The Financial Plan that Could Change Your Life

You might know the FOO (Financial Order of Operations ), but what does it look like in action? We walk through FOO-Following Freddie and his journey through each of the nine steps to building wealth. We know, though, that wealth-building isn't that easy. We then add some wrenches to the plan - from an accidental concert ticket purchase to buying a home to getting a raise. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠DRINKAG1.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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• 0:30Speaker 01

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• 0:34Speaker 02

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• 0:47Speaker 03

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• 1:24Speaker 01

  Why wait? Ask your doctor. Visit botoxchronicmigraine.com or call 1-800-44-BOTOX to learn more.

• 1:31Brian Preston?

  The Financial Order of Operations shows you exactly what to do with your next dollar, but does it really work in every situation?

• 1:38Speaker 05

  And Brian, I am so excited because today, we're going to see what it looks like for a person to actually follow the foo step by step. And we'll even throw some wrenches in there to see how it affects their journey and their wealth over the long term.

• 1:52Brian Preston?

  I'm Brian, he's Bo, and we're financial advisors here to help you navigate the Financial Order of Operations. With that, let's dive right in.

• 2:06Speaker 05

  That's right, Brian. The Financial Order of Operations is a nine-step guide to help you to decide exactly what you ought to do with your next dollar, but it's not a straight line. A lot of people think that. A lot of people think, okay, I go from step one to step two and step two to step three, but oftentimes, that's not how it plays out.

• 2:24Brian Preston?

  No, I want you to know, as you can tell, we're pretty proud of this system is because I like to say it's all-terrain, all-weather. It doesn't matter what's going on in your life. We got you covered. Bo, you've already kind of alluded to it. We even have a visual to kind of show this. A lot of people think it's just a walk up the stairs of you go from step one to step two and so forth. No, we know life is going to happen. There's going to be all kinds of things that happen to you. The examples we give here is, of course, you're going to have weird things happen with the vehicle you drive. You might lose your job. You might have big life things like you're going to buy your first house. We have a system that's going to get you through all these different elements.

• 3:04Speaker 05

  And what I love about today's show, Brian, is that a lot of systems are academic in nature and they're theoretical, but we thought, hey, let's step away from theory for a moment and let's talk about actual practical implications. What happens if we track a real individual in a real-life scenario navigating the Financial Order of Operations? So, we want to introduce you today to Foo Following Freddie. We're going to walk you through Freddie's life and how the Financial Order of Operations actually applies to him and what it could look like in a real-world scenario. So, Brian, we're going to start with Freddie. Freddie's 25 years old.

• 3:43Brian Preston?

  So, here's the thing. I feel like maybe I resemble more of Manny the Mutant, and now we've moved on to Foo Following Freddie.

• 3:51Speaker 05

  Right.

• 3:51Brian Preston?

  And Freddie might have some protein powder in his life. I mean, you can just sense this might be really falling on the line of Bo, even though you are older than 25.

• 4:00Speaker 05

  I am older than 25, but Foo Following Freddie is not. He is 25 years old. He has an annual salary of $58,500. That's right now the median salary for someone in the mid-20s.

• 4:13Speaker 05

  Right now, according to the US Bureau of Labor Statistics. So if we have a annual salary of $58,500, we know that the monthly take home after we factor in taxes and payroll taxes and things like that for Freddie is going to be just under $4,100 a month. It's $4,087. Well, we're going to assume that Freddie wants to keep his lifestyle in check. So when we factor in all of his monthly expenses and factor in groceries and utilities and rent and all of those things, we're going to assume that his monthly expenses are $3,500 a month. So if we have a total take home pay of $4,087 and we have monthly expenses of $3,500,

• 4:55Speaker 05

  that means that right out of the get go, there's some margin available to Freddie of $587. And we've already said this, Brian, he's starting at the very beginning. So he has zero savings. He is starting out at the beginning, blank slate.

• 5:10Brian Preston?

