Pod Insights Money Guy Show "How Do I Buy an RV?" About this episode "How should I treat the purchase of an RV? Does this count as a luxury vehicle and need to pay cash or pay off in a year?"
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:07 Speaker 00 We do have another question from Tucker, if you're ready for it.
0:10 Brian Preston? Okay.
0:12 Speaker 00 "How should service members that have retirement at a much lower age than normal, look at retirement and the amount needed at retirement?"
0:22 Speaker 02 Yes, so service members are really, really interesting. Your first question is, "How should people that are retiring early think about their retirement?" Well, I think one of the very first things you have to think about is longevity. Most folks, if you think about traditional retirement, they're going to retire at age 65 and they're going to live to somewhere between 85 to 95. So it's like 20 to 30-year retirement period. If you're a service member and you're going to be exiting in your 40s or 50s and you're considering that retirement, then what you're doing is, instead of only having 20 to 30 years you have to plan for, you might be having 40 to 50 years you have to plan for. So you better make sure your planning is pretty jammed up. Now, what I have seen, in my experience with a lot of service members,
1:04 Speaker 02 is that when they leave the service, it's not really full retirement. It is stage one retirement, step to the next thing. It's like the next endeavor. And so one of the things I would figure out is, okay, based on my service, what have I done from an asset accumulation standpoint? Have I built up TSP assets? Have I built up investment assets? And then what sort of guaranteed sources of income will I have later in life? Am I going to have pensions? Am I going to have VA benefits? Like, what are the things that, from my service career, are going to carry through to later in life? And then, from where I am today, to where I ultimately want to be one day? So I know where I'm at today and I know the life I want to live when I'm living my most abundant life.
1:48 Speaker 02 Are there steps I need to take to get from where I am today to get there? And what most people find is, yeah, that's when I'm going to shift and I'm going to do some career 2.0. And maybe I do this for 10 years, or maybe I do it for 15 years. But that's going to be a different stage of my career. But because of my service, because of the assets I've built, because of the low lifestyle I was able to have, because of the pension that I have, it's going to give me... Opportunities to be a lot more flexible. I don't have to go out and make a gazillion dollars a year. I might just need to go out and make enough to cover my expenses and be able to save reasonably. And if I can do that for seven, eight, nine, 10 years, then I'm going to be set off to the races, ready to financially be independent.
2:25 Brian Preston? I wrote down some quick notes here, Tucker. By the way, thank you for your service. I love that The Money Guy Show connects with a lot of people in the military. We even have studio tours come through and it's kind of cool. It really, really makes it really exciting. So that's one of the tours we did last week actually shaped my answer a little bit. So here's what I wrote down. Expenses drive the process. If you have to write down, once you leave service, what do you anticipate your budgeted burn rate is going to be? Because now you have the opportunity, once you know the expenses, you can lower, because that's the second thing, is what fills the gap, but the difference between your anticipated pension from what that budgeted burn rate is.
3:10 Brian Preston? And then you have to figure out, how am I going to fill this gap? For a lot of people, it's exactly what Bo said. They might transition to another opportunity. That's a new job. I've got a cousin that did the same thing, but then that, you know, he didn't realize he didn't love that as much. And then you have to kind of lean back on, do I have enough assets slash investments to fill it so I don't have to work so hard with my back, my brain and my hands? Just like we always talk about with our army of dollar bills. But so those are the two, you know, meat and potato parts of the answer. But here's a third one that I thought this was definitely something that service members ought to know. Make sure you get all the insurance you need before you retire. I'm talking about life insurance. I'm talking about disability insurance. Because there's this weird dance with service members is that,
3:54 Brian Preston? and I even saw this with my cousin, is that a lot, you guys are doing unique jobs and it's really hard on the body in a lot of ways. So a lot of times when you leave service, even though, you know, outward looking, you're, you look very healthy, you might have some, some pretty gnarly, you know, damage to you somewhere else. Whether it's your ankles or your knees from doing, or your ears and all these unique things from, from just being in the military. Military, so you're going to have some discussions with the VA to figure out if you qualify for additional benefits because of some of that damage you from your time of service, get your, you know, some of that might make you considered uninsurable.
4:36 Brian Preston? So that's why you have this weird dance where you have to get, I would encourage you before you have to kind of start, you know, doing that part of it. Don't do insurance fraud. Don't mishear me, but I'm just saying, make sure you have timed that out to understand, maybe it's easier to get my disability in my life, you know, before I have to have those unique conversations with, you know, Veteran Affairs.
