Pod Insights Money Guy Show Laid Off at 51: Are We Ready to Retire? | Making a Millionaire About this episode This week’s Making a Millionaire features Chris & Heather - a couple in their early 50s who thought they had more time to plan for retirement until a sudden layoff changed everything. With a $2.5M net worth, they wrestle with real fears, financial questions, and the exciting possibility of building a purpose-driven next chapter.
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Transcript 10,474 words · 8 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:59 Speaker 02 Welcome to Making a Millionaire. Today, we're talking to Chris and Heather. They're both 51 years old and live in Tennessee. They make about $225,000 between their salaries and rental income, and they have a net worth of almost $2.5 million. A recent layoff has left them wondering, have they hit financial independence? Let's dive in.
1:22 Brian Preston? Give me a gut check. You get the shock and awe news about the job. Are you scared? Are you comfortable? How do you feel?
1:28 Speaker 04 Oh, you're all looking at me. Oh, I get freaked out. I don't, I don't like it. I don't want to touch retirement yet. I don't want to go anywhere near it. I want it to sit there as long as possible because I don't know what the future brings. And I just want him to work.
1:45 Speaker 05 I've done software development for 29 years now, I think.
1:52 Speaker 05 She started out just being a stay at home mom for most of the time.
1:56 Speaker 04 Well, I started out as a florist.
1:59 Speaker 02 Florist, okay, awesome florist to stay at home mom.
2:02 Speaker 04 And then now I work with the city in the gas department.
2:06 Brian Preston? Does that stress out Valentine's Day that you actually had a background in that?
2:09 Speaker 04 Hate Valentine's Day, hate Mother's Day, and not really thrilled about Christmas and Thanksgiving.
2:17 Brian Preston? Just because of all the work. Same reason I don't eat Hardee's anymore.
2:21 Speaker 04 Lot of bows, lot of bows. Your hands get really torn up with rose thorns, things like that. I told him, never buy me flowers, buy me chocolate.
2:32 Speaker 02 I tell my wife the same thing, never buy me flowers, just bring me chocolate. That's what I tell her. Also, you guys were so kind, you kind of shared with us a net worth statement of where you guys are presently. I think to kind of level set, we ought to look at where you guys are right now because you have done a fantastic job of building wealth, of building up towards your great big beautiful tomorrow. And you can see right now, as you guys sit here, you have a total net worth of about two and a half million dollars. First and all, that's wild, right? Like, isn't that incredible? You can see that you have about a hundred thousand dollars in cash, you have about 1.7 in investment assets, and another 630,000 dollars in rental properties, which is amazing.
3:16 Speaker 02 So we should just pause for a moment and say, you guys have done a fantastic job. And so I think one of the questions that the audience probably has is, how'd you get here? What's your story? How did you end up where you are today?
3:29 Brian Preston? By the way, Heather's reaction, do y'all go over a net worth statement every year?
3:32 Speaker 02 Did you just figure this out for the first time?
3:34 Brian Preston? Shock you to see, is this a shock and awe moment?
3:36 Speaker 04 I knew it was upwards, but not, no, I did not know.
3:43 Brian Preston? Chris, what are we doing here? You know you're supposed to be having annual net worth meetings.
3:48 Speaker 05 It's not annual, it's all the time. I tell her, hey, guess what? And she just doesn't care as much as I do.
3:56 Speaker 04 How are we doing on a monthly basis? Good? Okay, great.
3:58 Speaker 02 That's it, just check in, we're doing great. So how did you guys get here? What's the story? Give us the background. How did you get to this spot at 51 years old?
4:05 Speaker 05 There's been a lot of highs and lows. And honestly, for most of my life, I didn't know what I was doing with, in terms of money. I started working and it was right before, you know, when the dot com stuff started happening. And, you know, it was pretty easy to get good money back then. Right away, I made some pretty good money. I bought a house fairly early. But as far as like what to invest in and how much to save, I was just guessing. So right out of my first job, you know, I got a 401k. I'm like, how much should I put in? I'm like, it says I could put in this much. I'll just put in that, whatever the maximum was.
4:40 Brian Preston? Oh, wow. That's a good decision.
4:42 Speaker 05 Yeah, and so I was living off not very much money, but I thought that's just what everyone did because it seemed like the smart thing to do. And so that ended up being a lot of what our retirement, but it just, it seemed like just by luck, I don't know, just.
4:54 Speaker 02 You didn't really plan anything, you just say, hey, I got, I can save this much, I'm going to start saving. And without a whole lot of strategy, just starting early and saving worked out pretty, pretty well, right?
5:03 Speaker 05 Yes, but it was easy for me because I was just living by myself and I could live on, you know, $20 a week of food and stuff like that. We got married and she's like, yeah, we're not.
5:17 Speaker 02 They change a little bit.
5:18 Speaker 05 Yeah. Investing, it was difficult to know what to do. And so there was a lot of just luck as far as, you know, I got into the real estate at the right time, but then my dad would help me with investing. And I just kind of let him, you're the finance guy, you just take control of it. And it turns out he didn't really know what he was doing very much. So I don't know how, like, I couldn't tell you how much my money grew and how much I put in or anything back then because I didn't.
5:47 Speaker 02 You were just saving. You weren't focusing a whole lot other than I'm just, hey, I know I'm saving for the future. I'm just kind of let the money do what the money does.
5:52 Speaker 05 Yeah, exactly.
5:53 Speaker 02 What I want people to hear is you'd have to know exactly what you're doing and you'd have to get every single decision right. But you got one decision right. And that one decision was, hey, we're going to start saving pretty early and we're just going to let that money work. Am I accurately encapsulating?
6:06 Speaker 05 Yes.
6:06 Speaker 02 What the story was?
6:07 Speaker 05 And even in, even in the, um, like the leaner times, like the messy middle times, um, we were still saving, I would say around 10% or so, maybe 13%.
6:18 Speaker 02 Sure.