  Yeah, don't let Freddie's good looks fool you. He's actually already a financial mutant because he's, you're like, you're looking at the monthly expenses and you're like, how in the world can we be doing this for 3,500? He's got roommates. He's thinking about things. I mean, the big takeaway here for me is that margin part is he's already living on less than he makes. So he's got $587. That look, and what's crazy is we're going to show you how that little bit, 587, is where that is the seed that's going to get planted and really spring forth this huge elm of a tree that is going to build wealth in the long term.

• 5:43Speaker 05

  So let's jump in. If Freddie is going to begin walking through the financial order of operations, he's going to start at step one, highest deductible. And we know through our case study that Freddie has a high deductible health plan through work. So he's got his first job. When he thinks about the highest deductible that exists in his life, it is going to be his health insurance deductible. And for this case study, we're going to assume that it's $2,500 for that deductible.

• 6:10Brian Preston?

  Yeah, now look, a lot of you, if you're brand new to the financial order of operations, why do we even have this step in here? This is to keep you from making the desperate decisions that let you, that really derail you right out of the starting box. And the big thing you have to protect yourself from. Is the catastrophic stuff that can come your way. That's a health issue. That's a car accident. These are the type of things that you can insure away the risk, but it means that you do need to be prepared to cover the deductible. And that's why we start off with the highest deductible. Not all of them. You don't have to sum them all up, but we do want you to have the highest, which in this case is probably Freddie's health insurance. $2,500. We've already said he has margin of $587. So he's going to be able to knock this out in about four months.

• 6:53Speaker 05

  Yeah, it's going to take him four months to get through that. But at the end of that four months, once he has that $2,500 saved up, guess what he gets to do? He gets to check off step one of the financial order of operations. So we've checked off step one. We're four months into our career. And then we get to go to the exciting one. We get to go to step two of the financial order of operations, employer match.

• 7:13Brian Preston?

  Yeah, now, look, Freddie fortunately is working for an employer, like many of you are, where the government has incentivized our employers that say, hey, if you will put a little bit, prime the pump, let's get this engine of saving for the future going. If you'll put a little bit in for your employees, we'll give you some tax benefits and other things as an employer. And it's really created this nice cohesive system to where, just like for Freddie, his employer said, look, if you will put in 3% of your salary, we will match this dollar for dollar for another 3%. So that is 100% guaranteed rate of return that's going to give Freddie a 6%. You can't sleep on that. That's pretty powerful, Bo.

• 7:58Speaker 05

  So right out of the gate, Freddie says, okay, I have some margin. I filled up my highest deductible, so I'm going to take advantage of that free money. So 3% of Freddie's salary, the $58,500, is $1,755 a year or about $147 a month. Remember, he had $587 once he filled up his highest deductible. So he's going to pull out of that $147 a month to be able to max out his employer match. So he sets up automatic contributions to start happening from his paycheck, starting in month five. So he's going to be automatic for the people beginning to build wealth. You know what he gets to do at this point? He gets to check off step number two, employer match.

• 8:41Brian Preston?

  Yeah, but here's where we're going to, you know how when you, when you, you, you scratch a cat, you, you're supposed to always go with the fur. You know, the step number three, you're going to see that the intersection of two and three is where you've actually now rubbed the cat backwards because there's going to be a whole group of people out there be like, wait a minute. He has high interest debt and you just told this guy to do his 401k first? We've already blown up another system that's pretty popular out there. How can this be the case, Bo?

• 9:07Speaker 05

  Well, the answer is, is because that employer match free money is even more attractive than how scary the high interest debt is. When we look at Freddie, because he is a young person, he does have some credit card debt. Right now, he has a balance of $3,000 on his credit card, but the interest rate that he's paying is 22%. And while 22% is egregious, it's awful, it's bad, it's nasty. It's not 100%. And that's what his employer match is. That's why we prioritize step two over step three, high interest debt. So if we think about his minimum payment that he's required to pay, it's going to be $75 a month. But remember Freddie is a financial mutant. He does not want to pay the minimum payment.

