Are You Making This Mistake With Your Cash?

Your emergency fund is so important it takes up TWO steps of The Financial Order of Operations. Far too many Americans, though, are not prioritizing their emergency funds. We've got fresh data from Bankrate that breaks down everything you need to know about the status of American emergency funds...and we aren't thrilled with the results. Then we answer your financial questions on everything from 401k match to sinking funds to CoastFI to a new box truck. Don't miss a fun new segment focused on recent headlines and how we're reacting to them. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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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• 0:35Brian Preston?

  Are you? Wow. Are you making this massive mistake with your cash?

• 0:43Brian Preston?

  Couldn't have planned that.

• 0:44Speaker 02

  Right, I am so excited because I think a lot of people are indeed making this mistake and they shouldn't be. And I think a lot of times when folks fall into a bad behavior, they often don't get caught in the bad behavior. So it makes them think it's okay, it's okay, it's okay. And what ends up happening is it's okay until it's not. And I think what we're talking about today, a lot of people are in that place.

• 1:07Brian Preston?

  Yeah, I mean, your emergency reserves, this is the part that's going to keep you from making desperate decisions. It's that margin or layer of protection. But yeah, we're finding out that most Americans are not respecting this. You know, recently came out, Bankrate released their emergency savings report and there's some really disturbing things that came out of this.

• 1:26Speaker 02

  Yeah, this first one, I think was maybe the most frightening. Did you know that right now 29% of Americans, almost one in three Americans have more credit card debt, more balance that they are carrying from a month over month basis than they actually have in emergency savings? I gotta believe, we see a lot of our stats, Brian, about how, you know, the thousand bucks. This is one of the most frightening, I think, we've shared because I could not imagine constantly living in that place.

• 1:55Brian Preston?

  Well, I am more in a trend where it seems to be getting worse. If you look at the fact that, and this is another thing that came out of this Bankrate report. Is 75% of Americans reporting having less emergency reserves than they did this time last year, or none at all. And I think a lot of people are right there on that razor thin margin of basically doing all the desperate decisions, using the credit cards. That's what that stat showed to me is that people are using credit cards as their emergency reserves, instead of having that piece of money.

• 2:24Speaker 02

  Well, and what's really interesting is this says that the emergency reserves has actually been decreasing. If you think about it, just the nature of inflation, what inflation is, is that the cost of goods, cost of services increases through time, thereby our burn rate likely increases through time. That would suggest that our emergency fund should actually increase through time. And yet, most Americans are moving in the wrong direction. Rather than their emergency reserves increasing, their emergency reserves are actually decreasing. That means that they get it wrong. And so, one of the things that was interesting in the study is, we read this stuff, and we come across this, we begin asking, okay, why? What was the reason? What was the purpose? Why is this happening? And they actually had

• 3:08Speaker 02

  a chart, and the question that Bankrate asked was, which of the following did you use your emergency fund for in the past year? And I thought the results were sort of interesting.

• 3:20Brian Preston?

  Yeah, I was actually happy that they put this question in there, because when I see decreasing data, I'm always like, well, what changed? Why is it? So, good on them that they actually put the question in there. And there are two of these that we wanted to highlight that we think are A-OK, is 51% actually had unplanned emergency expenses. Well, hey, that's what the money was there for.

• 3:39Speaker 02

  That's why the emergency fund exists.

• 3:40Brian Preston?

  The other one was, they were paying down some debt, you know, and if you pay attention to the financial order of operations, you notice that step three, high interest debt, is definitely before you're fully funding your emergency fund. We're A-OK if that's what you got stuck in. Where even, there's some gray zone areas, too. I think we put these as orange.

• 4:00Speaker 02

  Yeah, I think, I think you mentioned high interest debt. That's the thing it has to be, because what this says is, this does not specifically say that people were using their emergency fund to pay down high interest Debt, they just said pay down debt and that can be okay if it is a step three thing. But if you're using your emergency fund and you're paying off student loans, you're paying off auto loans that fit inside of 238, you're paying off a low interest rate mortgage, there's a chance that you're doing it wrong. So I want to remind you, when it comes to your debt, not all debt is created equal. Some debt should be considered high interest step three, but other debt should actually fall into step nine, the low interest debt part of the foo.

• 4:42Speaker 02

  So if you're someone in your twenties and you have student loans that are below 6%, perhaps it does not make sense to pay those off aggressively. If you're in your thirties, that's 5% and your forties, the number drops to 4%. If you're someone who has an automobile and you have followed 238, you've done what you're supposed to do there, even if it has a higher rate, even if you're a 20 year old and you have an eight or 9% auto rate, but it fits inside of 238, perhaps it does not make sense to pay that off aggressively, certainly not with your emergency fund. For your thirties, it drops to 9%, forties, it drops to 8%. And then credit cards are never okay. You should never carry a balance on a credit card, even if it's 0%, you should be paying it off.

• 5:24Speaker 02

  So if you do have emergency dollars sitting there, but you also have credit card debt that is rolling over month over month, that would be an acceptable place and acceptable reason to actually use the emergency fund to satisfy that debt.

• 5:38Brian Preston?

  So now let's look at where are the places people are using their emergency fund that we have issue with. And the first one I thought was, you know, monthly bills, day to day expenses. That's, that's kind of, that's, that's more of lifestyle or showing that you're not living on less than you make, you're not actually creating the margin in your financial life.

• 5:59Speaker 02

  Yeah, I think if you are doing that and your day to day, month to month, week to week expenses are coming out of your emergency fund, what that suggests is that you are likely living beyond your means. You're not living at your means, you're allowing your past self that's saved up to subsidize the life that you're living right now. And so one of the things you ought to immediately do is recalibrate. Okay, why am I spending money this way? Where is the money going? Is there a way that I can get my monthly bills or my day to day expenses down as low as possible so that I can then be inside my means, not beyond my means?

• 6:38Brian Preston?

