BIG Changes Are Coming To Your 401(k) - What You Need To Know

A new executive order could open up 401(k) plans to alternative investments like private equity, real estate, and cryptocurrency. We unpack what’s really changing, the potential risks, and why more options don’t always lead to better results. Then we answer your financial questions on topics like entrepreneurship, high-interest debt, rental properties, and a whole lot more! ⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. ⁠⁠⁠⁠NordVPN.com/MONEYGUY Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 1:06Brian Preston?

  Big changes potentially coming to your 401k. We just want to load you up. What do you actually need to know?

• 1:10Speaker 03

  Brent, I am so excited about this because we know that for most people, their 401k is one of the single most valuable tools that they have in their wealth building toolkit. And a lot of millionaires, their 401k is the first account to actually cross into the two comma club. So whenever there are changes, or whenever there are things that happen that may impact your retirement account, we want to make sure that you know about them. And that's exactly what we're going to go over today.

• 1:37Brian Preston?

  Well, I believe this was last Thursday. I didn't have this on my bingo card for the day, but it was, my feed started showing up as all of a sudden the executive order had been issued on 401ks. And here, here's actually, we did a screenshot, democratizing access to alternative assets for 401k investors. Signed in on August 7th. So as you guys know, we try not to do politics, but it's one of those things where we have to make sure, because one of your biggest assets is going to be your 401k. As Beau shared, it's the first account for most Millionaires that crosses into that seven figure status. So we just kind of wanted to look and say, hey, is there anything to this? What do you actually need to know? And will this actually impact your 401k?

• 2:21Speaker 03

  So let me walk through what the executive order says. And then Brian, I want you to explain exactly what that means sort of in layman terms. Cause this is what it said, the Secretary of Labor shall reexamine guidance on fiduciary duties on fiduciary duties on asset allocation under ERISA. And for those that don't know, ERISA is just the governing body that oversees employer sponsored retirement plans. Take 401k, 403B and so on. They shall clarify rules and guidelines around alternative asset classes under plans that fall under the subsection. And these alternative assets are defined as private equity,

• 2:59Speaker 03

  cryptocurrencies, real estate, and a number of others. And the SEC shall consider ways to facilitate access to these investments inside of 401ks, inside of 403Bs and other types of accounts. That's what the executive order says. Brian, what on earth does this mean?

• 3:17Brian Preston?

  Well, I think what they're trying to add more assets or investment choices to 401ks. But this is, these are typically everyone private equity, cryptocurrency, real estate. A lot of these things were what required accredited investors in the past. Um, you know, so it's interesting to see. And that's what we have a few more slides that we'll cover. But what I, my big takeaway is that anybody who's ever set up a 401k is that there's a fiduciary standard that goes into designing a 401k. So, and you're as a trustee and Bo and I are trustees of our current 401k.

• 3:57Brian Preston?

  You always get nervous because the attorneys will scare you to death on what are your risks as the trustee for this plan? So I think that this is just one of those things where they're trying to add more asset opportunities or investment opportunities into 401ks. But I'll be curious to see how this actually plays out. And that probably is a good segue into the next thing. Because what this means is, is they have like 180 days. For them to give a report on what's the viability of adding these additional asset classes to 401K.

• 4:29Speaker 03

  Yeah, it'll clear the path for the 401K fiduciaries, decide how they're going to do this, how they're going to roll it up. And if it happens, this potentially could open up $12 trillion in retirement assets for about 20% of the overall market to invest in these types of asset classes. Again, most folks, their 401K is the largest investment account that they have, the largest pot of money they have access to. And so now they are saying, hey, we want this pot of money, these pot of assets, to be able to invest in even more things and even different things. And, you know, you might be thinking, oh, this is a, this is a good thing. More options is better. When I go to the buffet, I want

• 5:11Speaker 03

  as many options there as possible. But Brian, I don't know if I'm going to sign off that I'm, I'm super excited.

• 5:17Brian Preston?

  Yeah, let's kind of go ahead and pivot to what does this actually mean for you? First, I want to make sure everybody, and I'm going to get to that part of it, but I think, I want everybody to take a deep breath. Your current regular investments, they're not going away.

• 5:29Speaker 03

  That's right.

• 5:29Brian Preston?

  But I do think that you make a good point, Bo. I mean, we've done a lot of 401K implementations. And sometimes you'll see a plan that will offer 120 options. You know, they'll give you every asset class, they'll give you all the different versions of it. And what we've, when we've set up 401Ks with employers, we often try to say, hey, let's, let's dial this down to 12 to 14 investments, so we can get the different asset classes, but let's not overwhelm the investors, because we need to get the core investments in there.

• 5:58Speaker 03

  That's right.

• 5:59Brian Preston?

  And that's the key part. I don't want this to dissuade people from making those basic, getting the S and P, getting the market, instead of trying to get into these, these fancy or more sophisticated investments way ahead of when they need to. And that's kind of the big takeaway is that I don't want people to get.

• 6:20Brian Preston?

  This is hard for me. I don't want people to get distracted by chasing the hot dot, but we'll keep going.

• 6:25Speaker 03

  Yeah, and, and, and just to kind of make sure that you're aware, even if this ends up moving forward, it doesn't mean that it's going to exactly happen inside your 401k. What will likely happen is they will expand the ability for these things to be in 401ks. It'll be up for the individual fiduciaries to decide if that goes in. And a lot of fiduciaries are still going to be concerned about whether or not making that available inside of their retirement account is them still satisfying their fiduciary duty. So even if this is allowed in some 401k plans or some 403B plans, it does not mean that it's going to be available in yours. And even if it happens, it likely means that it's not going to happen immediately. There's still going to be some lag time before this gets implemented. What, again, there's,

• 7:07Speaker 03

  there's a lot of unknown unknowns around this. What will most likely happen is that 401ks will begin to offer some sort of like self-directed brokerage option. And then it's inside of that self-directed brokerage option, you'll be able to do these alternative investments. But it's not going to move quickly. Remember, this is like 20% of the overall market that is represented by retirement plan assets. So this is not in, I do not think is going to move super quickly.

• 7:33Brian Preston?

  So let's actually, this is the part I want to get to. Key takeaways for you. We have done Making, Making a Millionaire where I pick on some of our guests because I feel like they get easily distracted by things that have come their way. And I think that this is the risk that a lot of Americans will fall into if you're not careful. First of all, you have to get over the boundary of will fiduciaries even take this risk since their, their, their rear ends are kind of on the, the line unless they somehow change the rules where the fiduciary standard is lowered significantly on these plans. And then it's, it's back to the point of a lot of what you're trying to do with your retirement plan. If you pull up the FOO is your key investments, when you get to five and six,

• 8:15Brian Preston?

  we want you just buying into the market. And it's going to be hard to do better than just core index funds or index target retirement funds. All the asset classes that were listed on this executive order are items I would consider to be step eight. And since unfortunately the majority, vast majority of Americans, there's even a stat that I saw that Was it close to half of Americans don't even know what's in there?

• 8:40Speaker 03

  Forty-six percent.

• 8:42Brian Preston?

  So, I mean, the fact is, don't get distracted chasing the hot dot. Majority of people still need to stay in that level of just do those core investments, the index funds and so forth. And then, of course, I think if you're, if you're higher up on the net worth scale, you've got the good foundation underneath you. Yeah, this might create some opportunity as a step eight, but for the vast majority, I hope it doesn't create a distraction.

