Charged Up! podcast: Earn more, owe less

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Episode 75 with journalist, author Jordan Goodman

 



Are you tired of paying off a 30-year mortgage and feeling like you aren’t making a dent in your principal? Or, could you use hundreds of thousands of dollars by cashing in on a policy you may not even remember you have? Veteran financial journalist and author of “Master Your Debt,” Jordan Goodman promises these aren’t scams. He says there are tools that you should be using to increase the return you get on your savings, lower your debt quickly and get money that may be owed to you. It’s worth keeping an open mind and hearing some tips that could change the quality of your life. 

So, let’s get Charged Up! about learning how to earn more and owe less!

Transcript:

Jenny Hoff:  Hi, Jordan. It’s really a pleasure to talk
with you today.

Jordan Goodman:  Great to be with you, Jenny.

Hoff:  So let’s start with your background. You’re
America’s money answers man, how did you fall into that role or take on that
role? What motivated you to get into this field and give us a little bit about
your background in finance?

Goodman:  Sure. So I’ve been a financial journalist for
almost 40 years. I was at Money Magazine for 18 years, that’s where I really
got the passion for helping people with all their financial decisions.
Undergraduate I went to school in Amherst College and London School of Economics,
went to Columbia School of Journalism for my master’s where I specialized in
the economic and business journalism. That was kind of the beginning of it all.
But it is really at Money Magazine where I developed this whole interest in how
to help people in all aspects of their money investing, debt, insurance, just
this whole area a long, long time. And started my website moneyanswers.com in
1993, that’s how far back this goes, and I’ve been improving it ever since and
doing videos and links and calling radio shows and 13 books. So I just love
helping people with their personal financial decisions.

I find that there’s a lot of
resources they don’t know about that if they do will make a big difference in
their lives and hopefully some of those things we’ll get to talk about today.

Hoff:  Yeah, absolutely and that’s what I like, it’s
not really just general advice and there’s a lot of great general advice out
there that people just having that knowledge it can change their lives, but I
like how you include in your book and in your tips really direct phone numbers
even that people can call, like they don’t have to do the work, here’s the
phone number, here’s a website that you can go to, here’s a company that can
offer you that product or whatever that assistance, and I think that is really
helpful in not only the first step of learning but the second step of here’s
exactly what you need to do.

Goodman:  I’m all about implementation, you’re right.

Hoff:  I love that.

Goodman:  You can have an idea, but if you don’t
implement it it’s not going to do you much good.

Hoff:  Exactly. So your book Master Your Debt has a
lot of great advice regarding all types of debt, but we’re going to talk about
some topics that we actually haven’t ever covered before in the show -
resources people may not know about to get their mortgage paid off faster, make
money off their savings if it’s not making money in the bank, all of those
kinds of things. So let’s start though with making more money off your savings
because it’s really a time where you can be very good, very responsible, you’re
saving up money, you have it in the bank and you’re getting almost nothing for
it. If you’re lucky 1 percent if you’re going with like an online bank or
something, but generally you’re getting almost nothing for it.

You say there is a better way to
make money off your savings in secured real estate funds; can you talk about
that a little bit?

Goodman:  So that’s right, so this is what I call the
saver’s dilemma. You keep it in the bank, see these money market funds, savings
accounts, you’re going to get pretty much zero. That’s going to stay that way
as far as the eye can see, Jenny. Because even though the Federal Reserve’s in
raising rates on what banks charge they don’t control what banks pay, and
therefore the banks can get away with it and they’ll continue to get away with
as long as they can. So, don’t assume you’re going to get anything in the bank
for any significant thing over 1 percent.

And then meanwhile if you go to
traditional ways of earning yields – bonds, real estate investment trusts, mass
limited partnerships, utilities, as interest rates have been rising and I think
will continue to you are going to lose a lot more in principle than you’re
earning an interest on those, so that’s not a particularly good solution
either. So yes, the solution to what I call the saver’s dilemma are secured
real estate funds, because that’s a way of earning an 8 percent yield over a
one-year time frame where the net asset value does not change. It stays at $10
a share, it doesn’t go up, it doesn’t go down. So as interest rates keep rising
you’re not losing the value of your principal that way.

