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Should You Pay Off Debt or Invest? | Listener Q&A with Marissa Wood
23 Plays1 month ago
- In this solo Q&A episode of The Future of Finance, Marissa Wood, co-founder of Union Financial Services, tackles your most pressing financial questions with clarity and real-life examples. From daily coffee habits to mortgage payoffs and investing for your kids’ futures, this episode breaks down key concepts in a way that’s easy to understand—and apply.
Whether you're just starting your financial journey or already investing, this is the perfect episode to fine-tune your strategy and build confidence in your money decisions.
⏱ Timestamps:
0:00 – Intro: Marissa’s Listener Q&A Special
0:32 – Does Buying Coffee Daily Really Hurt Your Financial Future?
2:07 – What Skipping Coffee Could Be Worth in 30 Years
3:34 – Tips for Saving on Coffee Without Giving It Up
4:21 – What Is the S&P 500 & Why It Matters
6:05 – What Is a Stock, Really? Ownership Explained
8:06 – What’s the Difference Between a Stock and a Mutual Fund?
10:33 – Diversifying Through Mutual Funds vs. Individual Stocks
11:08 – Should I Pay Off My Car or Invest Instead?
14:00 – How Much Investment Risk Should You Take On?
15:46 – Understanding Target Retirement Date Funds
17:16 – Should I Put Extra Toward My Mortgage Each Month?
20:19 – New Baby? What to Do Financially to Set Your Child Up for Success
🔗 Ready to take the first step?
Visit https://www.union-financial.com/ to schedule a free consultation.
💬 If this episode moved you or gave you a new perspective, please like, comment, and share it with someone who needs to hear this.
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Transcript
Introduction to the Future of Finance Podcast
00:00:09
Speaker
Hi, everyone. Welcome back to the Future of Finance podcast. I'm your host, Marissa Wood, one of the owners of Union Financial Services, which is an independent financial advisory firm.
00:00:20
Speaker
And today our episode is exciting.
Listener Questions on Financial Strategies
00:00:22
Speaker
We're going to be going through some listeners' top questions, and I'll be answering them in a very simple way that hopefully you'll learn a thing or two.
00:00:32
Speaker
And this is almost like a part two of a previous episode that we had where we went through some top questions. We're going to be trying to do this throughout the year. Every couple months have a top question and answer episode.
The Coffee Spending Debate: Invest or Enjoy?
00:00:46
Speaker
And so our first question that we received is, does buying coffee every day really make a difference? And we are in a culture where I think a lot of us love treating ourselves to that daily cup of coffee, gets our morning going.
00:01:03
Speaker
And there's nothing wrong with treating ourself every now and then. But what we want to see is, does it really make an impact in our future? And so I want to go through an exercise with you.
00:01:15
Speaker
Let's say that we're spending an average of $5 day on coffee. and we do that five times a week. Well, we're spending $25 a week on coffee.
00:01:26
Speaker
Now, if we do this throughout the whole year, we'll be spending about $1,300 a year. Now, that might be shocking to you, or it might be not that bad. You know, it's $1,300.
00:01:39
Speaker
Does it really make a difference? Well, let's do the math and let's see if it does. If that same $1,300 was invested, rather than using it to buy coffee, if that was invested over the next 30 years, you're putting away $1,300 a year, and you're earning an average of, let's say, 8% year interest, what would you have at the end of 30 years?
00:02:07
Speaker
You'd have a whopping $160,000.
00:02:12
Speaker
six figures, $160,000, by just putting away that money that you would have been buying your coffee with. And the number actually way higher than that because we're not even considering the cost of coffee going up over the years.
00:02:29
Speaker
We know with inflation that that $5 cup of coffee now is not going to be $5 two years from now, let alone 25 years from now. It'll be way more money per cup.
00:02:40
Speaker
And so the number really is way more than
Balancing Coffee Habits with Smart Savings
00:02:45
Speaker
160,000. But we're not telling you this to scare you away from buying that coffee and treating yourself every now and then if that's your vice.
00:02:52
Speaker
That is not my objective here. It's just to let you see that there is an impact And let's weigh out the pros and cons of maybe we only want to buy coffee once or twice a week and we can make it at home the rest.