• 9:06Speaker 03

  Well, and you sort of alluded to this, more options does not mean better options. And one thing that we want to make sure you're aware of is that higher risk does not always guarantee higher returns. We always think about things in terms of the risk spectrum. If I do something more aggressive and I take more risk, then that means I will get a higher rate of return. That's the wrong mindset. The mindset should be if I am willing to take more risk, then I should be given a higher rate of return for the risk I'm taking. And if that does not exist, perhaps that's not something that I should pursue. So, a lot of these private placement, private equity, real estate, even some of the crypto

• 9:46Speaker 03

  investments may be far out on the risk scale, but that does not necessarily correlate to meaning that you're going to have higher returns. And I'm worried that a lot of folks who should be focusing on steps one through seven will likely get distracted because they forget that building wealth, it is not necessarily easy, but it is remarkably simple.

• 10:10Brian Preston?

  It's simple, but it's hard because people get distracted. They fall into these traps. I still stand by the fact that I think about every year when I renew my, my Arizona mission insurance for our, our wealth management firm, one of the first questions they ask me is, how many private placements are you putting clients in? Because these are higher risk type of investments. So it offers a higher exposure to your insurance companies since you're on the line with this fiduciary standard. So just that share, just me knowing the, the experience of doing the application process every year when I'm renewing my insurance, I just don't know that this is probably going to turn out to be much too about.

• 10:47Brian Preston?

  I do think we were talking about just internally, this is how nerdy we are. We actually talk about this stuff is that I think that if you run a hedge fund, if you run a private equity company, you're going to, and that's probably where some of this pressure is coming from. They're going to self deal and probably add this stuff. They'll be willing to take the risk because it opens up so much in access to assets. And I do think, and this is, this kind of surprised me. I felt like the old man at the table when we were talking about, everybody on the content team said that probably where you'll first see this is crypto will probably make it.

• 11:17Speaker 03

  Sure. I think that's the one that will be the most likely to be most highly utilized would be my guess.

• 11:21Brian Preston?

  So in the comments, feel free or in the chat, you know, or the live stream, you know, give us your opinions because this is still a lot of area that will be uncovered over the next 180 days. But we just want to make sure in typical money guy fashion, we load you up. But it is one of those things, and I think this is probably the last key takeaway is remember you want to have a plan that's good before. That no matter what comes your way, that even if you're in the middle of chaos, it's good during, and then it's good after and represents the intersection of, you know, what are your goals? What are you trying to accomplish? Don't put on your blinders and stick with the plan that's going to get you there. Don't get distracted by chasing the hot dot of what is the latest, greatest trend? That's making it through the news cycle.

• 12:06Speaker 03

  I love Brian that we get to sit in this spot, that we get to see this information that comes out and hopefully help you discern and just figure out, okay, is this important to me? How does this affect me? And what are the things that I should watch out for? We love that we get to be here in this place doing that. We also love that while we're here every Tuesday morning at 10 a.m. Central, we can load you up with information. We can answer your questions. So right now, if you have a question, you want to get our take, you want us to weigh in on, we have the team out in the wings, collecting your questions. Make sure that you get them in the chat because we truly do believe that there is a better way to do money. So with that, Creative Director Rebi, I'm going to throw it over to you.

• 12:48Speaker 04

  I have a question from Manta Galaxy to kick us off. It says, I'm trying not to be foo-ish. My wife and I, in our 30s, have five and a half months in our emergency fund. Should we start transitioning to step five now and maximize time in the market? Or should we reach our goal of six months first?

• 13:10Brian Preston?

  Well, there's a lot of context missing in that question.

• 13:13Speaker 03

  Yeah, the, I would say the answer is it depends, but we can, we can navigate through this. Uh, first, I do think it's important to note that as we design the financial order of operations, probably hold the thing up.

• 13:26Speaker 03

  It's supposed to be a nine-step process that helps you figure out what you do with your next dollar. And the mindset we want you to have is I complete one step before I move on to the next one. So I want to make sure that I have my deductibles covered. And then once I've done that, then I can go get my employer match. I want to get all my employer match. And once I've done that, then I can go pay off my high interest debt. And then once I pay off my high interest debt, I can go build up my emergency fund. And then once I have a fully funded emergency fund, I can then go to step five. I can then go to my Roth and HSA. But fully funded emergency fund is, is a little bit subjective because who gets to define what your emergency fund should be? You get to define that.

• 14:10Speaker 03

  Now, our general guidance is that it should be somewhere for most people in the accumulation phase, between three months of living expenses and six months of living expenses. And there are a number of variables that will impact and dictate that. But you need to decide for you, okay, are we a two-income household? If we were to lose our job, how likely would we replace it? What's our other investment accounts look like? What sort of safety nets or backdrops do we have in place to define what your emergency fund should be? And you may arrive at the conclusion, hey, you know what? Five and a half months is a fully funded emergency fund. Or you may say, hey, it's not quite there. So the answer of whether or not you can move forward, I think, depends on how you define.

• 14:53Brian Preston?

  Well, let's put some meat on those bones. And the fact that, let's just say, man of Galaxy, both spouses are working, both make a great living. Both of them are in high-demand careers where they could easily replace their jobs if one of them got laid off. That is going to probably be somebody who's closer to a three-month cash reserves than a six months. And maybe they're at five and a half months just because of a personal preference or, or risk adversity, you know, where they just. They were reversed to taking on additional risk. That is, I'm gonna tell you, there's nothing wrong with you transitioning on over to step five, because you probably have put in the work, you've risk assessed it and you're there. Now, we could flip the coin and say, what happens if Manta Galaxy, if only one spouse is working?

• 15:37Brian Preston?

  And they're in a more specialized career field where, yeah, if they got laid off, it's going to create a lot of hardship for the family. That part, you definitely need to be at six months if that is, if you resemble that structure. And yes, it is very foo-ish if you are at five and a half months and you haven't just finished the drill and loaded it up. And the reason we're so strict about this, and why we call it the foo-ish, which is very foolish, is because you can actually put your financial life in the ditch if you run out of cash. We all take cash for granted, just like we do the oxygen we breathe, until we go underwater and then we realize, oh my goodness, there's a reason that we need to make sure we keep an emergency reserve so we don't make those desperate decisions

• 16:20Brian Preston?

  that realize to go into debt, or just make crazy decisions that are less than ideal for our future selves.

• 16:27Speaker 03

  Love it.

• 16:29Speaker 04

  Well, Manta Galaxy, thank you for being here and for asking the question. Hope that helps you think it through.

• 16:34Brian Preston?

  I have to ask now, because when I see something like Manta Galaxy, was that also a meme that me and Bo missed from the early 2000s? That just completely occupied the comment section?

• 16:44Speaker 04

  I don't recognize this one. Of course, I kind of missed the last one, too.

• 16:48Speaker 03

  Thornar, Thagdor?

• 16:50Speaker 04

  Trogdoor?

• 16:51Speaker 03

  Trogdoor?

• 16:51Brian Preston?

  You shouldn't try that, because now we're just, all you gotta do is reignite that. People are gonna be like, I knew these guys weren't that cool.

• 16:57Speaker 03

  Uh, I don't think that's the conclusion that they arrived, that they arrived to.

• 17:02Speaker 04

  I don't know. What conclusion do you arrive to? Let us know. Because we didn't know what, who Trogdoor was.

• 17:08Speaker 03

  We do now, though.