4:59 Speaker 02 Ruby, I think there's another thing that we've been working on, but I don't know, is it something we, can we talk about the thing that we've been working on? Is that not a thing we can talk about? As it relates to
5:08 Speaker 00 Which thing?
5:09 Speaker 02 Service members and military families and a special tool that they can use as they're trying to figure out the stuff that they have going on in life? I know we've been building it, I just don't know if we've released it yet.
5:19 Speaker 00 Yeah, we actually do have a military ebook that we've kind of like pre-released to some of you through some way. So we're excited that you kind of have your hands on it and we are excited to release more of that in the future because we know that our Military Money Guy family is such a huge part of what we're doing. And so we're excited to just release even more good content and hopefully just helpful resources for you as time goes on, hopefully pretty soon.
5:45 Speaker 02 I love it.
5:46 Speaker 00 Yeah.
5:46 Speaker 02 Great answer.
5:47 Speaker 00 All right. RParis has a question for you next.
5:52 Speaker 02 Our Parents?
5:53 Brian Preston? Our Paris.
5:54 Speaker 00 Our Paris.
5:56 Speaker 02 The letter, I heard
5:57 Speaker 00 The letter R.
5:58 Speaker 02 Parents.
5:59 Speaker 00 Paris.
6:00 Speaker 02 Like, oh, you are. Parents.
6:01 Brian Preston? Okay, you might be getting old.
6:02 Speaker 00 That's it.
6:04 Speaker 02 I'm out of here.
6:05 Speaker 00 He's really roasting you today. But he also put you in the same category as Arnold Schwarzenegger, so, like, in fitness.
6:12 Speaker 02 I'm gonna say, he called me the Hulk and now he's being Mr. Grumpy Gills over here.
6:13 Speaker 00 So I don't know. I don't know what's going on. A little of everything. Okay, RParis has a question. He says, "How should I treat the purchase of an RV? Does this count as a luxury vehicle and I need to pay cash, like the 238 rule says, or pay it off in a year? What do you think?"
6:31 Speaker 02 Well, let me tell you, let me tell you what it's not. Uh, RV is not like a 238 type purchase. That's
6:39 Brian Preston? Just because it has wheels on it.
6:40 Speaker 02 Yeah, this is not something to get you to your J O B. Uh, in my experience, generally when I think about recreational vehicles and something you're going to travel in, something you're going to sleep in, this in my mind falls more in the category of like a home purchase, like a second home. A lot of people treat an RV as their second home. So when you're thinking about, can I do this? One, I would think about it in that realm. Okay. Uh, am I at the stage of my financial career where buying a second home makes sense? If the answer to that question is no, meaning that I'm like early on in the foo, I'm on three, I'm on four. Oh, Brian, do you have the thing? Can you hold the thing up? We have a nine step tried and true process that'll walk you through what to do with your next dollar.
7:24 Speaker 02 Uh, RVs, not step one, not step two, not step three, not step four, not step five, not
7:29 Brian Preston? Step eight.
7:30 Speaker 02 Not step seven, or you could just jump right to it. They are a step eight thing. So the first question I would ask is, am I in step eight of the financial order of operations? And if I am, then I can start thinking about buying an RV. But if I'm not, then maybe I am thinking about adding a second home prematurely. Agree, disagree, want to fight over this? And what do you think about RVs?
7:52 Brian Preston? Yeah, I look at RVs. Now, look, they, they, a financial associate here in the office wrote a funny thing up on the board. And this, this question actually breaks their theorem. Now, they were trying to be funny. They said, you can, you can live in your car, but you can't drive your house to work. They were trying to be funny. It was not a very good joke, but I, but I saw it on one of the whiteboards as I was walking by. Um, and then this actually breaks it though, because you literally could drive this to your job.
8:24 Speaker 02 You literally could.
8:25 Brian Preston? But I, but I just know, if you guys have ever rented an RV, um, these things, I don't, I don't think they, they age well over, they depreciate as well. I mean, it is, it definitely depreciates. And this is one of those Lifestyle decisions, I will get some hate for saying this, but this definitely falls in the category of what I consider boats, RVs, off-road vehicles. These are all things that, you know, are different than what's required for life. So that's why this is step eight of the financial order of operations.
9:03 Speaker 02 But you agree it's not an automobile. It's not like I'm thinking about upgrading to a luxury car.
9:07 Speaker 00 It's not a 23A.
9:08 Speaker 02 It's not a, it's not a, this is not a vehicle.
9:11 Brian Preston? Unless this is the plot of Christmas Vacation. This is not, this is not a requirement.
9:16 Speaker 00 Living in it. Maybe.