• 9:52Speaker 05

  He wants to follow the financial order of operations. So after going to get his employer match, we know that he has margin of about $440 a month. Well, with that 440, we want him to extinguish this debt. We want him to knock out that $3,000 of credit card debt so that compound interest does not begin working against him.

• 10:15Brian Preston?

  This is where the discipline really does kick in because I think a lot of people, you get that first job, you, you get excited about the employer money that's coming in. But then you have this credit card and for a lot of us, we see the number is $3,000. And we're like, yeah, but I make over $50,000 a year. 3,000 is just not that much. And then you see your minimum payment's $75. There's a lot of temptation to kind of try to go ahead and get into Roth IRAs and doing other things to start growing your wealth. No, I want you to stay the course. Use that margin, that $440 to Get out of debt. This, you're paying 22%. You're not going to get rich ever if you're paying twice what you hope to earn to the banks.

• 10:58Brian Preston?

  So that's why I want you to go whole hog. Let's pay off this, this high interest debt for the seven months that it takes. And then, then we can continue the journey with the financial order of operations.

• 11:08Speaker 05

  That's right. At $440 a month, it'll take him about seven months to knock out that high interest debt. But once he does, boom, he gets to check off step number three. And then he gets to move into step number four, which is emergency reserves. Now remember, he has already established $2,500 for his highest deductible. So already has sort of some seed money in the emergency fund. And we always say that when it comes to an emergency fund, we want you to have somewhere between three months and six months of your living expenses available in cash, ready for you if an emergency comes. So Freddie looks at a situation. He says, I'm single, I'm not married, I don't have debt.

• 11:49Speaker 05

  There aren't other people depending on me. So he is going to determine that a three month emergency reserve is what likely makes the most sense for him. And remember, he has monthly expenses of $3,500. So if we take 3,500 times three, his need of an emergency fund is going to be $10,500.

• 12:08Brian Preston?

  This is going to be the biggest trap for my financial mutants. And by the way, how do I know this is a trap? It's because I fell into this trap myself. It's because a lot of you, look, you're going to get to step three, you have $3,000 of credit card debt. You know, you're paying 22%. That's common sense to say, we can't, we can't get ahead by paying 22%. However, you'll get to step four in your emergency reserves. And you say, you've always heard the term cash is trash. You want to get to your wealth building journey ASAP. Don't skip step number four. We think financial reserves and emergency, being prepared for emergency situations is not a one step. It's actually a two step part of the processes because this is the part where my financial mutants all the time will skip this step.

• 12:51Brian Preston?

  But, but here's the thing, you might lose your job. We all know bad news doesn't happen in isolation. It's typically. When it rains, it pours. You'll not only lose your job, but the stock market will go down. Your housing market will get destroyed. All these things very likely could happen at the same time. And when you, what you need to not do is take the, the cash, which acts like the oxygen that we breathe for granted. You need to go ahead, build up the three to six months. Don't skip this exercise. Be patient. Yes, I know it hurts that this is very likely for, for, for, we think about Freddie here. This is going to take 18 months and that's going to hurt. It's because they're going to be thinking about Roth IRAs. They're going to be thinking about what they could

• 13:31Brian Preston?

  be doing, investing this money in the S and P 500. Just hold, be patient. There are going to be plenty of stops on this journey to compound growth, but we've got to protect you by understanding the value of having good emergency reserves.

• 13:45Speaker 05

  So remember Freddie just paid off his high interest debt. So now he has $440 to work with. And if he's already got 2,500 in the high deductible pot, he's got to get to 10,500. He has 440 to do. It's going to take him just over 18 months to get there. But once he does that, once he commits to putting that money in that savings account for 18 months, he gets to check off step four emergency reserve. So at this point, Freddie is 27 years old. He's now been working the foo for two and a half years. He's made it all the way through step four. He is already in great shape. A lot of 27 year olds do not find themselves in this place. They have

• 14:29Speaker 05

  debt. They have no emergency fund. They feel like they're behind the eight ball because Freddie began to take it seriously at the beginning of his journey because he had a system, because he put a system in place. It took him two and a half years to get on solid financial footing, where now he can really begin building for his future.

