How to Make Money in a Market Crash

Mike J. wrote us and asked: "We sold about $70k in pretax assets at the peak. How would you recommend we buy back in? Dollar Cost Average? Or wait for a low point?" We quick off this Q&A answering his question, including the Goldilocks Rule to DCA! Then stick around as we answer more of YOUR financial questions. 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. 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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• 0:12Speaker 01

  Price and participation may vary. Promotion pricing may be lower than meal pricing.

• 0:16Speaker 02

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18 plus.

• 0:47Brian Preston?

  Here's a timely one. How to make money during a market crash.

• 0:51Speaker 04

  Brent, I am so excited about this. And I know that sounds a little contrary, but a lot of times people get nervous and they get freaked out and they get uncomfortable, get uncertain, but they recognize, hey, I feel like there might be some opportunity here. There might be some opportunity that I don't want to miss out on. And I love that you and I get to sit in this spot and we get to speak to that. I love that we get to speak to all kinds of questions that you guys care about because we believe that there's a better way to do money. So right now, every Tuesday at 10 a.m., we love that we get to load you up and answer your questions. Today is no different. So with that, Creative Director Rebi, I'm going to throw it over to you.

• 1:32Speaker 05

  All right, let's start with Mike Jay's question and talk about this. He says, "We, 32, have inadvertently sold about 70K in pre-tax assets at the peak. Would you recommend we buy back in dollar cost average or wait for a low point and reinvest everything at once?" What do you think?

• 1:52Speaker 04

  Okay, first thing, look, Mike, I'm gonna...

• 1:55Brian Preston?

  We have to scold him.

• 1:56Speaker 04

  I'm gonna pick on you because I, one, you're 32, so you're very young. I do not understand how you inadvertently...

• 2:03Speaker 05

  Inadvertently.

• 2:04Speaker 04

  ...sold a bunch of assets in a pre-tax account. Now, this is after tax, like, oh, I thought I was gonna buy a house, or I thought I was gonna do this, whatever. I get that one, but inadvertently, inside of a pre-tax account?

• 2:17Speaker 04

  Something seems awry here to me.

• 2:21Brian Preston?

  Before we answer your question, I have to give you the basic understanding that time in the market is better than time in the market.

• 2:29Speaker 04

  That's exactly right.

• 2:29Brian Preston?

  However, sometimes it's better to be lucky than good.

• 2:33Speaker 04

  Well, you're, I guess he said he got out at the high. So, okay.

• 2:36Brian Preston?

  Yeah, so I mean, he got lucky. He got, I mean, because this, it, it, look, the market in the short term can be very irrational. Over the long term, this thing really is a wealth creation opportunity. So, in the short term, there are some craziness things where, you know, because we, we know every year markets go down 14% on average, intra-year, you know, and that's, that's, that's correction territory. That's getting really close, throwing, you know, throwing a stone to even bear market potentially. So, but now let's address the question.

• 3:11Speaker 04

  Because here, here's what I think is interesting, and I think there's going to be a little nuance to this one. Because Mike said, I've got $70,000 pre-tax. Now, when he says pre-tax.

• 3:19Brian Preston?

  That means a retirement account.

• 3:20Speaker 04

  I'm going to assume that there's two different types of.

• 3:22Brian Preston?

  It's like a traditional retirement account.

• 3:24Speaker 04

  Well, I'm going to assume, because it might be, actually be Roth, because Roth would also be technically pre-tax assets.

• 3:28Brian Preston?

  No, it'd be after-tax.

• 3:30Speaker 04

  You think that's what he's talking about when he says that?

• 3:32Brian Preston?

  Roth IRA has already been tax money, so that's after, that's, that would be after-tax assets.

• 3:36Speaker 04

  So, you don't think he cashed out any of his Roth?

• 3:38Brian Preston?

  No, I think that he's got traditional 401K or employer match money that he's cashed out, or he's using the wrong term.

