collar, one percenters man, they
have sometimes the most debt and really struggle with trying to pay bills, you
know, truly living paycheck to paycheck so you can live paycheck to paycheck
and, you know, make 50 grand a year.
You can live paycheck to paycheck and make $10 million a year.
It's really just about how much money you're spending.
So we're just gonna give you a little bit more, education surrounding this.
This is one of the things that when Louie and I sit down with our recruits for kind
of our finance 1 0 1 for firefighters discussion, this is always the one that
I'm, I'm surprised at how much discussion.
Debt generates.
Yeah.
When we're talking about credit cards, when we're talking about mortgages,
when we're talking about loans, and I think that's just because there's
still a lot of misinformation out of there, about how debt works and how
credit cards work and even how to calculate interest, all this other stuff.
There's just a lot of, there's a lot of questions surrounding this that
people, much to what you talked about, internally kind of struggle with.
Bringing it up.
'cause it's, it's a source of conflict for them or a, a source of, shame sometimes.
Yeah.
So that's really what we're trying to do here is keep this just like we do
at the firehouse table where we, you know, share our most intimate secrets.
this is one of those things that we're gonna tell it to you, you know, from
Louie and I's experience as well.
I've struggled with this just as much as anyone else, so it really is
from the horse's mouth, so to speak.
You're, you're right in there with us if you've, you know, had high credit
card balances where you're wondering how you're going to, how you're gonna pay
those off, or, you know, you took out too much of a loan payment on a, on a truck.
The old 1309 edition, man, I've lived there, done that.
So it's, you, you, you welcome aboard.
Yep.
You know, it's, it's part of that deal.
So it's one of those things that we strive for here is, one of the
things that I love about the fire services, we're always trying to
improve it for the next generation.
And this is just one of those things that, you know, maybe we can share
a couple of our stories to try to help, prevent you guys from future
situations that we've run into.
Louie: Yeah, that sounds good.
said John.
I think, before we delve into the couple topics we're gonna talk about related to
debt, we just want to zoom out real quick and say why we're talking about debt.
you know, our goal in this episode is not to say that you are right, or you're
wrong for having debt, or to judge you for that, but we wanna provide some insight
as to why we believe paying off debt and becoming debt free is a fundamental step
in your journey to financial independence.
So we've talked about this on different episodes before.
I think even one of our first or second episode we ever did.
We talked about the steps to becoming financial independent, and we distilled
it down to three steps, right?
And it's like our used car salesman pitch is
Jon: like three simple steps, baby,
Louie: steps, three simple steps.
Not easy, but simple, right?
Those steps are, number one, live below your means.
Number two, get out and stay out of debt.
And number three, invest early and often.
So this is that.
Step two, it's hard to do.
Number three, invest early and often.
If you don't take care of step two, which is,
get out and stay outta debt.
So that's why we're talking about it.
That's why we think it's important.
And we think that, you know, the center, at the center of becoming financially
independent is the getting out and staying outta debt, because that's
what Americans struggle with the most.
That's what firefighters struggle with the most.
And there's always temptation, right, to, get into debt now.
So you can have whatever you want right now instead of later.
and we just, we know that that is always gonna be present throughout your life and
it's okay that, that temptation is there.
And it's okay if you have, debt right now that you haven't paid off.
there are ways and strategies that we'll talk about for paying off that debt.
but we don't want it to hinder your number one wealth building tool, which is
your income, and that's what debt does.
It robs you from that.
So that's where we're at.
And that's the high level view of why we're talking about it
and why we think it's important.
Jon: Yeah.
It's, interesting when, when you're talking about temptations, I just, I
started to think about just how good technology has gotten specifically
algorithms and marketing to where they can target you specifically.
And even sometimes you're like, you didn't even do a Google
search or a chat GBT search.
You're literally just chatting about something with your friends, and
then all of a sudden you look on your phone and it's literally right there
being like, how perfect is this?
so yeah, the temptations have never been greater.
honestly, and how they can drill down onto your every want or desire.
And now, because once again of technology, it's so easy.
One click payments sometimes, apple Pay here, you don't even have to
bring out a physical card anymore.
It's just with your phone within a proximity.
Like they really have taken all the friction out of transactions and just
made it as simple as possible, which just makes it that much more difficult when
you're talking about tracking expenses.
How much did I really spend?
How much money do I have?
All these things.
Louie: John, I was thinking about this.
We were, I think we were talking about this at the fire station not too long ago.
is if you are one of our younger guys Yep.
Or gals on, online.
you don't really ever deal with cash.
Everything is Venmo.
Credit cards, maybe a debit card, but you don't see like that.
You don't see or experience the physical cash going away from you
to realize like how much you have.
They're all just numbers on a digital screen that kind of tell
you what you have or what you owe.
And it's, it's weird to get a, a strong sense of Hey, this is
more money come going out than it's coming in, or whatever.
When you're just dealing with that, and that's hard for anyone, even people
who have dealt with cash in the past.
But if you're a younger person, 21, 22, 23, you're, you probably don't have a lot
of experience with physical cash because everything you know is so digitalized.
Super easy to fall into into those buy now, pay later traps, credit card traps
without even realizing, The pain that comes with spending all that money.
Yeah.
that's tough.
Jon: That is very tough.
And there's actually quite a few studies that have shown how much
more money you are likely to spend when you don't have like physical
currency, like fiat currency.
So paper money or coins.
once again, just because the ease of use, so to speak, and being
able to make those transactions.
So we're definitely with you.
We understand that.
Like I, I never hardly ever carry cash as well.
I, I'm typically a digital person as well.
so I definitely have those same reactions and those same emotions, but it's
definitely a generational gap as well.
Whereas like my grandfather, and my father-in-law, all they do is carry cash.
Like literally never have any plastic.
It's just cold, hard
Louie: a wad of cash.
Jon: just a wad of cash.
So shout out to Big Frank for his big old gangster wad of ones, Francis.
Yep.
Carrying a lot of that ca cold hard cash.
Yep.
Louie: so John, I mentioned that, debt, the reason, the problem that
we have with it, if you wanna say, John and I have a problem with it,
it's because we think it robs you from your number one wealth building
tool, which is, which is your income.
That is your, your source of, of inflow that you can use to invest, that
you can use to save for retirement.
But if you're paying debt, if you have a bunch of debt that
you need to make payments on, it's kind of robbing from that.
So in order to talk about that, I think we need to take a little bit of
a detour here and talk about, something that I really like to talk about.
I think this is a great way to make decisions.
and it's the old idea of opportunity cost.
Jon: Oh, this is your big Michigan brain out at, it's fine.
It, this is econ 1 0 1, business Strategy 1 0 1.
Yes.
You
Louie: to talk about
Jon: opportunity
Louie: We talk about this, to the new guys when we give them our
presentation, our financial presentation.
and it's a really kind of enlightening conversation 'cause we get to
interact with the new folks.
who are still in the academy.
And ask them what if they know what opportunity cost is, if they
are, if they have an idea, if they use it to make decisions.
But it's something that a lot of people might not be familiar
with if you are not used to the economic decision making process.
Now, full disclosure, I'm not an economist.
I went to Michigan where I did not major in economics, but I
took a lot of economics classes.
And this is something that, economists use to make decisions.