  And then if you move on to the next category, now this one, look, I think it's noble. But remember, you always put on your oxygen mask before you put on for your kids, you put on for family members when you're on the airplane. They want you protecting yourself first, and that's when we see people helping a family, friend, or a member. It's noble, but man, if you're already in a dire situation for yourself, it could be pretty dangerous.

• 7:01Speaker 02

  That's exactly right.

• 7:02Brian Preston?

  And then discretionary shopping, that's definitely no-no. How about vacation? That's a no-no. If you're running debt to build a vacation, that's not really a vacation. You're just building up a problem for yourself in the future. And then discretionary experiences, I don't even know what that means. What is that? What is discretionary?

• 7:20Speaker 02

  I'm assuming that's entertainment, concerts, those sorts of things.

• 7:25Brian Preston?

  That's YOLO, right? You only live once, go take advantage of that. I know that's a 2012 statement or whatever, but who cares? I'm telling you discretionary experiences seems like a bad decision in the masquerade that I've got to live for the moment.

• 7:38Speaker 02

  When you tap into your emergency fund for these type of things, what you're doing is you're actually taking advantage of your past self that saved for these expenses, and you're actually robbing your future self who had that money there for that unknown, unknown expense. So what's the better way? What's the way that you ought to think about this? Well, first you have to recognize why the emergency fund even exists. If you are underfunded, and we say all the time, we want you to have three to six months of living expenses in a fully funded emergency fund. If you're underfunded, what that then does is it opens you up to future financial risk. Maybe you're that person that says, oh, you know what? I'm going to keep one month of expenses in my emergency fund, or I'm not going to keep any cash, I'm going to be investing, and I'm going to do this and all these other things.

• 8:23Speaker 02

  And then something happens. The car breaks down, you have the medical expense, you have the job loss. Well, now, all of a sudden, this optimized machine that you were trying to operate in your financial life gets thrown off kilter, and now the only solution, the only recourse you have is to start swiping, to start racking up debt. It really opens you up to serious future financial risk.

• 8:45Brian Preston?

  Well, and also, I want to say, don't go too far in the other direction either. We are financial mutants. I want you to have that nice layer of protection by having an emergency fund, but don't go too far with it. I mean, all the time when we're doing episodes of Making a Millionaire, it's not uncommon to find financial mutants that are creating sinking funds for the craziest things, like, you know. Paying their annual.

• 9:06Speaker 02

  $11 for auto registration.

• 9:08Brian Preston?

  Auto registration fees or things like that where you go so far and you add it up and you find out not only do you have the three to six months of cash reserves, but then you have a whole nother year of cash just with these sinking funds. Be mindful that you can, there's too much of a good thing also because that may, if that's keeping you from loading up your 401k or loading up your Roth IRA, you might be doing it wrong in the wrong direction.

• 9:30Speaker 02

  Yeah. And then I think one of the best ways that you can protect yourself is you have to know your own numbers. Are you at the place where you actually understand what your burn rate is? Far too often I'll see somebody, I'll have a prospect reach out, but hey, I've got, you know, $30,000 in cash. And I'll be, okay, great. How'd you arrive at that number? Well, okay. Well, you know, when I set up my emergency fund, I was spending $5,000 a month and for six months, 30,000. Like, okay. Well, how much are you spending right now? Like, what's it cost to live the life you want to live on your terms? Oh, 8,000 bucks a month. Whoa, whoa, whoa. Just because the emergency fund used to satisfy the person you were in your 20s

• 10:10Speaker 02

  and your 30s, doesn't mean it's the right amount to satisfy the person you are now in your 30s, 40s and 50s. And so make sure that you are keeping an eye on what your actual burn rate is. So you know where your true lifestyle footprint exists. So that way you can make sure you have an emergency fund in place.

• 10:27Brian Preston?

  And then the last thing we'll close this out with is remember, this is a two-step process. What do I mean by that? We actually have two steps of our financial order of operations dedicated to emergency reserves. Step number one, highest deductible covered. This keeps you from just the emergencies, the bad things from a healthcare, from your auto, you get in a car accident, homeowners. We got you covered with your highest deductible covered. And then once you get through, you're getting the free money from your employer, you pay off the high interest app. We want you to have that three to six months of cash reserves. That's what's going to help you live your best life and sleep peacefully at night.

• 11:03Speaker 02

  I love Brian that we get to sit in this position, that we get to share this kind of information with you guys. We love that we get to do that. You know what else we love? We love when you subscribe, when you click the subscribe button so that we know that you are out there, that you are dialed in. If you subscribe, we promise we're not going to load up tons of content and blow up your feed. Every time you get a notification for us for subscribing to this channel, it is going to be brand new content, stuff you've not seen, stuff you've not watched. So if you've not subscribed, please do that right now so that we know you're out there. And what we like to do every Tuesday morning at 10 a.m. Central, Brian, is we like to answer questions.

• 11:41Brian Preston?

  That's exactly right.

• 11:42Speaker 02

  We like to load you guys up because we really do believe that there's a better way to do money. So what happens is if this is your first time, we have the team out in the wings right now collecting your questions. Make sure you get your question in the chat. If you have something you want us to weigh in on, you want to get our take on, you just want our thoughts on it, we would love to load you up. So with that, Creative Director Rebe, I'm going to throw it over to you.

• 12:06Speaker 03

  We're going to kick it off with a emergency fund question from Heather F., since that's what we're talking about this morning. It says, "Good morning. What is the typical timeframe of building an emergency fund? My husband and I have been stuck on this step for two to three years. We've had emergencies and it's taking forever to get to step five." Very real question. What advice or motivation or thoughts do you have for Heather?

