In this Part 2 episode, we discuss financial pitfalls. Have you ever stumbled upon a secret in your relationship that involved dollar signs, not just little white lies? Dr. Angela K Love joins me for a candid discussion on the sly and sometimes destructive world of financial infidelity that's lurking in the shadows of modern matrimony. We unwrap the complex tapestry of money matters and the silent cracks they can cause in a marriage. It's a deep dive into the emotional whirlpool of FOMO and the harsh wake-up call that follows for many who get caught in the razzle-dazzle of get-rich-quick dreams.
Navigating finances with your spouse is like dancing a tango – it takes two who know the steps and listen to the same rhythm. Our conversation includes high-interest debt and the pitfalls that can turn a love story into a financial horror story. We don't just pinpoint where the landmines are; we bring you tried and true strategies for managing your joint financial journey. Imagine having a financial playbook that you and your spouse can refer to.
Join us as we talk about some of the most important financial pitfalls.
In this Part 2 episode, we discuss financial pitfalls. Have you ever stumbled upon a secret in your relationship that involved dollar signs, not just little white lies? Dr. Angela K Love joins me for a candid discussion on the sly and sometimes destructive world of financial infidelity that's lurking in the shadows of modern matrimony. We unwrap the complex tapestry of money matters and the silent cracks they can cause in a marriage. It's a deep dive into the emotional whirlpool of FOMO and the harsh wake-up call that follows for many who get caught in the razzle-dazzle of get-rich-quick dreams.
Navigating finances with your spouse is like dancing a tango – it takes two who know the steps and listen to the same rhythm. Our conversation includes high-interest debt and the pitfalls that can turn a love story into a financial horror story. We don't just pinpoint where the landmines are; we bring you tried and true strategies for managing your joint financial journey. Imagine having a financial playbook that you and your spouse can refer to.
Join us as we talk about some of the most important financial pitfalls.
This is Life, love and Money with Dr Angela K Love, the podcast for couples who want to get a handle on their finances and strengthen their marriage at the same time. We take deep dives into the money challenges most married couples face and get real about them, plus practical tips on how to ensure a rock solid future for your money and your marriage. Now, dr Angela K Love.
Speaker 2:Today we're talking about financial infidelity. We're going to get into financial pitfalls. This is part two of when money matters break bonds, exposing financial infidelity, which we talked about in episode 10. In that episode, we covered what financial infidelity is and then we talked about causes. Today we're going to talk about financial pitfalls, which isn't necessarily financial infidelity, but sometimes, when we engage in financial pitfalls, the stress of that can cause us to engage in financial infidelity not always, but sometimes. That's what we're going to talk about today.
Speaker 3:Is that because you may jump into a financial pitfall or one of the spouses may feel ashamed so they don't want to share their error with the other spouse? Is that one of the reasons why that leads to it?
Speaker 2:I think that's it. Then also, financial pitfalls causes a lot of financial stress. The American Psychological Association they do a stress in America survey every year. One of the things that they ask participants is about money. There's a lot of money questions in that survey, along with physical issues, physical health and mental health and all of that. They talk about that and they've found that money issues contributes to a lot of stress. 63% of participants in the 2023 study said that they experienced financial stress. That financial stress can sometimes cause us to engage in financial infidelity, even though that wouldn't be our nature, it's not something we'd want to do, but maybe we get involved in a financial pitfall and then that causes us a lot of financial stress. Financial stress can end up causing us some mental or health issues. Then, all of a sudden, we just want it to go away. We might engage in some financial fidelity.
Speaker 3:I imagine with how prices have been raising over the past few years and it seems like that expenses are a lot more than what the income is raising, that is really increasing the amount of financial stress that people in our country feel.
Speaker 2:Yeah, I would agree with that. You and I have gone to the grocery store and we've seen our grocery bill double. We've gone to more of cooking from scratch, because you can save a lot of money, and our grocery bill is high.
Speaker 3:Yeah, I agree it's outrageous. Just everything else it seems to be increasing, whether it's cost of fuel or insurance cost or anything like that. I think that if people get tripped up with a little bit of a financial pitfall today, the impact of it could be greater than it was, say, three or four years ago, before COVID.
Speaker 2:Sure, absolutely, as you know, and I've shared a little bit about this but I'm writing a manuscript, or I've written the manuscript. I'm going through the developmental edits and line editing and copy editing. I'm doing all of that. The book is getting close to being done and I'm very excited about that. In the book I talk about financial pitfalls and I actually go through 19 of them. With those, I give some information on how to avoid them. In this episode we're not going to go through all 19, because that would be right.
Speaker 3:It might be a record podcast in terms of the length, if we're going to go through all 19 of them.
Speaker 2:Right, we're not going to do all 19. For our listeners if they want to know all 19,. They can get the book when it comes out. We're just going to go through a handful of them in this episode.