Business leaders use this to make decisions.
So the way that we do it, in our class for the new recruits is
kind of what we're gonna do here.
I'm gonna give you an example and John, you can, tell me if I'm missing the boat
here or If I don't have the right idea.
But here we go.
So this is the example that we give in our presentation.
Jon: And I'm glad that you've updated this.
'cause when Louis first did this, right around COVID, he was
talking about, movie tickets.
And I'm like, dude, when was the last time you were at a movie?
1984.
Louie: I think they're still wrong.
I think I need to go higher.
These are like matinee prices.
Jon: with the kids.
Yeah.
This is not a Friday night new release going to the 9:00
AM show or the 9:00 PM show.
Exactly.
Louie: But I don't go to the movies anymore, so I don't know what
the prices are, but here we go.
There's a first grade firefighter paramedic that's standing in line
at a movie theater at 5:00 PM He's gonna buy a movie ticket.
and I put down here $14, but it's probably more than that.
Right?
It's probably 20 bucks.
Jon: It might be, yeah, 16, 18, depending on whether you got
going to the A MC or the imax.
The
Louie: you're gonna The IMAX or the regular, yeah.
Yeah.
he's gonna buy a medium popcorn or a small popcorn for eight bucks.
And let's say he's gonna buy a Coca-Cola for $5.
So the total that he's gonna charge to his credit card.
Of course you gotta pay on your credit card
Jon: points, baby.
I need the points.
I need some miles sent
Louie: back.
I need those two times miles on entertainment purchases.
He's gonna charge about 30 bucks with taxes.
It's gonna be around $30, let's say.
Okay.
So while he's standing in line, he gets that beautiful text from vector
scheduling for a 12 hour overtime shift that starts that evening at 7:00 PM and
it goes to 7:00 AM the next day, 12 hours.
He ignores that text, that vector scheduling text, even though he
could easily respond to it and take it, and he completes his purchase.
So my question to the audience is what did it cost him to go to the movie?
Jon: 30 bucks, right?
Yeah.
Because it was the popcorn, it was the ticket, it was the Coca-Cola plus taxes.
and we'll say that this is a good firefighter and that they pay off
their credit card every month.
Yep.
no, they didn't get charged interest for their payment, but let's say, yeah.
So 30 bucks.
Yeah.
Louie: Cost him $30 wrong.
It costs him more than that.
And that's where the idea of opportunity cost comes in.
Opportunity cost is what you give up when you choose between options.
It's always fun to ask the recruits that.
'cause a lot of people will think like it's 30 bucks, right?
that's what it is.
There's always a few people in there that, know they're like, nah, it doesn't sound
right 'cause he gave up something else.
Right?
They intuitively know that you could have made more money or you could
have made money doing something else, but you chose not to do it.
And that's what opportunity costs, Cost is.
It's a key component.
Business decisions.
And a lot of people consider it the true cost of doing something
because it's what you give up when you choose between options.
So with debt, John, the, the reason why we say this is a bigger deal
than just the simple interest rate is because opportunity cost is the
amount of money you could have earned by investing your money instead
of paying interest to the lender.
So then we like to talk about the firefighter's favorite,
which is a new truck.
Yeah.
John, you mentioned the Ford F 1309, which is super common for
new recruits to buy right after.
Jon: the, what did you say?
It's now GMC.
Is that the or Chevy?
Is that the truck of choice by the, yeah,
Louie: the little side generation.
little side note, I don't know if everyone else has recognized this,
but I feel like it comes in waves.
there are, I don't know if it's like model years, you know, or, or
consumer reports or what determines, but it seems like you'll go to a,
you'll go to different fire stations.
And you will see oh, right now all the people coming out of
academy are buying the Tundra
Jon: tundras were big for a long time.
Yep.
Louie: then it was like, it was the Rams like the Rams were huge.
And now I see a lot of Chevy.
A lot of GMs.
Like those are really popular right now.
Yeah.
I don't know.
I don't know what.
Jon: They got a good, they got a good deal.
Louie: got a, everyone gets a good
Jon: a guy.
They got a guy and they got a good deal.
They got the firefighter discount.
Louie: one's ever gotten a bad deal on a new car.
I'm convinced.
I've never heard a firefighter tell me that they got fleeced,
when it came to getting their
Jon: I just got taken.
Louie: Oh my gosh.
But so then we drive it home for firefighters, and this is where it gets
personal for a lot of firefighters, and they start getting offended by this.
But if you had a 25-year-old firefighter who graduated the academy and he got
an average new car payment, which, John, what is the average new car
payment in the United States today?
Jon: If this has been updated, it's almost 750 bucks per month.
Louie: $750 a month.
That means that anytime you see a new car.
Driving down the road, there's a good chance that it ha that
it's towing around with it.
A $750 car payment.
Jon: And that's just for the, that's just for your payment.
That doesn't include the insurance and the maintenance and everything else.
That's truly just to pay back what you have borrowed?
Louie: That's what you borrowed.
Okay.
And the average length of a new car loan is about six years.
Yep.
So $750 for six years.
So the total price someone would pay over that six years, you just
take $745 a month, multiply it by
Jon: 72, 72, or Yep.
Louie: 72 months.
And that would be about $53,640.
Right?
Jon: Dang.
Yep.
Louie: Yep.
Wrong.
What It's not.
Yeah.
It's not $54,000 that you're paying because if you would've taken that
money instead and invested it at a 7% real growth rate, which is what
you would get in an s and p 500 or a total stock market index fund.
Yep.
The real growth you would have.
is $61,800 over that same timeframe.
So not only would you not be in debt, you would have six oh, about
$62,000 sitting in a whatever Roth IRA brokerage account, 4 57.
And if you were to let that money just sit and grow for the rest of your career,
it'd be worth $313,000 in retirement.
That sounds crazy, but what I'm submitting to you is that the opportunity cost of
buying that new Ford, F1, F 1309, or Ram 1309 or whatever it is that you're
buying, that the true cost of it is not that 54,000 or 55 that they tell you it's
gonna cost you or the, over the length of your loan, but instead it's what you give
up by not investing that money instead.
So you're giving up around $300,000 every time you do that, right?
And how many times do firefighters go out and be like, eh, you know what, this.
Truck
Jon: oh dude, after three or four years, that thing is a baloney skin.
You gotta get that thing replaced.
There's something that came out that's better
Louie: and what do, and the dealers like the dealerships are so good at
calling you up and being like, Hey, we know you have this truck that's
about five years old, four years old.
and Guess what?
You bring it into us.
We'll give you a brand new truck.
Trade that one in, and we'll keep your payments the same, same $750.
You don't have to worry about it.
Now you got a new Ram 1500 with all of the bells and whistles, and you
just pay $750 like you've been doing.
No, no harm, no foul.
It's all good.
I think you can see if you keep doing that, you're in this vicious cycle if,
and you are robbing from your future so that you can have these trucks now.
Jon: So if I'm tracking you though, go.
Going back to your example about the movie theater.
So the way that I would actually calculate the opportunity cost, so
it's not only taking the $30 that I physically spent to go for this form
of entertainment, but it would be on top of call it probably the $600 or
whatever I would've made in overtime.
For that 12 hours.