• 17:11Speaker 04

  Do you?

• 17:13Speaker 03

  Burn the roofs. That's the roofs. Wasn't that what they were saying? What the comments were saying? Burn the thatched roofs. It was a thing. I saw it in the comments.

• 17:20Speaker 04

  We're gonna, sorry, I shouldn't have gone farther. We're gonna stop there.

• 17:25Brian Preston?

  I'll take the blame for that.

• 17:27Speaker 04

  Okay, thank you, Ryan, for falling on the sword. Paul T. thankfully has a question up next. He says, "My wife and I together have about 22K in old 401Ks that we want to convert to IRAs. Should we roll them into rollover IRAs? Or pay the fees to convert them into Roth IRAs? I have one and she doesn't." I think he means Roth IRAs.

• 17:51Brian Preston?

  Oh.

• 17:53Speaker 03

  Well, it's not uncommon for someone to find themselves, Paul, in a situation where they have like a patchwork quilt of former employers. "I worked at this job and I contributed to the 401K and then I left it and then I got another job and I left it and I got another..." And all of a sudden you look back and you have this trail of old employer-sponsored plans that you think, "Man, wouldn't it be nice if I did something with those?" And what a lot of people don't realize is that when you leave an employer, you really have four options of what to do with that old 401K. And I say four, but it's really only three because you never do this one. This one, this fourth one, is to cash it out. And that's what I think a lot of people do, but that's like the absolute worst thing because if you're under 59 and a half and you cash it out, you're going to pay ordinary

• 18:37Speaker 03

  income taxes as well as a penalty on that to pull that money out. So that one doesn't make sense. So then you really have three options. Option number one, leave it where it is. Option number two, roll it into your new employer-sponsored plan, whether it be a 401K or 403B or something like that. Or option number three, you can roll it into an IRA. And then this is exactly what Paul's question. By the way, if you're curious about what to do with an older retirement plan, I think we have a resource at Money Guy.

• 19:03Brian Preston?

  We have a great deliverable.

• 19:04Speaker 03

  MoneyGuy.com/resources and it's called, "Got an Old 401K?" So if you want to know, like, what's the flow chart? How do I think through that? Go check that out at MoneyGuy.com/resources. But Paul, sounds like, has decided he wants to do this first. So I'm going to roll it to an IRA. The question then becomes, what kind of IRA? And then what should I think through as I decide?

• 19:26Brian Preston?

  Well, several things popped in my mind immediately is when I hear people talking about doing a Roth conversion because that's going to create some potential taxes. So the question I'd first have is, should we go ahead and create the taxes due to Roth conversion, but, or should we make sure, are you maximizing steps five and six? Because those don't cost any taxes if you're loading up your annual contributions. And the reason I say is because you told us it's $22,000 between you and your spouse's old 401ks. Well, that's, that's less than the 401k contribution and that's, you know, only a little bit over what two fully funded Roth IRAs would be. So you, you just got some meat on the bone and the fact that you could actually fund

• 20:08Brian Preston?

  some of this without creating the taxes by just making sure you're, you're working within the financial order of operations. Now, if you, if you've blown through five and six, and yes, you look at this and you're like, you know, this is one of those moments where my tax rates are going to spike up in the next year or two. And I'd really like to clear this out because it's go, open it up for me to do backdoor Roth contributions. There's a lot of things that could come into play that say, yeah, let's, let's do a Roth conversion. But before you do that, a lot of times, especially if you work for like a Fortune 500 company or an employer that has a great 401k, the easy answer is roll it into that new 401k that gets you the ERISA protection. It also allows you to do the backdoor Roth conversion strategies.

• 20:52Brian Preston?

  There's just a lot of benefits out there, but it is definitely one of those things you want to measure twice, cut once, because there's ramifications for whatever path you go with. And that's why that deliverable is so powerful is because it kind of walks you through some of the decision matrix of how you decide this in a good way.

• 21:08Speaker 03

  And I just want to clear up one thing in your question, Paul. I think the language you use is, hey, should I just pay the fees? For most folks, when they convert, or when they transfer assets from one custodian to another, convert from one type of account to another, there aren't really fees associated with it. Most of them don't have any sort of associated charges, like you think about like closing costs on a mortgage or something like that, but there are taxes due. So what you're really making is a tax decision, not a fee decision. If your custodian is charging your fees for moving your money, that should be a red flag anyway.

• 21:41Brian Preston?

  And everything we were talking about with moving it to a, a new, your new employer, that's what's called a trustee to trustee transfer, which that rollover should be a tax-free transaction.

• 21:52Speaker 04

  That's great, Paul T. Thank you for the question and thank you for being here on our live stream.

• 21:57Speaker 04

  Matthew T. has a question for you. It says, I am 27 with a student loan which will mature when I am 32. The interest rate is 5.375%. Do I treat this debt as step nine until I turn 30, then stop Roth contributions to prioritize it as step three, which is high interest debt? What do you think?

• 22:20Brian Preston?

  This is somebody, Matthew knows our system pretty good here.

• 22:23Speaker 03

  Well, so we actually have, we have some rules around this, right? Because as you're, Brian, we hold the thing up for me. As you're walking through the financial world of operations, one thing that you have to decide is what qualifies as high interest debt in step three versus what qualifies as low interest debt in step nine. And what I think a lot of people might not recognize is that it changes. What may be high interest debt to me may not be the same thing that's high interest debt to Brian, based on my unique circumstances. And student loans is one of those where what qualifies in our opinion as high interest versus low interest, changes as you age. And now we've got some like thoughts around this, considering like, you know, equity risk premium and opportunity cost of your dollars.

• 23:08Speaker 03

  But generally speaking, Brian, where I'm going with this is our guidance is if you're in your twenties and your student loans are below 6%, I would argue that does not count as high interest debt in step three. Agree? Disagree?

• 23:23Brian Preston?

  It's built into kind of our deliverables on the site. And that's why, but that's why I can tell that Matthew is a true financial mutant, because he's already picked up on that when he transitions into his 30s, though, there's a step down on that interest rate. It goes from 6% down to 5%. So I do think that Matthew, you're spot on in the fact that, look, you've already got some pressure building in the background also, and the fact that these things will come due, you know, what'd he say, 32?

• 23:51Speaker 03

  32, yep.

• 23:52Brian Preston?

  So I mean, you might be at the intersection where when you cross into your 30s, that you're already going to have the pressure because you know that you've only got two years, plus now the fact that we'd probably classify this as high interest debt. I think I would probably get very serious as you cross into your 30s. Hopefully you have enough career traction that you're going to have the cash flow flowing in that you're like, this is, yeah, this is the time to get serious and let's start tackling this.

• 24:18Speaker 03

  Love it.

• 24:19Speaker 04

  Awesome. Matthew T., thank you for being here and thank you for asking the question.

• 24:23Speaker 03

  One thing, can I just tell Matthew T. to go do one more thing?

• 24:26Speaker 04

  Of course.

• 24:26Speaker 03

  He's already done this, obviously. But you should go to moneyguy.com/resources, play with some of our calculators. You can look at the compound interest calculator, or what I want you to play with specifically is the wealth multiplier calculator. Because what I want you to see is that money in from age 27 to 29, I just want you to go look at what those wealth multipliers are at those ages. And yeah, while you could go satisfy this 5.375% interest, if you took those dollars and you applied that wealth multiplier to them to let them grow from now until 65, it gets really, really, really, really exciting for the dollars that you can save in these next three years.

