Monem Salam:  
Welcome to Halal Money Matters, sponsored by Saturna Capital. I'm Monem Salam. You know, there's so many different financial advisors out there that have different opinions about, you know, should you pay off your debt first? Or should you start investing in an IRA first? Or any slew of other kind of recommendations people have. So today, what I thought we'd do is spend a little bit of time talking about the financial order of operations. What exactly, as you're starting off, or if you're in the middle of wherever your financial journey is, what are priorities? What should be, you know, set up, 12345, those type of things. And today, we have Amjad Quadri, who's joining us. He is a regional manager for Saturna Capital. He's been in the Islamic investment business banking space for quite a long time. Prior to joining Saturna, he was actually in the Islamic mortgage business as well. So he has a BS in Information Decision Sciences from University of Illinois, and it's great to have him on the show. Let's get started.

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Monem Salam:  
So Amjad, welcome to the show.

Amjad Quadri: 
Thank you. I'm excited to be back on. It's been a long time.

Monem Salam:  
How long has it really been? I think the last one we did was on mortgages. I think if it was right?

Amjad Quadri: 
Yeah, I think it was almost, I think it was one of the first episodes.

Monem Salam:  
Yeah, you're, you're so welcome back and really, really appreciate you taking the time to come. So, you know, I wanted to start off and really kind of put a context to this, because we're talking about financial order of operations. So why don't we just start off and just in general, why don't you define what do we mean by financial order operations?

Amjad Quadri: 
So, you know, it's interesting, because when you mentioned the mortgage, I think when I came on, obviously, being in the mortgage field, before I got into this, I was really passionate about mortgages, because I had been in the field for so lon . Now, being away from the field, I'm really passionate about this financial order of operations. Because one of the questions we get asked, probably the biggest question we get asked at a lot of the conferences and shows and presentations we do is, where do I start, or what comes first? So the financial order of operations really helps people understand, what should I do first? What comes second? Where does Roth fall? Where does my HSA fall? Health Savings Accounts, and then, and then, what's next? Let's say someone's already good into their savings career, or, you know, they're in their mid 30s, and they're like, Okay, I probably have a few steps done. This is where I'm at. What's next? Or did I miss any steps? So I think that that it covers everything, and then, you know, all the way up to making sure your estate planning is done for when you get to that point.

Monem Salam:  
Yeah. So maybe, I mean, it might be something where you, you know, check in once in a while with this order of operations and be like, Okay, do I have anything that I missed or, you know, if you know, maybe early on in your life, you didn't have debt, but later on, you did accumulate it. So maybe in the middle of your life you're like, Okay, let me look at it, look back at it and see what I what I need to kind of reread your because maybe not exactly in this order, but I do get questions on I have three credit cards with debt on it. Which one should I pay off first? Or, you know, should I really do a Roth or should I really do a traditional, all of those different calculations and that people make in their hands or trying to make decisions on. This is a general guide, right? It's not like a be all, end all for everybody, but this is what we're going to talk about here, is really going to be a general guide for people as to how they should look at their finances, and what they should be initially do in priority wise, and then, and then follow a follow through with that.

Amjad Quadri: 
That's correct. It would be a general guide, and everyone's situation is a little different. And I think when we go through them, maybe we'll talk about a couple of scenarios that help highlight that.

Monem Salam:  
Okay, so we have 10 items in the order. So what I'd like to do is, let's just quickly run like, just name off all 10 of them, and then the rest of the podcast we'll spend talking about them specifically and why they're in one way or another, you know, something like that. So you want to start us off?

Amjad Quadri: 
Sure. So the 10 steps are, number one is deductibles in a reserve. Number two is credit card debt or high interest debt. Number three is your low interest riba debt. Number four is your 401(k) match. Number five is your emergency reserves, three to six months. Number six is your HSA or Roth and Roth. Number seven is going back to your 401(k) and maxing it out. Number eight, prepaid future expenses. Number nine, hyper accumulation. And number 10 would be estate planning.

Monem Salam:  
So thank you for doing that. And those of you who weren't able to, you know, remember all 10 of them? No, no worries, because we're going to go through one and in more detail every single one of them. But I did want to highlight one point, and that is that Amjad, I think you spent some time looking at these 10 and there are differences between, let's say, a conventional financial order of operations, and what you try to do, along with your colleagues and stuff, is really trying to order them from an Islamic perspective, correct?

Amjad Quadri: 
That's correct, yeah. I mean, it was interesting. It's probably one of the few things along many things that we collaborated as a group on, because we wanted to make sure that, you know, we all were kind of on the same page, that when we are talking to clients, we're al,l you know, on the same wavelength as what we thought was important, what came first and why? So it was a very fruitful discussion that helped us come up with these 10.

Monem Salam:  
Okay,great. So let's dig right in, and I'll start naming them, and you'll start defining them, and we'll, we'll start have a discussion. So number one was deductibles, emergency reserves,

Amjad Quadri: 
Yes. So this is not your three to six months of deductibles, and you'll see the reason why here in a second, but this is really deductibles when it comes to just your bare necessities. So if you have car insurance, you usually have a deductible, $ 500 to $1,000,rr if you have health insurance, you usually have a deductible. So this is where we want to make sure we have deductibles. Because, you know, health care sometimes is one of the biggest things that sometimes causes bankruptcies. Actually not sometimes. It's probably up there as one of the reasons why bankruptcies are filed.  The deductibles are something that you want to absolutely have before you do anything else.