9:19 Speaker 02 So I think it's okay. Like if this does fit into your financial order of operations, we say all the time that money is nothing more than a tool to allow us to achieve our goals. And if one of our goals is to own an RV, I do not, I'm not going to be so stringent and say, hey, to buy an RV, you gotta pay cash for it. I'm okay if you finance it. Same way that you might finance a second home if that was what you were doing. Assuming you're at the stage of your journey where that makes sense. Ooh, you want to fight now.
9:44 Brian Preston? No, I don't want to.
9:45 Speaker 02 You saw that?
9:45 Speaker 00 I thought that was a very reasonable answer though.
9:47 Brian Preston? It's just that this is an abundance goal. You just had to be careful because RVs can get really expensive.
9:52 Speaker 02 Sure. So can beach houses.
9:53 Brian Preston? So, yeah. So, yeah, it's, it's just that they, they age, they age a little differently. I've seen a lot of people make some, some decisions in step eight for vacation property. And somehow, even though it was less than ideal, they've actually been rewarded for it. Whereas I don't know if I think the, the come out on the other side is as rewarding sometimes on an RV.
10:18 Speaker 02 It sounds like, it sounds like you're anti RV.
10:20 Speaker 00 I was gonna say, you're not an RV guy. I mean, I'm not an RV person either, but.
10:23 Speaker 02 There was a time in your life. I don't know if you remember this.
10:25 Brian Preston? I tried, I tried to get my family to, I was like, look, let's drive from Tennessee
10:31 Speaker 00 He would be an RV guy.
10:32 Brian Preston? To a national park in an RV. We'll rent one.
10:34 Speaker 02 And you were so excited about this.
10:35 Brian Preston? And then we'll fly home because we'll probably be tired of the RV by the time we get to the national park. So we'll fly home and my oldest daughter, you know, at the time, she was, she was in high school, I think at the time. She goes, Dad, I'll blow through your data before we leave the state line. And I was like, okay. So I guess we're not doing this.
10:53 Speaker 02 Seriously, you see what happened here? Brian was an RV guy. His child crushed his RV dreams and now he's an anti RV guy.
11:00 Brian Preston? It wasn't just my child.
11:01 Speaker 02 Oh, his whole family.
11:02 Brian Preston? My spouse is like, that's not gonna be fun.
11:04 Speaker 02 His whole family. See, they robbed you of your RV life.
11:08 Speaker 00 That makes sense. I was like, this is interesting. Like, I get that, you know.
11:10 Brian Preston? Maybe I got a blind spot.
11:11 Speaker 00 A property is different than a vehicle. Like, I think that's fair to say in appreciation, but like, especially for step eight behavior. Like Bo said, like, if that's what you like to do, Brian.
11:21 Speaker 02 That's what you want to do.
11:22 Speaker 00 That's what you've taught me.
11:23 Brian Preston? Yeah, maybe.
11:23 Speaker 00 If that's how you want to deploy your dollars and bring you some happiness.
11:26 Brian Preston? I'm a girl dad, and I'm sure there's girls out there that love camping, but I know when we ever had those father-daughter or father-kids, you know, sleepovers in the backyard with tents. My kids were always the ones that wanted to go home at night. So we just, maybe I'm not an RV person. But it is definitely an abundance goal.
11:44 Speaker 02 It's a step, it's a step eight. That's what, it took us six minutes to say. It's not a car, it's a step eight goal. I love it.
11:50 Speaker 00 All right. Well, our parents, hopefully that helps you out and thanks for helping us get to the bottom.
11:55 Brian Preston? So do you think your family would go on an RV trip?
11:57 Speaker 00 No.
11:58 Brian Preston? But you don't have a desire to go on an RV, even though that shirt would lead, say, otherwise.
12:02 Speaker 02 I have zero desire to go on an RV trip, but you know what? If you invited me, you're like, hey Bo, let's take the show on the road. Let's get an RV. Let's go for a week or two. I'd be down.
12:12 Brian Preston? The only other RV.
12:13 Speaker 02 You see how quickly he'd jump all over that?
12:14 Speaker 00 He didn't like that.
12:15 Speaker 02 He just liked that one die on the vine.
12:16 Brian Preston? The only other RV story I have is that back when I was, this is back when I was a wee below.
12:22 Brian Preston? When I was, thought I might go into Boy Scouts. They took us on a hike in the Appalachian Trail, in North Georgia mountains.
12:28 Speaker 02 Okay.