00:03:05
Speaker
And we can invest all that extra money and really, really benefit our future. Just something to keep in mind that those little purchases you make on a daily basis will have a lasting long-term impact.
00:03:18
Speaker
And, you know, I'm a coffee drinker as well, but I do usually make mine at home. I buy the K-Cups. There's this French roast K-Cup package from Target that you get 90 K-Cups, and I think it's about $28 for the whole box.
00:03:35
Speaker
And then I buy my creamer. I like the Chobani creamer. And so I'm probably spending between 40 50 cents a cup by making it at home. And then every now and then I'll treat myself with something a little bit extra. I'll go to Starbucks or I'll go to Dunkin' every now and then for a treat.
00:03:53
Speaker
So it is doable to make it from home, save a whole lot of money. But I'm not here to tell you where to spend your money. I'm just raising awareness of the long term impact.
Understanding the S&P 500: A Benchmark of Economic Health
00:04:05
Speaker
All right. Now, our next question, and I think this is a very common question that people are thinking about, and that is, what is the S&P 500?
00:04:16
Speaker
I'm sure we've all heard the term, the S&P is up or the S&P is down. Have you seen the value of the S&P 500? And you might be thinking, what in the world are they talking about? What is the S&P?
00:04:29
Speaker
Well, first of all, it stands for Standard & Poor 500. Standard & Poor is a ratings agency. They're not an actual company that you invest in. And the 500 is the 500 top U.S. companies that are publicly traded.
00:04:47
Speaker
And so the S&P 500, it's really just a stock market index that tracks 500 of the top companies throughout the U.S. And it's a good benchmark to use because if the top 500 companies' stock is up and they're doing well, then that means our economy is overall in pretty good shape.
00:05:09
Speaker
If those top 500 companies' performance is down, their stock price is down, Our economy is probably heading towards a recession. And so that's the reason why we use it as a benchmark, really just to see the health of our overall stock market.
00:05:25
Speaker
And so that's when, you know, if you want to go on the stocks app on your phone and you see the S&P 500, that's the index people are tracking, whether it's at 6,000 6,200.
00:05:37
Speaker
As it grows, that means probably that most of the companies in the US, domestically publicly traded companies, are doing pretty well. So that's that benchmark index.
00:05:49
Speaker
It's good to keep an eye on, see how that S&P is doing. Now, another question is, what is a
Stocks 101: Ownership and Profit Realization
00:05:56
Speaker
stock? You know, and this is ah very general question because I think we all have an idea of, okay, you know, i want to buy a stock in a company, but what does that truly mean?
00:06:08
Speaker
Well, a stock represents a share of ownership within a company. And so you're participating in that company's earnings or losses, essentially, because you are now an owner.
00:06:20
Speaker
Even if you're just a very, very small sliver of an owner, you are still an owner of that company. And so buying one share of, let's say, Apple, apple makes you an owner of the Apple company.
00:06:34
Speaker
And so you're going to realize some of the benefits when that stock price goes up. They're probably making more money. The company's doing pretty well. You're riding that upswing.
00:06:46
Speaker
Your value of that stock will go up, which means you're making money. But really, you don't make money until you sell that stock. If you buy in at $100, let's say, and the stock price goes up to $150, in your mind, you're thinking you're making money, but you're really not until you sell that stock at $150 a share.
00:07:08
Speaker
Now you've realized a true gain. And same with losses. If a stock price goes down one day, Don't panic because it's not a true loss unless you actually sell that stock.
00:07:21
Speaker
Otherwise, you're just tracking the value of it. And so, you know, those true returns are achieved by buying or selling at a certain price.
00:07:32
Speaker
Obviously, we want to buy in low and we want to sell at a high price. Usually you make the most money if you can buy and hold that stock for a long period of time.
00:07:43
Speaker
Then you're not going to be paying crazy high taxes on earnings. ah You'll just be paying the capital gains tax rate. But overall, buying a stock really just represents ownership in that company that you purchased the stock from.
Stocks vs. Mutual Funds: Diversification and Risk Management
00:07:59
Speaker
And on that same topic, people will often ask me, well, what is a mutual fund and what's the difference between a stock and a mutual fund?