There’s a website related to it -
securedrealestatefunds.com, and what they’re doing is they’re lending money
short-term over a year or so to high-quality commercial real estate projects
all over the country like 30 different ones at any particular time, so it’s
geographically diversified and they’ll do like apartment buildings, medical
offices, assisted living, student housing, parking lots, just all kinds of
different things that have a hard time getting financing from the banks that
are so difficult these days. So you’re kind of filling a niche these ways.

Now this is what the Securities and Exchange Commission calls a
regulation A+ fund which commonly would be known as a crowd funding fund. These
have only been around for about two years because the Congress in 2012 passed
what’s called the JOBS Act of 2012, which authorized crowd funding funds. The
SEC took awhile to figure it out, started approving these things in 2016, and
this was one of the first ones out there.

Minimum of $5,000, no
commissions, minimum hold time, one year, you can get monthly checks if you
like or you can reinvest it and have it compound. So, there’s a way right
there, Jenny that people can get 8 percent without market volatility as opposed
to zero in the bank or 3 percent with lots of market volatility in bonds and
bond surrogates.

Hoff:  So how do we know that there’s no market
volatility with this? What if there was another real estate crash and somehow
does this protect you against that?

Goodman:  Well, it doesn’t protect you completely. I
mean, there is risk in real estate; I would never use the word guaranteed or
anything like that. But they mitigate the risks in various ways. I mean, we
talked about the diversification; they tend to lend in growing areas to builder
developers who’ve got a long-term track record of doing these things. They
don’t give them the money all upfront; they give it to them in stages. So, dig
the foundation, we’ll inspect it, OK, you did it right, now we’ll give you the
next 10 percent. And the maximum that they lend is 70 percent of the value of
the property. So, the builder always has at least 30 percent if not more skin
in the game to make sure the project gets done. And also, the projects make
economic sense, typically they’re adding value to an existing piece of real
estate, so again the builder has every reason to want to get this thing done.

I’ll give you an example, Jenny,
of one they did recently. A guy had a big house in Boulder, Colorado, he’d been
renting out to two students forever. He got a loan from the fund, re-jiggered
the house, a year later had four apartments instead of two in the same
building. So, the income with the building was up 100 percent actually. So he
has every reason to get that project done because he knows once it’s done his
income is going to be much higher. So that’s the way of mitigating the risks.

But if we had a complete total
disaster, yes, there’s some downside to these kinds of things.

Hoff:  And can you choose which projects you want to
invest in? Or is it just altogether bundled?

Goodman:  Altogether, and that’s the good thing. You
don’t have to be a real estate expert yourself, management has been doing this
for 30 years, they managed the whole thing. It’s completely passive income from
your point of view. All you have to do to get the 8 percent is wake up in the
morning breathing and you’re done.

Hoff:  OK, and so basically if I put $10,000 into
this I would get a check for $800 at the end of the year?

Goodman:  Well, you’re getting paid monthly.

Hoff:  OK.

Goodman:  You’re getting paid monthly. So you get about
$66 a month. And if you reinvest it you’re going to have some compounding. And
in addition to the interest checks which are from the mortgage interest they
have a profit-sharing element as well. So, when they lend to a particular
builder who sells the property at a profit he shares some of that profit with
the fund, and the shareholders actually get 80 percent of that profit. So, for
example, for 2017 the actual return of the fund was 8.7 percent, 8 percent from
interest, 0.7 from profit sharing. So you actually get a little bit extra as a
participation in the growth of the fund.

Hoff:  Now we are kind of in one of those boom times
though, is this one of those things that it sounds really good right now
because the economy is booming and as soon as the real estate market or just
the market in general takes a big dip which it will that we’re going to regret
that? Or do you feel like it’s actually more secure than having your money
necessarily sitting in an index fund or sitting in the bank?