6:19 Speaker 05 And so there was always, we're always putting something away.
6:22 Brian Preston? A lot of people go see this, say, but yeah, he said he was maxing it out, but I could tell by the tone, were there some mistakes? Or just, I think it's always good to share, because I know I made a ton of, look, I wrote a book. And half of the book is all the mistakes I made and how not to, to make those for yourself. Were there any mistakes at the beginning also, Chris?
6:40 Speaker 05 Yeah, we took a big hit, um, right around the time of the, uh, 2008.
6:45 Speaker 02 Great recession.
6:46 Brian Preston? Yeah, great recession.
6:46 Speaker 05 And I had loaned, uh, my dad a, a big sum of money. It was, you know, over a hundred thousand dollars and he lost it all. And so we had a, we basically had a rental property. We took out a mortgage to give him money with it. And now we were here, had this big payment and, and he wasn't paying it back. And so it was pretty lean at that time.
7:10 Speaker 02 Yeah.
7:11 Brian Preston? Heather, how does, because I know families are tough, your parents especially, they give you life so that they put you in a, in a certain status. But here you are, the spouse, I mean, how was that season?
7:24 Speaker 04 Well, I felt horrible for him because it's his dad. So it was kind of like my experience wasn't his experience for sure. And so it was just trying to support him and all that and just, okay, where do we go from here? Type attitude. Cause yeah, it was, it was hard because you're just, it's, it's sticky because it's family.
7:46 Speaker 02 Real messy.
7:47 Speaker 04 Yeah. And then with him having regrets about things. And so it's like, no, but where, where do we go? What, what steps should we take? And I knew he's a very logical person. So he looks at data. And so it was. And kind of just followed where he, so it was like, okay, what's our food budget? What can we afford? What can we, you know, what steps do we take? What can we stay in our house? Can we, you know? And so he was really good about just guiding us along there. So I just kind of leaned on him too with that. Cause I mean, he could talk at me all he wanted, I suppose. But it was just like, I, I knew he had a better picture of our finances than I did at that time.
8:29 Speaker 05 Well, not really, because that's actually when we started.
8:31 Speaker 04 Yeah.
8:31 Speaker 05 We started actually figuring out.
8:33 Speaker 02 Is that what caused you to start thinking about? You said earlier, I don't even think about it at times.
8:37 Speaker 05 Yeah.
8:37 Speaker 02 Is that the thing, the catalyst that made you start focusing on it, focusing on it and taking it seriously?
8:42 Speaker 05 Well, when we first got married, I wanted to do a budget. And so I developed my own budgeting software and it was.
8:50 Speaker 02 That's what I did when I wanted to do a budget. I just went and built my own software.
8:53 Speaker 05 It was horrible. It was so hard to use and that I ended up not using it. And that was kind of the end of the budget. It was like, this is so difficult to get anything done. And then when this happened, I had thought that we had been living, you know, pretty responsibly. And it just opened and I'd started going through the numbers. I'm like, man, there's a lot of inefficiency and waste and things like that, that we can figure out. And so we just went through all of the expenses and just started like, we can cut this, we can cut that. This is, this is wasteful. And we got to this bare bones budget and we're like, all right, if we do this, we'll be okay.
9:34 Speaker 02 Like we can get out of this hole.
9:35 Speaker 05 Yeah, it'd be difficult, but it'll be fine.
9:39 Speaker 02 You had to make some tough decisions, but you did and were able to crawl out of it.
9:42 Speaker 04 Yeah.
9:43 Brian Preston? What I think is amazing is that even with that hardship, and that hits you to the core. Cause it's family, it's, it's, you know, your blood. But yet here we are, we're about to have a discussion on your multi-million dollar net worth with zero debt. I mean, and isn't that amazing? And I think that is so good for anyone to hear is that this journey doesn't have to be perfect.
10:08 Speaker 02 That's right.
10:08 Brian Preston? You can make lots of mistakes and still come out on the other side. Because the thing that you said was luck, you know, at the beginning, you weren't giving yourself enough credit. I keep hearing this theme, you're very disciplined. And discipline is that first ingredient to wealth creation and and just the wake up and utilizing that is pretty amazing.
10:27 Speaker 02 So as you guys sit here today, I mean, you mentioned it, you don't have any debt on the books. So obviously that $100,000 home equity line that was taken out and then lost got paid back. And now you actually have rental properties that you own. As you guys sit here today and you're trying to think about your path forward in the future, what are the things you're looking for help with? I mean, what are the things? What was the thing that made you come on making a millionaire? Say, I want to know if if I can answer this question or what would the guy say about this? What are those things for you guys?
10:58 Speaker 05 I've been doing software for a long while. And, you know, recently I started coaching competitive robotics. And it's been it's been a lot of fun. I
11:09 Speaker 02 You just have these throwaway statements. When I started budgeting, I built my own software. Oh, by the way, I coached competitive robotics. It's just a thing that I do. And just so that's unbelievable. Chris is the most interesting. Cooler than anything in my resume. That's awesome.
11:25 Speaker 05 I just, I just, you know, and I've, I've always coached things like youth sports, coached all the kids youth sports and everything. And I've just really enjoyed it. But especially with this robotics thing, it's been amazing. And I can see how much kids learn and get out of it. And I would like to be able to do something along those lines at some point for kind of a second career.
11:48 Speaker 02 Okay.
11:49 Speaker 05 And trying to figure out when, when can that, when can I do that?
11:52 Speaker 02 It's a safe assumption, based on the way you frame that, that if you were going to go do that, it's likely going to create less income than your current career? Is that the idea around making that shift?
12:03 Speaker 05 Yes, it would be. Well, that's one thing with competitive robotics is really expensive to get into. And I would like to be able to find ways where I could help kids who, you know, they don't have as much resources to be able to to get into it. Even because even just to start getting into it, if you don't, you know, you have no anything, know anything about it. It's just expensive to get into.