• 12:31Speaker 02

  I know Brian, as I've experienced this in my life and as I've also kind of walked through with clients or their young people, it's hard and long in the beginning often, right? Like a lot of times it takes some time to get there, but the great thing about the emergency fund is once you have it, once you've completed it, once you've got that three to six months, you get to check the box. Like, okay, I've done it. Now I can focus on the other stuff. And so what's the appropriate timeframe or the right timeframe? Whatever you can do. I don't want to suggest that, oh, okay, you got to get an emergency fund built exactly inside of three months because that may not be. The case for you, but I also don't want to say, well, don't worry, just build it up over the next five or six years because in reality, if it's taking you a long time to build the

• 13:16Speaker 02

  emergency fund, there is an opportunity cost that you're missing out on having those dollars working. So one of the things, or one of the things we often tell people is when it comes to making financial decisions, really you have two levers that you get to pull. You can either increase your income or you can decrease your expenses. Well, doing either one of those will help you create additional margin in your life to build up that emergency fund. So I would argue, and look, emergencies happen, unknown unknowns come your way, things that we did not plan for come to fruition. That's what it's there for. If you have to use it and then rebuild it and use it and rebuild it, that's okay. Figure out how you can build it as quickly as possible.

• 13:56Brian Preston?

  Well, just by the way Heather wrote the question, I can tell that there's some frustration.

• 14:00Speaker 02

  Sure.

• 14:01Brian Preston?

  Because they've had some emergencies. I want to reframe this in a little different way is that Heather, I want you to give yourself some credit that if you didn't have this emergency fund that keeps getting used for emergencies, how bad would your credit card debt be? How many bad things would you now have just hanging over your shoulders if you didn't have this peace of mind money? I think it's actually, it's done exactly what it's supposed to do. It's been that layer of protection. It's frustrating to you because you're just stuck in, in, in step four, but you want to move on to the wealth building side and step five and six and beyond. But let's celebrate the fact that you actually had the margin, didn't have to make any desperate decisions because now, when you hit a good stretch, because it will, there will be some daylight that comes your way where all of

• 14:45Brian Preston?

  a sudden now, maybe you go three months, six months, nine months where the sky's not falling anymore. You start catching traction, you start building assets. That's when you'll be ready to know what to do with your next dollar with the financial order of operations. But I think the system has done exactly what it's supposed to do so that you're poised to take the next step to build wealth instead of just scrambling and always feeling in this state of being in desperation or debt that the majority of Americans are struggling with because they don't have that layer of protection.

• 15:15Speaker 02

  Love that.

• 15:17Speaker 03

  Heather F., thanks so much for the question and just the conversation about where you are in the food. That's great.

• 15:23Speaker 02

  Can I tell you two interesting things? You ready for this?

• 15:25Brian Preston?

  Yep.

• 15:26Speaker 02

  One, there's a lot of people in the chat that are worried about you, right? They say, hey, is Brian okay? He sounds like he may be under the weather. That's the first thing. I think you should address that. Second thing, a lot of people out there are saying, I kind of like this Brian voice. So like, could Brian bring this voice to every single Tuesday?

• 15:43Brian Preston?

  Let's see if we can do something here to show some value with this voice.

• 15:46Speaker 03

  Okay.

• 15:48Brian Preston?

  Elvira.

• 15:54Brian Preston?

  Anybody who's my age knows exactly that 33, it hit a little differently when that bass dropped in.

• 16:01Speaker 02

  There's a lot of people in the chat who have no idea what that was.

• 16:03Brian Preston?

  So that's all right. They're gonna go figure it out right now. I gave them enough clues.

• 16:07Speaker 02

  That's hilarious.

• 16:07Brian Preston?

  The reality is, is I felt much worse yesterday. I'm actually on the mend. I feel pretty good today.

• 16:12Speaker 02

  But you're not sick.

• 16:13Brian Preston?

  I woke up.

• 16:14Speaker 02

  Tell them you're not sick.

• 16:15Brian Preston?

  No, I was under the weather. Definitely. You know, I even told you, I said, hey, you might want to keep a little space for me today. But, but you know, my voice, it's a, it's a, it's a lagging indicator. It's not actually on the front end of the recovery. You know how these things work. It takes a little bit to get all the stuff out of the system.

• 16:31Speaker 02

  What a nerdy joke.

• 16:32Speaker 03

  So he's gonna be just fine. Do we have cold medicine Brian today here?

• 16:36Brian Preston?

  No, actually, for the sacrifice of the show, I wanted to make sure, not only did I load this thing up with all the, the supplements I take to make this old brain work, but I actually avoided the cold medicine so that I could give you all the best version of myself.

• 16:51Speaker 03

  Extra Sharp Brian is here today. I like it. All right, let's go to the next question from Tracy. It says, I started a new job and can't roll over my Roth 401k contributions from my previous employer's plan, which is the majority of my retirement savings. What should I do with those dollars if I want to retire at 55?

• 17:12Speaker 02

  All right, I'm gonna read this back slowly to make sure I've got it. I've got a new job and I can't roll over my Roth 401k from my employer. Why? What should I do with those dollars if I want to retire at 55? Well, a lot of times we tell people, when you, when it comes time to roll over an old 401k, you have a couple of different options. If you've not seen our flow chart, we have an amazing flow chart. You can go to moneyguide.com/resources and download it, what to do with an old 401k. And one of the things we often talk about is, hey, be real careful if you're going to roll over a 401k into an IRA rollover. Cause if you're someone who's carrying out something like a backdoor Roth conversion, and now you have IRA assets, you have now muddied the waters where you have to worry about the prorata rule and you're running into some issues.

• 17:57Brian Preston?

  But.

• 17:58Speaker 02

  Tracy's was a little bit different. Hers was asking about.

• 18:01Brian Preston?

  Well, it's Roth.

• 18:02Speaker 02

  Roth dollars, right?

• 18:03Brian Preston?

  Roth 401k dollars, they're not going to have those same limitations.