• 25:05Speaker 04

  Yeah, well said. Moneyguy.com/resources, click on our wealth multiplier calculator.

• 25:10Speaker 03

  I'm wasting sticky notes. This one's still good. I got more meat on this one.

• 25:16Brian Preston?

  It's almost like they make technology to where you can write notes.

• 25:19Speaker 04

  You know, I wasn't gonna call that out, but you're so right.

• 25:22Speaker 03

  It's so funny, because I don't know if you guys have checked this out. We do this show on every other Monday called Making a Millionaire, where you can go watch us do a deep dive with folks that are either millionaires or millionaires in the making. It's a lot of fun. Both of us use Remarkables in the show. I never bring it over to this set. And I, but it's because I got a computer here and I feel like I'd have, I'd have too many things going on.

• 25:45Speaker 04

  You do have like three beverages, a computer.

• 25:47Brian Preston?

  You're looking noxious with a Remarkable, an iPhone, and a laptop?

• 25:51Speaker 03

  It'd be something. It'd be something. So that's why I stick with the old sticky notes for my notes.

• 25:57Speaker 04

  Interesting.

• 25:58Brian Preston?

  We just need a bigger desk.

• 26:00Speaker 04

  Maybe that's it.

• 26:04Speaker 04

  All right, Snead has a question for you. "I have a 25K capital loss on a property and am just below the 15% gains or 22% tax bracket. Would you hold on to the losses for later pay raises or take 3K deductions even at a low tax bracket?"

• 26:27Brian Preston?

  Okay, so I have a 25%

• 26:28Speaker 04

  Fancy tax question for you.

• 26:30Brian Preston?

  Just below the 15%, 22% bracket, would you hold on to losses for later? This is one of those things, look, I like being tax smart. But it's also when you're, when you're doing year end planning, if you have the ability to rebalance and reallocate, because it's just also the better thing to do for your portfolio. This is a tool that you, I don't know that I'm holding on to losses because of my tax rates. It comes into play, don't get me wrong, but, but I'm thinking more if you've got the intersection of portfolio management plus tax policy.

• 27:08Brian Preston?

  I think the portfolio management is a bigger determining factor than transitioning from 15 to 22%.

• 27:16Speaker 03

  Yeah, I think, I want to think-

• 27:17Brian Preston?

  And also capital gains, I mean, because that 22% is a marginal rate, 15% is-

• 27:22Speaker 03

  You're, you're going where I was going. You said, okay, I've got these losses and generally speaking, the way that capital losses work is you can use capital losses to offset capital gains. So they can net to zero in any given year. Well, if you're below the 15% capital gains bracket, you're in the 0% capital gains, you're thinking, okay, well, if I just take capital gains, I'm going to pay 0% on that. So it's not really valuable for me to then use losses and offset money that wouldn't be taxed anyways. And I tend to agree with that. However, there is also this idea that if you have all of your capital losses and they offset all of your capital gains and you have even more than the capital gains you generated, you can actually then use up to $3,000

• 28:08Speaker 03

  to offset your ordinary income. Well, now we're talking about, okay, now some meaningful tax savings. If I'm in the 22% marginal tax bracket federally, then I can use $3,000 of those losses to offset that. Well, then there is some value in doing that. So it's difficult to give you like specific guidance, not knowing what the rest of your tax return looks like. But it is one of those things you want to think about because a lot of folks get so caught up in, I want to pay as little tax today as I- I can. I want to get today's taxes as low as low as low as low as low as low as low. What we think about makes a lot more sense. And this is what we want financial mutants focusing on is we want you to think about how many, how much am I going to pay in taxes over my lifetime? Like, what's my lifetime tax bill going to be?

• 28:52Speaker 03

  Because so often, we will see people capitalize on strategies today to drive their taxes as low as possible. And then what happens, we get in the future and all that planning they did is unwound? Because they didn't think two or three steps ahead. Here's a really easy example of someone who does this. Lot of Fortune 100 companies will offer what's called deferred compensation plans where you can say, hey, instead of paying me my salary, I want to defer my income into the future. And so you think, oh, that's great. I'm going to really drop my income. I'm going to defer. I'm not going to get taxed on it today. I'm going to put it in this deferred comp plan. It'll pay out later. Well, what they don't recognize is, man, if I do that, but I'm not strategic in thinking about how big I build that pot, or how I'm going to distribute that from the time I retire until I deplete that pot.

• 29:37Speaker 03

  All you may have done is sacrificed paying, you know, 35%, 32% today in exchange for paying 37% in the future. You didn't actually save yourself anything, even though you thought you were going to. So thinking through it two or three steps ahead is likely going to be a valuable exercise.

• 29:54Brian Preston?

  What also, what do you think about the fact, and it's okay if you disagree with me, and I'm just going to make up numbers because we don't know. Is if he's got a $25,000 capital loss, and let's just say that this was an initial investment that he put $125,000 in. Now it's worth market value of $100,000, $25,000 loss. Do you take into account the portfolio management side of it? Because how many people, how many people do we see that come to us? That they have these investments that you're like, there's just zero chance that that thing is recovering. What it is worth now is where it's going to probably be 18, 24, 36 months from now. And the opportunity cost of correcting a wrong and getting to fresh green shoots always comes into play too.

• 30:38Speaker 03

  Yeah, no, 100% it does. I use this analogy all the time when I'm talking to clients. If you were, say you were riding a bicycle, right? And you're riding a bicycle down a valley. And so for those of you at the podcast, you know, you kind of come to the bottom of the valley and then you come back up to the top of the peak. If you were riding a bicycle and your tire got flat at the bottom of the valley, you're not going to think to yourself, you know what? I'm gonna wait till I get back up to the top and then I'm gonna change this tire. No, you're gonna say, man, okay, I'm at the bottom. I'm down here. I've had this thing happen. Perhaps if I put a new tire on this bicycle, I'll be able, I might be able to get back to where I was much more quickly, much more efficiently, with much less pain.

• 31:19Speaker 03

  Investing is no different. We see people all the time. They'll buy this stock and oh, this is the next big stock. And all of a sudden it tanks and it's down 15, 20, 30%. Like, oh, man, I'm never gonna sell it. I can't. I gotta wait till it comes back. Gotta wait till it comes back. There is opportunity cost in waiting till something comes back. So you want to make sure you think through that. So I think absolute portfolio allocation and capital usage certainly comes into play.

• 31:42Brian Preston?

  And how many times have we heard people say, I haven't lost anything until I sell it?

• 31:46Speaker 03

  Yeah.

• 31:47Brian Preston?

  And we're like, well, you know, you have to still handicap if this thing's ever coming back. If you own Blockbuster stock, you know, it's probably not coming back. What's that? Cause there's a funny skit.

• 31:58Speaker 03

  Man, we did a, we did a, uh, uh, react video. By the way, if you're not subscribed, every other Monday, when we're not doing Making a Millionaire, we release these react videos. We actually just had one that come out, came out yesterday.

• 32:09Brian Preston?

  Brooklyn 99.

• 32:10Speaker 03

  Brooklyn 99. Did y'all hear?

• 32:15Speaker 04

  I wasn't gonna correct it.

• 32:17Brian Preston?

  Let's put a period between those nines.

• 32:19Speaker 04

  99.

• 32:20Speaker 03

  Brooklyn 99.