12:29 Brian Preston? And I don't know who was in charge of this trip, but somehow we take a whole group of guys, young, you know, young men, or, I mean, we were kids. And you had a few parents as chaperones, and it snowed. I mean, dumped, snow upon snow upon snow, up in the mountains. And we were staying from the Korean War tents, like surplus tents from the Korean War. And I had a sleeping bag that was not built for sub-zero. And I'll never forget, I woke up and my sleeping bag was soaking wet because there was a little tiny hole in the tent that soaked my sleeping bag. And meanwhile, three of my friends, one of the fathers brought an RV.
13:14 Brian Preston? And a group of the Better halves got to sleep in the RV, but all of us that weren't in the cool kid camp at that time slept in the tents and about died.
13:27 Speaker 02 There's some trauma.
13:28 Speaker 00 There's some RV related trauma.
13:30 Brian Preston? We barely made it out of the mountains. I mean, I was still, I can visualize how hard it was coming out of those mountains in the cars, trying to get home. Cause I was so, it just shows you how, we talk about Generation X. It's almost like the parents back then, just like, oh, screw it. Let's do it. It'll be alright. It'll just work out. I mean, it's just because I look back on some of the decision-making of my childhood and I'm like, who was the one saying, yo, because you know that snow was forecasted and they're like, it'll be alright. We'll be okay.
14:02 Speaker 02 I'm just imagining.
14:03 Brian Preston? Probably the person in the RV.
14:04 Speaker 02 I'm just imagining a seven-year-old Brian with tattered clothes, walking out of the woods, hair disheveled, full beard from the three days.
14:13 Brian Preston? By the way, all my friends.
14:14 Speaker 02 Just like coming out of war.
14:15 Brian Preston? All my friends that were in the RV, now thinking about this, they all got Eagle Scouts. I think this is the dividing line.
14:22 Speaker 00 You're like, of course, they thought it was easy.
14:24 Brian Preston? You look at life and you go fork in the road moments. Me in the leaky tent probably is what kept me from becoming an Eagle Scout. And then all my buddies who were sleeping in the comfort of the RV actually became Eagle Scouts. So I think that that was the dividing line.
14:38 Speaker 00 That was a good piece of history.
14:39 Speaker 02 This, I'm glad that came out right there.
14:41 Speaker 00 Me too.
14:42 Brian Preston? The ones that were in the RV know who they are. So maybe there is a bias.
14:49 Speaker 00 I think there definitely is something there.
14:53 Speaker 02 Go ahead, send me that bill.
14:55 Speaker 00 Oh, man. All right, we've got a couple more questions. Are you ready for them?
14:59 Speaker 02 Yes, ma'am.
15:00 Speaker 00 Sinking Potato says, I'm 26 and on step seven.
15:05 Speaker 02 Nice.
15:06 Speaker 00 Should I diversify my granted RSUs? How should I approach this?
15:12 Speaker 02 So, sinking potato, it sounds like you work for a company that part of your compensation isn't just the W2 wage that you receive, but you receive some stock compensation in the forms of restricted stock units. For those of you that don't know, this means that, hey, I'm gonna, as an employer, I'm gonna give you shares in this company, but you're not gonna get them all today. I'm gonna give you X number of shares and they're gonna vest over a certain period of time. Often, you know, maybe you'll get a third next year, a third the year after, and then the final third in the following year. And so, that's great, you get vested in this and when these shares vest, they're immediately taxable to you, and then they're your shares. You get to choose what you do with it. Well, a lot of folks, it's just kinda out of sight, out of mind.
15:57 Speaker 02 Like, I get my paycheck, it's my checking account, I've got these things happening in the background, and before you know it, after you've worked through a number of vesting cycles, you're sitting there saying, "Holy cow, I have a ton of RSUs, I have a ton of exposure." And while that may be exciting, certainly if you're working for a company whose stock price has done well, what you may not realize is that you've actually inserted a ton of risk into your overall financial picture, because now, not only is all of your human capital tied up in this singular company, right? They are your J O B, they're where...
16:28 Brian Preston? I'm gonna just start stealing, we're gonna play the word game here, whenever you steal my answers, I'm just gonna check them off and say, "Okay, there it is, keep going."
16:36 Speaker 02 All of your human capital is tied up in this company, well now, the majority of your financial capital can also be tied up in it. So, what you wanna make sure you do, is you don't become over-concentrated to that singular company, so, you ought to think about a strategy on how you divest RSUs. Brian, when we think about people divesting RSUs, what are some of the ways that we often see people do this? And what are, as a tax guy, what are the tax, the good tax ways to think about this?