Monem Salam:  
Yeah, so you make a good point is that you don't want to be, you know, your car gets into a car accident, and you don't have enough money to repair it, and so now you're stuck without  a car. You don't know how you're going to commute, those type of things. So or, and same thing with healthcare, right? I mean, one thing is the extreme of it is the bankruptcy. But I've seen a lot of people who end up, you know, the medical bills get forwarded onto the debt collectors, and that can really hurt or impact your credit score, which will later on, impact other things that are going on in your life as well. So those are the types of things we're talking about.

Amjad Quadri: 
That's correct. That's exactly it.

Monem Salam:  
Okay. So let's move on and the number one and the second one is credit card debt.

Amjad Quadri: 
Yeah, and this is where you'll clearly see us probably different from some other financial orders of operations, because the fact that we believe strongly in the field we are in, in the religion that we're in that that well, credit card debt is universally known as being bad. But some people would put something else before this, possibly because of the benefits of it. We want to make sure that your high interest debt, especially credit cards, that's where most people fall into it. But let's say somehow you got into some other kind of loan which fell into this category. We take care of those right away, because of how fast they can accumulate.

Monem Salam:  
Okay? So I guess in this particular case, it would be like, okay, so I have $10,000 and you know that I just got my own, maybe my, you know, I got a bonus, whatever it is I have, you know, $7,000 in credit card debt. Take that bonus and pay it off automatically, right? That's, that's kind of the goal here.

Amjad Quadri: 
Without even thinking about it, as long as you have your deductibles covered, you keep that everything else, the faster you get rid of it, the faster you'll start being able to accumulate money for other things once you get this taken care of.

Monem Salam:  
Yeah. I mean, you know, it's credit card debts that I've seen can vary. Sometimes they're up to 24, 25% interest rate on it. And you know, one way to one. Another way to say this is that, you know, how do I guarantee that I can get a 24% rate of my rate of return on my funds to pay off my credit card? Right?

Amjad Quadri: 
You're rarely going to get that rate of return guaranteed from anywhere else, so.

Monem Salam:  
Exactly, exactly. But the second way to do it is, let's supposing you don't have the funds and you have to accumulate them over time. So we just talked about most credit cards that have 24, 25% rate, interest rates on them. And then there are times when you're going to get a 0% credit card balance transfer offers or those type of things. What do you think?

Amjad Quadri: 
I definitely think minimizing your interest in your life is a strong goal. So if you have an offer and you haven't dug yourself in too deep where you can continue to be able to get those cards, then I would definitely get it, transfer my balance and still work to pay it off as if I was in the same type that I was before. Because the sooner you can do that, the sooner you'll start seeing openings to be able to do other things, like really get to the hyper accumulation stage, or just even get to a stage where you're accumulating and you're happy about it.

Monem Salam:  
Yeah. And also, the other thing to keep in mind is those offers are not unlimited. They finish off in a year. And so the idea is, is that you want to be able to say, Okay, well, five, $7,000 let's say $10,000 and in loans, I transfer it over, can I pay it off in a year? Right? Because it might be where the after the year that interest rate is even higher than it was in your first credit card. So you want to make sure you can you can budget that. But the other thing which is important to keep in mind is that what I tell people is that once you get that balance transfer done, cut up the credit card and throw it away. And the reason is because if you make a purchase on that card, what's going to happen is, is that whenever you make a payment, it first goes towards your purchase, and then it goes towards paying off the balance, and that balance is going to be much more from that perspective, you might not ever be able to pay it off. So that's a little trick that the credit card companies use that that's important for us to keep in mind.

Amjad Quadri: 
That's very strong point that I did not think of, and very good advice as far as cutting the credit card up, because, you know, if you get stuck back in the same cycle then, then it's not going to help you. I'm glad you brought this up, because credit cards, I think, are one thing that you know, for any college students listening, they get you in college somehow or another that's the time they really try to and you know, most people, no matter what background you come from, when you're in college, you feel poor because, you know your parents are trying to limit how much they give you. They want you to stay on a budget, but your friends end up doing things. Even though you're all in the same bucket, it always seems like someone might have a little bit more than you do, so you feel like, Hey, okay, maybe I can go out with them today and spend a little bit extra on my, you know, halal burger, or whatever it may be. But really, the better decision was to not do that. Now, don't get us wrong, I think we want everyone to build their  credit, and it's almost impossible, probably, to build your credit without getting a credit card at some point, but we have to make sure we budget appropriately, and we're spending only what we can pay off on a monthly basis.

Monem Salam:  
Thank you for that. Okay, now let's go. We talked about having deductibles, or having enough reserves to pay the deductibles. The second one was credit card debt, making sure you're paying or paying them all off. So number three, we're going to get into is low interest riba debt. What does that mean?

Amjad Quadri: 
So that would be for anyone that didn't get an Islamic mortgage. It might be like a conventional mortgage at this point. It could be a car loan. That's probably the two categories that I think mostly would fall into these. I can't think of something else that would fall into this. It's usually those two. Now, if you did get a deal on a credit card, and you know, you will also, instead of 0% you'll also get, like, a 3.99% financing or something else, in any of those cases, we, from our point of view, want to make sure you're out of anything that has to do with interest riba, so that you have barakah in your money. Because I strongly believe in seeing this in my own examples, being in the field for 22 years now, the sooner you bring that barakah into your life, the happier you'll be, and the sooner you'll see it paying you back.