Goodman:  If you’re comparing this to stocks this is
much more stable than that. Now the people who ran this fund have done it even
through the 2008/2009 crash and they hardly lost anything. Commercial real
estate tends not to go down as much as residential real estate, and certainly
the stock market. If we have a big downer the stock market will go down first.
This is going to be much more stable than that. Not guaranteed but much more
stable. And again, they’ve been doing this for a long time, the net asset value
is designed to stay at $10 a share.

Hoff:  And you don’t need to know anything about real
estate if you want to get into this?

Goodman:  Correct. Just understand the idea. There’s
actually a little video that explains the whole thing at that
securedrealestatefunds.com. So no, it’s completely passive from your point of
view. So for a lot of people who have money as you said they’ve been saving it,
it’s sitting in the savings account earning zero. This is a much better
alternative to earn 8 percent instead of zero without having to be an expert in
real estate at all.

Hoff:  Great, and it’s taking your money that isn’t
your emergency fund. So, for people listening to this if you’ve got, “OK,
I’ve got six months saved up in case I lose my job or something,” that’s
not the money that you would take out and put into this necessarily.

Goodman:  Correct.

Hoff:  It’s if you have well above that and it’s just
you’ve got a big chunk sitting in the bank, you don’t really know what to do
with it, you’re not an expert investor, you’re not really into buying houses
for yourself and renting them out, this is one option that’s relatively secure,
it’s a proven concept that’s been around for several years, and it’s very easy
to manage.

Goodman:  Correct. The minimum hold time is one year. So
you’re exactly right. If you need it to be liquid for less than a year this is
not appropriate for you. So, what a lot of people do his individual retirement account (IRA) money, or they
have 401(k) rollovers. You can do what’s called a self-directed IRA, put the
money in there, and now it’s compounding tax-free in a Roth IRA tax deferred in
a traditional IRA. And you don’t need the money for 10 or 20 years and you have
it compounding that way, that’s an ideal use of this.

Hoff:  So that would be instead of having that money
directed to an index fund or directed to stocks and bonds you would have a
portion of that money instead directed to this?

Goodman:  The way I look at it’s an alternative to bonds
and cash. Stocks do what stocks are going to do, in the long run they do really
well but obviously they’re volatile moment-to-moment. Bonds you’re going to get
maybe 3 percent with volatility. And cash as we said you’re going to get zero.
So to me if you have a balanced portfolio do whatever you’re going to do with
stocks, which are fine, but this is the kind of bond and cash portion of the
portfolio at least for some of your money.

Hoff:  All right, perfect. Great information. And
great, I had not actually looked into those so I will definitely be looking
into that as well.

Goodman:  Great.

Hoff:  Another tip that you have is about paying off
your 30-year mortgage in five to seven years now. I’ll be honest, Jordan, I see
a lot of these advertisements come up on Facebook or coming up on just
different websites I go to talking about this and talking about paying off your
mortgage really fast using a home equity line of credit. And I’ve always been
skeptical, it seems like too good to be true, one of these things that,
“Oh-oh, it’s the smelling of 2006 again, 2007 leading up to a big
bust.” But you say that this is actually a pretty good way to pay off your
mortgage much faster and save a bunch of money on interest.

Goodman:  And you’ll never hear about this from the
bank, Jenny. The bank likes the current system which works really well for them
which is you give them your money, sitting in the checking account, earning
zero as we just discussed, and then you get a 30-year mortgage you make the
same payment for 30 years, all the interest on a mortgage is front-end loaded.
The first 10 to 15 years you’re paying very, very little principle and most of
the interest. And then if you refinance you start a new 30-year clock all over
again and throw away tens of thousands of dollars in interest you paid on the
first mortgage. So don’t expect to hear about mortgage optimization from the
bank.

But yes, if you do it right it
can work. Now there are three things you need to make mortgage optimization
work. The first thing – you got to have equity in your house. If you’re
underwater in your house there’s nothing to borrow against, so that’s not going
to work. The second thing – you got to have a decent credit score, 680 or
higher, to be able to qualify for that home equity line of credit that HELOC.
And the third thing you need is positive cash flow, more money coming in than
going out during the month, because that positive cash flow is what’s pushing
the principal down on a regular basis.