• 3:45Speaker 04

  Freaked out, sold at the top, and he only sold his 401K, did not sell any Roth. I just feel like there's a chance, because I've seen people do this, that when they get scared, they get scared all across the realm. And what frustrates me about that is you are 32 years old, 32 years old. Realistically, any dollars that you have inside of any retirement accounts, whether it be 401K, 403B, Roth, et cetera, those are for retirement. So, we're talking about almost 30 years in the future. So, those should be, it's kind of like money that you just put aside, set it, forget it, ignore it, act like it does not exist. But that's not what you've done. And so, now you're in this position to decide, okay, well, how do I get back in? The only thing that I want to say to this is because time is on your side.

• 4:30Speaker 04

  In all likelihood, it will not matter what strategy you employed to get back into the market because 30 years is such a long time to have those dollars working. But we are also emotional creatures. So sometimes even though the math might suggest one thing, there might be a behavioral aspect that we have to factor into the equation.

• 4:50Brian Preston?

  Well, that's what I will tell you. My gut reaction, because this was pre-tax, I'm going to take it at his word that he's a financial mutant, knows what the term pre-tax is. He made this mistake. Now you come back a few weeks later and all of a sudden the market, everything is, you got a 10% off coupon. So if that's the case, there's a part of me that's just like, man, the money was working and this money is for 30 years in the future, put it back to work as fast as possible. Because we know markets make money eight out of 10 years. You just got a 10% off coupon. Now, if you are more concerned because you're an emotional person and you made this inadvertent mistake because of behavioral

• 5:29Brian Preston?

  issues, or concerns, or fears, then okay, well, we can ease you back into this, but it's going to have to, and that's where, Bo, I always like to talk about, we have a Goldilocks rule for dollar cost averaging. Can you explain what that means?

• 5:44Speaker 04

  Yeah, essentially what we have laid out for you is that depending on the size of the lump sum you're putting into the market will dictate how long you should consider easing it into the market. And here's the way the rule generally works. If the amount that you're going to invest is less than 10% of your total investment portfolio, we think there's a really high chance that you ought to just lump sum invest that. It's fairly inconsequential to your total wealth building journey. So just invest that all at once. If the lump sum is between 10 to 20% of your liquid portfolio, maybe ease it in in four purchases over four months. Between 20 and 30%, maybe six months. 30 to 40%, eight months. 40 to 50%, 10 months. And if what you're investing is greater

• 6:26Speaker 04

  than 50% of your entire liquid net worth, then perhaps it does make sense to ease that in over the course of 12 months. If you're more concerned about the behavioral aspect of, oh no, what if I do this today and tomorrow the market tanks? Is it going to cause me to freak out and make another bad decision again?

• 6:44Brian Preston?

  And then I have, I'm going to give you a bonus, just in case this thing hits bear market status. We're, you know, if the market does get bear market status, meaning that we lose 20%. Then every time we cross over another 5% loss, you can accelerate a month early. That's a dynamic dollar cost averaging strategy because we know that statistically, once you get into bear market status, 12 months, 24 months in the future, especially retirement money, that you have all this ability to to watch it grow and compound over time. That's a strategy that gives you the best of all worlds.

• 7:25Speaker 05

  Fantastic. Mike J. Great question. Thank you for asking it. Trevor M. has a question next for you guys. He says, "My fiance and I are struggling with if we should get a prenup or not. She makes about double what I make, but has no invested assets yet. I have 70K in invested assets, but make much less. We are both 29." Thoughts on, this is a tricky question, right?

• 7:50Brian Preston?

  It reminds me, and I'm gonna screw this up because I'm the old one who, my kids are older, so I don't do the fables and all that stuff. But what is it like the, the, the person, the, she gives up her mirror and he gives up, you know, it's like this couple.

• 8:06Speaker 05

  Oh, I know what you're talking, it's some.

• 8:07Brian Preston?

  It's that fable where they, they give up the, you know, they give up their favorite thing for somebody they love. And then they find out that they both did it and it doesn't really fit, but it's just, they're the opposites here. Is that you got one that makes a great income. Do you see what I'm saying? You got one that makes a great income. This is, I've screwed it all up, but here, let me get to the point.

• 8:28Speaker 04

  I'm excited to see it land.

• 8:29Brian Preston?

  Bo will save this. She makes a great income. He saved, he has money from some source. That is a strange dynamic. And that's probably, Bo, I'll let Bo do the hard, heavy lift here, but some of this is relationship stuff, too.

