Smart Money Podcast: Make a Plan to Achieve Your Dreams

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

But in this episode, we continue our series on financial dreams, with conversations with Nerds who have accomplished their financial dreams and interviews with outside guests about what they want to do with their money in 2022.

Check out this episode on any of these platforms:

• Apple Podcasts

• Spotify

Our take

To pin down your money goals for the year, think about your values, priorities and where you are in life. Realize that you may not be able to accomplish everything in one year.

If you’re trying to get a better grip on your spending habits, look into using the 50/30/20 budget. With this method, you direct half of your income to cover needs, like rent and food. Then 30% of your income goes to wants, like coffees in the morning or vacations. Lastly, 20% of your income goes to debt payments and savings.

If you want to become a homeowner in the new year, think about whether you’re in a good place to do so. If you don’t see yourself staying in a house for around five years, buying a house may not be worth the expense and hassle. Renting may not build equity, but it can buy you freedom.

Lastly, if you’re shopping for a new credit card in the new year, think about what types of perks you want. Once you’ve chosen the right card, work to get the sign-up bonuses. And after you’ve had your card for a while, take the time to evaluate whether it's worth the annual fee, if it has one.

Our tips

• Find a system. Whether you use the 50/30/20 budget or another budgeting tool, make a plan for your spending, saving and debt payments.

• Renting buys you freedom. Buying a home often doesn’t make sense if you aren’t able to stay put for a few years.

• Know what you want from a credit card. Applying for a new card can earn you a big sign-up bonus, but make sure the ongoing benefits are worth the annual fee.

More about achieving financial goals on NerdWallet:

Rent vs. Buy — What's Right for You?

Buying a House in 2022: What to Expect

Personal Finance Defined: The Guide to Maximizing Your Money

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Welcome to the NerdWallet Smart Money podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Sean Pyles.

Liz Weston: And I'm Liz Weston. To send the Nerds your money questions, call or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD. Or email us at [email protected]. Also, hit that subscribe button to get new episodes delivered to your devices every Monday. If you like what you hear, please leave us a review and tell a friend.

Sean: This week, we are continuing our series of episodes about financial dreams, where we talk with Nerds who have accomplished their financial goals and interview a few special guests about what they want to do with their money in 2022. And since we're NerdWallet, we will also discuss the steps you can take to accomplish your own financial dreams, whatever they are.

Liz: This time around, we're talking to Andrew DaCosta about his life as a pilot and his financial goals for 2022. Welcome to Smart Money, Andrew.

Andrew DaCosta: Oh, thank you so much. I'm super excited to be on the show with you guys today.

Sean: It's great to talk with you. I'd love to start off by hearing about how you got interested in becoming a pilot.

Andrew: I've always been interested in flying since I was a kid. My dad was really big into aviation. My dad has always wanted to be a pilot. He never went that route. He ended up doing something else instead, but he still had that passion and he instilled that in me as a kid. So we would go to the airports and he had some handheld radio. And we'd watch planes fly by. I grew up drawing airplanes, but as I got older, I shifted my mindset of that passion for aviation. I was like, "I want to make money."

So I decided to become an engineer, but I realized very quickly that working a 9-to-5 life, that being an engineer wasn't really what I wanted to do. It wasn't really fulfilling. So after a little while, I stopped doing that, decided to go full blast into aviation and went to flight school. And three years later, I became an airline pilot. It's been around four years now being a pilot. It's been a great ride so far.

Liz: So I’ve got to ask. How old were you when you took your first lesson?

Andrew: I was 18 years old when I got my first flight lesson.

Liz: And then how old were you when you got your ticket for the first time?

Andrew: I got my private pilot’s license at 21, and then I got away from aviation for a while and came back to it at 26. I passed my big-boy check ride to be an airline pilot at 27. As of yesterday, I actually just passed my captain upgrade.

Sean: Congrats.

Liz: Yeah. That's huge.

Andrew: Now I'm a qualified captain for my airline. Super excited. It's a lot of responsibility, but I'm ready for it.

Sean: So you are officially a captain now. Are you thinking of going in a different direction later on and maybe getting more international travel, or what are your ambitions from here?