• 18:07Speaker 02

  So one of the questions that I would have is what is it? Or why are you under the impression you're unable to roll those dollars over? Perhaps what you could do is go open up a Roth IRA at any of the custodians you like, the Fidelities, the Vanguard's, the Charles Schwabs, wherever you want. You can roll those Roth 401k dollars over into your Roth IRA. It's a completely tax-free transaction, so you're not going to generate any taxes or anything like that. And then you get to control what you invest in and what you do with the money and where it's at. Now, one other thing that could be happening, Brian, and I wonder if this is the case. Perhaps she looked, or he or she looked at their account and they noticed there were some like non-vested dollars.

• 18:50Speaker 02

  And hey, I can't roll it over because I might lose the money if I roll it over. Now, it'd be really interesting with that being the Roth portion. That means that you would have had to have converted some employer money into Roth at some point. But oftentimes when we leave a 401k, we might not have access to all of those dollars. Some of those dollars might be unvested if it's some sort of matching or some sort of profit sharing. And you think, okay, well, I'll just leave it in there and I'll have those dollars when I retire. That money's not your money. It's not your money now. It's never going to be your money unless you go back. So even if you roll out and you have to forfeit those non-vested dollars, those are going to be forfeited anyway. So don't let that be something that is inhibiting you or stopping you from rolling those dollars over.

• 19:30Brian Preston?

  Well, I think Tracy, definitely go take advantage of that resource. I mean, we legitimately have made it to where you just basically answer questions and follow the flow chart. Because you're going to quickly decide, hey, maybe your, your old Roth 401k was spectacular and you just want to leave it there. Nothing wrong with that. If it's, as long as you go through the work and make sure it's really a good plan. Or you can, um, if you check your employer, measure twice, cut once, make sure your employer, you sure they don't take rollovers? Cause a majority of plans do take rollovers. I would want to confirm that. And if that's not the case, and you don't like your old employer's 401k, cause maybe it's expensive, or it's a bunch of sub account fees and other things, then yeah, you can, I, I, I find it hard to believe that you couldn't then go set up a rollover Roth, you

• 20:13Brian Preston?

  know, IRA that you could transfer the money in. It's not even really a rollover. You're just a Roth IRA. Set it up and transfer those assets in there and do a trustee to trustee transfer.

• 20:23Speaker 02

  Somebody says, ma- maybe the issue is the new employer won't accept rollovers. That could be, that could certainly be a thing, but that's why you can open up a Roth IRA and then you have your access free and clear. One thing to be mindful of, if you do have two different sources inside your current 401k, say you have your Roth dollars, but then you also have employer money, pre-tax money. Don't just like carte blanche, roll all of the assets into Roth. Cause if you do that, you could create a taxable event across the employer dollars. Oftentimes, when you want to roll those dollars over, you have two checks issued or two ACH is sent, all the pre-tax money to a pre-tax rollover, all the Roth money to a Roth rollover. So that way you don't have any unintended or unplanned for tax consequences.

• 21:04Brian Preston?

  We've even split it, where you can roll your Roth portion to an IRA, Roth IRA. You can do your pre-tax to your new 401k at your existing employer. And that way you keep all the things separated.

• 21:16Speaker 02

  Love that. You gotta keep them separated.

• 21:18Brian Preston?

  That's, that's exactly where I was going with the offspring there.

• 21:21Speaker 02

  How many song lyrics can we get in today's show? Y'all ready for that?

• 21:24Brian Preston?

  We didn't even try this game, but we're doing pretty good at it so far.

• 21:27Speaker 03

  Great. Is anybody keeping score?

• 21:30Speaker 02

  I think we're at two.

• 21:31Brian Preston?

  Well, I think I'm at two.

• 21:33Speaker 02

  Okay, okay.

• 21:35Speaker 03

  This isn't a team sport. It's Bo against Brian, apparently. Well, Tracy T., thank you for the question. We really appreciate you being here and talking personal finance with us today on the show.

• 21:45Brian Preston?

  How many people knew it was the Oak Ridge Boys?

• 21:47Speaker 02

  Somebody called it Oak Ridge, Preston. So, yeah, we got some folks out there.

• 21:51Speaker 03

  They were out there.

• 21:53Brian Preston?

  Oh, that's a difference. Hanson.

• 21:54Speaker 03

  I was gonna say, I don't think that voice works for that song. I knew that one.

• 21:58Brian Preston?

  That's three, by the way.

• 21:59Speaker 03

  Oh, man. Well, hey, we're gonna do a couple more questions and then we are going to try a brand new segment of the show today. So be sure to stick around for that. But in the meantime, get your questions in the chat because we're still going to be answering several more throughout the duration of the episode. All right, next one is from BentCan14. It says, "Are sinking funds included in the savings rate? I have 401Ks, Roth IRA, and sinking funds, but it feels like I'm doing something wrong if I include them in my savings rate just to spend those dollars later."

• 22:35Speaker 02

  What say you?

• 22:39Brian Preston?

  I, you know, this is because we ran into this with our Making a Millionaire episode is that somebody was telling me that their burn rate was like $10,000 a month. And I was like, wait a minute, four grand of that is going into sinking funds. You're not really spending that.

• 22:50Speaker 02

  Right.

• 22:51Brian Preston?

  So your burn rate is not $10,000 a month. So I don't, it depends on the end. If it's for an expense that will happen this year, then yeah, that's not a savings rate. If it's for something like a house down payment, I mean, or something like that, it's in the gray zone. But really, when we say savings rate, can I be, let me give you the clarifying thing. It's the 25% that with the 20 to 25% depending upon how old you are, is really for retirement dollars or money for your Army of Dollar bills that's going to work for you in the, in the future for retirement. So if these sinking funds are going to be used in the next three to five years, they're never going to get invested. To be part of your army of dollar bills for retirement, then no, I don't think you can count it.