Monem Salam:  
That's a really great, good, great point about the barakah aspect of it. But let's, let's get a kind of dig a little bit deeper. I mean, look, the only way you're going to be able to pay off your mortgage in the quickest way possible is that you refinance with an Islamic one, right? It's nobody's going to have a million dollar whatever, however much your cost of your house is, to be able to just pay it off right away. If you do it right, that's, that's one of the, but if you don't, the fastest way to do that is Islamic mortgage. But what about a car? What do you suggest there?

Amjad Quadri: 
When you're starting off, it's important to get a good car, but ideally used, you know, if you did end up buying something new and you got it, I know there's an institution out there that does car financing. I don't think they're in all 50 states yet, but I think they're probably in about half of them, if not more. That would be one way to get that taken care of right away. And then the second thing is to try, I'm not even against if someone made a bad brand new car purchase, selling it and getting something within what you get back from selling it. So, you know, cars are one of those things. They're, they're depreciating asset, you know, unless you were really lucky, and it ended up getting one of the rare ones that don't depreciate, which is very, very hard to do. And being a fan of cars, I haven't even really figured out the full formula around that. And there's only, you know, mostly it's the exotics. And if you're just starting off and you're listening to us for the financial order of operations, you're not looking at exotics no, so.

Monem Salam:  
And I know you just mentioned that, I know this also that you're a big car fan, and I think one of the things that I remember you always saying is, don't ever buy a brand new car, right? It's always better to buy a used one, even pay cash for it, whatever you can afford. But don't ever buy a new one.

Amjad Quadri: 
Yeah. I also think, you know, it builds up resilience when you do that. I mean, I've had so many cars, you know, that were used and, you know, I was talking to one of my friends about this, like, when our car would overheat, we would open the heater in the car and blast the heat, even in the summertime, to get the car to cool down. And I had forgotten all these things that we had done. And until he reminded me, and in the winter time, you know, some of us had space heaters in our cars because, heaters didn't work. So you know things that we did early on. But listen, within a few months of working, after you graduate, you'll be able to get to a place where you'll be able to get a car that will not do all of those things, but don't rush that process. You have to have reliable transportation. That's a must very early on, because the last thing we want is for you not to be able to get to work to earn the good income that you're earning.

Monem Salam:  
Great. Okay, so we talked about general, I'm going to be keeping repeating, because there's, there's 10 of them, so I want to make sure that people so number one was deductibles, and making sure you can meet those. Number two is credit card debt. Number three, which is talked about, is low interest riba debt. And the next one comes up, which is a 401(k) match.

Amjad Quadri: 
So the reason why you want to get rid of your interest and your low interest and high interest, and ideally just move them over to Islamic financing, is because we want you to do whatever you can to get to this 401(k) match as soon as you can. You know if you're at a conference or you're at a dinner and a friend pulls out $100 bill and says, Hey, if someone just goes to the waiter and grabs me a Coke, I'll give them $100 you're like, Yeah, I want that. That's free money. But a lot of times we forget that our 401(k) match is free money, and maybe probably a lot more than that, you know, depending on where you're working. But people, it's astonishing how many people don't take advantage of their 401(k) match. So the reason why the first three steps are important and two and three, you know, finding a way to get them into some kind of Islamic vehicle is so that you can get to three and you can start taking advantage of free money that will help you get to a point where you get freedom at some point.

Monem Salam:  
Yeah, so there's two things here that I want to talk about when it comes to 401(k), number one is, is that we're talking about riba, and we're talking about making sure we're staying away from it. But in your 401(k), you can't really guarantee you're going to have an Islamic fund. So are you still saying we should be maxing out that money?

Amjad Quadri: 
You know, I highly believe that we should still do what we can to max out that money. That's free money, and what you put in and what your employer puts in that's 100% halal. And then we would have to, you know, put some pressure on us. We'll do what we can to get to a point where we help you get either some Islamic fund options or a fund that's in your account that comes as close as we can get you to some Islamic funds, and then we can talk about what to do from there.

Monem Salam:  
Okay, and then the other one was, is that what's interesting that you have number four, and I'll just quickly jump to number five, but you really have emergency reserves, that six month savings that you need to if the job loss or something, you have that after your 401 (k) match, which I find that very interesting.

Amjad Quadri: 
I feel like it should be after. And the reason for that is, again, there aren't many places you're getting free money. And the 401(k), you're getting free money, the emergency reserves, everyone's situation is slightly different. But if you're just starting off, and we can talk about this, this is where you know it depends on your household. Even how much your emergency reserves depends on your household. So if you have 2 W-2 income earners, then how much you save in your emergency reserves changes. But if you have 2 W-2 earners, ideally, especially early on, you should be able to live off of only one of your salaries, so both of you matching your 401(k), maximizing that before the emergency reserves make sense. Now, if you are a single household earner, you have two kids, and you don't have any emergency reserves. We would have to discuss that a little bit more just to find out what's the right, you know, ratio for you, but in a lot of cases, maximizing your returns, because there's nowhere else you're getting 100% guaranteed returns.

Monem Salam:  
Well, I mean, it's interesting. I mean, I get the whole part about the 100% on the one side, it's like, you know, well, great, I'm putting money away into 401(k) which I don't have access to, so I'm locking it away when I don't have my three months or six months saved. But on the other side, you can look at it and say, you know, the deductibles that I'm saving for the number one that I talked about, you can easily dip into that for your emergency reserve if you need to, and then replenish it back up again, whenever you have the wherewithal to do that, you know, for whatever reason. So I'm kind of torn between the two. It's like, I'm not sure exactly where, where to say, but I think you've pretty much said 401(k) match, and then the emergency reserves.