There is a free website you can
actually model it for yourself which is called truthinequity.com. And they have
what’s called a personal profile, you put in your income, your expenses, your
mortgage, your house value, all those things, they’re going to say, “OK,
what you’re doing today is going to take you 28 and a half years to pay off
your mortgage. With the numbers you just gave us it’ll be six and a half
years,” whatever comes out to be, and step by step they show you how to do
it.

Basically you’re keeping your
money which is normally sitting in the checking account in that HELOC, which is
a liquid line pushing the principal down every day. HELOCs are based on what’s
called average daily balance, how much do you owe today? You have a $50,000
HELOC, you put a thousand dollars in from your paycheck, you now have 49,000
instead of 50, so you’re paying interest on less principal. And just keep doing
that you pay your bills out of the HELOC and you’re making progress every day
on that principle instead of making almost no progress for many, many years.
That’s a much shortened version of it. The book I sent you, the Master Your
Debt, I actually have a whole chapter on this thing with actual tables to show
you how it actually works.

Hoff:  And what about the interest, because it does
say in the book that it’s a variable interest which again is one of those things
that makes you very jittery the idea of a variable interest and we have no idea
what’s going to happen with interest rates. Is that something that is very worrisome,
or you say that it’s not?

Goodman:  No. So you’re right. Home equity lines of credit
are based on the prime rate which goes up and down, lately it’s been going up.
And so conceivably rates could go up and it would cost a little bit more on
interest. But what people don’t remember is you’re paying the principal off so
much faster that even if the interest rate is somewhat higher it’s interest on
a far smaller amount of principal, right? So if the principal is going down
real fast the interest rate could go up dramatically, you’d still be ahead of
the game, you see?

In fact, at that truth and equity
one of the things that they do is they actually do a total impossible
worst-case scenario. Today the prime rate is maybe 4.75, and they say, “OK,
this is the numbers today, let’s bring the prime rate today from 4 and 3/4 to 10
percent instantly,” which is never going to happen but just in case. And
they say, “Oh, instead of paying it off in 6.2 years you’re paid off in
6.7 years,” whatever it maybe. Because the key thing in a mortgage is how
fast you pay off your principal. Nobody ever thinks about that way. They say,
“What’s my payment and what’s my rate.” But the real question is
paying off your principal which allows you to do it so much faster, because the
money you have is working for you every day, pushing that principle down instead
of sitting in the bank earning nothing and working for the bank.

Hoff:  Now what if instead you basically just take
the mortgage you have right now and you double pay the principal every month or
you triple pay the principal every month and pay it down faster that way? Is
that an alternative or is that not as efficient?

Goodman:  Not even close to as good. See, when you say
you do a double payments you’re giving money into the mortgage but you can’t
get it out. It’s not a two-way mousetrap as I put it. You can’t write a check
on your mortgage, right? So if you give them extra payments it’ll cut your pay
off instead of 30 years, maybe be 27 years or something like that. So it helps
you 27 years from now as opposed to right now this is helping you every day. It
hurts your liquidity, it hurts your cash flow, if you’re taking extra double
payments and you can’t get your money back out it’s costing you more money now
and not helping you that much.

I’d much rather pay my mortgage
often five to seven years instead of 27 years. Think of the amount of interest
you’re going to save, think of a young couple who’s 30, who has their mortgage
paid off at 35 instead of 60. What a difference in their life that’s going to
make?

Hoff:  And so who would this be ideal for? Is that
somebody who plans to stay in their house for a long time? What if you’re
planning to maybe sell your house the next couple of years?

Goodman:  Not necessarily. The faster you gain equity in
that home the faster you pay the mortgage off, when you sell your home in two
or three years you’ll get to keep more of the proceeds. You’ll have less of a
mortgage to pay off.

Hoff:  OK.

Goodman:  I mean, if you stay in your home a long time,
fine, your mortgage is paid off in five years. But if you’re going to move
sooner you’re in better position to keep more of the proceeds when you sell the
house.

Hoff:  And what are the potential risks involved with
something like this versus a regular mortgage?