• 23:32Speaker 02

  Yeah, I would say that a pretty hard line. I do not count sinking funds in my savings rate. Even if I'm doing something like saving up for the down payment on a mortgage, that's incredibly noble, noble, but I can't, what I can't say is I'm saving 25% and it's going into my down payment for my mortgage. I think what you're doing is you're saving some number less for financial independence. Maybe it's 5, 10, 15%. The rest of the money is going for this like prepaid expense that you have coming. But when it comes to 25%, we want that to be for future financial independence. Sinking funds is more paying for intermediate term goals or short term goals. It does not count that. Now, don't mishear us.

• 24:13Speaker 02

  That doesn't mean that they're bad. It doesn't mean that they're wrong. Doesn't even mean that you shouldn't do them. It means you should do them with the understanding of, okay, this is causing me, if it drops me below a 25% savings rate for the future, I'm now living in that gray zone where I'm under saving for what I should be saving for financial independence. I want to get the sinking fund funded. I want to save the dollars. I want to have them there. And I want to get back to 25% going to my future self as quickly as possible. And that's totally okay. That happens. That's part of the journey.

• 24:41Brian Preston?

  But I want to give the corrective advice that we see people all the time that they use, because sinking funds are just a component of helping you be disciplined to build the margin in your life. So you live on less than you make. But a lot of times they get that, that good habit and the good feeling you get from doing that good habit. It kind of gets too good, too big. And it over, it overwhelms your step four emergency reserve. So we find out that people have not only six months of emergency, emergency funds, but they have these huge accounts with these sinking funds. You're like, well, wait a minute, isn't that part of your emergency fund? And they're like, oh yeah, well, I guess I'm double counting. And we're like, well, yeah, you've got, you've, you've taken a good thing and turned it into foolish behavior.

• 25:24Brian Preston?

  And the fact that you built up this emergency cash way too big. And the corrective action is then we say, okay, why don't we take some of those sinking funds? It should be part of just your emergency fund and let's actually deploy them. Into the financial order of operations like into your Roth IRA or other things. There is a way to correct this that actually does create army of dollars and wealth for the future, but you gotta go through the effort of figuring out how much of this is supposed to be just emergency funds?

• 25:51Speaker 02

  Yeah, a lot of people are asking, oh, hold on, wait, wait. So shouldn't the emergency fund count towards a 25%? Isn't that a thing you have to? Don't miss here. Well, here's what we're saying. If you don't have a fully funded emergency fund in your past step one, two, three, it should be all hands on deck to fund the emergency. It's not like, okay, well, I'm going to save 25% towards my emergency fund and then I'm going to go spend all the rest until I get that. No, you should aggressively save as much as you can, as fast as you can, as hard as you can to get the emergency fund built up. And then, once you've done that, that's where the 25% starts. Okay, now, when I'm working towards 25%, I've got the emergency fund built. Now, I'm going to look at Roth IRA for me, Roth IRA for my spouse, HSA, 401k contributions, after-tax brokerage account.

• 26:35Speaker 02

  Those are where the 25% happened. Your emergency fund is something that should be like, uh-oh, I gotta get that in place. 25% doesn't factor in. And that's as much as you can possibly save to get there as quickly as you possibly can, assuming you're past one, two, three.

• 26:54Speaker 03

  Very thorough and good answer, guys.

• 26:56Brian Preston?

  You acted like you just did a, you got squeezed on the, um...

• 27:00Speaker 03

  I know, like, at the end, he was like, let me just throw this in there real fast. This is not rapid fire. Um, well, Bent Can 14, thank you for the question. Appreciate you being here.

• 27:10Speaker 03

  Next one, I am interested to see what you say. Uh, it's a 238 car question from James L. I need to buy a box truck for my next job. Should this follow 238? Do I make the eight part follow my current income or projected income with the new job? Thank you.

• 27:28Brian Preston?

  I think it's more of a 3D glasses situation than it is 238 because this is a business asset.

• 27:34Speaker 02

  Yep, that was the same thing.

• 27:35Brian Preston?

  And business assets are completely different. 238 is designed for your personal car and, and really, we're trying to just keep your ego in check with what you can actually afford. A business is a completely different thing because you just, you have to make decisions that are right for the business, but you have to make sure you can truly fund it. And that's why when I say put on my 3D glasses or your 3D glasses, it's, you know, do the dream plan. Essentially do a five to seven year spreadsheet with the dream plan of what you think all the cash flows are going to look like, do the down to earth plan, and then don't forget to do the do do plan of how bad, and then put this in there and see if it works and see if this actually makes you more efficient and more profitable and it's good for the business. That's, that's why I think it's that you're, you're using the wrong metric on this.

• 28:20Speaker 02

  Yeah. And, and when it comes to like, uh, business expenses and spending, businesses and personal finance are different, but oftentimes the, um, principles that we apply to our personal finances, if they were also applied to business would likely pan out pretty good for you, right? When you analyze this, think about it, I'd love if you're going to buy a box truck and depending on the size of the business and whichever, paying cash is wonderful. Like if you can pay cash and buy that equipment outright, it's a fantastic thing to be able to do. But if that's not possible, then one of the things you have to figure out is okay, if I have to take on debt to go satisfy this, what's the appropriate amount to take, appropriate amount of debt to take on? And how does that cash flow affect future business operations?

• 29:03Speaker 02

  It's a little bit different than just, okay, what's, what am I doing for my personal finances? Cause I don't know how long this box truck may last. If box trucks for you last 10 years, then that's a great thing. If you have to replace these because they're used super hard every three years, well, then it's a different metric you're going to use to figure out what's the appropriate way to fund that expense. So you, you can apply personal finance principles to business, but business finances work a little bit.

• 29:28Brian Preston?

  Well, I think you make a good point is you don't want to, cause here, here's what I think business people get themselves in trouble sometimes. You're going to be able to take accelerated depreciation and get a huge deduction when you, in the year that you buy this box truck. You just need to make sure that your financing aligns to the life expectancy reasonably well, because what you don't want to do is what Bo is saying is that you, you finance this thing over six or seven years, but yet you ride it so hard that it's basically worthless in three years. You realize what you've just created is a bunch of negative equity that hurts you. So it is your friend. Nothing wrong with using a little leverage, but make sure that it matches up nicely. I prefer the, the shorter the, the, the use of leverage, the better.