So it's actually $630 was my opportunity cost for basically going to the
movie versus taking the overtime
Louie: And it was probably, Yeah, it was probably about 600, five to 600 bucks.
is what You would make, you could have taken that and you chose not to.
You chose to go to the movie.
theater.
Yeah.
So you have that $30 that you spent at the movies, plus that $600 or whatever
that you gave up by not taking that over time, you could have had it.
Jon: Gotcha.
I'm tracking.
So
Louie: that's opportunity cost and that's what I would encourage people to
consider when they're choosing to take on.
debt Because instead of using that money for a beneficial purpose like savings
or investing, you are instead paying it back as principal and interest to a
lender over the course of a five years.
Or four years or whatever it is.
and I think you can see how that quickly turns into a vicious cycle with debt.
Jon: Yep.
And that's, and that's not just for, vehicle purchases.
That could be for, your residents.
That could be for all sorts of personal loans that you take
for all sorts of other things.
business loans that go bad.
Like it's not just all about auto loans, but that's, Louie and I hit on the auto
loans so much because this is universal.
And it's not just West Metro Peeps, it's, it's the fire service in general.
if we could get our folks to just buy not brand new vehicles and buy something
that was used, you know, four or five years old that's got a little bit of
mileage on it, and just save some of that difference, even if it's 30 or
40% difference from what a new vehicle is, you don't have to finance as much
for one, and then you can take that.
That difference, right?
If you could just take it from a $750 a month payment to a $350 a month
payment, so save that $400 and put that into something like your 4 57
or a Roth IRA or a brokerage account.
There's a lot of different investment vehicles that you could use.
I mean, you would change the trajectory of your career and your
financial life moving forward.
Yes.
I mean, that just gives you so many options and so much
flexibility moving forward.
And that's, I think as we've done this enough and talked to enough
people, like we understand that people need modes of transportation, right?
They need a physical, a safe way in a reliable way from getting
from one point to another.
And we know, you know, generally our personalities, firefighters
in general are, active people.
So they actually do use their trucks to some degree.
They put mountain bikes, they go camping, they go up in the back
country, they do all sorts of stuff.
Louie: they're paying for those mountain
Jon: Cash, cash, coal,
Louie: they're not getting in debt for
Jon: No, definitely not.
Boat.
Louie: The boat and the ATVs and the,
Jon: I gotta, I got, I need something to pull this.
Yeah.
Louie: they, the trailers and the fifth wheels, those are, I'm sure paid for.
In cash and not high interest loans at 7% or 8%.
No way.
Jon: Never.
Never.
No.
And this is why Louie and I joke about it, but this is something that, it
really is near and dear to our heart.
'cause we really are looking out for our brothers and sisters and their financial
futures and what's in their best interest.
And this is just the one thing universally, if we could just
co curb that behavior just a little bit, just modify it.
Just a touch to, if you still want a truck, that's great.
Just get something that's not brand new, something that's got
some depreciation on it already.
Something where you don't have to finance as much.
and keep it longer.
Don't keep it for three or four years.
keep it for 10 or 15 years until the wheels literally fall off.
Yeah.
you could definitely change the tides of where your financial trajectory is headed.
Yeah.
Like hands down.
Yeah.
I,
Louie: Yeah.
John, I think that's a good point is we're.
Don't mish heroes, We're, we're not saying you shouldn't have a reliable
vehicle that you shouldn't have.
A truck that you can use to haul things around and do stuff with your family.
We're not saying that at all.
but what we would submit to this audience is that most people that are
buying these new trucks had perfectly good working vehicles in the past.
Like we see it all the time where firefighter has a three or 4-year-old
truck that is working great.
Like it's fine.
It is, it is plenty of truck or car for that person and they will
still be like, eh, you know what?
I want this new one or I want this better model or this upgraded model.
And they keep doing that year in and year out or every four or five years I guess.
And it is, that is brutal to your finances.
and To assume otherwise, no matter how good of a deal you got on your
car, which we know everyone gets a good deal on their car, no one will
ever tell you they got a bad deal.
It is still taking from your future, it's still taking from money that you
could otherwise invest and earn money on.
And that's what our concern is.
That's why we're talking about it, because we think that, we see that so
often that we know it's taking real money out of you, out of the your future.
pocket.
Jon: Yep.
No, and that is, as usual.
that is well said.
So that's kind of our, our messaging, when it comes to, the auto loans
and just some of the traps that we see, our folks get into.
And it, and it's just one of those things like Louis really did explain it well.
It is a vicious cycle.
typically it takes a little bit of age and a little bit of wisdom, and
sometimes just being, we've talked about it before, it just sucks being
broke and paycheck to paycheck.
And that is typically something that starts to modify some of the
behaviors or, you get married and then you have some kids, so now you have
competing resources for your money.
So now it's not about the new truck anymore, it's about trying
to afford daycare or maybe co or education for your kids or something.
You just have a different priority in life.
Louie: Yeah.
Yeah.
Jon: and that's natural too.
So I know we're, I know there's a lot of people coming around the academy.
They're just like.
Just shaking their heads like, I don't care, man.
I earned this.
Louie: yeah, I
Jon: earned this.
I need this.
I worked hard for it.
And that's just, and that's just one of those things where so much of debt and
the concept behind surrounding debting taking out more and more is just this
need for feeling some type of fulfillment.
there's always this, Instagram and everything else.
You, it just, it's never been more in someone's face about how much someone
else has compared to what you have.
And it's really, it's, this is modifying behavior and perceptions more than it
is about dollars and cents and math.
Yeah.
It just is, at the end of the day, that's what it's about.
It's about priorities and values and how you're gonna
value your time and your money.
Louie: money.
Jon: But that
Louie: there you go.
So box that I'm there.
Boom.
No, I love it.
I love it.
Couldn't have said it better myself.
I love it.
Jon: Yeah, so that's, so that's auto loan.
So, and that's opportunity cost and just some of the things that, that,
we definitely have experienced.
I have been that 24-year-old person that bought a brand new
Toyota Tacoma right off the line.
'cause they got a sweet deal.
Louie: Yes, sir.
And,
Jon: I had that thing for a couple years and I was just spending so much
money on it that I no longer was getting a lot of, gratification out of it.
And I ended up selling it and bought some used, F-150, manual and it got
me around just fine and I was happier.
Nice
Louie: Nice
Jon: than I can ever remember.
So Nice.
Yep.
Getting personal there.
A little personal anecdote.
Yes.
So I have definitely been there and I have owned a couple of new trucks
and it's one of my biggest regrets.
what else?
So, when we're talking about opportunity costs, we're talking
about, you know, loans or debt.
you know, this is one that is interesting.
We always.
You know, go around the room with the, with the new firefighters and say okay,
cool, we know about financing and we know about taking out loans, but you know,
there's gotta be a good loan to take out.
Right.
And there's gotta be a bad loan to take out bad debt.
and it's really interesting to always hear people's perspectives on this.
And I don't know, Louis, what do you think is the number one
that people say is a good debt?
guaranteed, like I'll take this to the grave, like this is good debt.
This is something to take a loan out for.
That is good.
Louie: I'll tell you, I think historically, one of the golden examples
of what a good debt is student loan debt.
Jon: Oh, 100%.
They always come out with yep.
Student loan,
Louie: for sure.