Speaker 3:All right. Well, Faroe, what's one of them you want to hit?
Speaker 2:I think a big one is this, where folks adopt this get rich quick mentality I just want to get out there, I want to make a lot of money. And you're so consumed with wanting to make a lot of money that you'll jump into a scheme, some sort of scam or fraud or something like that, without even realizing that that's what you're doing, because you go head first before really asking questions and thinking through and doing research on what someone's bringing to the table wanting you to invest in or get mixed up in.
Speaker 3:Kind of like investing emotionally.
Speaker 2:Yeah.
Speaker 3:Instead of logically using your brain. We've been guilty of that at times over the years. I remember years ago in our marriage we had a guy that we went to church with that was putting together a bank holding company or something along that line. They also handle insurance and we invested in that. There was a lot of money for us at that time.
Speaker 2:Let's share what the dollar amount was, because that was back in what the early 90s or something like that, not early 90s. I think it was mid-90s.
Speaker 3:Mid-90s.
Speaker 2:It was $1,500.
Speaker 3:Yeah, it was big for us, especially at that time.
Speaker 2:Yeah, that felt like $10,000 at the time.
Speaker 3:It was a big amount for us at the time and we invested in it. We were friends with them at church and he was also a member in the business community where we were at and was a new startup and we ended up not doing enough research on it and it ended up that that has gone nowhere. For us that's basically $1,500 is completely down the drain that if we had used a lot more of our brain and research then it would have been something we probably wouldn't have done.
Speaker 2:Right, it may be being cautious, a little bit cautious in doing that. We say invest. It was actually penny stocks. They had actually-.
Speaker 3:Well, it was a startup company.
Speaker 2:But it had stock option. We were doing the penny stock on it. We weren't becoming owners or part owners or anything like that. We were actually investing, thinking that $1,500 over the course of five or two years.
Speaker 3:That was something there that was a pitfall that we fell into because we were only looking at the return. I think that that is at the growing rate. People get into that get rich quick scheme a lot when they're only looking at the return in the future and they're not looking at the risk today, knowing that whatever they put money out in is going to, they could lose the money and they could lose their time that they've put into this as well.
Speaker 2:If you get into some high debt or you're living paycheck to paycheck and you're feeling that pressure of we don't have enough money to pay the electric bill or we don't have enough money to get enough groceries for our family, especially right now where groceries are super expensive and then you're like, okay, someone comes along and they're hey, I have this opportunity. And you're like I just want to get comfortable, I want to be financially comfortable, I don't want to have to be stressing out every month, and so you jump at something without really getting into it, like you say, checking your brain at the door. But it's just doing a lot of research. It's asking a lot of questions, it's asking other people, maybe going to someone who's knowledgeable about investments and financing and that sort of thing. But the other thing that I do is a lot of times that someone comes to me not comes to me personally, or but maybe you see something, you get an email, or you see something by a friend on Facebook or something like that.
Speaker 2:Or you see an advertisement by a company that's reputable and you think, oh, this would be great. You're like, maybe I'll invest in that or I'll do that thing and I might make some money. What I do is I'll take the opportunity or the company name and I'll put it in an internet browser and I'll put scam after the name and I can get all sorts of information. And it's not necessarily that the company is scamming you or that the opportunity is necessarily a scam sometimes, but when you do that you can find out. Is this something that is going to give me a nice return on my investment? Is it legit? Should I really do that? So sometimes the opportunity is not necessarily scamming. It's just not going to have the type of return that's being told to you.
Speaker 3:Sure, the other thing you have to realize is, whatever the past performance is say you're buying into an investment or something that's really done well in the past year that doesn't necessarily mean it's going to be the same in the future. So that kind of a risk there you can't expect. If you got a 20% return on the stock last year, you can't necessarily expect it to be the same this year.
Speaker 2:True. The other red flag is when the person who's pitching the idea says this is a once in a lifetime deal. It's never going to come back around. If you don't jump on it now, you're never going to be able to get on this deal again, and that makes you feel like the sphere of missing out. You don't want to miss out on this opportunity. Oh, you better do it. And all of a sudden, they've attached in motion and to it that you're going to be left out of something.
Speaker 2:And that's a red flag because typically something, any sort of good deal opportunity, it is going to come back around, at least in my experience, Now that we're older and we've have some life experience and they're about. I can't tell you the number of times where someone said, oh, this is a once in a lifetime deal. And two years later it's the exact same opportunity and, oh, it's a once in a lifetime deal. And it's like, yeah, it was that, you know, a year ago, it was that two years ago. It's very rare that something is truly a once in a lifetime deal.
Speaker 3:Yeah, that FOMO fear of missing out.
Speaker 2:Yeah, and that gets a lot of people, it gets me. I struggle with that a little bit. You know, I don't want to miss out. I want to be part of what's going on. That's the first thing I have to keep in my mind. If someone throws that at me, it's like okay, I know that this is not a once in a lifetime deal. They're going for that fear of missing out and I need to take a second look, a harder look, at that.