• 32:21Brian Preston?

  I got 99 Brooklands.

• 32:23Speaker 03

  Yeah. So anyways, we did a react to like some very popular, uh, there were some office, some Schitt's Creek, some Brooklyn 99. Uh, and that was one of them. They had, uh, Blockbuster stock certificates that were not as valuable as they once were.

• 32:39Speaker 04

  Yep.

• 32:39Speaker 03

  Brooklyn 99.

• 32:41Brian Preston?

  You know, it's big in the rotation in the Preston household.

• 32:45Speaker 03

  That's hilarious.

• 32:47Speaker 04

  All right. Ready for the next question? It's from Andrew. He says, how should someone prepare for a six month unpaid sabbatical? What would you do? What would you tell them to do?

• 33:02Speaker 00

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• 34:02Speaker 03

  Well, I'm assuming, you know, the, the question you're asking is, hey, for six months, I'm going to have income go away. Going on a sabbatical, not going to have income coming in. And you got to think about, okay, well, what's my income actually do? It allows me to pay for the expenses that I'm in current life. So it pays for rent and mortgage and utilities and groceries and all the things necessary. So if I'm not going to have income coming in to pay my bills, the natural place that my head immediately goes, anytime I'm planning for some sort of period without income, I think that cash is probably your friend. And you want to build up an emergency fund above and beyond, and I wouldn't even call it an emergency fund.

• 34:45Speaker 03

  I'd call this like a sabbatical fund to make sure that you can cover that six months of living expenses, plus maybe even a few more if it's not guaranteed you'll be able to come back to work.

• 34:56Brian Preston?

  Yeah, I mean, look, this is all about preparation and planning is that you plan accordingly. If you're going to take advantage of this sabbatical is that you you make sure you've measured twice, cut once, that you have enough cash to to to pay all the bills and do the things. And then the second thing is more philosophical is if you're going to do this six month, let's let's make it purposeful because that's what when you do these type of things, it's supposed to kind of be a regenerative that you come out even better on the other side of it. So let's be purposeful with with how you spend that six months. And that's going to require planning and preparation as well. So I I look at this as both looking at the financial side, but as well as hitting the ground running on what you're hoping to get out of the sabbatical.

• 35:40Speaker 03

  And then the other thing that I would do going into this, and we say this whenever you make any significant life change or large type purchase or investment, we want you to put on your 3D glasses. As you prepare and move into this, I want you to think through, okay, if I take the sabbatical, what's the dream? What's the thing that's going to happen during the sabbatical? And what's the thing that's going to happen when I return from sabbatical? Then what's the down to earth likelihood? What's the most probable outcome? I'm going to do this, I'm going to leave. And then what really, really matters is the third one, the do do plan. Because, and we've seen this happen, what happens if you think, you know what? I'm burnt out. I've been just grinding, grinding, grinding, grinding. I just need a break. And I'm maybe I'm in the technologies field or I'm in some like sector that's just been

• 36:24Speaker 03

  very, very stressful the past couple of years. And I decide I'm going to take the sabbatical. I'm going to bow out for six months and then you know, I'll get right back into it. Well, all of a sudden, month five, five and a half rolls around and you start making those phone calls to try to make sure that you have placement back into the workforce. And it turns out, oh, man, it's a little bit harder to enter back in at the same place that I exited. And if that's the case, and if that's something that could happen for you, how are you going to plan for that? How are you going to navigate that? Not saying that you shouldn't do the sabbatical, but you should definitely think through, if that's a likely outcome, what would you do? And how will you navigate that?

• 37:01Brian Preston?

  Yeah, I guess this is a big consider because when I see sabbaticals, like I know a lot of employers, after you work for a number of years, they'll give you a period.

• 37:08Speaker 03

  Sure.

• 37:09Brian Preston?

  But but I've never seen six months. So that probably is more of a self chosen, I'm going to take six months off. And I think that's a probably a very valid concern. I would definitely put on my 3D glasses.

• 37:22Speaker 04

  Good stuff. Andrew, thank you for asking the question. I hope that helps you think through this decision and how you might prepare.

• 37:30Speaker 04

  Next question is from Jake. He says,

• 37:32Speaker 03

  Jake, the Jake?

• 37:34Speaker 04

  The Jake.

• 37:36Brian Preston?

  We still got that bottle of bourbon waiting for you, Jake. Jake brought gifts to Austin and we're still waiting to partake.

• 37:43Speaker 03

  So now he's got to come to fight.

• 37:44Speaker 04

  I know, he has to come visit. Anytime Jake, let us know. All right. He says, my company just announced that they are stopping the 401k match.

• 37:53Speaker 03

  Lame.

• 37:54Speaker 04

  That is lame. Is this a red flag to start looking? What's your insight or your take on this?

• 38:00Brian Preston?

  Well, I'd want to know why.

• 38:01Speaker 03

  Yeah, yeah, yep.

• 38:04Brian Preston?

  I mean, is this because they're going to beef up the profit sharing?

• 38:06Speaker 04

  That might be, yeah.

• 38:07Brian Preston?

  There's multiple reasons. It could be, look, when companies are in trouble, they financially, sometimes this is one of the areas where you see it. But it also, let's go the other side of the coin is sometimes plans will restructure because they, you know, like a match is a guaranteed 3%, 6%, whatever it is. And they might say, well, you know what? This is getting to be very expensive. We'd probably be better served doing a profit sharing or something that puts a little more

• 38:36Speaker 03

  Discretion.

• 38:37Brian Preston?

  Golden handcuffs or discretion on it too, because a lot of times if you're doing safe harbors, they're 100% vested on the day they're funded, whereas these chunks of money, the employer might want to make it more of a incentive for you to stay longer. So I'd want to know the why and then what is the alternative they're offering? Because if they, if they offer a more lucrative profit sharing, then okay, maybe this is okay. Especially if you've been there for a number of years and you're fully vested in everything. But like, okay, they're just basically restructuring how these things are. But if they're just shutting it all down, I'd be like, what's going on here? Well, and sometimes now, look, if they were recently purchased, you know, and maybe it was like a private equity company bought your, your firm and all of a sudden they're trying to come up with cost cutting measures.

• 39:22Brian Preston?

  I mean, then that's, that's just probably the, the new trend of your employer is going to be lean because they're, they're trying to restructure it in the next three to five years to get a higher multiple.

• 39:34Speaker 03

  Yes. Sometimes it can, it can be, it can be as innocent as restructuring. Another one that we've seen often is someone will They'll have a small company, small workforce, and they'll want to be really generous with their employees. They'll say, hey, we're going to do a dollar for dollar match up to 5% or a dollar for dollar match up to 10%. But then, as the company grows and has more success, that becomes very, very expensive. And they say, you know what, instead of doing a match, it would be less expensive for us to take away the match and we're just going to do like a safe harbor, non-elective 3%. So move away from the match and it's just going to be like some sort of minimum contribution for the overall workforce. That could be happening. It's not a match taking place, but there's still employer dollars flowing into the plan.

• 40:18Speaker 03

  Uh, but I agree with you. I'd ask the question, well, if you can, you know, maybe, maybe, maybe don't just barge into the CEO's office and say, hey, what's going on here? But if you could ask, hey, just curious what the thought process is here? And then be discerning. It's never a bad idea to make sure that you just kind of understand what's going on in the environment around you and make sure that you prepare and protect yourself for that.

• 40:41Brian Preston?