Andrew: My dream has always been to fly the bigger jets and flying international routes. We've all got to start somewhere. And for me, that's starting at a regional airline. And from there I built experience as a first officer, and then I moved to the left seat. Now as a captain, I'll build some time as a captain. And then from here, hopefully I'll be able to get on with a major airline and eventually get those major routes.

Sean: That comes with seniority, right?

Andrew: Seniority and experience. We all start somewhere, right?

Liz: I want to ask a question about the student loan issue because getting your pilot's license is not cheap. Getting all the gradations of it is not cheap. So how did you pay for it?

Andrew: A big part came from a loan through Wells Fargo. It was a private loan. I went to college for engineering, but when I graduated, the school that I went to, the only way that I can get a loan was through a private loan. The interest rate was decently OK, and was, I think, $60,000.

Liz: Wow. OK.

Andrew: Hopefully paying it off in the next couple months here. That was back in 2016, when I got that loan. It's getting close.

Liz: That's a lot of money to pay off. Congratulations on that too.

Andrew: Thanks. It took a lot of discipline, and luckily with my airline, we've gotten sign-on bonuses. Right now is a great time to be a pilot, get hired. You can get some pretty good bonuses because there's a decent shortage of pilots. I was able to put a lot of that aside towards my loans because at the end of the day, I think happiness is financial freedom.

Sean: With that, let's turn to your financial goals for 2022. What do you want to accomplish in the new year?

Andrew: One thing is being student-debt-free, being more disciplined with my budgeting for sure. 'Cause there are definitely times where I'm like, "Oh yeah, I'm sure I'm OK." And then I look at my credit card balance. I'm like, "Wow, I spent a lot more money than I would've liked to." So credit card discipline is a big one. It's so easy to just swipe a card, you know what I mean?

Sean: Do you have a current budgeting system that you use, or is it more seeing what you charge on your account and then kind of reeling a bit and paying it off?

Andrew: I wish I was more organized, but unfortunately that's not really the case. I'm definitely more of, "OK, I in my mind know how much I make, and I can make X amount of purchases." But again, it is those small things, those $5 cups of coffee every day at the airport, that really start to stack up at the end of the month. And then you realize, “Wow. I spent all this money on things that I didn't really plan for.”

Sean: Yeah. Yeah.

Andrew: And that it would be a lot better if I had budgeted correctly.

Sean: Have you ever looked into the 50/30/20 budgeting system? Are you familiar with that?

Andrew: I've heard of it.

Sean: Well, we can give you some information. We like it a lot at NerdWallet because it's so simple. So basically half of your income goes to cover things that are needs. That would be things like your rent. And then 30% goes towards wants. Those are the cups of coffee that you have in the morning, even though they may feel like a need. And then 20% goes towards your debt payments and savings.

And if you can go through your budget, your various line items of things that you're spending money on over the past month or three months, and then categorize them, you can see where your spending falls. And then readjust how you are allocating your money to try to fit into these buckets a little bit better.

Liz: And Andrew, one of the reasons we like it is it's very flexible. Doesn't really matter what your income is. It works on basically almost any income above poverty level. And it helps [that] if you lose your job, the must-have expenses that you have to cover are contained. And it gives you enough flexibility to have some fun and save for the future and all that. But I wanted to know about the credit card situation. Are you actually carrying balances? Are you still able to pay off your bill month to month?

Andrew: I pay my bill off month to month.

Liz: Oh, OK. All right.

Sean: That's good.

Andrew: If there is one thing that really bothered me, it’s paying interest on credit cards. I try my best to pay it off. Although when it comes to credit score, I'm not really sure what the best thing to do is: to just completely wipe it clean or to hold a balance?

Liz: You never want to carry a balance on a credit card. There's no advantage to it with your credit scores. You basically want to use your cards lightly, but regularly pay them off in full every month. And maybe don't use too many cards at one time. But you really, really don't have to carry a balance or pay any interest to have a good credit score. That's the good news.

I'm just thinking: You paid off a tremendous amount of money in a short amount of time, you're paying off your credit card bills in full every month — I don't think discipline is really your problem. I think you just need to get a system that actually works for you.