• 30:09Speaker 02

  That's right.

• 30:10Brian Preston?

  In the, in the, in the health of the business in the long term.

• 30:15Speaker 03

  Well, great. Thank you so much for the question, James. I hope that helps you think through it, not just as a vehicle decision, but also as a business decision. So, thanks for the answer, guys.

• 30:24Speaker 02

  Can I throw, can I throw one other thing in there? I'm sorry. These things are just hitting me.

• 30:27Speaker 03

  Great.

• 30:28Speaker 02

  Um, far too often I see people who have like this unbelievable metric when it comes to their personal finances, like I'm gonna be very responsible and do this. And it's almost like they lose that on the business side, because there's this guise of, oh, it's deductible.

• 30:41Brian Preston?

  It's the huge, I was thinking the exact same thing.

• 30:44Speaker 02

  Because I've got some business owner friends who their personal balance sheet looks fine, but I look at their business, I'm like, holy cow, why do you, why do you have all these lines of credit? Why do you have all this debt? Why? It's, it's interesting how it's disconnected. Yeah, there's like a justification around it.

• 30:57Brian Preston?

  Well, remember, what's funny is I'll watch somebody who's cheap with their personal life, but then they'll say, but I can spend $110,000 on this piece of equipment, because that's deductible to the business. And I'm like, yeah, but you, you realize, that's only saving you the, essentially if you say the taxes are 30%, you're still having to come up with these 70 cents on the dollar. So if you overspend $50,000, and you multiply 50,000 times 70%, you can say, you still pulled $35,000 out of your future back pocket.

• 31:28Speaker 02

  That's right.

• 31:28Brian Preston?

  And, and not even taking into account the carry costs and all the other things that go into it. So, don't let the, just like we say, don't let the tax tail wag the dog. You know, don't let the deductibility of something make you make bad decisions. You realize every dollar should be viewed as a, a dollar bill in your army of dollars. And I think you'll just, if you have that visual, you'll think about things differently.

• 31:51Speaker 02

  That's right.

• 31:52Brian Preston?

  Good point.

• 31:52Speaker 03

  That was a great add-on.

• 31:53Speaker 02

  Thanks, Raves.

• 31:54Brian Preston?

  No, it is a good one, because I see people lose their minds.

• 31:57Speaker 02

  It's nuts, man. It's so nuts.

• 31:58Brian Preston?

  I mean, I've had, I've had friends and neighbors say, I'm gonna start, I'm gonna go buy an airplane, so that I can, because I can rent it back to a, a flight school, and I can take all this accelerated depreciation, and it'll practically be free. And I'm like, huh, I bet there's... That sounds very complicated.

• 32:13Speaker 02

  So many business owners or so many people that want to be business, they like, they view deductions as like the main course. Ooh, let me go get some deductions. Being able to deduct expenses is, it's like, it's a feature. It's not the main thing. Like, it's, it's a thing that you can do for realistic expenses, but some people just lose their minds. Oh, I can deduct, I can, and they get themselves in a world of hurt with very little liquidity and a whole lot of debt. And that's just, that's not where you want to be.

• 32:39Brian Preston?

  Well, also, I always think in the long term is that if I'm going to be successful for the long term, there's going to be probably two years out of every decade that it's just going to feel scary. You know, just as a, and you should, especially as a small business owner, you should be naturally double scared, is that I've got to position myself in a way that when the bad times happen, I haven't been so willy nilly with my decisions that I put myself in a really desperate, bad moment in time.

• 33:08Speaker 02

  That's right.

• 33:08Brian Preston?

  Because that's where, that's where failure occurs. And that's where you get yourself out of in a hole you can't get out of.

• 33:12Speaker 02

  Yep.

• 33:14Speaker 03

  Very good stuff. Thanks, y'all. Okay, it is time to introduce our newest segment to at the Ask the Money Guy show. It is called From the Wings. The content team from the wings has put together a list of current or recent headlines for Brian and Bo to react to and respond to.

• 33:33Brian Preston?

  By the way, they did not share any of these with us, so I have no idea what they're going to say.

• 33:39Speaker 02

  You know, current events is not my strong suit.

• 33:42Brian Preston?

  Oh, yeah.

• 33:43Speaker 03

  They're all, well, you'll see. Anyway, so we're going to dive in.

• 33:48Brian Preston?

  They probably took that into account that you're barely literate. Just kidding. By the way, Bo's a CFA. He's actually very literate.

• 33:53Speaker 03

  He's very literate. Let's not start rumors.

• 33:55Speaker 02

  He can neither read nor swim.

• 33:57Speaker 03

  Oh, my goodness.

• 33:58Brian Preston?

  No, you definitely can read. No, I'd never take away from your IQ. You're, you're extremely, you just don't choose to read for pleasure. By the way, Bo's leaving for the beach soon.

• 34:10Speaker 02

  Literally, yep.

• 34:11Brian Preston?

  And I asked her, I said, what book are you taking on your trip?

• 34:13Speaker 03

  What was your answer?

• 34:14Brian Preston?

  And he says, I just sit there and watch the ocean go in and out.

• 34:17Speaker 02

  And I can't wait.

• 34:18Speaker 03

  For hours.

• 34:19Speaker 02

  I'm just gonna listen.

• 34:20Brian Preston?

  No books, no reading.

• 34:21Speaker 02

  It's gonna be wonderful.

• 34:22Brian Preston?

  Raw dog on the beach.

• 34:24Speaker 02

  Maybe I'll take a, a, a copy of Millionaire Mission with me. Maybe I'll take that and read.

• 34:28Brian Preston?

  You've read that book.

• 34:29Speaker 02

  I have read that.

• 34:30Brian Preston?

  You've read that book. You've edited that book.