Speaker 3:So anything else you can think of on the get rich quick scheme.
Speaker 2:Because people are living paycheck to paycheck and they're feeling that pressure of making money, or maybe their expenses are a little bit higher than their income and so that increases the pressure a little bit more. So it's a little bit worse than paycheck to paycheck and multi-level marketing opportunities. Now, they're not necessarily bad Not all of them are bad. Some of them are good but the issue is the way it's communicated. From the person who's trying to get their friend or their family member or something like that to join on, they don't really give them all the information up front and so they make it look really attractive oh, it's only, you know, $100 to sign up. It's only $200 to sign up and then you'll have your own company and you can do your own hours. You can make a lot of money. And the person who recruited me they're making $1,500 a week and they make it sound like you're going to go in, you're going to work five hours a week and all of a sudden you're going to be making $2,000 a week. All for this, $200 of an investment. And the reality is is that one? If you sign up with a multi-level marketing company, you're not buying into a business that you own. You're signing up to be a consultant for that company and you're selling a product for that company and you're really just a salesperson who makes money on commission. You don't make a base salary or base wage. And the other thing is is you're selling the product but you have to buy the product and you have to carry inventory. So there's this thing where you feel like it's your company because you're carrying inventory but you have to abide by all of their parameters and you have to abide by all of their rules and marketing things and all of that.
Speaker 2:The next thing is is usually when you're selling a product like that, you have to put in the time and the effort you have to get your friends and your family members to first come on and want to buy the product and maybe come to a party and that sort of thing, and then you have to get them to talk about you and get them to do parties to get friends and you have to build this network of people to try to get people to buy your product. It feels like your own business because you're buying inventory but you don't have control over that inventory. You don't have control over changing the type of inventory, the type of product that's being sold. And if they take a product that you have a client or a customer and they are buying one particular product and they really love that and that's the only product they buy from you and then all of a sudden that product is discontinued, then you lose a customer and you have to try to convince them to buy something else.
Speaker 2:And I remember this with Mary Kay. They had a bar soap facial soap that I used to use all the time and I would consistently buy that, and then they stopped selling it and they went to this kind of creamy moisturizer type soap and I didn't like that. It didn't do well with my skin. That was the only thing I bought from Mary Kay and that person lost me as a customer because I know they were buying that.
Speaker 3:Some multi-level stuff is a service. They're not selling products. So we had that because we were involved in a multi-level one time. It was a travel business. I bet we sold two or three trips You're trying to get, instead of people going to a travel agent to go to you and you'll be able to get stuff taken care of. But the issues we had with that is a few things came out after that like travelosity and kayak and Expedia all these travel companies that are out there that basically put a lot of the travel agents out of business where people just go to the internet, and this company was more based on trying to recruit other people, sell these rather than actually selling the product.
Speaker 2:Right, and that's where the key is with a lot of the multi-level marketing. That's the nature of the company or the nature of the plan. Multi-level meaning that in order for you to make money you have to recruit people to sign up to want to sell the product. You do make money, you make a certain amount of commission off of the product or the service that you're selling. But if you really want to make it something that is a slash business or a job where you're making a decent amount of money, not like this get rich quick type thing, you are having to recruit people.
Speaker 2:And I think the other thing that gets a little bit difficult is if you start to feel that pressure of I've signed up and now I've had to pay all this money for inventory to carry it, because they make you feel like, oh well, if you don't have the inventory on hand, then people are going to go to somewhere else to buy another product.
Speaker 2:You want to have it available so you can get it to them. If you're having to carry product or maybe you're with an MLM that you don't have to carry products but you're having to carry the whole entire kit to do shows and that sort of thing and you're having to carry that and keep that and buy new things that you have to show and that sort of thing. It gets to be a little cumbersome with that. But then you're always going to your friends and family and asking them you want to do a show, do you want to buy product? And I know for me when I've had friends that get into selling a product like that it seems like every conversation is well, do you want to sign up? Do you want to buy something? Do you want to do this, you want to do that? And then you feel uncomfortable so you start to avoid them and you just kind of turn and go the other way.
Speaker 2:It's because you don't want every conversation to be about having to buy something from them. But you understand at the same time they're feeling that pressure as well. They signed up for this and they want to sell the products. I did a few MLMs. I could be a little bit biased against them just because of my experience and feeling like I put a lot of money into those that I tried. It was portrayed as something that would be easy, wouldn't have to do a lot of hours of working and you could make decent amount of money. And that's just not true. You just need to realize if you're going to go into something and you really, really like the product and you want to make a decent amount of money, you're going to have to put in probably 20 to 25 or 30 hours a week.