Goodman:  It takes some discipline and you have to kind
of pay attention, so you have to kind of be interested in paying attention to
the details of moving your money around. And when you’re gaining more and more
equity in your house it can be a temptation. God, we’ve got all this equity,
this is great. Let’s go on a Caribbean cruise or something to waste the money.
So that’s a potential temptation. But I find most of the people that actually
implement mortgage optimization are disciplined, they do want to watch these
things carefully, and they get the benefit from it.

Hoff:  OK, and you say that that could basically take
a 30-year mortgage down to a five to seven-year mortgage.

Goodman:  Depends on the numbers, the faster your cash
flow, the more positive cash flow you have the faster that’s going to get paid
down. That’s correct.

Hoff:  And so you are paying more out every month
into your mortgage, it’s just doing a lot more work.

Goodman:  You’re not actually paying more, you’re
actually paying less because remember every day you’re making progress on the
principle. So as you owe less principal you owe less interest. So the payment
on the HELOC is actually going down every month until it goes to zero, and then
on your first you’re actually making faster progress as well. You kind of take
a bulk amount from the HELOC toward your first. So I’ll just give you a simple
example, say the house is worth 300,000 and you owed 200,000 on your first and
you’ve got a $50,000 HELOC. You’d write a $50,000 check on the HELOC to your
first so you now at 150 instead of 200. The same mortgage payment you’re making
on that first is now paying off more principal because you owe 150 instead of
200. So you’re actually making progress faster on the first and the HELOC at
the same time.

Hoff:  OK, and you explain it all in the book because
it’s confusing if you’re not familiar with this concept.

Goodman:  I know. It’s a new idea.

Hoff:  Yeah, so it’s definitely something worth
reading and looking over and seeing if you have the right personality type for
that. And as you said it takes a lot of management of making sure your money is
moving in the right places and you’re keeping track of your bills and you’re
making sure you have a positive cash flow at all times and that kind of stuff. So,
I think that if people do want to do this – make sure you take an honest look
at yourself that you can be responsible with this. If you’re more of a just set
it and have it automatically deducted from my account every month, I never want
to have to think about it, then it might not be the best idea.

Goodman:  I would agree with you. But look at the
payoff, paying a little bit more attention you’re going to save literally tens
of thousands of dollars in needless interest. So to me it’s worth to pay a
little bit of attention to have a huge payoff.

Hoff:  That’s amazing and great advice, definitely
something worth looking into. Another tip that you offer is verifying your loan
payments, and this is very interesting. You say that many of us are paying too
much for different loans that we have.

Goodman:  Correct, and they don’t even know that they’re
paying too much. That’s correct. So mortgages for example, say you have an
adjustable rate mortgage. It adjusts up and down based on the prime rate, on
the spread over the prime; there are all kinds of things that can go wrong. And
banks often sell one mortgage from one company to another and the records get
lost and all kinds of things are wrong there. There’s a place that can actually
help you see if your mortgage is correct which is called verifymymortgage.com,
that’s the first one.

The second one is escrow, when
you have your payments escrowed meaning they are pulling aside money for
property taxes and property insurance, in many cases they’re overestimating
what the taxes are going to be and what the insurance is going to be so they’re
taking out more than they really should. This kind of allows you to audit,
maybe it’s a good word, your escrow, the website for that verifymyescrow.com.

And then another one is PMI,
private mortgage insurance. In theory if you get up to 20 percent equity in
your house you shouldn’t be paying private mortgage insurance, PMI anymore. The
banks don’t look at that very carefully. People are paying PMI when they’re at
21, 25, and just can kind of go on and on and on. Now you could get to 20
percent equity in several ways by paying down the mortgage or say the value of
your house has gone up either just because of house prices going up in your
area or you’ve improved it, let’s say you’ve added a lot of improvements to the
house, your equity may be higher than you think and you can get rid of that PMI
which can literally be hundreds of dollars a month.

I’d like to say I like to pay for
insurance that covers me. This is insurance that doesn’t cover you, it covers
the lender. So I ain’t paying that kind of thing. So the website for that is
verifymypmi.com. In 30, 40 percent of the cases PMIs can be eliminated, their
mortgage payment is wrong and they’re paying too much on their escrow.