12:24 Speaker 02 I love it. All right. So how can we make maybe a career shift and maybe not focus on the things you have to do, but do something that you enjoy more like competitive robotics? What else? What are some other goals, financial goals that you guys have or things that you're looking to to lean in on?
12:38 Speaker 05 We have three kids. One of them's out of college. One of them's in college. One of them's in high school. And so there's college to to pay for and we kind of have a have a pretty good idea for that, but we just, you know, we want to make sure that's taken care of. And then also, just as the kids get older, you know, things are getting expensive like housing and stuff, being able to help give them a little bit of a jump start, perhaps.
13:04 Speaker 02 So help kids out with like future needs, like housing and that kind of stuff. Heather, what about you?
13:08 Speaker 04 The budget that we have, it's like I I still kind of in my head fall back to where we were at, and that was a long time ago, but the remnants are still, they sit with you. We have our little budget app that we use and sometimes I get really bad at it and I don't put my receipts in. And so my goal right now, it sounds silly, but it's important to me, is to stick with it because it doesn't, we are, we are not on as strict of budget as we used to be, obviously. But it's still important to know what you're spending.
13:47 Speaker 05 We thought we were doing it right.
13:48 Speaker 04 We thought we were doing good. And then, so that's why when you just look at your receipts, you, you know, okay, this is how much we spent on gas this month, this is how much we spent on groceries this month, this is how much we spent on Heather's fun things, you know, it's like there's budgets for everything. So it's not like you don't get to do things, it's just knowing.
14:04 Speaker 02 Knowing where it's going.
14:05 Speaker 04 Yeah.
14:06 Speaker 02 I love it. Having a purpose and a reason behind your dollars.
14:08 Brian Preston? I do want to share, though, I think that without a doubt, I love budgeting, especially starting out, but it's also, I'm okay that as your life progresses and as your net worth grows, you can add some slack in the system.
14:23 Speaker 04 Which you definitely have, yeah.
14:25 Brian Preston? Which is good. So I think I want to give you permission that that's okay, but there is something under the surface that I do think when big life things come your way, it sometimes can be a jolt to say, oh, my gosh, yeah, let's get back to the basics of what kind of created. I know, and I wanted to just give you guys an opportunity. Was there, is there anything that's made you specifically Heather, where you said y'all need to start tracking this more? You feel like recommitted. Is there, is there anything else going on?
14:56 Speaker 04 I guess in the past, we had money set aside for a new car and all of a sudden Chris was like, I, we've been spending, the money isn't there anymore. We had to re-save for that.
15:06 Speaker 02 So it was earmarked, but then those earmarked funds kinda got sucked out of the...
15:09 Speaker 04 Yeah, because we needed to pay bills. And so that kind of, was kind of like, wait, we can't do the new car now? You know, it was like, oh.
15:17 Speaker 02 Sort of eye-opening. Oh, wow.
15:18 Speaker 04 And so that, they're just like the ripples of life that just kinda stick with you. And so it's like, we aren't as, I don't wanna say strict, but we're not as...
15:29 Speaker 05 Like if we go over budget on something, we're just like, oh, that needs, that budget needs to pop up. So it's not, it's more tracking.
15:35 Speaker 02 It's more tracking than actually budgeting.
15:36 Speaker 04 Yeah, maybe I should say it that way. We, it's like, it's important to just keep track over our, um, we have everything in like categories. And so it's like, you know, you have extra money here, and you have extra money here, and then you have extra money here. And then, like, I have like my little fun fund that I get to have, and he has. And so you know, you can just be splurging, but you just...
16:01 Speaker 02 Because you've accounted for it.
16:02 Speaker 04 Exactly, exactly. You've accounted for the things that you spend. And so that's when I say, I, keeping track of your receipt, it's just so I know where those things go. And it's like, we're not as strict as, I mean, I guess it sounds strict, but it, we're not as strict as we used to be.
16:19 Speaker 02 You're more just keeping an eye on it. You're keeping track of it. That's great.
16:22 Brian Preston? Maintaining.
16:22 Speaker 04 Yeah.
16:23 Speaker 02 So what I'm gonna say, a lot of what you're focused on is kinda like immediate, like right now, how are we tracking? I noticed, you didn't mention financial independence. You didn't mention retirement. You didn't mention any of that kinda stuff. Is that a goal that you guys have? Cause as you sit here at 51 with $2.5 million, a lot of people are gonna see this, say, these guys, they're, where are they? Are they financially, is that not something on the radar for you guys?
16:47 Speaker 05 Yeah, that's, that's part of what we'd like to find out.
16:49 Speaker 02 No?
16:50 Speaker 05 Well, I kind of.
16:51 Speaker 04 Definitely for him.
16:52 Speaker 05 I mean, I would like to... Changed careers at some point and that timeline has actually been accelerated. Just yesterday, I found out I got laid off and so I only have till, you know, June with this current job. And so it's been something I've been planning like, oh, could I retire at some point soon? And so now these questions come up a little bit sooner than expected. And it's like, well, do I, you know, do I get another job? Especially because our youngest is going to college. I was thinking it might be a good idea to have a regular job during college. Or, you know, could I do something else and just make, you know, some money between now and, you know, whenever? I don't even know what that number would be.
17:37 Speaker 02 First of all, wow, right? That's a huge significant, because I think about in like a small, you know, we were saving for a car. And then when it came time to buy the car, the money wasn't there and that was like, uh oh. And now here we are, I'm kind of thinking about financial independence. And now this thing happens yesterday where it's like, oh, wow, are we there? It is the money that we had for retirement going to be there? Are we going to be okay? I gotta believe that's some of the stuff that's like rumbling around in the car as you're driving here, right? Like, what's, what's this gonna look like?
18:08 Speaker 05 I've been kind of expecting, but it came out somewhat all of a sudden. And so just trying to think about what, how much money do we actually need? Like in the immediate right now, what, what do we need to get by? And then for what's in retirement, like, how much more do I need to keep adding to retirement? You know, or, or is it good where it is? And can we just hang out where we are until we can access the retirement funds?