• 8:47Speaker 04

  Yeah. So when, when do we most often see prenuptial agreements used? It's when two people come into a marriage and one or the other, maybe both, have substantial assets that they have accumulated and accrued pre-marriage. And they just want to make sure that what they brought into the marriage kind of stays separated so that if something were to not work out and it were to dissolve, that those. Assets would be protected. That generally has to do with assets that you've built up, not future building or future earning potential.

• 9:13Brian Preston?

  Income doesn't typically, that's prenup, that's not prenup territory.

• 9:17Speaker 04

  Yeah, even though she makes double what you make, once you guys get married and you begin building assets jointly and you begin saving together and working towards common goals, that's all kind of like household property. That's likely all going to be joint property, all the wealth that you guys create. So, income and future income is less of a consideration over assets. Now, you said, "Hey, I'm bringing to this equation $70,000 of assets and she has not yet built those up." Well, 29, I don't want to discount this. $70,000 is a lot of money. If you put it, if you go to moneyguy.com/resources, check on a wealth multiplier, dump $70,000 into that at age 29 and see what it can turn into. It's huge. It's significant.

• 9:57Speaker 04

  It's substantial, based on what it can grow into. But as it stands right now today, I would not argue that that's like a huge sum of money necessarily to be bringing into the marriage. And so, I, when I look at your situation, whether or not to have a prenuptial agreement, the finances and the mathematics, in my mind, don't play in as much as the relational aspect. Where do you both feel comfortable? I don't know that this is one where I look at this and see a slam dunk and say, "Yeah, this absolutely makes sense." It's more, ah, I would ask the question, "Why? Why are you having the conversation? What is it that you are both nervous about?" And perhaps let's deal with that nervous thing first, before we think about putting the

• 10:40Speaker 04

  legal agreement in place that maybe is only addressing a symptom and not the root cause of the issue.

• 10:46Brian Preston?

  You're being nice. I'm just gonna put it out there. This is my opinion. I don't see a prenup issue here. I see, I see, I know, but here's what you're, here's what you're not saying that needs to be said. Because this works both ways. I don't care who makes the money, whether, you know, in the dynamic of a relationship, money is nothing more than a tool.

• 11:05Speaker 04

  That's right.

• 11:06Brian Preston?

  But I have seen this and it drives me crazy, and I talk about this on the show, is that you will find in a marriage, if this is going to be a lifetime marriage, I've been married close to 30 years, one of your careers is going to do something the others doesn't, and if you are, if everybody's keeping score based upon what they earn, there's power to that. And do you see how you're using this, this tool of money as a blunt instrument in the relationship? That's not a healthy thing. Because how does that, I've seen that dynamic work in multiple ways, and I've tried to counsel friends, neighbors, is because when I see, when you're holding the purse strings because you make the money and you're separating everything,

• 11:48Brian Preston?

  and you're making your spouse come to you for every dollar, that's not healthy. I mean, it's just not. It's, it's mine. And I don't like that. That might be different than, than, than what a lot of people think in, in this new, modern world, but I just don't think two becoming one, that that is a healthy thing. I've tried to do everything in my power to take the power of who earns the money out of our relationship so that we, our dynamic stays healthy. And I worry this might be a deeper conversation that needs to be had, is why is a prenup needed for either one of you even considering it? Because earning potential shouldn't do it. That's going to become marital property just because

• 12:32Brian Preston?

  it was earned during the marriage. Your assets, yeah, it's decent. Now, look,

• 12:36Speaker 04

  I bet so. I bet a bunch of it's retirement assets, probably.

• 12:39Brian Preston?

  I mean, it's probably retirement. Now, look, if it's inherited property, there are some legal protections as well as money you're bringing in the marriage. But, I mean, that's not, that's, that's something y'all need to have a conversation. Because power should not, money as a tool should not be a blunt instrument of power in a healthy relationship.

• 12:57Speaker 05

  Those are really good thoughts. And I kind of agree. Like, it's no more about looking forward to your financial goals that you want to do together and not like looking back, like, well, I saved this much, or I make this much. It's like, what's coming next is the ideal thing you should be thinking about. So, good thoughts, you guys. All right.