Amjad Quadri: 
Yeah, because I think if you get to a point of an emergency where you're really starting to dip into all these things, you can dip into your 401(k) as well. I mean, yes, there'll be penalties and stuff, but if you're in that situation, you're in that situation, and whether you had it in your checking account or your 401(k), it almost doesn't matter at that point, except for, obviously, you're going to get charged taxes and you're going to get charged penalties for taking it out early. But the penalties also, depending on your situation, depends on what you're taking it out for.

Monem Salam:  
Yeah and all you can also do a loan, right? I guess from there. But one thing that that actually brings up now that we're having this back and forth is that, you know, this is not revelation. So there can be differences between what I think about, what you think about, or even what, what the what our listeners are thinking about, because every situation is different, and at the end of the day, it's they're going to have to weigh their values over whatever else that's already out there and like I said, on the conventional side, there is a different order of operations. We have prioritized certain things to be able to keep the Islamic investor in mind,

Amjad Quadri: 
100%.

Monem Salam:  
Okay, so let's kind of recap a little bit. You have to have reserves for the deductibles that you need to pay. You have credit card debt, you have a low interest rate riba debt, you have a 401(k) match. And then we have, I know, kind of, kind of getting gone into this a little bit , but we have emergency reserves three to six months. Is there anything else you wanted to say about that emergency reserves?

Amjad Quadri: 
So let's take a few different scenarios. So one scenario is both the couple are working, and they both have pretty much steady jobs. You know, in that case, you might be looking at a three month scenario, because if something did happen to one job, it's possible that you're not even dipping into it. You're able to just live off of the income from one person while the other person is getting a job. Now, if one of the couple says, hey, you know what, I want to take a break, or I want to, I want to become an entrepreneur, right? And as great as entrepreneurship is, especially Alhamdulillah, in our community, we have tons of entrepreneurs, but then you're really looking at a six month minimum. And I know a couple that they actually just this scenario. They went for both of them having jobs, to one of them went to be an entrepreneur, and then the pandemic hit, and then they're like, Oh no, we really should get up to nine months in reserves, because the pandemic really changed things around, and especially for business owners, you didn't know what was going to happen. You didn't know when things were going to turn around. I don't think anyone thought we would be in it for almost two years when we started. And had, you know, the government not come up with different ways of helping business owners, we'd probably have a lot less business. I mean, a lot of them did go out during that time, we'd probably have a lot more out of it by this time.

Monem Salam:  
That's true. And I think you said it right. It's like, you know your job is secure. You have a stable income or a secondary source of income. Maybe you normally need closer to the lower end, three months. If your job is unsecure, if the economy goes bad, or you want you're a single earner, maybe you want to have a little bit more than that to be able to reserve on the side as well. Again, it's very, very situational, and it depends on the person who's actually reading through this. Okay, so emergency reserve. We're done now. The next one is HSA and Roth. So let's also define what each of these are very briefly.

Amjad Quadri: 
Absolutely. So the first one is health savings account. And the health savings account is one of the best ways to save in your, in any type of account in America. So the reason for that is because you get a triple tax advantage. The first advantage is when you put your money in, you get to put it in pre-tax. The second advantage is when you take your money out, you get to take it out without any taxes, if used for qualified health expenses or after the age of 65, and then the last one is that the growth that you have in there also remains tax free, and it accumulates without taxes.

Monem Salam:  
But there's a catch here, right? The catch is you have to have a high deductible policy.

Amjad Quadri: 
That's correct, right? That's one catch, and the second catch, not really a catch. The second thing that I would warn anyone against, when warned someone towards, not against when they're doing this is to make sure you're saving your health expense receipts. Those are very, very important. And I'll go into that a little bit. The reason why is, let's say you want to use it for just accumulating. You have no intentions of using it while you're you know, using the, while you're working. So when you're doing that, let's say this year 2024, I have about $2,000 worth of health expenses, and I've maxed out my health savings account. So, you know, I put in 3,500 my employer put in almost the same, or if they match, maybe even, like, 1,000 or two. So I have almost 5000 saved up in my HSA, and I had about $2,000 from my high deductible plan in expenses. Now I don't use it this year. I let it grow, but two years down the line, I really need money, and I want to take it out of my HSA, it's done well and it's grown. It went from the 5,000 to almost, you know, $6,000 and I want to take it out. Now, if I have no health expenses that year, it would be hard to take out, but if I still have my receipts from two years ago, I can use them then and take my $2,000 out and still keep it both tax free and the accumulation also remains tax free.

Monem Salam:  
That's an interesting point. And so this sounds really unlimited, so you can actually wait 20 years, collecting your receipts, and then take it all at once and have that offset be the case. And now I think a lot of these HSA high deductible policies, if you go online, they have these, what are called wallets or something where you can, or some vaults, if you want to call them, where they can help you save those receipts. Correct?

Amjad Quadri: 
That's true, and that's a really good way to save the receipts. And you'll have a nice counter as well to know, hey, how much can I get out at any time without worrying about taxes or anything else?

Monem Salam:  
Okay, so that this, this one, the HSA one actually ties into the first one, which is the deductibles, right? So a high deductible, people shouldn't get scared. It's only $1,500. They're still going to cover you for the major, major expenses that you have if you're in, God forbid, have cancer or something like that. So that's covered. We're just talking about the deductible is very high. So it just means that, for number one, you just have to accumulate a little bit faster.