Andrew: Right.

Sean: Yeah.

Andrew: Right. There are definitely times where I overextend myself, especially months where I anticipate making X amount and I made less.

Liz: Mm-hmm (affirmative).

Andrew: And then, there's months that I've made more than I anticipated. And that really falls down to how my secondary businesses are doing. Sometimes it'll be better and sometimes it'll be worse. So it goes back and forth.

Sean: Some people recommend having what's called a bare-bones budget if you have a volatile income. That way you know the minimum expenses that you have to cover each month. So if you do have one month that's a little bit more lean, you'll be able to still cover everything because your income as a pilot will be able to make sure that your rent is covered and things like that. And then if you have a month where you're making a little bit more, you can put that into things like your savings accounts.

So I also heard that you're interested in saving for a down payment on a house. Let's talk about that.

Andrew: Sure.

Sean: Are you currently in the process of saving? Or where are you in that?

Andrew: Definitely saving right now, especially in this market. I don't know how long I plan on staying in Philadelphia, especially if I can get a job with another airline that requires me to move. Maybe if I do buy a place, use that as a rental. For me, it's like, "OK, well I'm just renting right now. Things are great. And putting money aside when it's so expensive to own a home, it just doesn't seem realistic."

I don't know if that's just more like the millennial mindset because we have all this debt, owning a $500,000 home doesn't really seem feasible or doable any time, in any future. And to dial it back in, I try to save money, put money aside, but realistically it's like, "OK, well maybe one day I'll buy a house."

Sean: Well, right now, renting can be great for you because it gives you freedom. You're not tied down to a specific place. And because the housing market is so difficult, if you're trying to buy a house in Philadelphia where you are, or another major metropolitan city, it's going to be really expensive. That's part of why I recently bought a house — but I bought it in a rural coastal Washington town because that's where I could afford a house. It might be worth expanding where you're looking at houses, especially if there is an airport nearby. I'm not sure exactly how that works for you — if you need to be in a major hub city or if you could be somewhere where there is an airport nearby and fly elsewhere.

Liz: I think you probably need to be relatively sure you're going to stay in the same place for three to five years before it makes sense to buy a house. Unless you're going out to be a landlord. And that's a whole different discussion. But …

Andrew: Yeah, it's a whole other thing.

Liz: But if you're going to move in a year or two, probably renting, as Sean said — that buys you freedom. That's not a bad thing.

Andrew: I think for me too — especially where I want to live and my expectations — what I can afford to buy and what I can afford to rent are just vastly different. To own a place in inner-city Philadelphia just doesn't really seem feasible when the HOAs are what, $600, $800 a month.

Liz: Yeah.

Andrew: Just in HOA fees. That's not really something that I want to do.

Sean: Yeah, no, I'm right there with you. Just as some general guidelines for you: A lot of folks can put down a down payment of as little as 3.5%, and that's if they are going for a loan backed by the Federal Housing Administration. So it's not like you need 20% down of a house. It can be nice to have 20% down because then you don't have to have private mortgage insurance, and it could increase your chances of being approved for the mortgage, but you really don't need that much.

Andrew: OK. Well, that makes it a little easier to think that. I guess I always thought it would be better just to have 20% down.

Sean: When you're serious about home buying, you'll be able to do all this research. We have tons of articles for you at NerdWallet.

Liz: And calculators and everything else you need. And yeah, 20% is great if you can swing it; 3.5%, 5%, maybe 10% at the max is probably more realistic for most people.

Sean: And you're also interested in utilizing credit cards more in 2022. Is that right?

Andrew: Yeah. I would like to maybe get a new credit card or at least utilize the points, the different credit cards to my greatest advantage. Whether it be for business purchases or just for leisure, trying to get the most out of what I can. And I know NerdWallet's great with that type of stuff. I mean, I think looking way back in 2016, when I was first looking up different kinds of credit cards, NerdWallet was the first thing that popped up.

Sean: We work hard to be at the top of Google. So, we're doing our job. Yeah.