• 13:14Speaker 04

  Hey, I had a good thought.

• 13:15Speaker 05

  Yes.

• 13:15Speaker 04

  If you've not subscribed to the channel, make sure you subscribe because that's the only way that you're going to stay up to date on all the brand new information I'm putting out, like Making a Millionaire Mondays, or Mini Show Wednesdays, or Full Form Fridays. I just coined all those. Did you like that? That's pretty good.

• 13:31Speaker 05

  Full Form Fridays.

• 13:33Speaker 04

  Full Form Fridays. That's like the full world show, right? That's a good one.

• 13:36Brian Preston?

  Full Form Friday?

• 13:37Speaker 04

  Isn't that like a good, that's, everyone, y'all can't see this, but everyone out in the wings is nodding like, yeah, that's good stuff. We should put this guy on the marketing team. Brian doesn't say that, but everyone else is saying that. So if you've not subscribed, make sure you subscribe right now so you stay up to date on all of our new content.

• 13:52Brian Preston?

  Full Form.

• 13:54Speaker 04

  What would you call Fridays?

• 13:55Brian Preston?

  Flex Friday?

• 13:58Speaker 05

  You're both fired.

• 14:01Speaker 05

  Leave it to the marketing team.

• 14:02Brian Preston?

  Flexing that mental, that mental muscle of learning more about money.

• 14:06Speaker 04

  Here's what I like about you, Brian. You could have just left me there squandering on my own, just flailing in the water, like, you know what, I'm gonna jump in and flail with him.

• 14:14Speaker 05

  Thank you.

• 14:15Brian Preston?

  Full Form.

• 14:16Speaker 05

  That was so nice.

• 14:17Brian Preston?

  Oh, FFF. Oh, Full Form Friday.

• 14:21Speaker 00

  Your sausage McMuffin with egg didn't change, your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just $5. Only at McDonald's for a limited time.

• 14:33Speaker 01

  Price and participation may vary. Promotion pricing may be lower than meal pricing.

• 14:37Speaker 02

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up require compatibility and availability varies 18 plus.

• 15:03Speaker 05

  We do have some incredible full episodes that come out on Fridays, in case you didn't know.

• 15:07Brian Preston?

  They're just called F-Cubed. Welcome to F-Cube Friday.

• 15:10Speaker 05

  Yeah, we'll keep working on it. By the way, it's called, it's a short story called The Gift of the Magi that you were thinking of.

• 15:16Speaker 04

  Thank you.

• 15:16Speaker 05

  Written a long time ago.

• 15:17Brian Preston?

  Can you give a little detail? Because I obviously figured it all up.

• 15:20Speaker 05

  Um, basically, like, the...

• 15:23Speaker 05

  Premises like she has really beautiful hair so he let and he has a really nice watch and she like cuts her hair and sells it to buy him a watch chain and then he

• 15:32Speaker 04

  I've heard this.

• 15:33Speaker 05

  Yeah, right? Like it was ringing a bell and then she he sells the watch to get her a comb. And then like it's it's ironic because like

• 15:41Speaker 04

  So there was no mirror in this story at all?

• 15:43Brian Preston?

  No, but but no, I mean, but she but that is the story.

• 15:47Speaker 05

  I think it's a comb.

• 15:48Brian Preston?

  But this is what I would ask. The gift of maybe this couple is part of their relationship and communication. Go read Gift to the Magi because

• 15:57Speaker 04

  Is it a book or is it like a?

• 15:58Brian Preston?

  Or it's a fable.

• 15:59Speaker 05

  It's a short story.

• 16:00Speaker 04

  Okay.

• 16:00Brian Preston?

  Yeah.

• 16:00Speaker 05

  Written in 1905, like very, very old.

• 16:03Brian Preston?

  Yeah, but it but it don't get in a relationship if you can't be selfless. I think everybody should understand that you we all hope their relationships are 50 50, but you ought to go into the relationship thinking it's going to be 80 20. Meaning you're going to give 80% and and I mean, if both of you do that, you'll be incredibly happy.