Amjad Quadri: 
That's correct.

Monem Salam:  
Okay. And then, so now the second one you mentioned was Roth.

Amjad Quadri: 
Yeah. So Roth is, you know, it was the golden child when it came to saving before the HSA came out. And the reason for that is because you had two ways of being able to save. This is not pre tax money, so you don't get all three benefits you do with the HSA, but this is post tax money. You put the money in, and it grows tax free, and since you've already paid your taxes on it, you will never be taxed on it again. So that's the two benefits you get. And what's interesting about a Roth is when you get to a point where you're doing HSAs and Roth, and you've had them both for a couple of years, you can think about possibly, again, depending on your financial situation, replacing one and five with this. And I think Monem will definitely caution as to maybe why not to do that, but depending on the stage that you're at in your accumulation of wealth, this might be something that you can do. Especially replacing one with the HSA is possible because you've gotten to a point where you have enough money to do that now, replacing five with the Roth, I think would be a lot more debatable. Well,

Monem Salam:  
yeah, but the, I think after five years, the contributions in the Roth that you have, you can take out any time without taxes or penalties. And I think that's what you're referring to, that if you've, you know, put it in for five years. Right, the current rates are $7,000 per year. You have 35,000 that you've put in that could technically become your deductible reserve. And so if you did have some kind of a situation with your car, with your health, that type of thing, this is another source for you to tap into without actually doing that. I think that the only negative part of that is, you know, Roths are usually been meant for saving in retirement or all those things and dipping into them now, there's a huge opportunity cost for the growth, the opportunity of not growing that money rather than using it. But hey, you know, you want to be around when you retire, and sometimes the only way you're going to be around is you have to dip into your Roth to do it. So in that particular case, I would say, you know, go, go for it.

Amjad Quadri: 
That would be one caution. And the nice way to get to the five years is, let's say, you know you're not sure when you're going to maximize your Roth, but you just turned 16, you have a job that you know pays you minimally, but you're getting W-2 income. If you start your Roth then then the five years is at 21 it doesn't matter if you're only funding it with $200 per year. And at 21 you start maximizing it because you have a full time job, you have enough money to do that you can still take the principal out from that point on. So the five year counter starts the year you started. It doesn't matter how much you funded at that.

Monem Salam:  
That's a really good point. So I appreciate you mentioning that.

Amjad Quadri: 
I think it's important to mention the other risk of using Roth or HSA as an emergency reserve is that they fluctuate as stock market is a fluctuating, you know, entity, so it is possible that you'll take out less than you put in. But I think we're okay with this, because by the time you get to this phase, we're assuming that, you know, Inshallah, that you've had a few years of Roth or HSA already in there, so the fluctuation won't hurt you as much, but if you just, let's say you in my example, where you did start at 16 and you only put in $200 per year, but at 21 you started putting in some 7,000 and at 22 you need it, and we're just having a bad year in the market. It's possible you'll be taking a little bit less out, because the stock market goes up and down. And I know we sound like we're giving conflicting advice here, but when you get to this point, you might even understand why we're saying what we're saying, because the chances of you taking it out when it's a down year are probably less seeing how much the market goes down versus how much the market goes up. And then we also know, in a five year cycle, the stock market, it goes up, and historically, no one has lost money in a five year cycle. So keeping those things in mind, it's just something that I wanted people to know, because it is possible in the scenario that I say, if you take it out at 22 and maximize at 21 you might be taking less out, but if you had a few more years under your belt, then you're probably okay there.

Monem Salam:  
Yeah, but was, plus, we're not talking about, you know, initially starting off. And the first thing you do is open up a Roth account. That's the lights number six, so you have your reserve, right? And then once you get down to the Roth, you can begin to say, Okay, I want to take my, some of my reserves and put it into my Roth. That doesn't mean you have to do it, do that first. I'm pretty, I think you're, you're pretty clear on that as well.

Amjad Quadri: 
Yeah, yeah. I just want to make sure. And that's why it's in the order it is. That's why we don't have HSA with deductibles as number one.

Monem Salam:  
Exactly, exactly, all right. So again, so emergency reserve for deductibles, credit card debt to pay off, low interest rate debt, pay that off as well. 401(k) match, having an emergency reserve anywhere between three months and six months, depending on your situation. HSA and Roth, right? The next one is max out your 401(k). Now here I want to be kind of give a caveat. That is, I'm assuming that when you talked about 401(k) match, and now we're talking about 401(k) here we're talking about a traditional because, generally speaking, you can also have a Roth t  401(k). So here I'm assuming what you're talking about is maximizing your traditional 401(k), or is it for both?

Amjad Quadri: 
So this debate of maxing out your traditional versus Roth 401(k) is a debate you'll find many, many videos online about and thus far, you know, I nerd out on some of these videos, I haven't found an answer that I'd say has really answered it one way or the other. I think a good medium is that you know, in your early 20s, each dollar you save for retirement is worth about $95 at the time you retire, assuming you know 65 and a steady rate of return. So if someone came to me and said, hey, you know what, I'd rather maximize my Roth in my 20s, in my 401(k). Even if I can't fully maximize it out, I can see, hey, you know that makes sense. You're younger, you have multiple years of growth before you're going to tap into it. For me, I'm almost 50. You know, when I first started, 10 years ago, I was 100% Roth in my 401(k) recently I changed to be, you know, pre tax only because, as I'm getting closer to, you know, hopefully one day retiring, I don't know that I'll have as many years of growth left in there. So that's kind of where I think the answer, as a lot of financial advisors might say, is it depends. And this is where it depends. One way or the other, maximizing your 401(k), that's the right thing to do, whether you do Roth or traditional. You know, as long as you're maximizing it, there's no wrong answers.