Speaker 3:Sure, you brought up a good point about feeling pressured with both. If you're in an MLM, feeling pressured to talk to anybody you come across with about your business and kind of restricts your friendship a little bit because you'll have people that avoid you. Because of that, the only time I think that I've seen you had a friend once that did had an MLM thing, but their purpose that they had is they're going to adopt a baby. They were using that as kind of a go fund me type thing in order to raise money for the adoption and stuff like that, and that's how they marketed it too. So then it kind of becomes a little bit different. Or to me that'd be like if you had a youth group that was doing car washes to do a mission trip or fund something like that.
Speaker 2:you know that you would see Well, car wash, though, is an MLM.
Speaker 3:It's not MLM, but it's the same thing. I mean, it's doing some sort of business with a theme that you're raising money for a certain goal that you have there. And you're right, it's not MLM unless the youth are really innovative and they can recruit other youth underneath them. Who recruit other youth underneath them in order for them to do car wash and two different locations.
Speaker 3:And the others could just set up and just kind of manage, set kind of up here at the top of the car wash pyramid and just manage all this other stuff that's going on.
Speaker 2:Yeah, and if the east location is busy you can tell people I'll go to the west location. That one's available.
Speaker 3:That's right. That would make a lot of sense on that. Do you have more on MLM stuff or do you got some other pitfalls you want to go to?
Speaker 2:The next financial pitfall I want to talk about is financial codependency.
Speaker 3:Okay, what do you mean by that?
Speaker 2:Codependency is when a person has an unrealistic emotional or psychological dependence on another person. Financial codependency occurs when a person relies on others, including their spouse, to manage their finances without understanding their financial situation, and financial codependency can lead to financial vulnerability if a relationship changes, such as a divorce or a death of a spouse. We talked about this in a past episode, where we talked about having that financial playbook and making sure that both spouses know what the financial situation is, what accounts are out there, what the account names are, what the account details are, the account number, how to get a hold of the contact.
Speaker 3:Yeah, what happens if you get hit by a bus type thing?
Speaker 2:Yeah, what happens if you get hit by?
Speaker 3:a bus.
Speaker 2:Financial codependency. I don't want to know anything about our finances. So you go ahead and take care of it and just relying on your spouse to manage everything and not making yourself aware of what's going on and how bills are being paid and how much money is in the checking account or the savings account, what's in the retirement accounts, that sort of thing. If something were to happen to your spouse all of a sudden, now you're scrambling to try to find out all of that information.
Speaker 3:This is kind of a challenge some for us, because we kind of divide responsibilities financially.
Speaker 2:Right.
Speaker 3:You know a little bit and that helps in terms of getting stuff done. But you would have a better idea day to day what you have in the checkbook. While I might have a better idea this structure of our auto and home insurance that we'd have on that, it's kind of, it's almost one of those things that it'd be nice if you had, like a central file or location or whatever that you could save this information in that, shared between the spouses, so that you would, if you're splitting up financial duties, which often need to be done because of the work involved in it, then it makes it so that it makes an easy one space that everybody can go to to pull that up.
Speaker 2:Which you had talked about in a previous episode the one that we talked about how to help an adult parent who loses a spouse and we got into what you can do now, and that's creating a financial playbook, because you don't want to be vulnerable if something were to happen to your spouse. You'd want to be able to access the accounts and be able to get access to money and that sort of thing.
Speaker 2:If you're unfortunate enough to where you experience divorce, you would also need to know what's going on with the finances, so that you're not just all of a sudden without any money at all.
Speaker 3:Sure, and that financial playbook, that might be a good idea to create someday as a template for somebody. That's a good idea.
Speaker 2:Another project for me to get on. The next one is high interest, debt or interest only, okay. And we experienced this way back when with our first house. We bought a house and then we got a home equity line of credit or a HELOC and we did interest only and realized we weren't paying down the principal. That was a little bit frustrating until we realized, okay, we need to refinance this so that we're paying principal, or we need to start making principal payments so that we can pay down this loan. And credit cards are like that. Even though you're paying down the principal, the way the payment is structured, if you're not paying the card off every month and you're doing those monthly payments, you get into this cycle of paying a little bit of interest paying a little bit of principal, rather, but a lot of interest and you're really not getting anywhere. And then, if you charge on it and you add into the amount of money that you owe on it, you're just going into the hole every month instead of getting ahead of it.
Speaker 3:Sure, and I think on the high interest debt thing you got to be wary of where you are in the economic cycle. So if you had a car loan you went out and got today and is at 5%. That may seem really high compared to a car loan you would have gotten in 2020 or 2021. But today that's decent in terms of a rate and real good in some cases because interest rates are just a lot higher than what they were then.