• 16:24Speaker 05

  I didn't want to leave you hanging. I was like, there is a real story.

• 16:27Brian Preston?

  I thought it was a good exclamation point.

• 16:28Speaker 05

  That applies. So

• 16:30Speaker 04

  How can I get away from FQ? Ah, no, I'd bring you back.

• 16:34Speaker 05

  All right, let's move on to Hunter M's question. It says, my fiance, 26, and I, 23, both work for General Motors and just recently got our profit sharing check.

• 16:45Brian Preston?

  Nice.

• 16:45Speaker 05

  What should we do with the money? It's $21,000 when we are already hitting the 25% investment rate.

• 16:53Brian Preston?

  Yeah, but profit sharing is going to be in their retirement account. Or is this or is this a bonus?

• 16:57Speaker 04

  I think this means a bonus.

• 16:59Speaker 05

  Yeah, so it sounds like they just got $21,000 of cash.

• 17:02Speaker 04

  I'm going to go on a limb and and Hunter, I'm just thinking back to when I was 26 or 23 years old. And if I would have come into a $21,000 check, I would have been like, oh, my goodness. That would have been life changing money back then. And I'm going to assume for you at 26 and 23, this is a substantial sum. Now, you just said one thing, I think, that was really, really interesting. You said, hey, I'm already hitting my 25%. Here's my question for you. When you calculate your 25% savings rate that you're doing, did you factor in that $21,000 bonus? Or was your 25% savings just on your base salary, the base income that you have coming in? Because I would argue if it's only on the base salary, that's great. But when you factor in your total income, base salary plus this bonus,

• 17:45Speaker 04

  you have not yet saved 25% of your gross income. You still have more to do and mathematically, the way that'd work out is at least 21% of that $21,000 should be saved so that you could continue saving 25% of the gross. Now then the question becomes, Brian, well, what do I do with it once I get it?

• 18:06Brian Preston?

  It's almost like this stuff writes itself. The Financial Order of Operations, hang on, let me give it to all my people, ASMR people.

• 18:16Brian Preston?

  So.

• 18:17Speaker 04

  I see, I see, I see a future for them.

• 18:19Brian Preston?

  So, so, so here's the thing.

• 18:21Speaker 05

  Financial advice doesn't work out.

• 18:22Brian Preston?

  I love, I love, because you're already paying some respect to the Financial Order of Operations. Because I didn't hear anything about it, you know, high interest debt or anything. You've already hit 25%, so this is like step six type stuff. And you're 26 and 23, wowzer.

• 18:37Speaker 04

  It's huge.

• 18:38Brian Preston?

  So you get to step seven, because it, hyper accumulation is why it's called. Means that we're going beyond the 25% or at least considering what we need to do. You need to ask yourself, what is the why and what's the purpose of this money in the long term? Because there's a part of you that, and it's probably you're trying to figure out, can I go to step eight? And that's where we either expand a lifestyle or do other things. You first need to ask yourself, what's the, what are you going to do with your money? Are you retiring early? And then the other thing I always think about, for 26 and 23 year olds, you're just so new to the process that you just haven't had enough time, more than likely, because I don't think they shared their numbers yet, on what they have in investment assets. You're just not at a critical mass point.

• 19:21Brian Preston?

  So y'all just need to have a conversation as a couple and say, look, why don't we do something that gives us even a, go look at our wealth multiplier. Go to moneyguy.com/resources. Figure out as a communication tool, is there a portion of this that we can accelerate building up that critical mass even faster and maybe even reach some of those, think about how we're going to use this money in the long term, over the decades? And then figure out, okay, well, maybe there's a healthy balance here. Maybe we're going to put half of this to work, to 60% of this to work, because this would be a huge head start. Or maybe a portion of this can be to go splurge, do a vacation. You know, because that's what I love. I love kind of a little bit of both. You know, a little bit, because then you do those vacations, have those memories.

• 20:06Brian Preston?

  Because I didn't hear anything about kids either, so let's go, you know, let's go make some memories as well as build a head start on even more years in the future.