Monem Salam:  
Yeah. So maximizing means, like, why don't you tell us exactly what that is?

Amjad Quadri: 
So, yeah, so maximizing means under the age of 50, you can put $23,000 away per year. And then above the age of 50, for both the IRAs and 401(k)s, you have what's called a catch up provision that the IRS allows, and that comes out to $4,000 per year this year. And these have been steadily going up, so just keep an eye out for what they are. And your 401(k) provider can tell you, or someone else can help you. Actually, for this year, the catch up is $7,500 for anyone above 50.

Monem Salam:  
Okay, so again, again, we had the comment. I made the comment on the 401(k) match, and that is that in the 401(k) even though you're maximizing it, right, you're not able to, I mean, you don't, you can't control whether or not that the investment would be halal or not. So that is a factor to consider, right? I mean, I could say, Okay, well, you know, I'm going to do my 401(k) match, but any additional dollar that I would put in, I don't want to put it into a Roth 401(k), I'd rather put it in a little bit more into a Roth IRA, so then I can control my investments.

Amjad Quadri: 
100%. I would, I would even say that if you don't have access to Islamic funds, or even, you know, if you call one of us and we help you get to something that might be as Islamic as possible to try to keep you away from other funds. I'm I debate even maximizing it in that scenario, because, you know it, it would add to more work. At that point, we'd be looking at another way of maximizing your savings.

Monem Salam:  
Yeah. So for example, you could do, you know, you can, you can do your 401(k), rather than doing 401(k) do maximize your Roth, right? And then whatever extra money you have, you can still open up a regular account, individually or joint. And if you're in the right funds, they might have a minimum tax burden on you, so it could still end up being being beneficial for you to save it outside of your 401(k).

Amjad Quadri: 
That's correct, and that's what I would do in that scenario, is I would save it outside of my 401(k), but maximize the savings and really treat it as if, Hey, okay, my 401(k), amount is 23 my match gets me up to, let's say, 5000, I want to go ahead and put the rest of it in here, so I'm going to get the 18,000 and every year I'm going to make sure I reach that 18,000 number in my taxable account.

Monem Salam:  
Alright, so let's go through the list against we have emergency reserve for your deductibles. Pay your credit card debt off early, then pay off your low interest rate riba. And now if that happens, you're now you're basically debt free. You would do your 401(k) match. You have your emergency reserves, which is like, you know, three to six months. You have your HSA, which is health signings, accounts, your Roth IRA. And then you maximize, maximize your401(k) or max 401(k) if there's no halal options, maximize, just so your savings equivalent to whatever you would have done in the 401(k). All right, the next one is prepaid future expenses.

Amjad Quadri: 
Yes. And so a lot of people might have been wondering this whole time that we're talking. Hey, how come we're not talking about educational savings, or our kids, or something along those lines, and the reason for that is it's really important for us to understand that when it comes for savings for our children, if we have not taken care of ourselves first and we put them first, we might end up causing a bigger burden for them than we would have had we saved for their education. Now, don't get me wrong. I understand education is super expensive now. It's grown faster than inflation. It's grown faster than your most other expenses that we've seen over the last few years, and it's important to try to help them as much as we can. But if we end up b ecoming a burden on them that will be a lot more stress for them than having lower education, finding out a way to pay for their education. One of the examples that I know, I've heard many people say, including one of our colleagues, is if you're on a plane, they always tell you, make sure you put your mask on first. And you might think, Oh, no. I really love my kid. I want to save them, but if you put their mask on first, they will not be able to reach your mask or get up out of their seat with their seat belt on to help you. It's something similar when it comes to this, because if you put your mask on first, then you can easily help them. Something similar. You might think, Oh no, you know, my kids will be happy to take care of me when I get old. Believe me, if you talk to some kids now, they'll be like, No, don't worry about my education. Take care of yourself. That might be harder for them to do, to take care of you than it would be for them to figure out a way to get educated and take care of themselves.

Monem Salam:  
So we're talking about education here. So there are again, vehicles available for you, some of them halal, some of them not, so really, we need to look into exactly what those are. But one thing to keep in mind is that even your Roth IRA, you can use for education expenses for your family, so higher education expenses for your family. So that's one education savings account is another one. It gives you control of where you're making your investment. Your investments. And last one is 529, but they have no, you have no control over that money that's money that's going to be locked up, that's going to be there. But there's another one when it comes to education, and some, some states offer this. I know we do here in Washington, where you can actually make tuition payments based on today's dollars for your kid going in the future, is that something you would recommend?

Amjad Quadri: 
I definitely think that that is something that you should do now. It depends how many kids you have, right? Like, if you have, in my case, I have four kids. If I decided to do that with one university local, you know, it's a good bet maybe that one of my four kids will go there. Now, if you only have one kid, you might want to think about if they want to go out of state or something else. You know, there's always a way to get your money out. It just might not have been the best advice for you in that scenario.

Monem Salam:  
And can you think of any other prepaid expenses that we're talking about for the future?

Amjad Quadri: 
You know, my understanding is, and I didn't look into this much, but my understanding is, you can now start prepaying nursing homes as well, that there's a way to prepay some of your later life decisions. So that would be another thing that would fall into this category.