18:35 Speaker 02 I love this. Well, let's, let's talk about what you guys have been doing. Cause you said, okay, how much have I been saving and where should I, and how much we need to keep saving? Let's talk about what you guys have currently been doing. Cause we know that you're at a two and a half million dollar net worth, which is amazing. But it's not like you took the foot off the pedal. You guys are still great savers. When we look at your savings priority, how you guys strategize, you're still saving about 21% of your gross income. You've got about 85, 50 going into your HSA. So you're maxing that out. We love that. That's a solid step five. You're both maxing out Roth IRAs at $16,000 each. Again, another step five.
19:09 Brian Preston? By the way, congratulations for being in that post 50 age group. As a fellow person, we'll make Bo feel like the old person that doesn't get the catch up contributions.
19:19 Speaker 02 And then you're also putting money in your 401k, so it's 18% of Sauer Chris, 22.5. So you guys have been saving about $47,000 a year.
19:26 Speaker 05 It's actually a little bit more than that.
19:27 Speaker 02 A little bit more than that, okay.
19:28 Brian Preston? Taking advantage of a little bit more of that catch up too, right?
19:31 Speaker 05 We actually maxed, we did the full max.
19:32 Speaker 02 Oh, awesome, this has been wonderful, awesome. So you guys have been fantastic savers. So you've, again, you've done some things well. You started saving early, maybe you had some like hiccups all the way. Then you started like paying attention to it, started tracking it, started seeing where your money, and then you figured out, how can we improve our savings? How can we continue to make sure we're putting money aside for the future? Cause who knows when on that random Thursday, a phone call is going to come in that says, hey, circumstances are changing. One of the things that we love to be able to do is get to sit in this seat and tell people, okay, well, let's look at where you are today. Let's look at what you've done so far. Let's really analyze and assess, are you at the financial independence point?
20:13 Speaker 02 Or if you're not at the financial independence point, what steps are required? Or what would you have to do to be able to get there? Does that sound like something that would be interesting and helpful for you guys to walk through?
20:24 Speaker 05 Yeah.
20:24 Speaker 02 Awesome, wonderful.
20:26 Brian Preston? Give me a gut check. Are y'all, cause I mean, when I see two and a half million dollars, I feel pretty good about that. But then you get the shock and awe news about the job. Are y'all, what's your baseline right now? Are you scared? Are you comfortable? How do you feel? Before we get into actually showing you some numbers?
20:44 Speaker 04 Oh, you're all looking at me.
20:46 Brian Preston? I will both of you.
20:47 Speaker 02 How do you feel? Did you see that? All the eyes turn.
20:51 Speaker 04 Oh, I get freaked out. I don't, I don't like it. I don't want to touch a retirement yet. I don't want to go anywhere near it. I want it to sit there as long as possible, because I don't know what the future brings. And I just want him to work.
21:02 Brian Preston? Well, you got kids that are about to go to college. I get that.
21:05 Speaker 04 I don't feel old enough yet to even be like, looking at even touching anything on that yet.
21:11 Brian Preston? Preach, 51 is like 35.
21:12 Speaker 02 Retirement's for the old people, not the 51 year olds. That's what I'm hearing you say.
21:16 Speaker 04 I don't, I don't feel ready yet.
21:18 Speaker 05 Got it.
21:19 Speaker 04 I don't know.
21:19 Speaker 05 I got it.
21:20 Brian Preston? And how about you?
21:20 Speaker 05 One thing happened when, when the thing went south in 2008. Um, you know, we learned a really good lesson as far as relying on money. And, you know, it was a scary point in time for us back then, because I realized we did put a lot of security in our retirement and our money situation. And really I was just realizing our faith is the really important thing through that whole thing. That was. What got us through and I just thought, you know, if we have us and our family and we live in some dumpy little apartment, you know, who cares?
21:58 Speaker 02 We'll be okay.
21:58 Speaker 05 Yeah, and so
21:59 Speaker 02 We know the things that really matter to us.
22:01 Speaker 05 Yeah, and so like with the the stuff right now, it's like, well, we have, we have enough money. Like if we bought like a very small house, we would be fine. It's just, it's just like how much extra would it be? I guess.
22:19 Speaker 02 I love that. I love that. It's a great perspective, especially going to an unknown like this. To figure out, okay, well, what's the minimum threshold? But again, you guys have done a lot of the hard work of saving and building. And so one of the things I want to answer is, okay, well, we can answer the minimum threshold. But are you at the point where you could maintain the actual desired standard of living, the desired lifestyle that you have? And I think it'd be super fun for us to dive into those numbers.
22:42 Speaker 05 Okay.
22:42 Speaker 02 I'm no robotics expert. I want to be very clear, but I would imagine when it comes to robotics, the quality of the materials that you're using to build the robotic thing probably improve the robot that you build. Is that a safe, safe analysis? Like if you have good materials that you're using, you get a good outcome on the back end. Well, personal finance is no different. So when we think about you guys, I want to run through the assumptions, the inputs that we're using for your retirement plan. Because the outcome, the analysis is only going to be as good as the assumptions we put in. So I want to make sure that all of this is accurate and representative of the life that you are currently living and the life that you want to live. So we know that right now, both of you are 51 years old.
23:24 Speaker 02 And we're going to assume in our base case that we're going to have a age 65 retirement for both of you. So we're going to work to full retirement age in our base case. Now, we're also going to assume an expiration for you guys of age 95. So we want to have like a nice, long life, a nice, long retirement that we're going to be planning for. When we think about the money that we want to spend, you guys have told us, you put together, Bud, you said, hey, our base living expenses to live the life that we want to live on our terms is $9,000 a month. Is that accurate?
23:57 Speaker 05 It's pretty close.