  Yeah.

• 40:42Speaker 04

  Yeah, that's good thoughts. So maybe not time to walk out the door, but definitely figure out why.

• 40:46Speaker 03

  But also, you know, Franklin's wonderful this time of year and every time of year. So start looking.

• 40:53Brian Preston?

  It's a little humid right now though.

• 40:57Speaker 04

  Bro, it's like, love it here. Brian's like, mm.

• 40:59Brian Preston?

  No, I do love it here. You'll, you'll know. I think this is a beautiful place to live and raise a family, but it is quite humid right now. But I think a lot of America is humid right now.

• 41:09Speaker 03

  Lots of humidity.

• 41:12Speaker 04

  All right. Next question is from IJP1208. It says, I have about 10K left in credit card debt. It's high interest. I've cut it down from 30K.

• 41:24Brian Preston?

  Wow.

• 41:25Speaker 04

  Which is great. Should I do a 10K loan or get a 0% APR credit card?

• 41:35Speaker 04

  Or is there something else he should consider?

• 41:39Brian Preston?

  Yeah, I mean, I would like to know the timeframe that they went from 30 to 10.

• 41:43Speaker 04

  Yeah.

• 41:44Brian Preston?

  Because it sounds like they're already on the path of like, just take no prisoners, make it happen. I'd rather you go down that path because it just seems like the relief valve of going and getting more debt. Or one of those 0% APR trap cards. Cause I mean, look, it works if everything lines up. But if you, man, if anything goes wrong, those things can be a mess. And usually there's some fees when you transfer to a degree too. So I would rather you just take no prisoners and go ahead and finish the drill on that 10,000. We don't have enough context to know how hard that's going to be from, from the variables that have been provided.

• 42:20Speaker 03

  Yeah, I, I do not love option number one, going to take a loan out to pay it off. Cause what I'm thinking when I hear that is, oh, that's like a home equity line. That's a 401k loan. It's something like that. I don't love just replacing one debt with another debt. You're not really solving any problems. You're just kind of exacerbating an issue. And I'll also say this, and this may be a hot take amongst our financial mutant community, but I'm going to go and throw it out there. I'm not a fan of like the 0% APR transfer game. Like I recognize there are, there's a mathematic substantiation to doing that. I've got this high interest, I'm going to transfer it to a zero interest card. I'm going to pay it off. But I, there's just, there are tripwires and there are things that can go wrong. And there are things that can go bad to make that not a good thing.

• 43:04Speaker 03

  I agree with you, IJP, you've already shown that you have the propensity to knock out credit card debt from $30,000 to $10,000. What I'd love to see you do is just buckle down and finish the drill, whatever that means. Get as lean as possible, cut your expenses down as much as possible, throw the kitchen sink at that. I would rather see you go sell stuff like, oh, you know, I've got old stuff in my garage or I've got clothes I don't wear anymore. I'm going to do consignment, whatever that thing is. I'm going to go figure out a way to get super, super creative to knock this out. And then once I get that $10,000 balance to zero, I'm going to count all that interest that I

• 43:44Speaker 03

  accrued as sort of an education tax that I paid to learn what to not ever do again. I'm going to get it down to zero and as much as I can control it, I'm never, ever, ever, ever, ever going to run up credit card debt again. I'm going to start following the financial order of operations. I'm going to start building up my emergency fund. I'm going to have a fully funded emergency fund so that I have that thing that will prevent me from finding myself in this position again.

• 44:10Brian Preston?

  I think a lot of Americans, they see debt, specifically consumer debt and credit card debt, as the bridge to solve a big problem they have is that you can go get the things you want now, even though you truly can't afford it, and then you'll catch back up. And that's, we know that's a trap. It's a bridge to nowhere. You've obviously been on that bridge. You've realized what a trap it is. Now you're on the way back of building yourself and clawing yourself out of this hole that you've had. But what I worry is that we're redoing it with the wrong thing. If you go take on more debt or these 0% credit cards, because they're going to give you relief valves of, oh, I can take the pressure off of myself and maybe I can relax. Maybe I can now reward myself because

• 44:51Brian Preston?

  I paid off $20,000 worth of credit card. No, let's finish the drill. It's because it's just, you haven't finished the project and I just don't want these things to be a distraction from the ultimate celebration is when you're completely out of high interest debt. And now you get to start, you're on day one of your future financial, you know, success.

• 45:13Speaker 03

  Love it. Your future financial future.

• 45:16Speaker 04

  Your future financial future?

• 45:17Brian Preston?

  Come on now. I'm good at math.

• 45:21Speaker 04

  And at podcasting.

• 45:23Brian Preston?

  Well, as long as you have an understanding of the English language that lets you fill in the gaps.

• 45:27Speaker 03

  There you go. That's it. That's it.

• 45:29Speaker 04

  It's working for us. IJP 1208. Thank you for the question.

• 45:36Speaker 04

  Next question is from James K. It says, "We have two paid off rental or real estate properties with tenants and we're living in our third property with money owed being 350K and at a 7.25% rate. My question is, should I sell one of the properties and be debt free?"

• 45:58Brian Preston?

  There's way too many things. I need a spreadsheet.

• 46:02Speaker 04

  First, to make a spreadsheet.

• 46:04Speaker 03

  Yes, I'm so sorry that I keep plugging, but I just can't help it because it's so, it's so on point. We have a Making a Millionaire episode coming out in the next month. We just recently recorded it and it was almost this very thing. Hey, we've got this rental property, but we have this other problem that we're trying to solve. And how do we figure that out? What are the options? And we're able to walk through, okay, here are a number of different options available to you. The answer to your question, James, unfortunately is, it depends. It depends on a number of factors and your unique personal situation to where, yeah, sometimes if you have a paid off property and maybe you look at, all right,

• 46:47Speaker 03

  I've done the math and I know that I could sell this property for X dollars and I know that right now I'm bringing in Y dollars of rent. And when I think about, okay, Y dollars of rent relative to X dollars of home value is not a great yield. Like, I'm not making a ton of this money. So I have all this capital tied up and maybe it's in a house that like really ran up in 2021, 2022, 2023, but there's not a lot of juice left in there to squeeze. So it might just grow at the pace of inflation. Yeah, it could potentially make sense to sell one of those properties and then use that to satisfy debt or build towards other financial goals. Or... If they're already paid for and they're already cash flowing and they're creating

• 47:29Speaker 03

  an income for you and they're a diversified source of revenue for you, it might make sense to keep it. It's not like absolute one way or the other.

• 47:41Brian Preston?

  Well, also, you know, because there's so much that we don't know. What if you have a great tenant? We all hear the brochure is you get this tenant that's been in there for 10, 15 years. They're basically helping you buy this house. They give no trouble. They even make improvements. I don't know your situation because if you have one of those tenants and then you go sell this, I mean, it, there's a lot of questions I would have, but I also think Bo makes a great point. That's why I made the joke that I need a spreadsheet is because there's just too much. I don't know what your opportunity cost because everything you do financially is an incremental decision. This path will take you here. This path will take you there. And I think our jobs as financial advisors is that we help you go down those paths without officially going down those paths. We actually

• 48:24Brian Preston?

  get to kind of spot check, do some, some stress testing, do some, you know, assessments of each one of those scenarios. And then you come out on the other side feeling like, yes, this is the ideal path to check all the boxes and do this well because you've got a great opportunity here. I mean, you have two paid for homes. You've got tenants that sound like they're paying their rent and not causing a lot of trouble. But yeah, now you have a mortgage that is, is pretty high. So, you know, over 7%. That's the other thing is that, you know, it doesn't mean you're going to be stuck at 7% forever.