Speaker 2:Well, a year ago car loans were like in the tens for interest rate and then yesterday we were looking just to see what auto loan interest rates were. We had one of the credit unions that we do business with it was at 5.99%. But now auto dealers they're starting to offer some lower rates, like 0.9, 1.9, 2.9, depending on the number of months that you're doing, whether you're doing a 36 month, 48 month loan. But you're right, doing an auto loan at 5.99 or even 10%, if you can wait to get an auto loan or save up your money and pay cash and buy something maybe that's not brand new and you buy something that's used, that's ideal. The issue with used cars is that I like to say sometimes you're buying other people's problems. You don't know what you're buying.
Speaker 3:Yeah, that's the risk you have, and sometimes the new stuff, because we've seen new vehicles that have warranty issues or something that gets fixed or a recall, but typically you got the manufacturer back in you, whereas a used car you don't have anything like that that's available for you.
Speaker 2:If you did get a loan a year ago and it was 8 or 9 or 10 or 12%, whatever it was because I know that it got as high as 14% and now it's much lower it might be worth refinancing that so that you can get that interest rate down and you can pay off that car faster and you're not paying as much to interest.
Speaker 2:Your paying more to more principal and you could also like, if you have three years left on your auto loan, refinance it for three years at that lower interest rate so that you're paying less to interest, paying more to the principal.
Speaker 2:And the other thing to consider is if you have a lot of credit card debt and I know some people speak out against this but there are ways to do a consolidation loan, debt consolidation loan for credit cards, to where you don't go into more credit card debt. And I know that some people say well, you know, if you do a credit card debt consolidation loan, then you're just going to go and charge up those cards again and now you're going to have additional debt. But if you do it right, which is you get rid of the credit cards and you either shred them, you close the accounts or you put them in a safe deposit box at your bank so that you don't have access to them Then you do the debt consolidation, where you're bringing everything together and you get it at a lower interest rate and then you turn that into an installment loan. Then you have like, okay, if I am doing all this and I do an installment loan for five years, then you know, okay, I'm going to have this paid off in five years, or you can do it three years and have this paid off in three years, and then you leave the credit cards alone.
Speaker 2:Don't go open new accounts. Do what you need to do If safe deposit box is not going to keep you from using them. If you're going to end up going to the bank and getting them and using them, then maybe closing the account is ideal for you. It'll ding your credit score for a while, but if that's what's going to help you be disciplined and not using them, then that would be the way to go.
Speaker 3:Well, and if you had it in a safety deposit box at some other location? That's an awful hassle to have to say, okay, I found something on the internet I want to buy. Now I've got to get in my vehicle, go all the way down to the bank or credit union, go in, sign in, get in the safety deposit box, get the thing, come back, do the stuff. Putting those extra steps in there may curb somebody from wanting to do that.
Speaker 2:Right. Or if you shred the cards and you leave the account open, so that way it's not dinging your FICO score. If you shred the credit card, then you don't have access to it at all and that way you're not dinging your FICO score. Because that is important to have a good, strong FICO score. For employment, because employers run credit backgrounds. For insurance, you can get lower auto insurance, other types of insurance, if you have a good credit score. If you're renting and you're looking for a place to rent, they run your credit score and they're looking at all these things. You can get your utility deposit waived if you have a really strong credit score. So if you're trying to keep your credit score strong or you're trying to build it and not have it go down, then shred the credit card and you can take those Go ahead.
Speaker 3:But leave the account open.
Speaker 2:But leave the account open and consolidate those for a lower interest rate onto an installment loan, and that way you see the light at the end of the tunnel. Okay, it's going to be three years and we'll get this paid off, or five years, what have you? Another one is inadequate insurance.
Speaker 3:Adequate insurance okay.
Speaker 2:Either being underinsured or uninsured. Underinsured is if you don't have enough insurance. Let's say that you have $60,000 per accident for auto insurance but then you get into an accident that cost $100,000, you would be underinsured. So insurance company comes and says well, we'll pay the $60,000, but you're going to have to come up with the $40,000. And then you don't have enough insurance and you're on the hook for that $40,000. Uninsured is just not being insured at all. If you need to be insured and you're not and you get an auto accident and it's your fault, you're going to be on the hook for all the damages.
Speaker 3:Well, and you need to be aware that a lot of the states out there I mean every state has requirements on how much auto insurance you need for liability and stuff like that. But the minimum amount required by a lot of states is nowhere close to the amount that you would want to feel comfortable with. Because, if I forgot what it is down here in Texas is it $50,000 or something like that for liability, 60. Or 60, something like that for the minimum amount you're supposed to have. But you can consider if you got into an accident with one new vehicle today. A lot of those are just by themselves or over $60,000.
Speaker 3:Thanks for whatever you can not counting even yours, and if you got into multiple with as expensive as vehicles are today, there's some issues there. So you may want to consider raising the amount of protection that you have on your insurance for your auto or also maybe picking up an umbrella liability policy that could handle additional to help get your insurance up to an amount where it would help you out.
Speaker 2:Yeah.