You're doing it to improve your education and your employment chances
and your marketability in the workforce.
So yeah, take out student loan debt and then I, I've pushed back on people and
say, ask these people who took out 70, 80, $90,000 in student loans and then
got some liberal arts degree and they had to come into the workforce earning,
not much more above minimum wage.
or Maybe even minimum wage 'cause they couldn't find a job.
That happens a lot.
I think there's, we can't assume that everyone that took out $70,000 in
student loan debt, has some kind of, high earning degree or that they are
a, you know, an engineer or they're in a STEM field or something like that.
It doesn't really always work that way.
A lot of these people who are taking on 70, or $80,000 in student loan debt,
sometimes they're teachers, sometimes.
They're very blue collar, middle class incomes.
And I bet if you asked a lot of those people, if they think that that was good
debt, they would probably tell you no.
In retrospect, I wish I didn't take on that debt.
I wish I would have went to a college that wasn't as expensive or.
did something where I could have earned more.
They, they there's a lot of regrets around student loan debt right now, and that
you can just tell in our culture, the debates about, student loan forgiveness.
and All these things.
You could tell that there's a lot of people that are unhappy and
they don't consider it a good debt.
Like it was common.
Like I remember growing up it was just like, oh, don't
worry about student loan debt.
That's a good debt.
And now I think that tide is changing and they're like, this is
not really necessarily a good debt.
could be depending on how you use it.
But definitely it is not guaranteed good debt.
Jon: And I think some of this is on the messaging standpoint from society, right?
They always cite like how much more a college educated person will make than
someone that doesn't go to college, like a high school graduate, and
how much more money they will make.
But I would be willing to say that tho the tides are shifting in that specific
thing, to Louis's point, unless you go to school for a specific purpose, so
whether that's engineering or accounting, or you're gonna be a physician or you
practice law or something like that, where there's a tangible outcome.
But just general education now or, or liberal arts.
for the most part, especially with AI and the way things are going, it's
replacing a lot of entry level things.
the blue collar folks are probably gonna have a leg up here in the future because
you can't build houses yet with ai.
You can't plum a, a house with AI yet.
there's gonna be a lot of manual labor that still needs to be done, and those
are gonna be the jobs that are gonna be commanding some salaries, and it's
not gonna be on a lot of entry level stuff that you might have gotten from
some type of a liberal arts degree.
So it's one of those things, it's I understand the value of college.
I was like the Van Wilder.
I can't tell you how many colleges I went to, and I had a great experience.
Yeah.
but did that put me in a better position to, to get this job?
I, I really can't say that I was better prepared because I went to college.
Now I had some experiences that might have been beneficial.
but as far as the physical degree there, there was no benefit.
Honestly, for me, in this specific profession, I'm not
using that degree at all.
Louie: Yeah, I.
mean, we're using our degrees in our education to help
educate other firefighters.
Correct.
But when it comes to doing the core aspects of this job, no, no benefit
from me having a background in finance.
Really from that perspective, it's, that's just how it is.
That's how it is with A lot of people and their educational backgrounds,
Jon: so probably a close second behind student loans is always viewed as a good
form of, financing or taking out loans to, to better yourselves or your education.
I would say very close.
Second is gotta be homes.
People will tell you a personal residence.
It's a great wealth building tool, that, you know, it's always gonna
be good debt taken outta a mortgage.
And I love, I'll always love your response when you say that
you flip it right on its head.
And because right now, once again, we've got hindsight bias, right?
The, our real estate market in Colorado and really across the nation.
since COVID has just gone, you know, up into the right, it's gone just vertical
where we've increased, you know, some housing values, you know, almost, 50%.
60% from where they were even three or four years ago.
So it's viewed as like a great investment that's gonna continue
on that trajectory in perpetuity.
And it's, you know, it couldn't actually be further from the truth.
And, you know, people that have never lived through a housing recession or a
housing bubble, which happened in the GFC, you know, the late, 2007, 2008, up
to 2010, and actually, when your value of your house automatically goes underwater,
so you owe more money than it's worth.
it, I, I can guarantee you, if, if we would've done this for a recruit
class in 2010 or 2011, that probably would not have been the vibe, right?
Because there were so many flare closures going on.
There was so much issue around so much, so many houses that have been built,
and this inventory that's just stacking up and the value just kept going.
down and down.
So a lot of this is timing for one.
Yeah.
It's very geographic specific as well.
Like our market here is different than it is in other places in the country.
and I would just, I would just challenge that, you know, real estate to some
degree can be at a good investment.
Just like any of these things can be, like taking out, student
loans can be a good investment.
It just really depends on how it's used and whether or
not it's used appropriately.
Louie: Yeah.
And John, full disclosure, I'll just be honest with our audience right here.
I have mor a mortgage.
I have, housing debt.
when we bought a house fairly recently, I had to take on a
mortgage in order to buy that house.
Because that is what the vast majority of Americans have to do.
if They wanna buy a house.
So once again, you know, we're not saying that you shouldn't do it.
And if you are buying a house, you are sacrificing your future.
you're not necessarily, but you could be.
there's a lot of people who, Take on too much house debt and they can't afford
to invest or save for their future.
And money is really, really tight.
and They have to work a bunch of overtime or try to get a second job because they
have stretched themselves in order to buy a house before they were ready.
And that's a very personal financial decision.
Like we get, I mean, John and I always feel bad when we have to talk to these
younger firefighters and these new recruits about buying a house because
we're like, man, we realize if you don't own a house now, if you don't own a
real estate after the last 20 years in this market, it's really hard to look
at someone in the face and be like, Hey, you need to save 20% down and you
need to buy a house that's way cheaper in a neighborhood that you might not
like as much that you can afford it.
it's hard to tell people that, but you know, if you, if you just
look at it objectively, it's a pretty bad time to buy a home.
Like it.
Mortgage rates are high, in the Denver metro area.
Prices have kind of leveled off, I guess you could say that, but it's
not it hasn't been a bubble burst.
It's not like the prices have gone down by 30% and you can get these
great deals, even though mortgage rates are high, people still want
these high prices for their homes.
And, there's, there's more houses on the market now than there was
maybe, six months ago or a year ago.
But it's not like it's just flooded and driving the prices down.
Jon: No.
And people, people that have those houses, they can sit on 'em.
unlike in 2008 and 2009 and 2010 where they were literally underwater, they
couldn't afford their mortgage anymore.
People that have been buying houses now, like their credit worthiness,
their ability, to take out that money, they can easily afford
those payments for the most part.
they don't have to get liquidated to get right.
So these houses are not getting slashed from a cost perspective because a lot
of these people bought it, 5, 6, 10.
20 years ago, and they've got a ton of equity in that house.
There's no reason for them to sell at a huge discount.
And they'll just wait, just wait.
And eventually that house will move for sure.
It will eventually move, it might get discounted a little bit, for them
it's, it's worth to wait, three or four or five months to sell it for top
dollar then to just slash the price by 20% to get it closed tomorrow.
So you're just not gonna see that in, talking to realtors
and, and everyone else.
I just, in our area, Denver, I just, I don't foresee that happening anytime soon.
Louie: So then, John, let me ask you this, 'cause I've heard this a lot and I
just wanted to get your thoughts on it.