23:57 Speaker 02 It's pretty close. Because when we look at the numbers. Nine was in there, but it seemed like there were a lot of months where it might've actually like trended closer to 12. And what I want to do is I want us to be very realistic around what our living expenses are. Cause you said, Heather, you said this comment, I'd like put asterisks by it. You have to know what you're spending. You have to know where your dollars are going. That is so true in the accumulation and building phase, but it is even more true in the decumulation financial independence phase. Cause the viability of a long-term plan is very much going to depend on spending. So I want us to be so, so accurate of what we model so that you understand and recognize what you're actually getting into. Cause while you can cut to the quick and you can cut all your expenses
24:39 Speaker 02 down, I think for most folks, that's not the goal of financial independence. The goal is to live the life that you want to live, the way that you want to live it, on the terms that you want to live in. So we're going to use 9,000 as our base case, but we're going to deviate from that pretty, pretty quickly. You guys also said, hey, there's this idea that we might want to buy a future house. So we've got this money that we've been saving up about 400,000, little over $400,000 that might be for a future home purchase. The way that we wanted to think about this in the plan, cause you didn't tell us like when that house might happen or what that might look like. We just assumed that that pot of money is already earmarked for that house. And we had to arbitrarily pick, so we just said in 2030, whatever that pot of money has grown to, we're just
25:21 Speaker 02 going to use that to go buy the house. So that's your house fund. And in 2030, you're going to buy a primary residence. Does that sound like a reasonable assumption?
25:28 Speaker 05 Sounds about right.
25:29 Speaker 02 Awesome. So then when we think about the resources with which you have to work, we know that you have your cash reserves at about $108,000. We know that we have this like home buying fund that right now has about $416,000 in it. And then we have all of your various investment accounts. We have the Roth 401k, the SEP IRA, the traditional 401k, traditional IRA, all the HSAs, and then we have all of your rental properties in Alabama. So if we look at you guys, you are at about a $2.4 million total net worth. That's the net worth with which we have to use to provide for financial independence. Anything, you don't have some crazy big trust fund account that's left off of this, right?
26:11 Speaker 02 So this is what we have to work with. These are the numbers. So then when we think about, okay, well, what are the resources you have to use? We know that right now, or as of a few days ago, Chris, your salary and bonus was about $125,000 a year. Heather, your salary and bonus was right at $50,000 a year. So as a household, about $175,000 household income. So we'd assume if you were going to pivot to a similar career, you would make around that income. That's again, that's our base case scenario. We also know for each of you, you're going to get social security benefits at some point in retirement. For our base case, we're saying, hey, what if they wait until they hit full retirement age? So you're going to work till 65, pay into social security until 65, and then at 67, you'll begin drawing
26:53 Speaker 02 a benefit. Well, based on though, based on your income and what you've paid into the system, we're estimating, Chris, that your social security will be a little under $47,000 a year. And Heather, yours will be right around $23,000 a year when you get to social security age. We also know that you have some rental income coming in from all these Alabama properties. It's about $50,000. And then Heather, you have a pension that's going to be about $8,400 that will start when you get to age 65. $8,500 annually, not monthly, but it's just we want to make sure we factor that in. From an income standpoint, is all of this accurate?
27:27 Speaker 05 The pension might not. Well, no, the pension, yes.
27:29 Speaker 02 Is that good? Okay, great. Because again, the quality of the output will depend on the accuracy of the inputs. We want to be as, as accurate, but also as conservative as we can. And so what we said also is, okay, if you're working, we're imagine that you're going to continue being saver. So you're going to do things like max out your HSA. You're going to do things like put 18% of your salary into the 401k. We're going to max out the Roth IRAs. Chris, your current former employer was putting money in. So there's an employer match that we were, that we were including in this. So as long as you're working, we assume that you're going to be saving. So what we said is, with all those assumptions about your unique scenario, what does this look like if we have a 3% inflation
28:11 Speaker 02 rate? So that $9,000 a month is going to grow at inflation and our cash will grow at inflation and our property values will go up with inflation. That way we're tracking that appropriately. And then what's it look like if just on a straight line basis, the money that we're investing can grow at 7.4% annually, straight line. And the way we came up with that is that's just a 60 40 portfolio. Average historical return on a 60 40 with appropriate standard deviations. All right. So 3% inflation, 7.4% long-term rate of return. Makes sense? Yep. All right. So let me show you what the plan actually looks like.
28:48 Brian Preston? This is where it gets exciting.
28:49 Speaker 02 What you can see is each one of these bars is an individual year of your retirement. So you can see that every year, the bar kind of goes up. We get almost to 2030 and you can see that your consumable portfolio will have grown to about $2.4 million. We then go buy that house that we've been saving for. You guys continue working all the way out until age 65. And then at 65, when you retire, in today's dollars, because we've brought all this back into present value terms. In today's dollars, you would retire at 65 with about three and a half million dollars. Your portfolio would start providing for your living expense need.
29:27 Speaker 02 And what you notice is the portfolio continues to go all the way up until you guys leave this earth at age 95. And you leave behind about 8.3 million dollars in today's dollars for the kids. So 8.3 million, think they'd be okay? Is that like an okay inheritance? Think that that would work, right? Now, I do want to deviate one iota here because I don't think that 9,000 is the spending number we ought to be using. Because again, when we look at your budget, it looks like 12,000 was probably closer to the actual spend to maintain the standard of living that you guys want to maintain. Does that, does that feel right?
30:05 Speaker 05 Yeah, because with 9,000, we have like a little wiggle room, but with 12,000, that's when we can, you know, afford to upgrade vehicles or buy, go on vacations.
30:17 Brian Preston? Got all the one-off stuff.
30:18 Speaker 02 Yeah, live the life that you ultimately want to live. So watch what happens when I change this to 12,000. As you would expect, there's a meaningful impact to the plan, right? Now, instead of you leaving this earth with 8.3 million You leave this earth with 5.4 million. So that additional spending did cut out about $3 million out of the plan, but it's still pretty solid, right? So, but we know, we do know that the market does not give us 7.4% rates of return every year. So one of the things that we have to do is we have to run this through a Monte Carlo simulation. And what this does is it runs a thousand different iterations of a thousand different possible market outcomes. Some of them really, really positive and some of them really, really negative.