• 20:14Speaker 04

  So I'm hearing you. At a minimum, you got to make sure that if, once you factor in your total comp, 25% is what you're saving, but above and beyond that, you kind of get to pick and choose. Do I want this to be used for future purposes, future goals that we have? Or are we on a good pace? Are we on a good path? Or we can use some of this just for now, to enjoy the present?

• 20:31Brian Preston?

  Well, and I want to bring in a little, this is where I coach, is because I've lived a life where, come into a marriage, my wife and I, when we both got married, neither one of us, like our idea of traveling was like our parents loading us up, going down to Panama City.

• 20:47Speaker 04

  Yeah, buddy.

• 20:48Brian Preston?

  And loading every, the entire family in one room, kids slept in the closet, you know, in sleeping bags, and you know, and so you do it. So when we got married, we hadn't done anything. Everything was nice. I remember we went to Cancun, Mexico, our honeymoon, and the place was not that great. But looking back on it, but for us, I was like, what? You got to be kidding me, they give you this, that? So it took very little to peak my happiness factor, and I would encourage you and your spouse, talk about it, and y'all figure out if there's some little thing, because I think, always think about like lottery winners. Lottery winners, their problem with their relationship with money and happiness is they try to do everything all at once.

• 21:29Brian Preston?

  And that is a failure for understanding how the hedonic treadmill and happiness and dopamine and all the other good things that happen when you feel this rush of, man, we're doing something together. So that's why I think you could probably take inventory in your relationship. Do something special that creates a memory, but then also make sure that this, this has potential to have fingerprints for many years to come in your financial success.

• 21:56Speaker 04

  Love it.

• 21:57Speaker 05

  Awesome. All right, we've got a question from Tyler Knecht. This is an interesting one. He says, "Any advice for an 18-year-old that pays their parents? I pay my mom about 20K a year, which is 1,667 per month for rent. So it's hard to save for college."

• 22:20Brian Preston?

  Man, how noble.

• 22:22Speaker 04

  Man.

• 22:24Brian Preston?

  But Bo, you were... I want to give you a compliment and set the table for you.

• 22:29Speaker 04

  Okay.

• 22:30Brian Preston?

  Bo, when he started working for me, 20 years of age, by the way. Made it through college, 20 years of age. Was literally making money, more money, I think, in college than it was when I offered him. Because he was on... He had so many scholarships.

• 22:43Speaker 04

  Took a pay cut to get my first job.

• 22:45Brian Preston?

  Tyler, obviously, tough situation. If you're having to pay your mom rent. I mean, I think this is so noble that you... It sounds like you got a rough situation, but yet somehow you are this unique individual that's able to go out and make money already at such a young age. That the reason I make the correlation of Bo is that it just sets you up, that you obviously are a dynamic person that seems like you have a lot of things going for you. And I think it's great that you're also using that talent and that blessing to try to pay, help your mother out who might be struggling with stuff. Bo, since you resemble a lot of this, because you came from a tough, humble beginning, but then you always seemed like you just were able to make things happen.

• 23:30Brian Preston?

  What would you share with Tyler?

• 23:31Speaker 04

  Yeah, it's interesting. Because here's what I don't know. I don't know the familial dynamic here, and I want to be sensitive to that. So I'm going to speak sort of just in absolute terms, kind of removing the family relationship out of the equation. Because, one, I think it's remarkable that you are 18 years old and you make enough money to be able to pay $20,000 a year in rent. Like, that in and of itself is pretty impressive. But you've also said, "Hey, because I'm paying this rent, it's going to be really hard for me to..." Be able to pay for college because it sounds like the burden of that is going to fall on your shoulders as well. So what are some things I can do? Now, again, this is where I want to be sensitive to the familial relationship and I want to kind of like, I don't know the unique

• 24:11Speaker 04

  circumstances there, but when I hear about an 18-year-old paying $1,667 of rent every month, where my mind immediately went was, man, that's pretty expensive rent. Like, that's a pretty expensive number. And so, one of the things that I would try to think through-

• 24:26Brian Preston?

  Got to negotiate with mom.