I've heard some people say this a lot.
I've heard Old timers tell me this.
Even young people tell me this, and they'll say something like,
renting is throwing away money, but buying a house is an investment.
What do you think about that?
Jon: Yeah, once again, in theory it sounds very logical.
It does.
It sounds like, okay, I've got a house and I know that it's gonna appreciate
on average, 2% year, over year.
So if I hold this thing for 10 or 15 years and I spent this much money,
I know when I get to sell this, like I'm actually making money.
I'm gonna, I'm going to sell this at a higher price than I paid for it.
Hence, it's a good investment.
And the problem is the theory or the logic is flawed in that people, and even people
that make a killing on their house, right?
They sell it for a lot more than they ever paid for it.
they never account for all the intangibles that they.
Paid for the house as far as the maintenance, any updating they
did, like all of those housing costs that go with home ownership,
that never gets factored into the
Louie: Correct.
Jon: Versus, versus if you're renting, like you know
exactly what it's gonna cost.
Right now, you might have to change a couple light bulbs here and there, but
any major appliance or whatever, that's gonna be your landlord's responsibility,
property taxes, homeowners insurance, any type of physical, improvement to the,
residence is all gonna be on the landlord.
And that eats up a ton of money.
Like people just never, and even you, Louie, who is very detail oriented, has
a nice little spreadsheet, you would probably still be off, considerably when
you actually looked at how much did it
Louie: the true cost of home ownership
Jon: to live at this place?
and that's a logic that is completely flawed.
Louie: I, Yeah.
And that's, and we say that to the new people when we're doing that, financial
recruit presentation because it's important to know, you shouldn't feel
bad if you can't buy a home right now.
And that's what we're trying to do is If right now is the time for you
to rent so you can save up money for a down payment or to pay off
other debt, that's an okay thing.
It's not Like you're missing like some kind of once in a lifetime opportunity.
and we just don't want people to feel bad of that.
And to John's point, you know, when you rent you're, the cost of that
rent is, is the most you'll pay.
You pay your rent payment, you pay renter's insurance, but that's about the
most you're gonna pay when you own a home.
You're, you pay principal interest, you pay your property taxes, you pay your
homeowner's insurance, you pay your HOA, but that's the minimum you will pay.
Yeah.
And then everything else you do on top of that, all the maintenance
and all the home improvement.
I, you're right.
I, I could, I would have a hard time telling you and I'm detail
oriented when it comes to my money.
I would have a hard time telling you what I spent on my house.
Like what I remember our old house like.
I can just go buy and look at things.
Whenever you buy a house, you're like, well, we need a new fence.
Like when we moved in this house it had a Fence from 1986 probably
that needed to be replaced.
You know?
How much is this to replace a fence?
It's not five grand.
Like fences are absurdly expensive.
Correct.
The deck was falling apart.
Talk about expense.
You want a new deck, that's gonna cost you a pretty penny.
water heater was like not original to the house, but almost
that needed To be replaced.
Oh, HVAC unit.
You want one of those too.
Guess what?
That's gonna cost you something.
Bathroom remodels.
You got two or three bathrooms.
You wanna remodel all of 'em.
Guess what?
The wife wants a new kitchen.
We want new cabinets with the nice sweet pullouts and that with the soft
clothes and some granite countertops.
John, I'm not these are not examples.
I'm telling you that that's what I did on my house.
Like this.
is All of that cost a lot of money.
Talk about opportunity cost.
If I had not done that, I would've had more money.
I, I would submit to people, and this is a very controversial thing,
there's people that have debated this on both sides for a long, long time.
But I would submit to you that if you took the true cost of home ownership
and you compared it to renting, you would not be as far ahead, if at all
as a homeowner than you are renting.
A lot of people don't like to hear it 'cause they just see the price
and they go in the Denver real estate market, it goes up an insane amount.
I get it.
I do get it.
And I'm not saying you wouldn't make money, but would you make as much
as if you invested, you know, the difference between renting and owning?
I don't know.
It gets really muddled at that point.
Th That's a very long-winded way of saying, don't feel bad if you
can't buy right now and you have other priorities in your life, like
hopefully paying off debt, that's okay.
That's, that's a good thing.
And you are not, so far behind your peers and it's you'll
never be able to buy a house.
It's, I, I would just try to encourage people that it's okay, it's okay
if you have to wait and you're not throwing away money by, by renting.
In fact, when you buy a house, you will throw away money in a lot of ways.
I.
mean, Houses are some of the biggest money pits you will get, and you
don't get a return on investment on everything that you do to a home,
especially if you're living in the home.
It's not if you had a rental property or something that you, and you're a
real estate investor, that's a little different and we won't get into that.
But when it's your own home and you're doing things because you want it and
you like it that way, you're never gonna see all the investment return on that
money, that those are just the facts.
Jon: Yep.
It's a, buying a home.
and living in a place that is yours.
It's a lifestyle choice and that's why people do it.
They do it because there's an emotional response to it, right?
Your home and, and all the emotions and the feelings that
go along with owning something.
there's some, there's a lot of pride built into that.
That's what a lot of the American dream is built on, is home ownership.
So, and there's a lot of pressure as well.
'cause that's older generations, you know, that has what they were
taught to build wealth is to buy a home and invest in that stuff.
So a lot of this stuff, the circumstances we are dealing with now, and Louis,
and I probably sound a little tone deaf to some degree, but I have a lot of
empathy and sympathy for, for our new firefighters and trying to figure and
navigate this stuff because it is, it is very choppy, but there's a lot of
places in the country and quite frankly, the world where it is very common to
rent your, basically your whole life.
If you grew up in the Bay Area in California, a lot of people rent there
just because, once again, the cost difference, you know, between owning a
home versus renting, it's astronomical.
New York City, a lot of other coastal areas, people that come from there,
it's not as foreign to them the concept of renting a single family home and
not, you know, and not owning it.
So a lot of this is just people that have grown up in this area
or have been surrounded by people that have always owned their homes.
It's, it's just kind of what they know and what they feel comfortable with.
So, yeah, once again, we're trying to look out for.
your guys' best financial futures, and this is a very personal decision,
but, the other thing I will say about home ownership is, it's really tough
because, you know, you might find a place, a starter home, and then,
you know, after four or five years you kind of outgrow it or you have
a family and the, the transactional cost of real estate is criminal.
Louie: Brutal.
Jon: it's just one of those things.
It's not like selling a stock where, you pay a little bit on your capital
gains and then you move on, like a, it's a pain in the butt to move, but
b, like the friction loss, the amount of money you lose in transaction
stuff between, realtors and all these
Louie: title companies.
Oh, It's crazy.
Jon: so super crazy and
Louie: know it's criminal.
Like they've tried to change some of those things and tried to
pass some laws, but it's still.
Absurdly expensive.
Jon: Yep.
So that's our little soapbox or tangent on just home ownership and loans and, whether
or not it's a good debt versus bad debt.
A lot of this is gonna depend on your own personal situations,
but just don't feel like the, the train's passing you by, so to speak.
If you are on the sidelines and, and you're happy and you're renting
a place like more power to you, you have the ability to reach a lot of
financial milestones in your life.
And that should not be defined by where your physical address is.
Louie: And I think, we'll, we might address this on a future
Jon: Yeah.