31:01 Speaker 02 And the way the system works, it says of those thousand iterations, how many got us all the way to age 95 without us running out of money? Without us having to change our behavior, without us having to cut back. And what you can see is if you were to work the way you're working right now, all the way till age 65 and then retire, you have a 98% probability of success of not having to change your behavior. That means that 980 of the thousand scenarios got all the way into the plan with no behavioral change.
31:31 Speaker 04 That's lovely.
31:32 Speaker 02 Sounds, sounds pretty good, right? Sounds pretty comfortable. But that's if you work till 65.
31:37 Speaker 05 Yeah, that's not gonna happen.
31:39 Speaker 02 That's not gonna happen. Chris is like, this is cool.
31:41 Brian Preston? I was letting both set it up, but we all know life has happened and there's all kinds of other things. So we need to plan for other contingencies.
31:48 Speaker 02 So then the question becomes, we've had this thing happen now where employment has changed and we're unsure exactly what future employment may look like. And so whenever we plan, we think about what's the worst case scenario? And worst case scenario would be this is it. You are done. Today starts your retirement.
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33:04 Speaker 02 So if today were to start your retirement, we have to adjust some of our assumptions. So one of those assumptions is, we're not going to be working out till age 65. We're also not going to be saving the same way that we were saving because now, when we go down to one income, that's going to have to provide for living expenses. And then the other change that's going to take place is, social security was built as though we were going to pay into the system all the way until 65. If you stop working now, well, you only paid into the system until 51. So your social security benefit would also have to decrease. So if you were to retire today and your social security also decreased, okay, now, now we have some problems. Yep.
33:47 Speaker 02 Like, this doesn't look ideal. You can see that even on our straight line assumption, by age 84, the portfolio has been depleted. It's now gone to zero. For good measure, we have to look at the Monte Carlo simulation again to see what the probability of success is. You can see that now it's dropped to 37%. So what that tells us immediately is, we have a problem. So I'm going to pause there for a moment. Tell me where your mindset is right now.
34:17 Speaker 05 Spending $12,000 a month, I mean, that's, that's a lot for us. It's, we, because we have that excess wiggle. We basically, you know, we want to save 25% of our incomes. We put that away. And then beyond that, it's just, oh, this is money that we can use for whatever we want. So in some ways, it's not the amount of money, we would just do less, less things.
34:43 Speaker 02 Yeah. So imagine one of the questions you're trying to ask is, okay, well, 12,000 doesn't work. Is, is there a number that does work? I, I mean, you tell me if that's a question you're curious about.
34:54 Speaker 05 Well, I'm just trying to think, how much do I need to keep saving now for retirement? Cause that will help me determine how much, what kind of a job that I should get.
35:03 Speaker 02 Sure.
35:03 Speaker 05 I guess that's the main question. How much money should I be making right now?
35:06 Brian Preston? That's a great question.
35:07 Speaker 05 Until I can access retirement?
35:08 Speaker 02 I, I love that. Cause whenever we face problems, there's always, there's always, there's only two levers that people have to work with. And that, Brian, you say this all the time. There's two levers, only two things you can do when you're trying to solve a financial problem.
35:19 Brian Preston? You can make more money, or you can spend less. Those are the two levers. You've, obviously, this is what I call the do do plan. You know, when we're putting on the 3D glasses is, so I don't, and, and I say this for you.
35:31 Speaker 02 That gotta giggle for Heather.
35:32 Brian Preston? Well, no, but, but, cause I can see, you know, and even our discussion as we were walking into the studio, Heather is probably a little nervous about this, just from some of our discussions. So that's why I'm telling you, this is as bad as it gets on the do do plan. But, but the good news is, this isn't actually what I think the down to earth plan is. I think that there is, there's lots of alternatives, some levers that we're going to be able to pull. And Bo kind of laid out the dream plan. That was the 65 and all the other things. So now we've kind of given you, if you worked until 65 and all this, you go leave the earth with a gazillion dollars, which was somewhat unrealistic. But now we're giving you this baseline of the do do plan, because some things of life has happened.
36:14 Speaker 02 Yeah.
36:15 Brian Preston? I'm excited for, for Bo to fill in the gaps on kind of what the down to earth plan is. Because that's where we start building this thing back. So hopefully you leave here feeling like we at least paid respect to what opportunities you guys had.
36:31 Speaker 02 So let's think about this, right? Uh, you said there's two levers. I can spend less, or I can make more, increase my income. And you just said, hey, it'd be great if you could just tell me, if I got a good job, how much money to make? Like, how much I do need to save? What does that number look like? Okay. Well, what we figured out, uh, and again, I'm going to go back to our illustration, because you can see, we have this issue where we're kind of running out of money in our eighties, if we just got the straight line, right? And it's a pretty low probability. We were actually able to go backdoor into the math and say, okay, if Chris were to be able to generate some sort of income and that income could provide for their living expenses, might you guys be in what's known as coast fi? I've done enough saving up to this point that if I can just create enough income to cover my
37:17 Speaker 02 living expenses, I don't really have to save a whole lot more. I can just let my money continue to grow. And if I let my money continue to grow for a certain amount of time, it will grow to the point to where then it can provide for me. And so we said, okay, what would their coast fine number be? If we're gonna assume that Heather keeps working, how much would Chris have to go out and make? So they don't really have to save anymore, but they could just live off of their incomes and provide for their living needs. And what we found was if you could get a job that pays $60,000 a year, or if you could side hustle and make $60,000 a year, you notice that on our straight line, it kind of flattens out that, you know, you start retirement, you have today a consumable portfolio of about $1.8 million.