• 34:32Speaker 02

  I did, I did.

• 34:34Speaker 03

  All right, well, let's dive into some headlines. So you tell us first of all, is this news or is it noise and we shouldn't pay attention? And then give us your take if you have any reactions to it. Are you ready?

• 34:43Speaker 02

  No timer, just like our thoughts.

• 34:45Speaker 03

  We're, uh, we're trying a new segment.

• 34:47Speaker 02

  Got it.

• 34:48Speaker 03

  More relaxed segment. We'll see how it goes.

• 34:49Brian Preston?

  Bo, you can go first.

• 34:50Speaker 02

  Okay.

• 34:52Speaker 03

  The first headline says, and I'm very curious to see what you say about this. SEC approves plan to remove day trading limit for small investors.

• 35:05Speaker 02

  SEC approves plan to remove day trading. Well, that just sounds bad, right?

• 35:12Speaker 02

  One, I am not a huge fan of day trading. I don't think there's a lot of success in it. I think oftentimes it can be more like gambling. And when I read this headline, it says SEC approves plan to remove the limit for small investors. Meaning if you're a small investor, we're gonna raise how much you can trade on a daily basis, if I'm understanding what the headline is saying. Now, I want to be careful.

• 35:33Brian Preston?

  News or noise?

• 35:35Speaker 02

  Oh, is that what I'm supposed to be doing?

• 35:36Brian Preston?

  First.

• 35:36Speaker 03

  That's the first thing. And then your thoughts were great too, though. That was correct.

• 35:39Speaker 02

  It depends. Uh, for, for, for our purpose is noise. I was trying to explain it, but for our.

• 35:45Brian Preston?

  No, you're right. You know, and I think that's fine.

• 35:48Speaker 02

  What I imagine is when it caught, when it says small investors, it's probably not talking about retail investors. It's probably talking about small institutions. It would be my guess in terms of that, but either way, it's, I think it's noise to our audience.

• 36:00Brian Preston?

  I mean, I think it's noise because if you're day trading, you've lost the plot. So I would, I would not do it. Now, look. I don't know the merits of this. I haven't read this article, so, but it, it sounds like, hey, there were some protections out there to keep people from themselves, but I'm gonna tell you, a financial mutant is not day trading. It's a, by the way, not only is it a fool's errand, but also you'll create a big burden for yourself when you do taxes. It's just, I just don't, I don't think it's, that momentum play is not as effective as people think it is. And if, you know, it's kind of like you sit down at the poker table, if you don't know who the fish is at the table, then you're the, you're the fish.

• 36:39Speaker 02

  Mm-hmm.

• 36:40Brian Preston?

  It's the same way with trading. There's a reason that a lot of these, when you go with these brokerage companies, you know, the Robin Hoods and elsewhere, you realize a lot of the big fish are paying for access to those investors because they can, they can play on the other side of it and make more money.

• 36:55Speaker 03

  All right. Next one, is this news or noise? Stock market notches one of its fastest turnarounds in years from Yahoo Finance.

• 37:05Speaker 02

  Ooh, I got a thought.

• 37:06Brian Preston?

  I mean, these are all noise. I, I saw this one as it came across, and it's because, you know, with all the geopolitical stuff going on, it's like, it's like kaboom, kaboom, kaboom, kaboom, you know, depending upon, you know, what's going on with the straight. And if it's open, is it closed, you know, what did the president say? It's all noise. Just, you know, know where you are in the financial order of operations, and I think you will be A-OK. It's OK to pay attention to this stuff, just because, like I said, when the market's down 20%, I want you to know, hey, what do I do to maximize this moment? And when we go through these periods where we hit all-time highs, that's also, it's good to know what's going on in this moment, but this is still noise to me.

• 37:46Speaker 02

  News.

• 37:49Speaker 03

  Are we in want-to-fight territory?

• 37:51Brian Preston?

  Let's hear what you say.

• 37:52Speaker 02

  Uh, I think this is news. I think you should pay attention to this, uh, because it is a reminder to us how quickly the market can turn, how quickly something can shift, and all of a sudden, things are scary, scary, scary, scary, and there's a rapid turnaround. I think you should pay attention to that. So what that should tell you is, oh, man, if I'm one of those people that gets real nervous in the downturn, and I'm thinking, oh, you know what, I'm just gonna, I'm gonna sit on the sidelines, and I'm gonna wait for things to feel better, and then I'll get back in when things- A little more comfortable. It doesn't often happen that way. It often happens in a V shape. It hits the bottom and it bounces right back up. I think you should pay attention to this, that two, three weeks ago, the headlines were terrible and scary and horrifying. And now they're, oh, turnaround, things are great.

• 38:35Speaker 02

  You want to be careful being on the sidelines when that happens. So I'd say, pay attention, remind yourself when things are bad. They could just as quickly become good as they became bad.

• 38:48Brian Preston?

  And ABB, always be buying, baby.

• 38:50Speaker 03

  There it is.

• 38:50Brian Preston?

  Boom.

• 38:51Speaker 03

  All right, good, good takes. You kind of did two sides of the same point there.

• 38:54Brian Preston?

  I'm not mad at him. It's fine. I think he said that just to be controversial.

• 38:59Speaker 03

  Which I appreciate.

• 39:00Brian Preston?

  He's about to go on vacation, so I figured he'd get, you know, bite into me a little bit.

• 39:04Speaker 03

  All right, next one says, uh, tell me, is it news or noise? Why adjustable rate mortgages are making a comeback?

• 39:13Brian Preston?

  Well, I think that's, I think you could use that as news.

• 39:16Speaker 02

  Newsworthy.

• 39:16Brian Preston?

  Because a lot of times, you know, look, Americans, we always lock ourselves into, to 15 year, 30, primarily 30 year mortgages. But a lot of times people, you know, we found out in our most recent housing show, people flip houses every 12 years. That's considered the long term, but a lot of people, like if you know you work for a company that's going to relocate you every five years. You ought to probably make sure you understand with those financial products, because you might be paying a premium for something that you're not even getting the benefit out of. So paying attention to what's going on in the cycle with interest rates is important.