Speaker 3:But this applies, I think, to other insurances too. It could be your health insurance. A lot of people's health insurance is all dictated by your employer, so you may have some issues there. It could be your homeowner's insurance If you have a home that would cost quarter of a million dollars to rebuild, but you only have insurance for a hundred thousand. If you had a complete loss on that, then you'd have a pretty hefty bill to finish the rebuilding of it. What's the next pitfall that you got on your list?
Speaker 2:Well, another one is lifestyle inflation.
Speaker 3:Lifestyle inflation. That's interesting. What does that mean?
Speaker 2:Lifestyle inflation is that spending increases as your income increases. Instead of going okay, I just got a raise or I took on a job and now I make more money each month, and taking that difference, that new amount that you're getting every month, instead of taking that and putting it into savings or paying off debt, you just end up increasing your spending to meet that amount of income that you're making. So you never really get ahead and you continue to live paycheck to paycheck. You may go wow, this is great to have extra money for the first month or two when you get a raise or you take on a job where you make more money, but then you get comfortable with spending that money and you actually cause yourself to engage in lifestyle inflation.
Speaker 3:I would say that would be common with a lot of people that if you're making more money then you're going to spend, tend to spend more personally and stuff on that end. So does that mean to not spend? Mean if somebody could get a raise but they could be real disciplined and not spend anything more than what they spent before? But is that realistic in all cases?
Speaker 2:Maybe not in all cases, but overall, just looking at the big picture, a lot of people think that the cure to their financial woes is increasing the minimum wage. Now, this is really controversial and some people are going to be like, oh, I don't agree with you, but the deal is is that if you increase the minimum wage but you haven't figured out how to use the money and manage your money, well, now you increase the minimum wage. A lot of people start doing that lifestyle inflation. They might be making $10 an hour and find themselves living paycheck to paycheck and then minimum wage goes up to $12 an hour and they go oh, this is great, now I have this extra money every month and, before you know it, products are being increased because companies, if they have to increase their wage, they're going to take that additional cost and they're going to turn that back to the consumer. So there is a lag, I think, between what the products cost and then that minimum wage. So minimum wages go up. It takes a company maybe a month or two. They increase their cost and now your costs have increased and so you really haven't gotten anywhere, and then you may increase your spending to match now what you're making and you really haven't gotten anywhere. So I don't really believe that increasing the minimum wage is necessarily going to help people. It's just going to increase costs and they're going to increase their spending to match the amount of money that they're making. A new couple with a new baby their costs increase and so they need to be able to make more money to be able to buy the diapers and buy the formula and take care of the kid, buy the clothes and all the things, medical appointments and everything that goes along with having a newborn and a child. And you add another child and maybe a third child and your costs go up.
Speaker 2:Or let's say you have a medical illness and that medical illness is chronic and now you have some different type of foods that you need to eat. Maybe your dietary needs have changed and you might have some supplements or some medications that you have to take because of that illness, and so that can increase your costs. I think sometimes our costs increase, our spending increase, but that's not necessarily lifestyle. So I think those things the baby's lifestyle, but I think a medical illness. You don't choose to have a medical illness necessarily. Lifestyle with a baby sometimes babies are surprises, but that's part of lifestyle. You're married and you're doing things that might cause you to get pregnant, and all of a sudden you have a baby that you weren't quite ready for. But because of that, your expenses increase, and so having an increase in your wages or your job helps, you know is going to increase your spending.
Speaker 3:Yeah, I agree. Your thing on your minimum wage is yeah, somebody may make more money, but it doesn't increase their purchasing power.
Speaker 2:Right, that's a better way to say it.
Speaker 3:Let's say you had a wage where you could buy five Big Macs a week. If your wage goes up to where you're going to be able to buy six now, eventually the price of the Big Macs will go up. So you're still at five. I mean, in order for you to get ahead, you're going to need to provide more value in the market for your labor than what you're being paid. And the more value that you can provide, then the more opportunity you'll have for a better position or better pay or more opportunities like that.
Speaker 3:Right Do you have any others?
Speaker 2:Yeah, we're going to do one more before we sign off of this episode.
Speaker 3:I have one I thought of.
Speaker 2:Oh, go for it.
Speaker 3:I think ignorance.
Speaker 2:Okay.
Speaker 3:And a good example of this we went out with our oldest son to buy a vehicle yesterday and he was going to go ahead and get finance because the dealership had a good deal in terms of interest rate and finance and stuff. So he had to sit down with their financial guy and the financial guy basically did his stuff with running the credit because he had this whole other list of products that he wanted to add on to the loan Warranties and stuff along that line and all this stuff added more money to the loan payment and when you began to look at some of these, it just didn't make economic sense in terms of doing it. I mean, one of them was warranties that basically the term of the loan he had the warranty would have run out before the manufacturer's warranty ran out. So you would just been spending money on this warranty that there's no way you could have gotten anything out on it.