37:59 Speaker 02 You live this life that we've laid out at a $12,000 a month burn rate. And you can see when you leave this earth, you leave behind about $1.8 million. It's kind of like you've lived off of the interest. So if we take this and we run it back through our Monte Carlo simulation, just assuming that you can bridge that gap earning $60,000 from today until 65, well, now all of a sudden you're at an 81% probability of success. Just so you know, when we are doing assessments for clients, we say, hey, if we can get you above 80%, we feel really, really comfortable. Because what this is saying, it's not saying that in those 19% of scenarios, people ended up homeless on the side of the road. That's not what it's saying. In 19% of the scenarios, you might've had to tighten the belt a little bit. You might've had to-
38:44 Brian Preston? What you go do naturally.
38:45 Speaker 02 Instead of staying at 12,000, you might've had to go to 10,000. You might've had, in the Great Recession, maybe you didn't buy the new car. You didn't go on the expensive trip. You just tighten the belt, which we all do when those sort of things happen.
38:58 Brian Preston? And there's also the go-go years, the slow go and the no-go years. It kind of, so you don't have to hit 100%. You don't have to hit 98%. I think I would feel good at 81%. So, so that actually changes things. Now, we still have more levers to pull, but before we do, give us feedback on-
39:19 Speaker 02 These numbers.
39:20 Speaker 05 Yeah, well, sixty thousand, that's, that's not a big deal. I could make that.
39:24 Speaker 02 You can make that. So that sounds like a pretty attainable goal based on your skill set.
39:28 Speaker 04 So in this scenario, how, for like him doing the sixty, that would be until sixty-five?
39:37 Speaker 02 That's what we modeled right here.
39:38 Speaker 04 Okay, okay.
39:39 Speaker 02 Him earning sixty thousand dollars until sixty-five.
39:42 Speaker 04 And then fully retiring.
39:43 Speaker 02 And then both of you fully retire.
39:45 Speaker 04 Okay.
39:45 Speaker 05 Well, hopefully I'll be doing, if I'm earning that much money, it's doing something that I really, I imagine I'd be doing that past sixty-five also.
39:53 Speaker 02 Sure.
39:53 Speaker 04 Yeah.
39:54 Speaker 02 This may not be retirement. This may be next endeavor. It may be the next thing.
40:00 Speaker 05 That's what I'm looking for.
40:01 Brian Preston? I also heard you share earlier, your, your heart of an educator is you do this, you just threw it out there on the, on the down low, about advanced robotics and stuff like that. And then you've even shared with us that you do some, you've, you've done some teaching to like cohort of homeschooled kids and other things. Is this something that, I mean, could that generate sixty grand? Or is it go take something plus that?
40:24 Speaker 05 Um, it could generate, I don't know if I could generate. The part of robotics is really expensive. And I would like to be able to help people who don't have as much money to be able to participate. So I don't want to necessarily make a lot of money. But, you know, I do, I do, I can program and I can do stuff, contract work, and I don't have to work full-time and I could still make pretty good money doing that.
40:46 Speaker 02 Okay, love that. So one of the things I think we ought to look at is what if you don't earn any more income? What, what if you actually have to figure out, okay, what is our real spend number? So what I want to do is I want to take away you working. Let's go back to the do-do plan where you are not in a good spot, where the portfolio does not have a high probability of success. And we said, okay, well, what's the spend number? How much could we actually spend, starting right now, every month for the rest of our lives, and still have a high probability of success? And we were pretty excited to see that if you could drop your spending from twelve thousand dollars a month to ten thousand five hundred dollars a month, the plan actually works. Again, you can see that you go from eight point three million.
41:28 Speaker 02 On the dream plan to now you're still leaving behind when you leave this earth about one and a half million dollars for the kids. So you have some cushion built in. When we take this and we run it back through the Monte Carlo simulation, looking at those thousand different scenarios, thousand different iterations, you can see that we're right there close to that 80%, right? Like we are right there within a stone's throw. So if you guys could say, okay, well, yeah, 9,000 was pretty lean and 12,000 is doing all the things we want to do. Maybe 10,500 is that happy medium. Maybe that's somewhere that you could land and say, okay, well, I don't have to go work anywhere. I don't have to generate income, but if we can spend at that level, it opens some doors, opens some opportunities.
42:11 Speaker 05 A lot of our spending right now, again, comes from robotics. Robotics is just really expensive. We have one more season of it and then that kind of goes away. So that spending goes down.
42:25 Speaker 05 We don't, we don't spend a lot. We don't really like for vacations, I like to read books. It's not.
42:34 Speaker 02 Have you read any, have you read any really good ones in the last year? Is there like a book that you're like, this book in the last year was just so good?
42:48 Speaker 02 That's awesome. That's great. And, and, and what, what I hope, what I hope you're recognizing is we're laying out individual scenarios. The real answer for you guys probably isn't one of these distinct scenarios. It's probably some combination that we're in. You may go make some income and you may make $30,000 a year and you may not spend 10,500, you may spend 11,000, but the combination of those shows you where the guardrails are. Cause all we want you to, cause you, this, you've had this incredibly uncertain thing happen in the last 24 hours. And what we want you to know is where the guardrails are. Okay. Based on what we've done so far, what are the pieces and parts we need to know so that we can continue on the path that we're on and pull and
43:31 Speaker 02 adjust the appropriate levers? That's the peace of mind we want you guys to walk out of here with.
43:36 Speaker 04 Absolutely.
43:36 Brian Preston? I want to get, make sure I'm giving you guys enough space to kind of process and even share. What seeing these actual numbers does, not only to know it mathematically, but even as the relationships side of things.
43:51 Speaker 04 Oh, it's definitely peace of mind knowing the route isn't all uphill.
43:57 Speaker 02 You have options.
43:58 Speaker 04 Yes.
43:58 Speaker 02 You have options.
43:59 Speaker 04 Yes.
44:00 Brian Preston? And that's Good options.
44:01 Speaker 02 That's a testament.