• 24:27Speaker 04

  Well, so one might be negotiate with mom. Hey, is there some way to like negotiate on this rental amount? Or two, if you are, let's assume that you're 18 and independent and sort of on your own or whatever, there might be other circumstances where you could provide shelter and housing for yourself that would be less expensive than $1,600. You might be able to go rent an apartment for $1,000 a month, or you could go rent somewhere and have a roommate and split cost or something like that. Again, I don't know the familial circumstance, but when I see that so much of your money is going to rent without knowing your income, I immediately think, okay, does this $20,000 you're paying in rent represent more than 25% of your gross income? Because that's generally our rule on housing. You don't want housing

• 25:11Speaker 04

  to cost you more than 25%. If that's the case, is there a way that I can get my housing costs down? So now, let's pause there. Let's assume the answer's no. I can't do any of that stuff. I gotta pay mom. I gotta send the house. I gotta do all this. Well, then what do I do for college? It sounds like if you don't have any money to save for college and you still have a desire to go to college, odds are you're probably going to have to borrow money to go to college. So I would think about, what are the least expensive ways that I can get my secondary education? Instead of going to like the large state public school, are there ways I could begin taking classes right now at the local community college, begin knocking out some of my core classes-

• 25:47Brian Preston?

  Dual enrollment.

• 25:48Speaker 04

  Doing dual enrollment. Are there solutions in place now that I could begin to satisfy my higher education requirement at a lower price point? And then, if it does get to the point that ultimately I have to take out loans, I want to keep my footprint absolutely as small as possible. And I don't want all of the student loan debt that I accumulate between now and the time that I leave college- To be more than what I anticipate my first year salary being. So if I think I'm gonna go get a degree in a vocation that's gonna allow me to make $50,000 a year, I wanna make sure that my total student loan debt does not exceed $50,000 for whatever I have to take out. So if you only have to accumulate 10, 15, $20,000 of debt, and that's something you have to do

• 26:31Speaker 04

  in order to be able to graduate, you're gonna find that once you get into the working world, that's gonna be much better than graduating saying, "Oh, I had this blank check. I have $80,000 of college debt. Now I gotta go pay on that for the next 10, 15, 20 years." That's a hard one. What did I say there that you like?

• 26:47Brian Preston?

  Well, I wanted to add just a few life tips here, cuz I mean, sometimes when you... I'm just assuming based upon paying rent to your... when you're that young, that this is a humble beginning situation. And I remember humble beginning for me was I didn't understand how scholarships worked. I didn't know how... And I always look back and I go, "Man," I didn't... Like, I took the SAT like, once, and you know, and it... Oh, look, I was really good at math, and you would wonder if I was even literate, like you probably do watching the show. On the other side, so I'm lucky I got into the University of Georgia. Fortunately, it was a lot easier to get into back then. But what I've now having resources, I realize how powerful it is for

• 27:28Brian Preston?

  young people to go take an ACT or an SAT prep. Do you realize how colleges give so much weight on scholarship and grant... scholarship money, based upon those test scores? So, don't sleep on the fact that, you know, you need to probably go take a prep course so you can get... cuz if you, if you pair a great test score with your humble beginnings and this life story, you probably go qualify for a lot of scholarships. And that would be a huge head start on not even having student loan. And then the other thing I was immediately thinking about is you... We hear this thing all the time talking about failure to launch, where kids just never go out on their own. And this is the opposite of this situation, is that you've got... I've got... I'm worried about failure to...

• 28:14Brian Preston?

  Well, I mean, I'm trying to... Be able to launch. Well, because I'm just, if your, if your mom is counting on you to provide this much money every year, now maybe you're gonna be, if you're a professional athlete and you can go buy mom a house and do the things that, you know, that you typically see on the news headlines about, that's great. But if you're just going a traditional path that you're gonna become a professional in something and you have to build, we need to start creating a process to where your mom's not counting on that rent. So that's healthy for you as well as for her to figure out where that transition point is because you have the opposite of a failure to launch standpoint is. Because if you're having to never be able to launch yourself because of having to cover family expenses, that, that, that can be an unhealthy relationship as well. Yep.

• 28:58Speaker 05

  Really good thoughts for Tyler. Tyler, thank you for being willing to ask that question and get that conversation started, and we hope that really helps.

• 29:05Speaker 04

  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.

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