17:00 Brian Preston? Well, there's several things to consider here, is that you, likely you're getting RSUs every year, so it's almost like a ladder, and the fact that, you know, you got some coming in, you got some coming out. You got some coming in, you got some coming out, so it really creates a cool system to where you can create diversification, just through the passage of time and creating a system that lets you sell these. Now, you... You can figure out how optimistic you are about the company you're with, with keeping in that delicate balance that Bo was talking about of human capital versus investment capital. But I mean, a lot of people just turn them over. I mean, that's the typical thing, you know, with options, sometimes you exercise them and then you hold them for 12 months and then you wash and repeat on the diversification. RSU's are a little different.
17:45 Speaker 02 Because when they vest, it's taxable to you on that day. So if you sell them immediately, there's no additional tax consequence. It's the point of minimal tax impact if you sell when the RSU's vest.
17:56 Brian Preston? So I definitely agree with Bo. Make sure you're diversifying your human capital from the investment capital. The other thing I was gonna say is it's not uncommon when you see, when I see this type of stuff for these companies, these public companies, they also offer employee stock purchase plans where they will offer like 15% discounts and they do the lower of at the beginning of the quarter or at the end of the quarter. We look at this as like a step two on the financial order of operations because it literally is free money. But you have to walk this delicate balance of maximizing these employer benefits, but getting out of them or diversifying them as fast as you possibly can because there is obviously risk of concentration. But man, oh, man, what an awesome wealth building opportunity.
18:40 Brian Preston? If you understand the risk, you understand the opportunity and you execute a plan that lets you leverage and build on this to maximize your wealth building journey. That's great.
18:51 Speaker 00 Awesome. Thinking Potato, thanks for the question. Scott's question is up next. He says, "I have about 60K in my Thrift Savings Plan. New Retirement tells me the most efficient thing to do tax-wise in converting to Roth is to convert to Roth as soon as possible. Any recommendations?"
19:14 Brian Preston? Well, I think that's taking into account the time component of it, but where's the tax component, Beau?
19:20 Speaker 02 Yeah, what I would argue is anytime you read something that tells you this thing is absolutely the number one thing that you should do and is best for you, my spidey senses would immediately go off because personal finance is personal. And so what's best for you may not be what's best for the person that sits next to you at the office. So, we love Roth conversions. It's an idea of I take pre-tax assets and I convert them into Roth and I pay tax now and then those dollars grow tax-free. But with the TSP, I think, isn't there like a Roth ability to do contributions to your TSP in Roth? So maybe instead of you converting, maybe switching how your contributions go in might make sense. It is unclear, based on your unique circumstances, what would be the best answer?
20:02 Speaker 02 Because ultimately, Brian, when you think about Roth conversion decisions, you have to make some tax assumptions, right? Based on like where you are today versus what you think in the future to drive which one might make the most sense, right?
20:16 Brian Preston? Yeah, the quick things I wrote down was tax rates and when matters because I want you to write down your life timeline or anticipated life timeline is because what we always are looking for are there arbitrage opportunities to get the lowest tax rates for the income that you got coming in. Obviously, if you're in your peak earning years, you're paying the highest marginal rates for ordinary income tax opportunities, like a Roth conversion. But if you look ahead and you say, hey, there's going to be a season. Maybe I'm taking a sabbatical or maybe I'm changing careers or I'm retiring early and I'm going to have a year or two where I'm living off of after-tax assets and my taxable income for my return purposes is going to be very low.
20:59 Brian Preston? By all means, use those years to convert assets that are in those traditional type of tax-deferred assets into Roth assets, but you've got to do the work. You've got to do the timeline, you've got to do the tax projections, and you've got to measure twice, cut once.
21:17 Speaker 02 I love it.
21:18 Speaker 00 Fantastic. As always, these were great questions. Thank you for being here. Thank you for asking. Thank you for showing up during our premieres and live streams every week. We just want to hopefully be helpful and help you feel more confident about your wealth building journey. So keep tuning in here on YouTube. Subscribe if you haven't already and be sure to check out moneyguy.com/resources for our abundance of free calculators and downloads just to help you continue these conversations about personal finance. So as always, thanks for being here.
21:49 Brian Preston? You know, as we get to these time of the year, I always get somewhat more sentimental, if you can believe that's even possible. And that's why it's always worth repeating that true wealth is the ability to focus on what really matters to you and your family. I'm your host, Brian Preston. Mr. Bo Hanson, Money Guy team, out.
22:09 Speaker 03 The Money Guy Show is hosted by Brian Preston. 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 the Money Guy Show. The information provided is for informational purposes only and does not constitute financial, tax, investment, or legal advice.
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