• 14:47Brian Preston?

  What I like about the system also is that it's going to be, it's going to motivate you. I mean, I look, I've been in positions to where I was so ready to move to the next step of what I was trying to do with my financial life that I was literally rolling coins. I've been at points where you're counting on if your grandparents give you 50 bucks, we're excited because that I know this sounds ridiculous, but you also, I've had, don't go out to eat weekends. You know, where you just say, you know what, this weekend, so I can save an extra $200 towards my goal. I'm just not going out. This is the type of mentality that a financial mutant will have to get to step five and beyond.

• 15:26Brian Preston?

  So that you can actually start building those finance, you know, your, your army of dollars to really start working harder for you than your brain, your back and even your hands.

• 15:35Speaker 05

  All right. So let's remember Freddie's been working the financial order of operations for two and a half years. He's now into his career. He's 27 years old. Now let's assume that Freddie gets a raise. He ends up advancing his career, making good decisions, adding value. And so now he goes to an annual salary of $70,000. Well, as soon as that happens, some automatic things happen. He's already saving 3% into his 401k because he was getting that employer match. So now his 3% contribution gets increased up to $175 a month. Well, in addition to this, he also has a higher take home. His take home pay is now, after taxes, after 401k withholding, $4,628.

• 16:20Speaker 05

  But you know what Freddie doesn't do? Freddie recognizes, man, I'm a financial mutant. I'm still young. Just because I got this pay raise, just because I have more money now, I'm not going to change my lifestyle. And Freddie says at 27, I'm going to keep my monthly expenses at $3,500 a month. I'm going to keep them right where they are. And when he does that, he now has $1,128 of margin available to him every month. And keep in mind, he's already made it through step four. He didn't change his living expenses. So his high yield savings account, his emergency fund is at $10,500. He is ready to start rocking and rolling.

• 17:03Brian Preston?

  Yeah. Now we can come into step five with momentum because you can imagine not earlier before the pay raise, he only had a margin of, you know, 500 bucks, but then after you put that towards the matching money, the credit card debt. And other stuff. It just, it was 500 bucks. Now he's over a thousand bucks a month. We're going to crush not only step five, we're going to crush step six. This is gonna be fun to watch how your army of dollar bills can do. If you just can be patient, be disciplined, there will be your just reward in your future.

• 17:36Speaker 05

  So now he's putting 3% into his 401k. He's already saving there, but now he wants to kick it up a notch. And he knows that in order to max out his Roth IRA this year, he needs to save $7,500. So he just takes $7,500, divides it by 12, and he starts putting $625 a month into his Roth IRA. So he maxes that out, and even when he does that, he still has $418 a month left over. So then he says, hey, I'm already participating in a high deductible health plan at my work. I'm gonna go max out the individual HSA and the max this year for individuals on HSA plan is $4,400 a year.

• 18:17Speaker 05

  So now he starts putting $366 a month into his HSA. So even after maxing out his Roth IRA and maxing out his HSA, Freddie still has $137 of margin left over that he gets to do something with.

• 18:34Brian Preston?

  I, I think it's interesting. We started this in, in his early twenties and he was very disciplined. But I gotta tell you, it took a while and, and look, I don't mind being completely transparent. I've shared going through the financial order of operations. I didn't feel completely comfortable or feeling like I had money and margin, a lot of margin in my life. Until I was actually in my early 40s. So I think it's pretty normal that here's Freddie doing his best life. But even at age 27, it's probably not until he gets to step five that he feels like he's an unleashed financial mutant. Because now he's actually loading up his Roth IRA and doing things. I share that only so you see the transparency of it's okay if you get frustrated. That this is going to take some time to build this success.