It should be a whole other
Louie: just talk about home ownership, renting best practices
if you're going to buy a house.
and How to set yourself up for success.
there's a lot that we can delve into there that we're not gonna do.
So that's just maybe a little bit of a teaser for, a future episode where
we kind of fully delve into mortgage loans and calculating the cost and
how much you should be able to spend from your take home Pay on, on, on.
housing.
There's a lot of stuff like that that we can cover.
and We probably will at a later episode, just know that we, we do.
Empathize with that situation of wanting to buy a home.
And, we know it could be a big blessing, but it could also be a
curse if you're not doing it right.
Jon: Man.
I have heard so many people that you can just hear the resentment
in their voice, especially that got caught in the COVID craze when people
were basically, sight unseen, making offers, not doing any inspections.
And I know of several people that I've actually sat down with, and they
are beyond frustrated that they just felt like they had the fomo, right?
The fear of missing out, and that if they didn't get it now, it
was never gonna happen for 'em.
And then they got just a turd.
It's just costing 'em nothing but money.
And you can just tell that they're frustrated.
They're at their wit's end, this was a huge mistake.
And for most people, this will be the one of the biggest
financial decisions they'll make.
So go in with your eyes wide open when you're making those decisions
and have a solid reason and a game plan for attacking how you're gonna
afford that or what that looks like.
Louie: Yeah.
That's it.
Yep.
Jon: All right.
you know, and then everything else culminates into, you
know, the good verse bad.
And, and once again, a lot of this is just pen, but I would say on average, you know,
most, auto debt is probably not great because it's a depreciating asset, right?
I wouldn't probably consider that a great investment for the most part.
you know, any kind of credit card balances is a terrible investment.
So, we would avoid those.
and really just anything in which you're not going to get some type of,
investment gain out of it would more or less probably be considered from
just like a mathematical standpoint, not a great investment, right?
By definition.
Louie: and credit card debt, it should go without saying.
At this point, I think most people intuitively know that if you have
credit card debt and you're carrying a balance over from one month to
another, you're, you are paying an insane amount of interest, like
a criminal amount of interest.
I'm talking 20%, 25%.
Yeah.
30% is what you are paying to the credit card companies for the privilege of
earning that 2% cash back or that 1.5%,
mileage points or whatever it is.
And you're probably spending more than you would otherwise.
'cause you realize, eh, it's just credit card, like no big deal.
Over time that compounds and it is a brutal hit to your finances
if you are carrying credit card debt and it doesn't help.
you, It doesn't help you in any way except for getting you what you want right now.
Jon: Yep.
And that's one of the things.
obviously we know that debt is necessary for the majority of people listening to
this, it, it just is, whether that's gonna be a home or some other type, you're gonna
have to go to a lender and borrow money.
Part of the way that that borrower figures out what basically your rate
is gonna be, How much you're gonna have to pay back as far as interest
is based on your credit score.
So this is one, once again, like I was baffled when Louis and I first
brought this up, to our firefighters.
just the, once again, the amount of misinformation and disinformation
surrounding credit scores was scary.
Louie: A lot of confusion.
Jon: A lot of confusion.
most of our folks, I know at least, speaking for our organization is
part of the background processes, is they actually pull your credit.
They wanna make sure that you have a decent credit score.
And the reason for that is, a lot of your credit score is around,
your dependability or reliability.
how good of a borrower are you, how, how willing are you
going to, pay that money back?
So that's one of the things that, you know, a lot of public safety agencies
use it look at just to basically, see whether or not you have risky behavior.
and it's just like a little but look behind the curtain
into your personal profile,
Louie: John, I got a good idea.
I just thought of this.
Okay.
Tell me if I'm
Jon: this a business opportunity?
This
Louie: an opportunity for West Metro to get some different people in our pool.
I think we should find out who has the worst credit score.
Just like tank their terrible credit and hire those guys with the idea that
maybe they're hungry, like they know they
Jon: need to
Louie: job.
Like they gotta work
hard 'cause they got these creditors breathing down their, neck, they're
in debt up to their eyeballs and they know I'm gonna work every single.
overtime to
Jon: I've got to, I've got to.
Louie: I'll work all the overtimes that you'll give me.
I'll get Mando and I'll be happy about it, and I'm gonna just do whatever I know
I can't afford to lose this job, so I'm gonna tell this to our new administration.
We got a new chief, we got a lot of changes coming and I'm gonna.
encourage 'em.
I think you guys should go for the people that have terrible credit scores.
'cause they're gonna be hungry.
They're gonna, they're gonna be
Jon: I love that reverse psychology, Louis, that's taking a flyer on
someone that's got a couple discharges, a couple bankruptcies, Yeah.
you might be onto something.
Our our retention in, recruitment is gonna go through the roof.
Oh yeah.
Because people literally cannot afford to leave.
you might be onto something
Louie: So if you're one of the chiefs there that listening to this, let's go
for the guys with the bad credit scores.
All right.
That's who we're gonna hire.
Jon: That's it.
All right.
So how, so this is one of the things that is often just not.
Not well understood.
And this is an educational gap, is how do they actually
come up with your credit score?
Is that just some random score?
Like how does that happen?
So there's a couple different, credit bureaus basically that kind of have a
monopoly honestly, on this whole system.
So Equifax is one, TransUnion is another one, and I never, what's the third one?
Experian.
Experian, thank you.
Those are kind of the three credit bureaus.
So as your credit is getting pulled, they will the, they will be the ones that
report back and they all have a little bit of a different algorithm on how they
calculate your physical score, but more or less universally across all three of 'em.
This is how they calculate it.
your biggest influence is on your payment history.
All right.
So once again, reliability.
Do your, pay your bills on time.
That makes up 35%.
So that's a pretty good chunk.
So almost a third of your overall credit score is whether or not
you are timely with your payments.
So you make that monthly payment on time and you're not delinquent.
Louie: can do everything right with credit cards and the mix and all those other
things, but if you do not pay your debts on time, you will have a bad credit score.
'cause It's over.
It's about a third.
Jon: it's a third.
it's a hill you can't overcome, basically.
Yeah.
so right on top of that, an equal of importance besides your timeliness on
pavement is basically how much do you owe?
Alright, so once again, the fancy, technical term for this is what
they call credit utilization.
Alright, so let's make this really simple and let's say that I have
basically a thousand dollars, right?
That's what my credit line is.
That's how much my credit card says I can take out.
That's my amount that I can utilize if I max that thing out every month
and put a thousand dollars on that.
So basically I utilize 100% of my credit.
the credit reporting agencies do not like that.
That basically it's a, it's a risky behavior that's man, this
guy is maxing out every month.
ah, I don't know about this.
he doesn't seem like he's responsible with credit when he is utilizing it.
As much to its capacity.
So that makes up 30% of your credit score.
So once again, credit utilization.
So how much of that credit you utilize makes up about
another third of your score?
So kind of the moral of the story of that in our tip and trick is, is
to just keep that utilization low.
So if I've got a thousand dollars limit, it's basically just put a
hundred dollars on there, pay it off.
Now my utilization rate was 10%.
That looks much, much better in the credit bureau's eyes.
if you are responsible, you can typically get that limit raised.