00:08:10
Speaker
Well, so we just said a stock is, you know, one share ownership in that company. Well, a mutual fund is when an investment firm pulls together investors' assets and they buy a lot of different stocks and bonds and alternative investments and they create one mutual fund.
00:08:30
Speaker
So think of a pie chart. and a lot of different slices in that pie. And each slice represents maybe a different stock or a different bond inside of one mutual fund.
00:08:42
Speaker
And the whole reason why people want to invest in mutual funds, maybe as opposed to picking stocks, is your risk is spread out. You don't have all of your eggs in one basket or in one company.
00:08:55
Speaker
You're going to be spread out ah among a lot of different companies, maybe different industries, different size companies. And the whole idea of that is just diversification.
00:09:06
Speaker
You want to decrease your overall risk and you know Ultimately, picking stocks is not easy. It's not easy for the average consumer to do on their own.
00:09:18
Speaker
We don't know exactly which companies are going to be the best performers that year or you know which ones are going to have it a bad quarter or a bad year. And so the mindset is buying in on a mutual fund where you don't have to do all that research picking individual stocks because that mutual fund company did it for you.
00:09:38
Speaker
And we can diversify even further by putting together a portfolio for our clients filled with a lot of different mutual funds. And so now we really have our risks spread out.
00:09:50
Speaker
We have exposure to a ton of different industries, a ton of different companies. And the reality is when you're really diversified, If one industry, let's say the tech industry, has a bad quarter, your whole portfolio is not going to suffer because you're really spread out.
00:10:08
Speaker
And that's our job of advisors is, you know, let's put together ah really diversified portfolio based on your risk tolerance. And let's get you a lot of different companies inside of your portfolio rather than just buying stock in one particular company and having all of your eggs in their
Invest or Pay Off Car Loan? Weighing Depreciation Against Growth
00:10:28
Speaker
basket.
00:10:28
Speaker
And that's that's really a summary of the difference between a stock and a mutual fund. It's good to have both in your portfolio, but think of that mutual fund as just a lot of slivers of different stocks inside of one fund.
00:10:43
Speaker
Also easier for people maybe that don't have a huge budget to buy shares of each individual company on their own. you know Some companies' stock is very expensive, a couple hundred dollars for one share, but maybe you can put that same $500 into a mutual fund and now you have ownership of a ton of different companies rather than just one company.
00:11:08
Speaker
So that's kind of a overview of the difference between a stock and a mutual fund. Now, our next question that we received is, should I pay off my car first or should I invest the money?
00:11:21
Speaker
And this is a great question because i think a lot of us want to limit the amount of debt that we have. And, you know, it can be ah burden that we carry around having either student loan debt or car debt or house debt.
00:11:37
Speaker
And we want to alleviate that burden and pay off that debt. That's human instinct. Sometimes it makes sense and sometimes it does not make sense to pay off that debt.
00:11:48
Speaker
And here's why. Let's say you have a car and you're really wanting to pay that off to fully own that car. And so instead of making your $300 a month payment, you say, well, I'm going to put $1,000 a month towards that car payment, get this thing paid off so I own it outright.
00:12:09
Speaker
That may be a good idea, but it might not be. And here's why. Once you own that car, you know you've put all of that extra surplus money that you've had every month towards paying off that car, now you own it.
00:12:23
Speaker
You now own an asset that's going to depreciate pretty much forever. And what I mean by that is, unless it's a collectible car, some kind of rare vehicle, or the market for cars changes drastically, most of the time, cars go down in value throughout the years.
00:12:45
Speaker
And so, OK, I'm going to have fully paid off car that's now going to be worth less next year, even less the year after that, even less the year after that.
00:12:57
Speaker
Well, that's a terrible investment. Isn't it? Rather than if I had that extra $600, $700 a month, I can invest it and earn 6%, 7%, 8%, 9%, 10% interest on it.
00:13:13
Speaker
And now I have a true asset that's going up in value rather than your car that's going down in value. Something to consider. um i usually just don't recommend people pay off assets that depreciate.
00:13:28
Speaker
Different story if it's a house that's growing in value or you know something else that's going to make more sense in your life, but a car or a boat. I'd really like to dive a little bit deeper with you on that. Does it make sense to pay it off or not?