• 19:15Speaker 05

  So we, once we get the money going into the Roth, going into the HSA, we get to check step five. We get to check maxing out those tax-free accounts. So now that we've maxed out the tax-free accounts, we've maxed. Maxed out the Roth, we maxed out the HSA. Now we get to go to step six, max out your retirement account.

• 19:33Brian Preston?

  Yeah, now this is, look, we've always been very transparent about this too. A lot of people get to step six and you see max out retirement, you're like, wait a minute, okay, I gotta start doing some math on this. You know, if the maximum you can do is 24,500, that's $2,041 a month. Freddie doesn't have it. He doesn't make that. He doesn't make enough money. So does that mean now I'm trapped in step six forever until I get huge pay raises? No, at some point, we're going to need to do a check to figure out what's your savings rate, where you're at. Cause we know that Freddie's margin is $137 to put into this 401k. That's a far cry from 2041.

• 20:12Brian Preston?

  But this is also a good time to stop and evaluate and say, hey, where are we at with our 401k and our contributions? Because maybe we can actually increase this margin if we take into account all the things that are working.

• 20:25Speaker 05

  Yes, he was not able to max out step six, but he is able to improve. He does add that $137. So now he's putting $312 a month into his 401k. So if we think about Freddie's monthly savings, we know that he's got $312 going into his 401k. We know that he has $625 a month going into his Roth IRA. We know that he's got $366 a month going into his HSA. So if you add all of that up, he's saving $1,303 a month. But if we think about his $70,000 salary, we know that we want him saving

• 21:00Speaker 05

  25% of his gross income, he needs to be saving $1,458 a month. But it looks like Freddie's falling just a little bit short.

• 21:11Brian Preston?

  Yeah, this is where people often wonder, where do your numbers come from? We always say, look, if you're bull, if you're close enough to the social safety net, if your income as a single individual is less than $100,000, $200,000 for a married couple, you actually get to count your employer match in that 25%. Well, we already know his employer is giving him 3%. It's a dollar for dollar match on the first 3%. So that's incredible. That immediately pushes him up. To $1,478, which actually beats the 25% by 20 bucks a month. This is magical because this means actually Freddie is a financial mutant who's not only graduated through steps one through six, he's now into step seven of hyper accumulation.

• 21:55Speaker 05

  Yeah, it's wild. If we think about this, Freddie is just two and a half years into his journey, two and a half years into his working career, and yet he's already built a solid financial foundation and he is starting to stack up dollars for his future. We just figured out that based on his income, he's saving 25% of his gross income at the ripe age of 27. Well, if you go out to moneyguy.com/resources, we have a great deliverable called how much should you shave? And how much?

• 22:27Brian Preston?

  You should shave enough to have just the least amount of facial hair that you want.

• 22:32Speaker 05

  How much should you shave at moneyguy.com/resources? Which shows that starting at his age, he's somewhere between age 25 and 30, if he can save 25% of his gross income by the time that he gets to financial independence, by the time that he gets out to age 65, he'll be able to get a pay raise. He'll be able to retire with a higher standard of living than he had during his working years, or what's more likely, he's going to be able to have more options sooner and earlier in life. This is how powerful the financial order of operations can be if you figure it out early and begin putting these parts and pieces into place.

• 23:14Brian Preston?

  Well, and that's, look, we recognize this is a nine-step system. And here's Freddie, he's in step seven. There still leaves two additional steps. We've got prepaid future expenses, which is step eight. We also have step nine, low interest debt. Well, this is the part where Freddie kind of gets his choose your own adventure. We already know he's single, he doesn't have children yet. He doesn't necessarily have any mortgage debt to pay off, so step nine's not really a big consideration. Step eight, yeah, so maybe he's traveled a little bit more, maybe has a little bit nicer car payment, or you know, maybe he's living life on consumption a little bit. More he could, or he could save this, be whether it's additional cash, whether it's additional investments. It truly is a choose your own adventure at this point for Freddie.