Hoff:  Wow. Definitely something worth looking into.
And then those sites I assume they charge money in order to do the audit?

Goodman:  They do, it’s a peace of mind kind of thing,
right? And if it’s wrong which 30, 40 percent of the case it is they’ll
actually write a detailed letter and say, “Here’s what the mortgage
payment should be. And here’s how many thousands of dollars you’ve overpaid to
that lender over the last several years and you get a refund of that.” So
it can pay for itself many times for you.

Hoff:  Absolutely. All right, you also recommend
refinancing your car to get lower payments. Now is this just stretching out how
many months you’ll be paying off your car and you’ll ultimately be paying more
interest? Or is it there some other trick I’m not seeing there? And who would
be a good candidate for this?

Goodman:  There are other ways of doing it. So a lot of
people got into some pretty fancy cars the last few years and took on bigger
payments than they can really afford. So instead of losing your car to the repo
man at 3:00 in the morning, which is not a good experience, it ruins your
credit while you’re at it. You can change the maturity and interest rate on
your car loan to a more affordable level, and therefore hold on to your car.
There’s a free website that will help you do that which is myloangen.com. You go
in, you put in, it takes you about three minutes or so, you put in your current
car payment, how many more months you have to go, the interest rate, how much
you owe and then it gives you a little dial, kind of like a speed dial and you
move the dial to where you want. If you change the maturity to make it longer
you’re going to bring the payment down to make it more affordable.

Say you have a car today that
you’ve got a $500 a month payment for the next three years, and that’s becoming
too much for you. If you move that out to say six years your payment may go
down to 250, and yes, you will pay more interest in the long run but you’re not
going to get your car loss to the repo man as well. So, you choose the level,
interest rate and the payment you want. And then when you have something you
like, you hit submit, and it goes to a bunch of credit unions around the
country who compete for your business to give you the best loan for that
amount. So it’s just a way of people getting back control of their car loans
which in many cases are much more than they can afford.

Hoff:  All right, so this is for people who cannot
afford their car loans anymore essentially, and they’re going to get it
repossessed or they’re going to have to sell it and figure something out.

Goodman:  Well, in many cases they’re underwater. If you
sell a car the value of the car goes down a lot faster than loan is paid off,
right? A lot of cars are underwater without having driven off a bridge. And you
can’t sell your car because you’re going to have to come up with additional
cash out of your pocket to pay it off in effect, so that’s usually not a good
solution. People tend to like the cars they bought but they’re costing them too
much. So it gives them an option to pay it back, again, the website for that -
myloangen.com.

Hoff:  All right, great. OK, so we’ve talked a lot
about insurance policies, we were just talking about PMI. And a lot of my
experts in the show definitely recommend insuring yourself especially for
emergency situations life insurance is a big recommendation, especially if you
have children or dependents who need your income. And if something horrible
should happen they would be in big trouble if there was nothing coming into
help cover the costs. Now you say in your book though that isn’t a lifetime
need necessarily that at some point you may not need that life insurance
anymore that you’ve been paying for every month. And instead of just kind of
letting it go away by stop paying it you can actually make tens of thousands of
dollars off it.

Goodman:  Correct. This is what’s called the life
settlement market. And you’re right, most people when they get to a certain age
they just let the policy lapse, they stop paying the premiums, and it just goes
away. And the insurance company is real happy because they’ve been getting
money from you for many, many years and they’ve never had to make out a payment
of any kind. Instead you can sell your life insurance policy to somebody who
will then collect the death benefit and they pay the premiums, and you get a
whole bunch of cash. Say you had a million dollar policy and say you were 70
years old, something like that. Say you had some kind of a heart condition or
some kind of a health problem. Somebody might pay you like $400,000 in cash
right now for that and then when you die they get the million dollars and they
take over the premiums, as opposed to letting it lapse and getting nothing from
it.

Now tell your children about this
because they’re not going to get the death benefit. But usually the children
are fine about it. Parents should get the money out of it, use it to pay off
their mortgage, pay off debts and invest for themselves, so in many cases it
can work out really well.