• 48:56Speaker 03

  There we go. We're so often, I feel like we see people do this. They, they come up with a permanent solution to a temporary problem.

• 49:03Brian Preston?

  Right.

• 49:03Speaker 03

  Like, like selling that rental property and satisfying that debt would be a permanent solution to no longer have that rental property. When in reality, what if rates drop? Well, what if you're able to refinance that seven and was it, I don't remember if it's seven and a quarter, seven and three quarters, but that like 7% rate down to like? Five and a half.

• 49:20Brian Preston?

  And I've got, because we know nothing. So I love just coming up with nerdy little scenarios.

• 49:24Speaker 03

  Editing team do not clip that right there. He said, we know nothing.

• 49:26Brian Preston?

  Well, but it's just, I could have had Jon Snow to the end of that, but it's, um, if you think about the fact of like the making a millionaire that you're referencing, they lived in each one of these homes. What if this individual, what if James lived in this house two years ago? And it had a huge, one of the, that second real property had a huge, see, that would be a cool thing too. Because what if he had a $500,000 tax-free gain that was sitting out there? That would probably push the needle a certain way. We just don't know, James. We, there's a lot, like I said, this is the beauty of being a financial advisor is that people's like, hey, you do index funds. What do you guys do for clients since you use index? I'm like, do you not realize how much financial planning, a good financial planner actually does on scenario planning?

• 50:11Brian Preston?

  And figuring out how you come out on the other end of the best way? I mean, I get excited thinking of all the different things, but at the end of the day, James, this is one of those situations where it depends and it's the personal and personal finance.

• 50:24Speaker 03

  And this might be a great place where it makes sense to take the relationship to the next level. A lot of times when you're navigating these things, and I just don't know what I don't know. And I recognize that the decision I make can have huge implications and a very long tail. You've likely only had to make this decision one time, but if you partnered with an advisory team who's helped hundreds of people make that decision and navigate it and seen a number of different sides, it can be an incredibly valuable thing just to give you peace of mind and help you think about the parts of the equation maybe you had not thought about.

• 50:59Speaker 04

  Yeah, that's good stuff. If that sounds like you, go to moneyguy.com, click on become a client, because then you can just learn more and see if that is actually something that is going to move the needle for you and be a level up for you in this time.

• 51:10Brian Preston?

  And we'll leave the porch light on for you.

• 51:11Speaker 04

  Absolutely.

• 51:15Speaker 04

  Dylan M. is up next. He says, "Hey, Money Guy team."

• 51:18Speaker 03

  Hey.

• 51:18Speaker 04

  Currently, I'm 25, living at home after graduating college. At step seven, but if I were to move out, my savings rate would go below 25%. Should I wait to move until I can keep at that 25% investing rate? What do you think Dylan should do? Should he move out?

• 51:40Brian Preston?

  Bo, this is life coach Bo moment.

• 51:43Speaker 03

  Well, here's the thing, Dylan. It's hard to answer your question definitively because both could make sense. Maybe you and mom and dad have a really good thing worked out and like, "Hey, I'm living with you guys and there's a benefit. I'm cutting the grass and I do the laundry" or whatever, or maybe I'm paying your rent or I'm helping offset utilities and that's great and I have a high savings rate. Or you can move out and spread your wings and branch out and go live on your own and do your own thing. We've seen both of these scenarios make sense in different situations. We've seen situations where we said, "No, no, no. The kid's gotta get out of the house. You can't be in the house. You gotta get out. You gotta go start. You gotta be on your own." And we've seen other words like, "Hey, this is a great opportunity

• 52:26Speaker 03

  for you to really stack cash right now while you don't have to be out on your own. Your parents aren't providing economic outpatient care. They're providing a very real opportunity for you to get a leg up that might not be available to other people who don't have a similar situation." You have to figure out in your circumstance, considering that there are two parties involved. There's the parental party and then there is the child, not child, you're a grown man, but there's the, what's another word for child that's not child? That's like an adult child?

• 52:58Brian Preston?

  Adult children?

• 52:58Speaker 03

  Adult child. There's a parental thing and then there's the adult.

• 53:02Brian Preston?

  Cause you're still a children of somebody when you're an adult.

• 53:04Speaker 03

  Yeah, I just didn't want to keep calling him a kid. You're an adult child. You want to make sure that the decision to stay or to go does not adversely affect one or the other. I mean, you don't want to stay in there if it's going to be detrimental to your parents' long-term financial viability because they're subsidizing your lifestyle. But also, if you going out on your own is going to cause your savings rate to drop. That's okay. Most 25 year olds aren't able to have a 25% savings rate. That's okay. 25 should be the thing that you're working towards. You may not be able to start right there, and I think that's okay.

• 53:42Brian Preston?

  First of all, Dylan, kudos to you because you sound like you're gainfully employed. You're investing this money if you, since you said you, you spot checked it at step seven. That means you're loading up not only the Roth IRA, but you're also loading up and maxing out your 401k at the employer. That's well done. I mean, that's, that's, that's probably your parents are very proud of that as well. But I will say, I, I was, I was out with multiple couples and one of them was talking about their adult child. They were trying to figure out if they're going to put a bike lock on the fridge. So you, you have to ask, you know, I would ask you to triage your personal situation to see, are mom and dad as excited about my 25% as, as you are, and maybe they are, and that's still your best scenario to be there.

• 54:26Brian Preston?

  But there's also another thing that I, I think about, and I don't know if this is, you can call me an old, old, old soul for saying this. I lived with roommates until I got married. I mean, because when I was in Atlanta, I had two roommates. In college, I had multiple roommates. It's amazing what you can afford if you can have other people's money to, to bolster what you have. You know, so I would look into that as an opportunity too. Nothing wrong with taking on roommates and just, but you have to ask yourself, what is my best version of myself in my twenties, best version of myself in my thirties, forties, fifties and beyond? And there's going to be an answer that kind of like is a, a shiny stone sitting in the sand.

• 55:08Brian Preston?

  And if you do the exercise, it's going to be just, you can't avoid it and you'll know that that's the path you should take. What?

• 55:15Speaker 03

  I'm just saying, they don't like, nah, man, I got roommates and they're great. They clean the house and they buy their groceries. It's awesome.

• 55:23Brian Preston?

  Now, look, y'all know, as I've gotten in my fifties, I'm super sentimental. I have this conflict that I want my oldest daughter, as she graduates college, to go be super successful, live on her own. But there's another part of you like, man, I kind of like having her around. I mean, so you might be in a great, I mean, I think that that's sometimes us Americans, we live in Tennessee now and you know, we're from Georgia. I'm jealous of people who live really close to all their relatives because there is something about, and a lot of other cultures get this right with the extended families and so forth. Americans, sometimes we miss on that. So is the sentimental 50-something? I'm like, yeah, I mean, it'd be kind of nice being around the kids and the parents.

• 56:06Brian Preston?

  But everybody's situation's different. But I just want to make sure you're living your best life and not stunning yourself by staying there too long as well.

• 56:15Speaker 04

  Some good life advice there, guys. Thank you, Dylan M., for asking the question, and I hope that helps. Next one is from Enden.

• 56:25Brian Preston?