• 23:56Speaker 05

  What I think is wonderful, because what I want you to see is, okay, what do we do? We followed the financial order of operations. We just followed the nine step process. And so one of the questions you may be asking is, okay, well, where is this leading Freddie? Okay, yeah, I get it. He did this. And yeah, I get it. He did this. What does he actually end up at? What does his future financial life look like? And we never assumed that Freddie's income made it to $100,000. We didn't give him any big promotions or big pay raises. This was just taking some behaviors he figured out in his mid twenties and applying that across the remainder of his working career. Do you realize if he does this over an entire working career, by the time he gets to retirement,

• 24:37Speaker 05

  he would have a portfolio of almost 5.8 million dollars. Now, again, we didn't do pay raises. We didn't do cost of, that's 5.8 million in today's dollars just by executing the financial order of operations, starting in his twenties.

• 24:53Brian Preston?

  Well, I think it's, you know, this, this shows is a great case study is that we've, we know the data out there of when people cross into millionaire status is typically your late 40s. And look, Freddie, even though he never made six figures income, he crossed into seven figure status, the, the two comma club.

• 25:10Speaker 05

  Yep.

• 25:11Brian Preston?

  Right at age 48. So I'm telling you, this is the thing when people, what I love about this is I want you to use this as motivation is that we, we wrote the scenario, went right down through it, but everybody's gonna be different. Is that a lot of you will get a later start. Some of you will get a later start. Some of you will come into this with a later start, but a bigger income. You know, some of you guys use wherever you are, the financial order of operations will meet you where you are and help you maximize what to do with the next dollar. I just want you to get motivated. I want you to get excited and not feel like the system is stacked against you.

• 25:44Speaker 05

  One thing I think is beautiful about this illustration is you can see that in his first 20 working years, from 25 to 45, he goes from zero to $800,000.

• 25:55Brian Preston?

  Yep.

• 25:55Speaker 05

  But in the next 20 working years, from 45 to 65, he goes from 800,000 to 5.8 million dollars. If you can let your money work for you, it will do incredible things.

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• 27:34Speaker 01

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• 27:40Speaker 05

  But I can already hear the naysayers out there, Brian. They're saying, "But guys, what you laid out is unrealistic. That's not the way that life happens." Sometimes, curveballs get thrown our way. And we already alluded to that at the very beginning of the show. We said the financial order of operations is not a straight line. And what we just showed you through the Freddie case study, it was kind of a straight line. So we said, "Hey, let's throw some wrenches in there. Let's say, okay, how does it impact it if some things change?" So we said, "Okay, very first wrench, what's this look like if all of a sudden Freddie has an event take place and it wipes out his emergency fund?" Emergency funds are supposed to be for those unknown, unknown things that come our way and it completely wipes them out. So the example that...

• 28:25Speaker 05

  The content team came up with-

• 28:27Brian Preston?

  They're big Zootopia fans, I think.

• 28:28Speaker 05

  They said Freddie's nephew took his phone and bought 11 non-refundable VIP tickets to a Shakira concert in Rio de Janeiro. This wiped out all of Freddie's emergency fund. So what does he have to do? He has to go all the way back to step one. Remember, this is a guy who was crushing it. He was in step seven of the foo and then this thing happens and he has to go all the way back to the beginning.

• 28:54Brian Preston?

  So let's see, it's going to take approximately, if you did the math on this, it'll be about seven months of missing investments. And that's okay, because as we actually show you what the, the cause and effect relationship is, is that you recover. This is what I love about the Financial Order of Operations is even when life happens, and I know we took some liberties trying to be funny with this, you're going to be okay. The system will meet you where you are and help you navigate out.