It's as simple as a lot of times you can just do it on your app.
on your credit card, you can obviously give 'em a call or do it
online and get that limit raised.
a lot of that just has to do with their little algorithm behind the
scenes as far as how much money do you report, how much money do you make?
They'll look back and see how much money you've utilized.
And for most people, it's not a big deal to, to increase that.
So if you are trying to bump up your credit score a little bit, that's a
simple little way with not opening a bunch of lines of credit with just making
sure that utilization rate, stays low.
beyond those.
So those, so between those two, that's it, that's two thirds of your credit score
basically is in those two components.
So paying on time and not maxing out your credit cards, keeping that balance low.
on top of that is, new credit.
So that's also, whenever you apply for something, there's what's called
a soft poll and a hard poll or a soft inquiry and a hard inquiry.
if it's a hard inquiry, which they are required to disclose, whenever
you fill out something, that is what will go, that's what will get
reported to the credit bureaus.
If it's a soft poll, which a lot of these buy now, pay later, programs
are, it doesn't get reported.
All right?
So that makes up about 10%.
So if you're going, you know, and trying to open up a lot of new lines
of credit, that is obviously something that could be a little bit of a factor.
But once again, that's only 10%.
that's not gonna make or break any of this stuff.
credit history.
So this is just how long you've owned your credit?
I still have a credit card that I specifically keep open.
I use it once per year.
I buy a pack of bubble gum or something else from the convenience
store just to keep this open.
but it's been, what, almost 25 years that I've had this one credit card.
So it's great.
It looks like I've been responsible, I've owned this credit for 25 years.
That makes up about 15% of your credit score.
not always closing out your credit cards.
Louie: a great piece of advice.
John, is If you buy, you said you buy a pack of bubble gum once a year.
twice a year.
The reason why you do that 'cause if you don't, they'll close it.
They'll close it.
And they'll be like, this guy's now using the credit.
We're just gonna take it away and close it.
And if that's your longest standing credit on your account, it will
take a hit to your credit history.
Like John said.
And it will also increase your, your credit utilization, right.
Because now you have less credit available.
So if you have this credit card from your college days,
assuming there's no fee on it.
it makes sense to probably keep it open.
There's not a really great reason to close that line of credit, because
it will lower your credit utilization and it will increase your credit
history, which are really important.
So take that old credit card that you've had since college and buy a.
Buy a.
a couple cans of Zinn a couple times a year.
And you'll be fine.
Jon: And you'll be fine.
That's right.
that's just your credit card you use for zi.
All right, there you go.
and then last but not least is about another 10%.
And this is just credit mix.
And what they mean by this is just different forms of credit.
So credit cards are one form.
Auto loans are another form.
Student loans are a form.
Mortgage mortgages are a form.
So basically if you just have credit from a lot of different, like asset classes in
that capacity, that makes up about 10%.
But really the moral of the story is here.
Carrying balances does not somehow improve your credit.
That was probably the number one misconception we
heard time and time again.
It's no, the credit cards want to see you have a balance.
Well, of course they do.
'cause that's how they make money.
But it, it, it is not going to make your credit score better.
In fact, it'll make it, it'll make it worse because once again, your
utilization rate is gonna be higher.
That's the amount you owe, which is a third of your credit score
is gonna continually be used.
for paying unpaid balances.
Louie: Yes.
So just to say it again because we're very serious about this.
Do not carry a balance, on your credit card from month to month in hopes that
it's gonna increase your credit score.
And there's a lot of younger people out there who don't understand how
it works, that believe they need to carry a balance in order for
them to improve their credit score.
And that's not true.
If you pay it off every month, you'll get the same benefits and
that and have a better credit score than if you carried a balance.
Month to month on that credit card.
Yep.
Jon: And you should have a great way of being able to track your credit.
Almost every credit card now that I've seen has a way that basically they
will give you a free, or as part of owning that credit card, they'll give
you a credit report or credit score.
You're also entitled by law, once per year to go to free annual credit.
Louie: I think it's, yeah, free annual credit.
Jon: report.com
or something like that.
You can Google that or chat GPT it.
But basically it's required by legislation.
that will, that is entitled from each one of the three credit reporting bureaus
is to get a free copy of that report.
You can do that once per year per bureau.
So if you're just wondering, that will show everything in totality and
you just wanna make sure that that is accurate because there's a lot of
fraudsters out there, And there's a lot of, financial fraud that happens.
So that's one way to prevent it.
But something that got brought up in one of the, one of our discussions
that I hadn't really thought about and I haven't used personally, but
I know Louie can speak to this, is ways to protect your credit.
And that is by freezing your credit.
You wanna chat on that a
Louie: bit?
Yeah.
Jon: on that, Louis?
Sure.
Louie: a lot of people know that stolen identity is a real thing.
Stolen credit cards, people have skimmers that they.
Put on ATM machines or put on, you know, at convenience stores, and then
all of a sudden they get all these fraudulent charges against their credit
cards or debit cards, or they get new lines of credits that are being pulled
out because they, there was a social security breach at some, you know, at
whoever, Verizon or T-Mobile or wherever.
and then they have these new credits and it, you know, you could
eventually get it fixed, but it can do serious damage to your credit in
the meantime until they get it fixed.
So there's, there's two lines of thought for how people can help with,
stolen identity or, or, fraudulent lines of credit taken out one way.
and the one that you see a lot of people pitch is credit monitoring.
And credit monitoring is basically, someone, a company telling you
that your identity has been stolen or that new lines of credit have
been pulled out, against your name.
But that happens after the fact, so you basically have to do
damage control after the fact.
What I use and what I like and tell people that they should
consider is doing a credit freeze.
What a credit freeze does is it prevents new lines of credit from
being drawn or taken out in your name.
Now, it does require more work to set these up because you have to go through
each of the bureaus that John mentioned, so Equifax, Experian, and TransUnion.
You have to create an account and then you have to freeze your credit.
What happens when you freeze your credit is that no one can pull out new lines
of credit in your name, including you.
You can't be like, you know what?
I want this credit card.
Let me go pull it out.
Let me just go open this new credit card.
You will get rejected because they will not be able to open that line
of credit when your credit is frozen.
In order to get a new line of credit, you would have to log in to those
bureaus, those credit bureaus, and.
Thaw your credit or unfreeze your credit.
and they have these kind of fancy ways where you can do it for 24
hours or even a week or whatever, and then it automatically freezes again.
so it, it requires a little bit more work, but then you can be more secure
in knowing that no one is gonna steal your credit and open new lines of
credit if you have those in place.
So I strongly encourage if you don't freeze your credit that it's
something you should consider doing because it'll prevent some kind
of costly and just some headaches.
Jon: Headaches, headaches.
Yep.
Anyone that's had their identity stolen or some type of, credit card or
something compromised, it's just a huge pain in the ass to get that rectified.
Louie: And it is free to do it at all the bureaus.
I think it's a law now that they have to provide that.
service for free.
So I strongly encourage you guys to, to freeze your credit and not have to
worry about whether or not someone's taking out new credit in your name.
Jon: Yeah, that's definitely, industry best practices for sure.
So thanks for bringing that to our attention, Louis.
so one of the things I wanted to chat on really quickly, you know, we're
kind of coming up on about an hour or so, which is always, seems like all
our episodes last about an hour or so.