You have to be older, I would say
70 plus actually. So this may be more for the parents of the people who are
listening, the people listening directly. But it’s something again the
insurance company will never tell you about. And there’s a website you can find
out about it which is fundinglife.com. They basically put together buyers and
sellers of life insurance policy. You would be the seller of the policy, and
the people who buy it are hedge funds and banks and private investors. Say that
guy that paid $400,000 at a million dollar policy, when the person dies they
get a million dollars. So they more than doubled their money they just don’t
know when it’s going to be.

Hoff:  I don’t know, Jordan, if I love the idea of
somebody just waiting for me to croak so they cannot collect money on it.

Goodman:  Well, they don’t come and knock you off
typically.

Hoff:  Are you sure? Oh, typically, that’s the thing.
That’s a qualifier, typically, that’s what I want to know. How much information
do they have about me that they, I don’t know, mess with that a little bit? It
seems kind of scary.

Goodman:  It’s never happened, let’s put it that way.
But I mean, in the meantime that person’s got $400,000 right now that they can
use to pay off debts and invest and make a big difference in their lives that
otherwise we’re getting nothing from it.

Hoff:  Well, this is definitely probably a very, very
good solution for maybe an elderly parent who needs to now enter a nursing home
or needs in-house care and the money is just not there to do it, but they been
paying $300 a month for the last 40 years on a life insurance policy or $100 a
month or whatever it is that this could now make a difference between their
last years being a lot more comfortable versus stressing out about money and
not having a good quality care.

Goodman:  It’s an asset they have they don’t even know
they have.

Hoff:  Yeah, so benefiting from your own death
benefit.

Goodman:  Exactly. And now while you’re still alive.

Hoff:  Right, exactly. So it’s very interesting and I
almost want to go get my life insurance right now to have that in 30 years when
I might need it.

Goodman:  Well, the older you are and the sicker you are
the more money you’re going to get. So if you’re 85 and you’ve got terminal
cancer you’ll get a big price because the buyer’s not going to have to wait
very long, if you’re 70 and in good shape you’re not going to get as much
money. The older you get obviously the more chance you have of dying and
therefore the higher the price you’re going to get for it.

Hoff:  OK, very interesting. Let’s now talk about
refinancing student loans. Perfect timing, this is the time of year where a lot
of children will start entering college in a couple of months and they’re going
to be taking on crazy loans to fund that university experience. And now I did
do a story once with SoFi and they do these refinancing student loans and they
consolidate and stuff like that. But the question is if you have federal loans
they’re pretty forgiving when you pay them off, and I think that they’ll like
give you some time to find a job and all of these different protections are in
place. But a lot of times people have a mix of federal and private loans which
in those private loans can get very high in interest. So talk about why
somebody should and want to refinance and consolidate their student loans?

Goodman:  Yeah, I would not use the word forgiving when
I talk about federal loans. Now there’s forbearance which is a different thing,
which means the interest keeps chugging along, you just don’t have to make
payments for like six months after you graduate. But the interest keeps piling
up anyway. But you’re right, private loans are much more expensive. So, if you
do one of these consolidation services and refinancing you can get typically in
the 2 to 3 percent range. Now I know SoFi, they’re out there, my experience
with SoFi is they want extremely high credit scores, 750 or higher, huge cash
flow. They want doctors, lawyers who are wildly successful.

Hoff:  Stanford graduates, Harvard graduates.

Goodman:  Well, that’s nice. But that’s not most people,
OK? So the place that I recommend which has been better is called credible.com,
and then just do /money-answers. They have a platform about five or six
different lenders with different credit criteria that aren’t so super high-end
that the average person is able to qualify or something like that. And so,
they’ll combine your federal loans and your private loans into one, and again 2
to 3 percent as opposed to 4 to 6 percent on the federal loans and 8 to 10
percent or more on the private loans. Yes, you are giving up the forbearance
and the other things of the federal loans. But if I’d get a lower interest rate
it’ll help them pay them off quicker. And actually, if you give them that
credible.com/money-answers, they’ll give you 200 bucks off your first payment
as well. So you get a little get off to a good start there as well.