• 29:22Speaker 05

  So I'm going to say it even differently. Taking off seven months of investing to step back and rebuild, instead of Freddie retiring with a portfolio of 5.76 million, his portfolio still makes it to 5.47 million. He still makes it to financial independence. Okay, but what if we have another type of wrench? Remember, one of the things we said is that Freddie had this great thing where he worked with an employer that gave him a dollar for dollar match on the first 3%. So he got free money from the jump. Well, what happens if at age 28, when he is starting to get some traction in his career, he decides to shift jobs?

• 30:03Speaker 05

  And when he shifts jobs, he now moves to an employer that does not have a 401k match. They still have a 401k plan available, but there is no match. What does Freddie do? Well, he goes back to step two and there is no employer match in step two. So it doesn't necessarily change his investing behavior, but what it does change is he now misses out, and we said if he's with this employer for 10 years, he now misses out on that employer match. 175- Dollars a month it was getting from his employer for 10 years even if that happens and the free money goes away it's still not a detrimental blow to his financial life.

• 30:45Brian Preston?

  What I think is like this is where I'm an optimist even in negative situations is because when we actually do the math on this and when we ask ourselves what is $175 per month invested turn into you can see the difference here is close to $400,000 if you would have told me hey if we go invest $175 a month for the next 10 years what's the impact go be I don't think a lot of people because if you do 175 I could probably you know times 120 that's only $175 times 120 months that's only $21,000 to say $21,000 impacts your life to close to 400,000 shows the power of compounding

• 31:28Brian Preston?

  growth now yes it stinks that his account is worth less you know close to 400,000 but Freddie's gonna be a okay.

• 31:35Speaker 05

  He's still okay so then let's okay well what happens okay maybe it's not losing an employer match or maybe it's not some emergency fund thing maybe Freddie is just a normal person that wants to make normal people decisions and he decides you know what one of my financial goals is I want to buy a house and I know that the average first time home buyer is somewhere in their early to mid 30s so we say okay what happens if Freddie decides age 35 he wants to buy a house well the very first thing Freddie's gonna do is say you know what I understand there's a better way to do money so when I go to buy my first house I'm gonna make sure that I follow

• 32:15Speaker 05

  the 3525 rule that's 3% down not 20% down necessary but at least 3% down I don't want to be in the house or in that home for any less than five years I want to make sure I can see myself there and I want to make sure that my monthly housing costs do not exceed 25% of my monthly gross income now this is a place to pause Brian because What a lot of people don't recognize is that the three and the 25 have to coordinate.

• 32:46Brian Preston?

  Yeah.

• 32:46Speaker 05

  A lot of people say, "Oh, I'm gonna put 3% down." But if I only put down 3%, I may run afoul of the 25. I may have to put more down. And what Freddie determined was, man, you know what? In order for me to follow these home buying rules, I'm gonna have to put down more than 3%.

• 33:03Brian Preston?

  Yeah, we backed into the math. We'll go ahead and do that for you. We figured out it was gonna be 9% to still qualify under the 25% amount. So yes, we gave, you know, if you know our 3.5%, 25%, we do give a lot of grace on that down payment where it can be as low as 3%, but we do want you to pay respect to the fact of, so you're not house-rich, life-poor. This actually would hold Freddie back by, he wouldn't be able to invest. It would take him 18 months to come up with that house down payment. That's a big deal for a financial mutant. So you can imagine, and not only that, it didn't only take him backwards on saving up for the down payment. We figured out, because a lot of people, if we're having an honest conversation, when you buy the house, there's some additional expenses that come into your life too.

• 33:46Brian Preston?

  So we even took into the consideration that now your monthly housing and living expenses are going to be higher. What did we assume? About $1,000 a month?

• 33:55Speaker 05

  Well, what we said is because they're higher, he's only going to be able to save $1,000 a month. Remember, he was saving substantially more than that. But now at age 35, he buys this house. It's a new financial goal that he has, but he has to decrease his savings. Well, even having to decrease his savings to $1,000 a month at age 35, because he did a lot of the hard work early on, because he followed the financial order of operations from 25 to 35, he's still, even with a reduced savings, even not saving 25% of his gross income, he still gets to retirement, age 65, with over $4.6 million.