That's apparently just what we've got.
but I know it's, I know it's concerning.
It's concerning to me and I know it's becoming more of a thing.
so I feel like a lot of the audience will probably resonate with this,
but it's these buy now pay later.
Firms that are starting to pop up and they're everywhere, right?
so Klarna is probably one of the world's biggest.
Affirm is another one.
Amazon is onto this Apple.
There's a whole subsidiary of different businesses that the, that they offer this.
But it's very easy, right?
Once again, you basically create account, but it, it allows you to pay over time.
All right.
Right.
And most of the time if you make these installment payments or you meet the
certain time in which this has to be paid back, there literally is 0% interest.
there's no catch to that.
It's just like your credit card.
If you pay it off in time, there is no fee associated with that.
You are not paying any interest.
It's
Louie: free money.
So
Jon: it's basically free money.
why would I not do this?
but the problem is that a lot of people now are using these
to finance certain things.
So they're not using it to pay it off at the end of the month.
But now, instead of, you know, if you're making a purchase of, let's
say it's a thousand dollars, rather than pay that off, in two months,
I'm gonna pay it off over a year.
That's a lot better.
It's only 80 bucks a month.
Instead of the 500 a month, I would've had to pay it off before.
The problem with that is, they're catchy in that they actually are putting you into
an actual a, a loan repayment plan, which once again, they're pulling your credit.
It's a hard credit inquiry, so it's affecting your credit.
Louie: hard?
Is it hard pull every time you get, use one of those services?
Jon: only if you use it beyond basically the free terms.
And most of these places that I could do research on were between
30 days to to three to four months.
If you pay it off in that time over, you know, a couple installments,
call it three or four installments, it wouldn't cost you anything.
But if you go beyond that, which a lot of people do, 'cause they
purchase something for 2,500 bucks and they're like, man, I don't want
to pay this off in three months.
I'll do it in a year.
They don't read the fine print.
And then they're basically being charged like true credit card rates, you know,
18, 19, 20% to finance that stuff.
They've, they get it confused with the literally the 0% installments and
now they go into a financing option.
And I've seen a lot of our folks talk about using this and.
Literally, you can use it for everything.
You can use it to buy a little Caesars pizza as you can.
You can do installment payments on that stuff.
So it's just one of those buyer beware, situations that we wanted
to address with you guys because I, I've been hearing a lot about it.
I've done a little bit of research on it and I know people that've used
it and they've used it responsible just like with certain credit cards.
But you really have to dig into the details with some of these things.
And I would just harken back to what we kind of talked about in the
beginning and just really reprioritizing you know, the amount of money that
you have and where it's going.
And is this something really that you truly need?
Or is this a want?
Yeah.
And a lot of times those lines get muddied by us.
and there's a certain sense of entitlement with that goes with that,
where we're just like, oh, I work hard.
I deserve this kind of thing.
So
Louie: and
Jon: just be careful with
Louie: Be very careful and I can al I already know there's some
smart asses that are listening.
here.
It's 'cause they're firefighters that are going, but.
Louis and John, you guys just told me about opportunity cost.
So if I can take a four month, a firm loan and keep that money invested,
instead, Then I am, I'm sticking it to the man, I'm making money.
Like I'm crazy not to do it.
but I think what we're trying to say is you're kind of playing with fire
and the chances that you're gonna have that invested, which you're, if
you invest for the long term, four, four months is not the long term.
You shouldn't be investing your money, for four months with the
idea of selling it higher and then being able to pay off your.
little Caesar's pizza.
You're playing with fire.
so don't,
Jon: generally not advisable.
Louie: Don't do that.
Don't do that.
that's not how you're gonna make money and stick it to the man.
Jon: Yes, exactly.
So once again, if you're coming up with a installment or a strategy on how to
pay something off, maybe just save up a little bit more money, work that over
time or two, just keep it in the bank and then just pay it off all in once
and get those credit card reward points that you need to go fly to Europe for.
So there's other ways to do it, but I've just, I wanted to at least
bring, put that, in our notes to shed a little bit of light on, because
I know, there has been some people that have gotten burned by that.
Yeah.
So just buyer beware with, Klarna and any of these other buy now,
pay later type, businesses.
Boom.
Louie: Boom.
I think that pretty much concludes it.
We covered a lot of stuff about debt and we know it's a very personal topic as we
talked about earlier, I think the major points that we're trying to get across
is that debt robs from your future, by.
Crippling your number one wealth building tool, which is your income.
and the cost of debt is not just the interest you pay, it's the
opportunity cost of what you could have done with that money.
Those are the kind of lessons that we want to get across here.
Not judging anyone, not making you feel bad, just want you to
consider that going forward.
Jon: Yep.
that's good.
And that's well said.
One of the things, obviously this was more of just a general overview
about debt, generally speaking.
We know, we just touched on, on some, on some threads, regarding, auto loans
and mortgages and home ownership and just really on the surface level.
Those will be episodes all to themselves.
'cause they really do afford more of an opportunity to discuss those.
someone I can guarantee you is gonna be like, oh cool, they're talking about debt.
Why didn't they talk about 4 57 loans?
That is the number one question that Louis and I get all the time.
Once again, we hear you and we will specifically talk about certain
strategies and if you do need to take out, some type of loan, like where
should you source that loan from, and best practices when it comes to that.
But we just wanted to, once again, from more of a holistic.
Standpoint, talk about how it's how, what goes into debt as far as your credit
scores and some of these finer details.
So there'll definitely be a lot more to come on that, just as some other teasers.
we will having an episode talking about.
The beep beep B, the big beautiful Bill.
once again, that's new legislation for those of the you that don't
know, that's new legislation that was passed by President Trump.
He signed that on our Independence Day, July 4th.
But a lot of moving parts with that.
I still have not gotten to go through all of it and its entirety, but there's
definitely some things that specifically, Could affect firefighters, and a
lot of other moving parts with that.
So we're gonna have an episode all designated just to the big beautiful
bill 'cause there are a lot of things that are coming out that will actually
be beneficial honestly, to a lot of our members, in lowering some taxes
and just keeping some other credits available and some other stuff like that.
I've been asked a lot about that specific legislation.
So Lou and I will do a deep dive on the big beautiful bill.
just kind give you some of the Reader's Digest or the chat GPT
notes on how it's gonna apply to us.
That's perfect.
Perfect.
All right, man.
Without further ado, Louie, it feels good to be back in local
Louie: back in the saddle.
Let's go.
Jon: It is just like riding a bike, baby.
Yeah.
it's been fun.
thank you all for being patient and I hope everyone had a wonderful summer.
I hope you got to spend it with your friends and family and maybe go
someplace or maybe just not be at work.
nonetheless.
we really appreciate y'all out there.
love doing this with Glu.
we'll be back next month another episode of the Physical Firehouse.
Louie: Stay safe and keep saving.
The Fiscal Firehouse Podcast is a podcast curated specifically
for local 1309 members.
This podcast is for informational and educational purposes only,
and should not be construed as professional financial advice.
Should you need professional advice, consult a licensed
financial advisor or tax advisor.
The opinions of John Beatty, Louis Barilla and their castmates are
solely their own, and don't reflect that of West Metro Fire Rescue.