Liz: Well, and as you probably know, the biggest payoff is actually with the sign-up bonuses. When you get a new card, you can get a hundred thousand points or a hundred thousand miles or something like that. And you typically have to spend a certain amount in the first few months — you might have to spend $5,000 in the first three months or whatever.

And since you mentioned a business, you also can get a card for your business specifically. And that doesn't show up, typically, on your credit report. You use your own credit to get those cards, but it doesn't affect your credit in the same way. So there's a lot of territory to explore here. Have you done some basic research about what kind of card you might want to get?

Andrew: I was looking into business cards. Considering I do spend a lot of time in airports, I was considering something that maybe has access to the American Express Centurion Lounge, things like that. But then I look at the idea of paying $700 a year for those benefits and it makes me think, "Can I justify these fees on these credit cards to actually get the most out of it?"

Sean: What do you want from your card? Are you interested in getting travel points, hotel stays potentially? Or cash back?

Andrew: I think for me it's more hotel stays or things with travel where I could use my card and save for something that's on a trip where it's like, "Oh, I can stay at this really nice hotel for a lot more practical price compared to what I could have before."

And that's just because of my everyday purchases with this credit card that I'm working towards this. And it actually is beneficial. I think the card that I have now, it's a great card that I've had since 2016. But I think after that initial sign-up bonus, it's like, "OK, well, what have you done for me lately?"

Liz: That's a legitimate question to ask. And personally, I love those premium cards. I know they're expensive, but they also have a lot of benefits that can offset all of that expense typically. Well, I don't know how much you have to worry about baggage fees, but you know, there can be airline fees that they give back. There can be credits for restaurants. So if you look at the long list of benefits they have, and you think that you can use those benefits, then those premium cards actually can pay for themselves. And oh man, the lounges make a huge difference, don't they?

Andrew: Oh, they do. They do. Especially when you're sitting at the airport on, we have what's called ready reserve, which means we just sit at the airport and wait for a phone call.

Liz: Oh fun.

Andrew: Yeah. That's something my airline recently implemented back during COVID. I had to do it a couple times. And now that I'm moving to captain, my seniority is a lot lower than what it was as a first officer. I'm the first on the totem pole to get called.

Liz: Yeah. I'd say lounge access is now a necessity. It rolls to the must-haves.

Andrew: Exactly. Lounge access would be nice, but I think you need an actual ticket going somewhere to actually get access to those lounges, if I recall correctly.

Liz: Yeah. That's a very good thing to look into. It's all in the fine print.

Andrew: It's always in the fine print.

Sean: Well, between paying off your student loan debt and your recent promotion, it sounds like you have a lot of exciting stuff in store for you in 2022. Even if that doesn't mean buying a house this year.

Andrew: And I'm moving out of my current spot. I've been living with two other pilot friends of mine, and they're all moving to bigger and better things and moving to different cities. So we're all splitting up. And so in the new year, I'm moving to a new place. And I was thinking about it too. I was like, "Man, this is probably the last time I'll ever be living with friends again." It was a little sad at the same time.

Sean: Yeah.

Andrew: It's like at least we don't have to argue about dishes anymore.

Sean: Yeah.

Andrew: So like if there's dishes in the sink, "Oh, that's on you buddy."

Sean: Right. Nothing like having your own space like that.

Great. Well, Andrew, so great to talk with you. Hope you have a great 2022.

Andrew: Oh, thank you very much. It was great talking with you both as well.

Liz: And with that, let's get to our takeaway tips. First, find a system. Whether you use the 50/30/20 budget or another budgeting tool, make a plan for your spending, saving and debt payment.

Sean: Next up, renting buys you freedom. Buying a home often doesn't make sense if you aren't able to stay put for a few years.

Liz: Finally, know what you want from a credit card. Applying for a new card can earn you a big sign-up bonus, but make sure the ongoing benefits are worth the annual fee.

And that's all we have for this episode. If you want your money questions answered on a future episode, turn to the Nerds and call or text us your questions at 901-730-6373, that's 901-730-NERD. You can also email us at [email protected]. Visit nerdwallet.com/podcast for more information on this episode, and remember to subscribe, rate and review us wherever you're getting this podcast.

Sean: And here is our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.