00:13:43
Speaker
Because it might not.
Assessing Investment Risk: A Personal Approach
00:13:45
Speaker
All right. Now, the next question we received is, how do I know how much risk I should be taking with my investments? And that's a great question because It really depends on where you're at in life and what your goals are.
00:13:59
Speaker
And your age is a huge factor in that. Now, when we meet with clients, usually the first step that we take in gathering our data and doing what we call the financial discovery with a client is doing a risk profile questionnaire.
00:14:16
Speaker
14 or 15 questions and it goes through scenarios on when you're going to be needing this money that you're investing. How would you feel if the stock market declined? Would that cause you to panic or are you okay waiting it out and waiting for it to come back?
00:14:34
Speaker
um Do you plan on adding to this money or is this Your life savings and you're done working and you're never going to add to it again. you need it to produce income for you? lot of questions that are going to eventually tell us at the end of the questionnaire what your risk score is.
00:14:52
Speaker
And so that'll give us an answer on you know Mary Smith. She might have thought that she was very aggressive in her mind. But after completing the questionnaire, we discovered that she's a moderate investor. She's right in the middle on the risk score.
00:15:08
Speaker
And therefore, we should invest her money moderately. We don't want to take a ton of risk and go all into stocks and all into very high risk, high reward type investments.
00:15:21
Speaker
Mary Smith might want that more slow and steady type of growth in order to accomplish her goals. And so just choosing ah very aggressive portfolio or ah super conservative strategy like CDs and bank accounts, it might not be what's best for your situation. And you really don't know what your true risk tolerance is until you have a conversation with a professional.
00:15:46
Speaker
You know, on that same topic, i always like to bring up those target retirement date funds that are available in a lot of company retirement plans, a lot of 401k, 403b plans.
00:15:58
Speaker
You might have a list of target retirement date funds to choose from. One might be a target retirement date of 2030. target retirement date of 2040, 2050. And as we go down and that target retirement date is further into the future, that fund is going to be more and more aggressive.
00:16:21
Speaker
Makes sense, right? If we say, you know, I'm 30 years old and I think I'm going to retire 2065, right? twenty sixty five Well, that should be invested way more aggressive than someone that says, my ideal retirement date is 2030.
00:16:37
Speaker
Well, that's only a couple years away. We need to be way more conservative at that point. And so you might want to take a look at your four ah one k plan choices, and see which target retirement date fund that you chose.
00:16:52
Speaker
And that number attached to that fund is when you ideally would like to retire, what year you would like to retire. the further out that year, the more aggressive that fund is going to be.
00:17:05
Speaker
Something to keep in mind. And we can, of course, look over that choice list with you and make sure that you are invested properly according to your age and your risk tolerance.
00:17:16
Speaker
All right.
Early Mortgage Payoff vs. Investment Potential
00:17:18
Speaker
Now, our next question is, should I put extra money onto my mortgage every month? Now, We actually have an episode with a mortgage advisor, Jason Johnson, and that's a very exciting episode. I don't know if it'll have already came out by now or if it's coming out soon. If it already came out, I'll make sure to include that in the description below, a link to that episode.
00:17:43
Speaker
But when it comes to paying off your mortgage early, once again, it depends. It depends what position you're at in life, what your age is, but most importantly is what that interest rate is.
00:17:56
Speaker
If you have a really low rate on your mortgage, let's say 3%, 3.5%, 4%, I wouldn't rush to pay it off because we can make more money by investing that money in a brokerage account, some other type of investment that will yield you actual growth.
00:18:15
Speaker
six, seven, eight, nine, 10% average. If we can take that extra money and invest it, it makes a whole lot more sense than paying off a low interest rate debt. Now, if your mortgage rate is high, it might make sense to put more towards that mortgage.
00:18:31
Speaker
um But something to keep in mind when you are making extra payments towards your mortgage, make sure that it's actually going towards the principal. If you're just putting an extra $1,000 month it might be paying towards interest as well versus if, you know, on that coupon sheet or online, you're going to want to select extra payment towards principal and have that whole $1,000 go towards the principal loan amount, and that will actually pay down the loan.