So it’s such a huge burden, the
average person this year graduating has got about $39,400, that’s the average
amount of debt, and a lot of people 50, 100, 150,000 – undergraduate. Graduate
school, medical, law school, business school – 200, 300, 400,000 before they
get their first jobs. So this is the crisis of this generation. And I’m not
making the loans disappear but paying them off at 2 to 3 percent is a lot
better than higher rates.

Hoff:  Yeah, absolutely. And so you’re saying that
there are sites out there and there are companies out there that are will to
take you even if you don’t have a perfect credit score and you aren’t the first
in your class from Harvard?

Goodman:  Correct, which so far that’s the people they
go for, which is great for them. See, the SoFi has hedge funds behind them where
they get their money. And the hedge funds don’t want to lose any money, so they
have super, super high credit criteria which again is great for SoFi, but in my
real-life experience the vast majority of people I’ve ever referred to them got
rejected and that’s not a good feeling. Where with Credible you have a choice
of five or six different places, some might accept you, some might not, but you
have a much higher chance of actually getting it and making it happen.

Hoff:  And where do they get their funding from?

Goodman:  Credible is like a platform, and the funders
are credit unions and various other companies that are in the student loan
refinancing space, so Credible itself doesn’t make the loans, they’re like a
platform that provides the place for people to have choice of five or six
different places.

Hoff:  All right, great. Now you’ve given a lot of
great information, a lot of really interesting tips, and I’m sure tips that
many of us have not even heard about or thought about or we’ve seen ads for and
felt a little sketchy about like is this the real deal type of thing. So it’s
very good to know that you with your expertise and your background you actually
stand by some of these tips.

Goodman:  I’ve vetted all these things, absolutely, for
years and years and years, absolutely.

Hoff:  Now of all the things that you’ve been
recommending or maybe it’s one you haven’t mentioned yet, what would you say is
just the No. 1 tip that could really change somebody’s life if they do it?

Goodman:  Of the ones we talked about clearly mortgage
optimization to save tens of thousands of dollars in interest and to pay your
mortgage off in five to seven years instead of 30 years is going to make a huge
difference in people’s lives, and gives them a sense of power that their money
is working for them all the time. So we talked about a lot of things but I
think that’s the one that’s got the biggest impact and will probably help most
of your listeners.

Hoff:  Fantastic. Finally what gets you charged up
about being America’s money answers man?

Goodman:  Well, I think you can see I love it, I’m
passionate about this stuff. I really like to help people. I like to provide
resources that they do not know exist. I mean, just about everything we talked
about today, and you’re an expert in this field, you hadn’t heard about it
before either, right?

Hoff:  Right.

Goodman:  So to offer resources, specific things with
websites that actually help people really feels great, I mean, I’ve been doing
this a long time at Money Magazine and doing call and radio shows and speeches
to all kinds of groups, to empower them. I mean, just look at what we’ve done
in the last half-hour or so. We got them earning 8 percent of their money,
we’ve got them paying their mortgage off in five years instead of 30 years, we
got them to make sure their loan payments are accurate instead of way
overinflated, we refinanced their car loan so they will not be visited by the
repo man in the middle of the night, we gave them hundreds of thousands of
dollars in selling a life insurance policy that otherwise it would have let
lapse, we refinanced their student loans to 2 to 3 percent. I mean, we’ve done
a lot of good stuff in the last half-hour. That really feels good to serve
people and giving them resources they never even knew existed.

Hoff:  Absolutely. And I love when it’s really new
information that’s just not as readily available. So Jordan Goodman again,
Master Your Debt, that’s one of your books and you also have the book
Everyone’s Money Book, and you have a lot of great tips in there and charts and
websites and phone numbers that people can call and exact steps they need to
take to start enacting some of these tips. Thank you so much for joining us
today and sharing your knowledge.

Goodman:  Thanks so much, Jenny. I really appreciate it.

See related: Charged Up! podcast: How smart couples can retire rich with David Bach




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