Monem Salam:  
Like long term care insurance?

Amjad Quadri: 
Yes. Before we go on, you know, one of the things that I think we didn't mention when it came to the HSA also falls into the ESA category a little bit, is, you know, some people are worried that they might not qualify for the Roth IRA. So it's important to remember that there is a backdoor Roth option, and even if you don't qualify, it's possible to do that for majority of the cases that we've seen. So keep that in mind. Don't ever feel like, Oh, I can't do the Roth. I've reached the income limit. It's important to know that there is a way to still save for the Roth. And as Monem mentioned, whether it's a Roth or a traditional IRA. And a lot of times, when you leave from one job to another job, many people move their old 401(k)s over to us, which falls into a traditional IRA. And when you do that, you're able to use an IRA for education expenses without any penalties.

Monem Salam:  
That's good to know. Okay, so you ready? So I go through them again. So it's emergency reserve for your deductibles. Pay off your credit card debts, then pay off your low interest rate riba debt, match your 401(k), have an emergency reserve, open up and invest in an HSA and a Roth. You maximize your 401(k), or some other form of a halal retirement, prepaid future expenses, you start funding those. So the next one we have is hyper accumulation. And what I what I think about hyper accumulation is, you know, there's basically two times in your life when you're going to have your income likely be vastly more than your expenses. One is when after you graduate from college. And the second one is after your kids have graduated from college, independently working, and you have the wherewithal to do that. And at that time, the hyper accumulation phase is you basically save as much as you can for the future benefit of whatever that money is going to be able to get you. I know it might be a little bit painful at a certain point, but I think the future benefits of that far away, whatever immediate results you're going to get from is that what you're what you're thinking about in hyper accumulation as well?

Amjad Quadri: 
That is, and there's two points to bring up here that are important. You know, one is, you know, you've identified two really wonderful stages. You know, when you first get a job, you're out of college, you finally earn some real money. You're like, woo hoo. And you have to understand, in those ages, each dollar is worth a huge multiple, almost $88 at the time of retirement. So keep that in mind every time you're thinking of getting one extra, whatever it may be, whether you're out for kebabs or you're out for chai, you know, if you're thinking of getting that extra thing, don't forego some basic, you know, happiness that that stage brings. But just remember to match the happiness with savings because of how much every dollar is worth. And the second point that I think is important when you mentioned those stages is most people that are saving diligently become millionaires between the ages of, you know, your late 40s. About 48 is usually when most people become millionaires. And you know, if you look at that, that's about, you know, 25, 28 years into your working life. And if you save steadily, that's when you're going to hit that and obviously that's also another milestone to keep in mind. So keeping everything that Monem said, keeping in mind the multiple that you'll have in your early 20s, you know, if you reach that stage, you're going to feel a little bit sense of relief, like I really met a milestone. If you really do well, and you start in your 20s, you're going tor reach that status of millionaire way before most people and then, you know, you get to the point where you really think about, hey, at what point am I going to retire?

Monem Salam:  
What role do you think zakat plays in the financial order of operations?
 
Amjad Quadri: 
Zakat has to be done on a yearly basis. I don't think there's, in my eyes, there's no compromise for zakat. I you know, I know, even when it comes to some type of instruments, like 401(k)s, there might be some opinions out there, you know, whether you pay on it or how much you pay on it, my opinion is you have to pay on your savings. One of the local scholars here had mentioned in his 401(k) talk that there's no opinion on 401(k) that says, Oh, you don't have to pay it at all because you don't have access to it. That made sense to him, because we know that 401(k) is a choice. You are choosing to save even if your employer matches, and though you cannot touch it without penalties till 59 and a half, that's a choice you're making. And if you're making a choice to accumulate wealth, don't short you know your religion or God by not doing your zakat on there. Not only do we know this from our faith that anytime you give to charity, you know God gives back in multiple folds, but now I've seen non-Muslim financial advisors have done a few studies where they're looking at their retired or people close to retirement, but people that are really giving away to charity. And one of them, I heard them put a number on it, and he said, anyone that I've seen giveaway to charity, I've seen it come back 1.7. I was like, wow. How did he come up with that? We know it's double or more is my understanding, and so it's important for us. Anytime, if you're listening to this, you're very much probably in the category of someone that you know God has gifted with the ability to save to get to these points. So it's important to keep in mind that none of this happens or continues to happen without us being grateful for what we have and to be able to continue to give away in charity.

Monem Salam:  
That's a very good point. Okay, so again, so let's kind of recap all of them again, really quickly. It's emergency reserve for your deductible, pay off your credit card debt, and then your low interest rate debt. You put enough money to match your 401(k) that the company's matching you. You have emergency reserves. You have health savings account and Roth. You have maximizing your 401(k) and or other form of retirement, whichever is halal. You have prepaid future expenses like education or nursing home or those type of things. And the last one we mentioned was hyper accumulation. And finally, we come to, you know, it's interesting, it's final also, because probably one of the final things you'll ever do, which is estate planning. And so this, I'm assuming you're talking about having a will and putting money away from your living trust, or doing those things, right?

Amjad Quadri: 
Yes. And though it's number 10 here on our list, it doesn't mean it's the last thing you do. You definitely don't want to wait till you've done all of this to get there. You want to try to do this as early as you can in your life, because it is essential. Anything can happen to us at any time. It's something that we strongly believe in so making sure that we have all our ducks in a row and that everything gets distributed the way we want to. And more so even according to the Islamic principles, we have to make sure we take care of some of this early on. It's last only because of the way it falls into the order of savings. But it's not something that should be done last.