00:19:05
Speaker
You know, if we have a $100,000 mortgage $1,000 towards principal, and we put a thousand dollars towards the principal we're actually reducing that $100,000 balance
00:19:18
Speaker
So that's something to keep in mind if you do want to make extra payments. Make sure it's going towards the principal. And if you haven't already, Google what an amortization schedule is.
00:19:31
Speaker
And that will show you if you want to pay off your mortgage, let's say, in 15 years instead of 30, it will show you how to do that and what your extra principal payment should be each month based on your loan.
00:19:43
Speaker
But once again, we're going to get more into detail on that with our episode with an actual mortgage advisor. and I think that's going to be very exciting because many of our listeners have a mortgage of their own or they might be in the process of buying their very first house. And it's a daunting task getting a mortgage and having that huge mortgage and asset now with your house. And it has to be done in in a way that makes sense for your future so that you're not taking on too much debt and you're still able to invest your money as well.
00:20:19
Speaker
And so look forward to to diving a little bit deeper on that topic.
Financial Planning After Parenthood: Budgeting and Investing
00:20:24
Speaker
Now, our last question is, i just had a baby. What should I be doing to set up my child for the future? And that is a wonderful question because Anytime you're adding to your family or having a child or making any kind of drastic change inside of your family, your financial situation changes drastically.
00:20:48
Speaker
And so what your bills were prior to having that baby are going to be a lot different moving forward. So it really is a great time to sit down with a professional and go over, first of all, a budget.
00:21:02
Speaker
Second of all, do we both have life insurance because, God forbid, one of us passes away? The other one's going to need a lump sum of cash in order to keep those bills paid.
00:21:14
Speaker
And then we can talk about investing for that child's future, whether we look at a brokerage account, some kind of custodial account that you'll be the custodian owner.
00:21:25
Speaker
Maybe we want to look at something for college for them. Maybe we want to set them up even with a tax-free investment of their own, tax-free life insurance, tax-free Roth IRA.
00:21:37
Speaker
It really is amazing what even $100 a month can do for a baby when we're talking 20, 30, 40 years in the future.
00:21:47
Speaker
You can set yourself up with generations worth of tax-free wealth. And it's a huge passion of mine and and something that I feel like has been trending in 2025. A lot of my clients are building up an investment account for their children's future with a very small monthly contribution.
00:22:10
Speaker
And just by consistently putting away that money, their child could potentially be a tax-free millionaire in the future. And how incredible is that? you know I can't wait to see that actually come to fruition.
00:22:23
Speaker
But we do have an entire episode with the five financial tips for new parents. And that came out a couple months ago. I'll put that link in the description below. And I'd encourage anyone expecting recently starting a family or thinking about doing so in the next couple years, give that episode a listen. You might pick up on a tip or two.
00:22:47
Speaker
because it is a new financial world once you bring a child into that. And of course, we want to make sure that you're going to be the most successful in this new journey as possible.
Conclusion and Open Invitation for Further Questions
00:22:59
Speaker
And for anyone else that had any other questions, obviously, we just scratched the surface on a lot of these topics. We'd love to dive a little bit deeper with you or address your individual question with your family's personal situation.
00:23:14
Speaker
I'd encourage you to go to our website, union-financial.com, click on schedule a meeting. All of our meetings and phone calls are always complimentary, so you can pick a time on the calendar, take an hour out of your day to get your questions answered by a professional.
00:23:32
Speaker
And you'll give yourself that peace of mind and at least a little bit of knowledge moving forward on something that was keeping you up at night. Thank you all for watching today. I'm your host, Marissa Wood with Union Financial Services, and we look forward to helping you live a better financial future.
00:23:52
Speaker
Investment advisory services offered through Brookstone Capital Management, LLC, a registered investment advisor. BCM and union financial services are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
00:24:06
Speaker
The opinions expressed by Marissa Wood and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involved risk and otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. This program is designed to provide accurate and authoritative information with regard to subject covered. Index or fixed index annuities are not designed for short-term investments and may be subject to caps, restrictions, fees, and surrender charge as described in the annuity contract.
00:25:03
Speaker
Guarantees are backed by the financial strength and claims paying ability of the insurer. Please refer to our firm brochure, the ADV 2A, item 4, for additional information. Any comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products.
00:25:22
Speaker
Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by Brookstone.