Speaker 3:And I think that a lot of times when people have contracts and they don't read and they don't necessarily go through all of it and they don't think through some of that stuff, they get pressured and jumping in to maybe add on to some of this debt. They are taking on something they need because of ignorance, and if they would spend time with somebody that understands that or take time to learn it themselves? When they have those opportunities and things that come up, they know what to take advantage of and what to shun away from. I mean, wouldn't you agree?
Speaker 2:Yeah, I think in this situation, our son he put down a nice deposit and so gap warranty didn't really apply to his situation. But I think what happens with going and buying a car is you go there, you pretty much know what you want to buy. You do a test drive and usually within like an hour or less I'm going to say 30 to 60 minutes you know which car you want. I want this car, but for some reason you're at the dealership for four hours. That's how long we were there and we weren't there for four hours because we looked at vehicles for four hours. He had, our son had decided on a car within an hour, but then for three hours. I was maybe an hour and a half to two hours. He was waiting his turn to talk to the finance guy and once he got in there it had been about three hours.
Speaker 2:And by this time you just want to be done. You just want to say let me sign the papers, give me my key, I'm tired, I'm hungry, I want to go home. And it was raining, it was a nice day. So you get in there and the sales pitch for the warranty is really quick, high pressures, and this particular salesperson decided to do the fear mongering approach, which was, oh, cars break down all the time and there's electrical issues, and cars are all electric now, and so you want to have this warranty, you should get it. And you're feeling pressured like, no, I don't want to. Then they begin arguing with you and, oh, you really need it. I can't believe you don't want to protect yourself and you start to feel like, okay, should I not even buy this car if it's this bad and I have to have a warranty, should I walk away?
Speaker 3:And isn't the manufacturer's warranty going to cover it?
Speaker 2:Right, isn't it going to cover it? You just want the guy to leave you alone. Now our son, he was like nope, I mean, he was. He's really good at not allowing someone the pressure into something that he doesn't want, and so he was able to say no all the way through it. But I think sometimes we give into that and we're like okay, I will do whatever you want, just let me sign some papers. I want to go home now.
Speaker 3:That's kind of a different fit fall. That's kind of like mercy. Mercy, yeah, just let me sign anything so I can get on with my life. That could be something.
Speaker 2:Yeah, you're right, Kind of the just let me get out of here. But along the lines of the warranty, one thing that we discovered, which was was not a year ago, we were on a trip and your vehicle, your work vehicle, broke down because we were going. You went, we went to a conference for your job and you were using your work vehicle and on the way back the transmission went out and you had a warranty. You had bought that extended warranty. We got it to the dealership or not a dealership.
Speaker 3:It was through the credit union on the extended warranty.
Speaker 2:Right, but at the time that the car broke down, we got it to the transmission place.
Speaker 3:Yeah, and they the repair shop.
Speaker 2:you gave me the information for the extended warranty and they said oh, we can't use this because you still have the manufacturers warranty, so we have to go through the manufacturer. The thing about extended warranties is that you're paying on it but you can't use it until your manufacturers warranty is no longer valid. If you have a manufacturers warranty for, let's say, three years and 36,000 miles, yours is I don't know how many years, but it's so many years and 60,000 miles.
Speaker 2:Right, but let's use three years and 36,000 miles. So if you have a manufacturers warranty for three years and 36,000 miles and you bought this extended warranty, part of your payment is to that extended warranty, or maybe you pay a lump sum. Then you go in to use that. They're saying, oh, you can't use that until the manufacturers warranty is no longer valid and you're paying for something that you don't actually have constructive use of.
Speaker 3:Yeah, that's true. Some of these warranties seem so bad that if you call the warranty company and you're asking them, okay, what's wrong with your vehicle? And you would say, well, my water pump broke, or something like that, they would say, oh, it's not covered under warrant.
Speaker 2:Right, Right.
Speaker 3:We felt that pain Remember the problem is to read the fine print on exactly what's covered. I bet that gentleman that's selling that in the finance department probably sells a bunch of these because of straight ignorance of people as to the stuff that's being presented to them and they just don't know and they think. Well, I want to definitely protect my investment and I don't want the vehicle to break down, so maybe it's a good thing to get.
Speaker 2:Right, and you know, if people have had great success with a warranty and they, like those, go out there and buy that and keep doing what you're doing, if that's what you'd like to do For us. We've been burned a few times, and so is our son, on buying warranties, and so we're very leery of those and we like to ask a lot of questions. If warranty companies, car companies, wanted to get a little bit more bang for their buck or at least for someone like us who's been burned by those, it's maybe talked to us after the manufacturer's warranty is over with and then we could look at something like that instead of buying something that we can't actually use until the manufacturer's warranty is no longer valid.
Speaker 3:Okay, so you had another pitfall too. Which one did you have?