  I like the question mark on that name. Was there a question at the end?

• 56:28Speaker 04

  Was debating how I was going to pronounce it as I was pronouncing it. So I'm gonna go with Enden.

• 56:34Brian Preston?

  Enden.

• 56:36Speaker 04

  The question says, can you apply the FOO, the Financial Order of Operations, towards a business? I feel like we may be running a little bit too fat on cash, but we're hesitant to take extra distributions with several more years remaining of our business loan. What do you think? You are FOO and business guys. What would you say to Enden?

• 56:59Brian Preston?

  The FOO is really a personal finance thing. I think that you are, Enden, you are running this as a CEO. You have to risk, look, risk assess the situation. I've often said entrepreneurs have this fear. I mean, I don't think it goes away ever completely. Hasn't gone away yet. I mean, no, because y'all, even when I paid off my mortgage, I was like, don't worry, I still have plenty of debt out there. You know, it's one of those things where I think as a business owner, and then you think about all the employees, you think about payroll, I'm always a little nervous. It's a different mindset as a business owner than it is just for standard Financial Order of Operations is because you not only have to think about your personal finance situation, but you have to think about the viability

• 57:42Brian Preston?

  of the business, and you have to think about the viability for your employees. And there's just a lot of responsibilities sitting on the shoulders for business owners. Then I think it does make sense to have extra cash. That's not necessarily a foo thing. It's more of a, hey, as a business, I might need to keep a little more additional liquidity. So that the viability of this thing can handle no matter what comes my way.

• 58:05Speaker 03

  Yeah. My answer would be.

• 58:08Brian Preston?

  I guess four can be modified because we say that even for retirees, it goes to 18 to 24 months. I'm sorry.

• 58:14Speaker 03

  No, no, no, we're on the same page. What I would say is the foo does not apply, but the principles surrounding the foo apply. Brian, will you hold the thing up for me? You guys have probably noticed the foo is these nine steps, but they're sort of like, it's like three steps and three steps and three steps. And I think you can approach your business stuff kind of the same way because at the top level, at the very first, you're like really focusing on like risk management, like, am I making sure that I don't have things working against me? So like, if you have super high interest debt and credit card debt inside your business, you gotta like knock that out. You gotta get rid of that. You gotta make sure that you're not, you know, you're not carrying that. And then you move on to like emergency reserves. Okay. Well, yeah, I do want to make sure that I keep enough in my business so that I can

• 58:57Speaker 03

  either pay for my outstanding business loan as that note comes due, or I can satisfy payroll, or I can invest in it, those sort of things. And then, once you've answered those, then it becomes, okay, what's the best use of capital? The best use of capital may be indeed to leave money in my business to be reinvested in my business. It's historically why Warren Buffett, he says he doesn't like to pay out dividends. Rather than me giving you the money to invest, I'm going to leave money in the entity so that we can reinvest. And I think that we can reinvest better than you can invest as a shareholder on your own. Well, you as a business owner are making that same decision. When you decide, okay, do I leave money in the business to invest in the business? Or do I distribute it out to me? Or if you arrive at the conclusion, okay, I've done that and the business is great

• 59:39Speaker 03

  and there's still excess capital. Okay, perhaps I do need to distribute it out to me. And that would be like that bottom tranche of the financial order of operations where they're thinking, okay, how do I optimize? And how do I think about that like second and third level of thinking? So I think the foo does apply in terms of concept and philosophy, but the steps are a little bit different because businesses are very, very unique and very, very different in how they operate.

• 1:00:04Brian Preston?

  When I wrote Millionaire Mission, you know, because that's, it's really kind of the origin story of. The foo, but also at the end, the very last chapter, I talk about what I do with my own money. And one of the things I talk about in one of the closing chapters is, is how cash is an unbelievable wealth builder in the long term, but it's more of a step eight of the financial order of operations. And I think for a business owner, that kind of applies to you as well. So it ties into exactly what Bo was talking about is that you might need to keep a little extra powder money for, for opportunities as well as for, for being nimble in your sector or whatever your, your, your business navigates, but that's why it's a step eight. You know, you don't do this until you've mastered steps one through seven.

• 1:00:49Speaker 03

  That's right.

• 1:00:50Speaker 04

  That's great. Well, hey, thank you. And hey, how would you say it? You want to say his name, Bo?

• 1:00:56Speaker 03

  I do not.

• 1:00:56Speaker 04

  Go ahead.

• 1:00:57Speaker 03

  I don't.

• 1:00:57Speaker 04

  I dare you.

• 1:00:58Speaker 03

  I thought it was Endeen.

• 1:01:00Speaker 04

  Endeen.

• 1:01:00Brian Preston?

  You just didn't put the question mark on the end.

• 1:01:02Speaker 04

  Endeen or Enden, whoever you are, thank you for the question. And I hope that that helps you think about your business and the foo in a helpful way. You know, if you have more questions, we have moneyguy.com/resources out there for you all the time. It's all free resources. So be sure to go take advantage of those. We made those for you because we want it to be super accessible. Our show is super accessible. That's why we try to be everywhere you might like to watch or listen. And that's why we show up every 10, every Tuesday at 10 a.m. Central, right here on YouTube, answering your questions. So be sure to check out moneyguy.com/resources and we'll see you next Tuesday.

• 1:01:39Brian Preston?

  I, I thought, but I'll say I have one closing thing is that, you know, we went on Ice Coffee Hour. The episode dropped on Sunday. Wowzer.

• 1:01:48Speaker 03

  Yeah.

• 1:01:48Brian Preston?

  I mean, holy cow. I mean, I didn't think that many people were interested in what we had to say, but they are.

• 1:01:53Speaker 03

  We got to talk about a lot of stuff that we don't get to talk about here, what I thought was super fun and super interesting. So.

• 1:01:59Brian Preston?

  Um, I just got a text right before I went on recording from a childhood friend who drives, you know, works for UPS. And he was like, I about drove off the side of the road when I heard y'all's voices on a podcast I'd put on. So that's what, so go check it out. I know he's talking about Ice Coffee Hour and I'm like, shame on him that he's not listening to our stuff every week anyway. But I think it's, um, I love getting shout outs from, from, you know, childhood friends and others who, who might've come across the show. And you guys have been, I'm assuming you watching our live stream have also been the ones writing all the positive comments on the, on the show. Thank you. I mean, it's really cool to kind of see. The visit actually turned out as well as it did. And we appreciate that Graham and Jack gave us the opportunity. They reached out to us and said, hey, do y'all want to come on the show?

• 1:02:44Brian Preston?

  We're like, yeah, we'd love to have access to your 1.3 million subscribers to show what we do here with the Financial Order of Operations. So, so thanks for all the positive comments and thanks for just always supporting us. Cause I think you guys can tell where our heart is, is that we really are trying to, with the Financial Order of Operations, with the abundance cycles, we want people to be successful with their money. There really is a better way to do money, as Bo even started the show today. So use our system, take advantage of all of our free stuff. Go to moneyguy.com/resources, lean into the free stuff, maximize yourself. And then that of course creates the graduation point of the abundance cycle of becoming a client, will leave the porch light on.

• 1:03:26Brian Preston?

  I'm your host, Brian Preston, Mr. Bo Hanson, Farid and the rest of the content team. Money Guy, out.

• 1:03:32Speaker 03

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with 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 the Money Guy Show. 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.

• 1:04:05Speaker 06

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