Monem Salam:  
Yeah. And also, I mean, it's technically, estate planning is not a saving for you. It's saving for your children, because they're the ones going to inherit it. But, but it's important point you mentioned, because you might get stuck on 401(k) match, thinking that, Oh, I have to match, and I can never go on to the other one. But that's a yearly thing. I think what we're talking about here is establishing the habits that'll make you do these things yearly. And then once you've done that, and you've set yourself up for that, then the hyper accumulation comes, and along the way, you're doing your estate planning as well. So it's not a, you know, it's not one then the other. When it comes to the latter part of it, it definitely does matter in the in between one and let's say four or five, but, but everything else after that is almost on a yearly basis that you're doing it.

Amjad Quadri: 
Absolutely. I was actually thinking the same thing. Between one and five, it's probably not, you know, a high priority, but after that, you know, between six and eight, it's, you know, definitely before eight. But between six and seven. It's debatable where it would fall.

Monem Salam:  
Yeah, that's great. I will go over one last time for everybody. Number one emergency reserves to pay your deductibles. Number two and three are paying off your credit card debt, and then after that, paying off your low interest riba debt. You know, you want to put enough money to match your 401(k) that the employer is giving you. You have emergency reserves that you want to save up for. You have a health savings account in Roth. You max out your 401(k), or any other type of savings that's halal for your retirement, you prepay your future expenses for either, you know, things like education or nursing home. Then you come to your hyper accumulation phase, and finally, your estate planning. So now that we've covered all these, Amjad, is there any kind of final thing you want to kind of talk about in this, in these order of operations?

Amjad Quadri: 
Yes, you know this is really important. And for anyone that's trying to do financial planning and being in the industry now, on this side of it, for 10 years, I was very focused for a long time on the fact that I wanted to get to my numbers so that I can retire. And I don't know that I was focused on that to be able to definitely retire, because I want to stop working. I really enjoy my job, so I don't know that that was my goal, or to know that I have the freedom to do that. And it's important to understand that having the freedom to do that is important, because most people that retire, I think the statistics show that they end up retiring before 65 not because they wanted to, but because they had to, because of their health. And it's important that we're planning, just in case something happens to us. And the second thing is, we don't want to get to a point where we retire and then our health doesn't allow us to do what we might want to do so, if it was travel, if it's, you know, make some extra umrahs, or, really, you know, make another Hajj, because you wanted to do it now, you have some time to do it. Well, whatever it is, you know, we have to make sure that we've planned well enough to do that. And then the last thing that really changed for me on a very recent trip that I had taken is, and we touched on this earlier is, I want to get to a point in my life, and it struck me because a friend of mine told me this, and he was just like, we're just somehow in conversation. It came up in a group that, you know, what's your number for retirement? And he said, My number is $100 million but it's not for retirement. It's $100 million because I want to really be able to make a difference. And so keeping what he said in mind, and I might not be as ambitious as he is, you know, I want to get to a point where my giving becomes something that's change worthy, like if I make a trip to you know, whether it's Mexico or whether it's India or Yemen, I want to if I see a project that's really well, like one of my cousins in India has a project where he's training mechanics. They have a one year DeVry-like institution there where they train mechanics. And it's so well known that even governmental mechanics, they do internships with them, and they get the best ratings when they come back to the school from the institutions where they go and do these internships, because they do one month learning, one month on the field, one month learning. And I want to be able to say, Okay, let's set up three more of these, and I want to fund it completely and have the ability to do that, because I realized that it, it's something really awesome that's making a difference, or like the job training program that one of the institutions in Mexico has a masjid, really beautiful Masjid in a small town, you know, they have a they've set up a whole training program. At the moment, they're doing some sewing classes because they're not far from a tourist town, so that whoever takes the sewing classes can go and sell stuff into in the tourist town, or some kind of computer thing so that, you know, some of this back end offices for a lot of the American companies that people are trained for that, so…

Monem Salam:  
And then one last, just kind of wrapping this up as well. What do you think, maybe, if you think of one, is there kind of some kind of one mistake that people make when it comes to financial order of operations, I'll say one of them, right from our perspective, is making sure you're always investing according to Islamic values, and not cutting corners.

Amjad Quadri: 
I think that's important, because at some point in time in your life, whether you believe it or not, you're going to get to a point where you're like, uh, did everything I earned from this, was it halal? And then if you have to clean it up, even if you got, hey, I got 2% extra in this fund that does better than all the rest of them, that little bit might not have made a difference because you ended up in your life, like I said, this realization that made me realize that I want to be able to give, you know, a significant amount. You might want to say, hey, I want to make sure everything I have is halal. And if you got to that stage and you ended up having to clean up so much that it didn't matter, the sooner you keep it halal, the better it is. I think the only second point that I would have to that is to save as much as you can in your 20s. It's called the golden decade for saving. And there's a reason for that, because the time invested can never be you can never get it back.

Monem Salam:  
So thank you Amjad so much for your time. Time. I know this is actually been one of my, my favorite ones, because we've really dug deep into, you know, the questions people have about, what should I prioritize, right? What should I be saving for or investing for now versus, what should I maybe hold off on until that now is done and I can do that later on. So I really appreciate your time, and I hope to have you on another podcast.

Amjad Quadri: 
Looking forward to it. Thank you very much for having me.

[music]

Monem Salam:  
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