Speaker 2:I did, and this one is not conducting an annual personal financial audit. That's a mouthful. Every year, people should go through and do a personal financial audit on their finances to make sure that they know everything that's going on.
Speaker 2:I had a friend who was getting to the point where she was living paycheck to paycheck. She didn't know where all her money was going. She had a lot of automatic payments set up, and so I told her you know, hey, go check your bank statement and start looking at what's coming out every month, which you should be doing on a monthly basis. When you go to pay bills, you should be looking at your bank statement and just looking at what's coming out of it out of there and making sure everything looks legit and there's no fraud and there's not something that's being charged that you canceled. She found that she was still paying internet on a rental house that she had rented a year before, so she had been paying internet for a year at a location where she wasn't renting that house anymore. I'm sure the people that lived at that house were very thankful that they were getting free internet.
Speaker 3:They might not have known.
Speaker 2:Maybe they weren't using it but she was paying for internet on a rent, you know, a place that she had moved out of a year prior. And another thing that she found out is she was also still paying for a cell phone bill for her ex-spouse. She had unfortunately had to go, you know, went through a divorce and she was paying for a cell phone bill and didn't realize that that was coming out on an automatic payment and you know some listeners may say well, don't you look?
Speaker 2:but a lot of us not us, I shouldn't say us I look at, I go through and look at all the purchases and everything. But a lot of folks set up automatic payments and then they don't look at their credit card bill or they don't look at their bank statement. They just kind of keep this running Okay, I have this much money and not this much was deposited for my paycheck and I have these bills and they just kind of go off of whatever the available balance is. If the credit card bill looks the same, they go in and they pay that and you get in a hurry. So I think that not only in addition to doing a financial audit where you're tracking and saying, okay, here's all the different accounts we have, here's all the account information, but here's the balances, this is what the payments are for these different things, but it's every month just skimming what the charges are on your checking account, looking at your savings and seeing if anything's been withdrawn that you didn't withdraw. So you're looking.
Speaker 2:You're looking for fraud and also, if you're using a credit card because you're trying to get airline miles or whatever it is, it's a loyalty program, double check, just scan through those and make sure that all those charges that are on there are ones that you did and it's not something that is a fraudulent or something that you canceled, because that happens all the time you sign up for something a subscription you decide three, four months into it you don't want it, you cancel it, but you didn't do it the right way and it's still charging.
Speaker 2:Or maybe you did it the right way but it's still charging for some reason and you want to make sure that if you're still getting charged for that, you contact the company and get that canceled so that's not continuing. And a lot of times like I had one where I got charged, I tried it out, I got charged, I canceled it and then it charged me again. I contact the company and I said, hey, I canceled this. Here's my email or this is a screenshot of me canceling it and they gave me back my money and carried it back to me. But I've also had times where I forgot, I wanted to cancel it and I forgot and then as soon as I saw that charge, I called them up or I chat with them and I say I don't want this anymore and they immediately credit it back and close the account. So companies are really good about that. Most companies are pretty good about that.
Speaker 3:Yeah, well, that's a good point about doing the financial audit. It kind of goes in our thing about creating like a financial playbook to kind of go hand in hand Because you have updates every year to your financial stuff, whether it's new accounts that are open or maybe you changed insurances or something like that, but those are all important things there, to keep accurate stuff and have it communicate back and forth to your spouse.
Speaker 2:Sure. Well, that's all we have for financial pitfalls for this episode. This episode is going to be a little bit longer than normal, but we wanted to get some of those in there. If you're interested in knowing more financial pitfalls, be on the lookout later this year for my book that's coming out, because I'll have 19 of those, or we might add ignorance to the list and I might get that, squeeze that in there and there might be 20 financial pitfalls that you can read through and see some ideas for how to not fall for financial pitfalls and have some ideas on how not to fall for financial pitfalls.
Speaker 3:That makes sense, makes a lot of sense. I think this is some great information for the folks, don't you think?
Speaker 2:Yeah, I wish I would have known a lot of these things when early in our marriage or even before that, just when I entered adulthood I think adulting 101 would have been great to be able to go through some sort of something to learn about financial pitfalls, so that I wouldn't have fallen for some of these things, because I think I've engaged in a lot of these things, unfortunately, sure.
Speaker 3:Well, you know, they say the experts are those that have made all the mistakes.
Speaker 2:Right, so that's for sure.
Speaker 3:Well, I want to thank everybody for taking time to listen today and we look forward to seeing you on the next episode.
Speaker 2:Yep, thank you for listening to the Life, love and Money podcast. If you would like to sign up for my email list, you can do so at AngelaKLove that's AngelaKAYE Lovecom, and when you sign up for my newsletter, you'll get a free copy of 10 questions to understand your spouse's money personality and you'll learn about your personality as well. So hop on over to my website and sign up for my newsletter today. Thank you for listening.