44:02 Speaker 04 Not, not hard options either.
44:04 Brian Preston? Yeah, this isn't, this isn't like, oh my God, we got a bowl of bag of potatoes and that's what we're gonna be eating for the next week. You guys rock and roll for all the sacrifice early on.
44:14 Speaker 04 Yeah.
44:14 Brian Preston? You got good options.
44:15 Speaker 05 Yeah.
44:16 Speaker 04 Yeah.
44:16 Speaker 05 And, you know, I look at the numbers a lot and it is nice knowing that it's not just me that, cause I can see, look at the numbers like, I think we're okay, but you know, I don't do this for a living. So.
44:29 Speaker 02 Yeah.
44:29 Speaker 05 It's kind of good confirmation.
44:31 Speaker 02 I don't imagine if I were to ask you a week ago, hey, Chris, do you think in the next week, you're gonna get a call that's gonna rock your world? You wouldn't have said that, but because you guys did the thing early on, because you saved 25% of your gross, because you practiced deferred gratification, because you thought about the future, you are in a position right now that when life threw an unknown, unknown at you.
44:55 Brian Preston? It threw a grenade.
44:56 Speaker 02 It didn't derail you. It didn't throw you off. You guys are far enough in the journey that you get to choose what your next pivot looks like.
45:02 Speaker 04 Yeah.
45:03 Speaker 02 Are we going to just track better and figure out what our spend is? Am I gonna go find another job making the same income and do that for a few more years? Or am I gonna go find a job and a hobby and a passion that I love and do that forever? You guys kind of get to be in the driver's seat defining what the next phase of your life looks like.
45:22 Brian Preston? I want to give y'all credit. We talk about different phases of wealth building and I think for a lot of people, and this is why it's so important when you're young, you have to kind of have the make the wealth phase. Whereas I feel like sometimes young people, when they start making good money, you, you admitted, Chris, early on in the nineties, it was easy to go make good money.
45:39 Speaker 04 Yeah.
45:39 Brian Preston? I think a lot of people just assume forever they'll be in this type of scenario. So if you, if you disrespect the make wealth phase, where you actually use the, the ingredient of discipline, then when you get to, you know, post 45, where you kind of need to be in the maintained wealth phase. You're kind of struggling or scrambling to play catch up because you did all the make wealth phases. You're maintained even with a grenade thrown in in the middle of this. I felt so happy because the good news is Bo and I had already run through some of this thinking we were going to talk about a normal retirement. And then that's when Megan came and gave us the news. I already had this peace of mind
46:23 Brian Preston? for you guys because we were like, oh my gosh, the timing couldn't be better for you to come on the show. Because I think now y'all's journey back home is going to be, y'all get to have discussions. And I know Bo's about to share your homework with you. But I think a big part, y'all's homework is different than a lot of our guests' because a lot of our guests was like a checklist of this, this, and this. You guys is more of the journey. Now of all of the sacrifice and discipline of the good years is now pairing fruit that you get to kind of think about what is life? What's the life we want to live from this day forward? And that's kind of exciting.
47:02 Speaker 02 All right, you guys ready for the homework? Sure. All right, here's the homework. First thing I have for you, you said this was one of your goals. I want to track better. One of the things I want to do is track better. Well, this is a wonderful time to start doing that. So as you go home, figure out what's your system going to be for tracking better? Are we $9,000 spenders? Are we $12,000 spenders? Are we $10,500 spenders? Are we somewhere in between? So one of the homework for you, figure out what system you guys are going to implement together so that you have confidence around the tracking that you're doing. The next thing you got to do is figure out, based on the three Ds that we laid out, based on the do-do, based on the dream, and then based on the down-to-earth, which option are you going to pursue? We have a favorite, and I don't want to lay this on you, but I'll tell you our favorite. We love the idea of you
47:45 Speaker 02 going out and making, not the same income that you were making, but if you could go out and make an income of like $60,000 doing what you love, and you allow those dollars to continue to grow from now until you get to normal retirement age, you just have to get a whole lot less creative. Because we didn't talk about this, but we could look at your account structure and where you have to pull dollars from right now, and you could do it. Like, there is a scenario. scenario, but you have to do stuff like tapping into your Roth IRAs and that sort of thing. And man, if you could just let those dollars grow from 51 where you are now to just 59 and a half, or maybe 65, it just makes it a whole lot. I don't want to say easier, but that makes it a whole lot easier. So it's one of those things. I think that's a great scenario for you to consider, but you guys have to figure out, what do you ultimately want? What do you want
48:28 Speaker 02 this next phase to look like? And then your last thing is build the next steps. If that's the case, what is the first next thing that you're going to do? Is it brush up on your resume? Is it begin making connections? Is it start looking for the opportunities that can give you paid gigs right now? You'll know that better than anyone else, but you have to start the process of moving in that direction. And you guys get to define what are the next 40 years look like now that we're at this pivot point?
48:56 Brian Preston? Everybody assumes that things are easier, especially when they see success. But the reality of that, and we see it all the time with our clients is that, man, it's not the straight line. The financial order of operations isn't even a linear process. There's going to be steps back. And there's even times where you have to dust yourself off and figure out where you go. But, I mean, I got so excited just knowing that we got to have this conversation, have this discussion about how you can live your great, big, beautiful tomorrow. I just feel so fulfilled knowing that y'all made the sacrifice early on. And that's why anybody who watches our content, and even for people who get a late start, just do something. Today is the day to
49:40 Brian Preston? make action happen. So you can start building your great, big, beautiful tomorrow. And that's why, Bo, if others wanted to join and come on, or even know how to become part of Making a Millionaire, what do they need to do?
49:52 Speaker 02 Yeah, if you'd like to be on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to access any of our free resources, you can go to moneyguy.com/resources.
50:02 Brian Preston? Thank you, thank you, thank you for coming on. Y'all been great. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy team, out.
50:10 Speaker 02 Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management.
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