• 34:36Speaker 05

  Again, even though it's a lower number than original, I think that Freddie's gonna be okay.

• 34:41Brian Preston?

  So we've done, what I find interesting, Bo, is now, none of this is bad. But well, besides the Shakira tickets, that was negative, but you know, but the... Next one, a life decision, that's a choice. But life's not always bad news or sideways moves. Every now and then, the world and life smiles upon you. And what if all of a sudden, at age 40, he got a really large pay raise? What would that do to this?

• 35:08Speaker 05

  Yeah, what's great is we said, okay, what if he gets a significant pay raise? And now, because of that, he's able to save anymore. So he takes this new job and he gets this new raise and he's able to invest more in his 401k. What if at age 40, even though he was following the foo from 25 all the way to 40, what if he was able to kick it up a notch? And he started saving $2,000 a month, starting at age 40. Well, on his normal path, by the time he got to retirement, he was able to retire with about $5.7 million. But just by being able to save in his highest earning years from age 40 to 65,

• 35:48Speaker 05

  now his retirement nest egg is $6.3 million. Just because instead of allowing that money to go purely to lifestyle, he allowed it to also build for his future financial well-being.

• 36:03Brian Preston?

  I've really enjoyed going through this exercise because when we talk about the financial order of operations, I always say it's the all-weather, all-terrain type vehicle. And this shows you, because the other part about what we get to do for a living, Beau, is that I love that we looked at every one of these things kind of independently of each other. Is that I always say that there is not just one path to success. There are literally to infinity and beyond paths of success. And we've just now covered, here's five different paths. And what I think is interesting is they go from $4.6 million of success all the way up to $6.4 million of success. Your life really is a choose your own adventure. And you kind of have to figure out what you, as a financial mutant, want to get out of life.

• 36:47Brian Preston?

  Because we'll give you the numbers, we'll give you the mindset. But the other day, personal finance is definitely personal.

• 36:53Speaker 05

  And what I love is, is no matter what life throws your way, no matter what thing happens while you're in this accumulation phase. We want the financial order of operations to be your benchmark. We want it to be your compass. We want it to be your guide that lets you feel confident that you know exactly what you're going to do with your next dollar. We've built this both through our personal experiences as well as the experience we get to share with hundreds and thousands of financial mutants out there that have been able to successfully navigate their financial lives. This isn't just theory. It's not just academia.

• 37:31Speaker 05

  This is a real world system that we have seen really work in practice for real people every single day.

• 37:39Brian Preston?

  Yeah, so that's why I want to invite you. If you, if you look at this and go, yeah, but how's this pertain to me specifically? You've got several options. The easiest, and by the way, we want to make this as easy as possible. If you go to learn.moneyguy.com, we actually have the Financial Order of Operations course. We updated this. We dropped the price to like a quarter of what it used to be. You heard that right. We really did shave off about 75% of the cost is because we wanted to make this as accessible as possible to our audience. And by the way, even if that's too much, we also have my book, my New York Times bestselling book, Millionaire Mission. We'll walk you through the financial order of operations because our biggest thing is, is that I want you to live your best life. Bo wants you to live your best life. We want you to be a financial mutant without regrets.

• 38:22Brian Preston?

  And we know that even though building wealth is relatively simple, it doesn't mean it's easy because what happens is when you start doing these simple steps over and over, you're going to find that even though you're trying to keep it as simple as possible, complexity will show up. And that's what, guess what? Once again, just because we planted that seed that turned into a giant elm of success, we'll leave the porch light on for you. That's why we work with clients in 49 states all across the country. We'd love to make it 50. So reach out to us. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

• 38:59Speaker 05

  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.

• 39:31Speaker 00

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