• 39:51Speaker 02

  There was a, there was a long time, I mean, probably a decade or so where adjustable rate mortgages just didn't make a whole lot of sense. Fixed rates on 15 and 30s were so low. If, if you were getting adjustable, you were kind of just being foolish by not locking that in.

• 40:07Brian Preston?

  That's a good point.

• 40:07Speaker 02

  Now that rates have come high and adjustable rates are somewhat attractive, assuming that you're in the right position, right circumstance, you kind of go through the 3D glasses. You understand what you're doing. An adjustable rate mortgage could indeed likely make sense for you, but you have to know what the risk is. With adjustable rate mortgage, whenever that, whatever that period is, if it's five, one, seven, one, 10, one, whatever that is, whenever that ends, you better have a plan for that. You know what you're going to do and when you're going to do it and how you're going to do it, or what you're going to do before you get to that place. But We always want to know about what products are available and what tools we might be able to use in our tool belt, so then we can determine if it makes sense to use those or not.

• 40:48Brian Preston?

  And if you are going to use an adjustable rate, go ahead and do the work of reading the fine print to see what is your exposure when the rate adjusts at the end, because sometimes it's not as bad as you would think.

• 40:58Speaker 02

  That's right.

• 40:59Brian Preston?

  And you're like, okay, if I get stuck and I'm in this area longer than I thought, that it can only go up this much.

• 41:04Speaker 02

  Yeah, like a 2% increase.

• 41:06Brian Preston?

  Yeah, it's not as big of a risk, but then other times you're like, holy cow, that's a risk that I probably, I better either make sure I'm not here any longer, or, you know, or be very cautious about using this product. Go ahead and read the fine print on that, so you know what's happening at the end of this term, just in case you get stuck.

• 41:24Speaker 02

  Yep.

• 41:25Speaker 03

  Good discussion. All right. Overall newsworthy. All right. This last one. I don't think you're ready. Uh, I need to know, is this news or is it noise? The world's oldest octopus fossil isn't an octopus after all, scientists say.

• 41:47Brian Preston?

  What? Who put this in there? I want to know afterwards, we're going to find out which team member put this in there, so we can take corrective action.

• 41:54Speaker 03

  This was from the wings.

• 41:55Speaker 02

  I want to know what is it?

• 41:56Brian Preston?

  Is this Ken?

• 41:57Speaker 02

  I'm on the edge of my seat. If it was not, if it's not an octopus.

• 42:01Speaker 03

  Here's a quote from the article. It says, "This has too many teeth, so it can't be an octopus." And that's how we realized that the world's oldest octopus is actually a fossil nautilus, not an octopus.

• 42:12Brian Preston?

  I get this news because now, when you go to your weekend dinner party, or you're hanging out with your relatives or your buddies, you can be like, you know what? That oldest octopus fossil, did you hear? It's kind of like Pluto. It's not a planet anymore.

• 42:26Speaker 02

  No, that's back. Pluto back. It came back, right?

• 42:29Brian Preston?

  I mean, these are things you should know if you want to be the most intriguing person at your dinner party.

• 42:34Speaker 02

  Octopi have teeth? I didn't actually know that they had teeth. Are they?

• 42:38Speaker 03

  Not that, not as many as this fossil had, apparently.

• 42:42Brian Preston?

  Now you know.

• 42:43Speaker 03

  Now you know.

• 42:45Speaker 02

  You can't say you left this livestream and didn't learn something today. Because I bet you that was not on anybody's bingo card.

• 42:50Speaker 03

  It was not on anybody's radar.

• 42:52Brian Preston?

  Hey, put in the comments if you already knew that. Or if that came across your newsfeed. Because you're in the right place.

• 42:58Speaker 03

  Has been from the wings. If you have a headline, article, something happening that's related to personal finance that you would like Brian and Bo to react to in this segment in the future, drop it in the comments of this episode or post it in the Moneyverse and we will check it out.

• 43:13Brian Preston?

  I think I like this segment because it, look, there are some times, I would encourage, because we have so much volatility going on, not that I'm trying to influence our team, but y'all should, sometimes like Yahoo, they give me notifications, like the sky's falling. And I'm like, are you freaking kidding me? The market's not even down like a half a percent, but they have this crazy scary headline. I think those would be useful to kind of, because every now and then I tweet. If I'm not being lazy, I'll tweet that out and say, look, this is why you have to be careful with you letting your head.

• 43:41Speaker 03

  When is the last time you tweeted?

• 43:43Brian Preston?

  I mean, it's probably been a year or two, you know? This is what happens when you've been doing this over 20 years. You know, it all runs together.

• 43:50Speaker 02

  Did you know that octopus?

• 43:52Speaker 03

  I knew he was researching this.

• 43:53Speaker 02

  Octopuses don't actually have teeth, they have beaks.

• 43:56Speaker 03

  They have what?

• 43:57Speaker 02

  Beaks, like a duck, like a bird. Our chat said it, I Googled it, it's a thing. They actually have beaks. I was this many minutes old when I learned that.

• 44:08Brian Preston?

  So here's what I'm sitting here thinking, like I eat calamari, which is squid, right? But then octopus, I eat its tentacles. Because if you go to fancy restaurants, they actually serve you like an octopus tentacle. And I just think it's interesting that this is all still part of the food supply.

• 44:25Speaker 02

  That is interesting.

• 44:26Speaker 03

  Interesting.

• 44:28Brian Preston?

  By the way, we're probably.

• 44:30Speaker 03

  Jake from the chat did say, quote, "Doesn't matter because I'm not going in the ocean." Bo, probably.

• 44:37Speaker 02

  That's true. That's true. What I think is wild is I was, I was at soccer practice. Cause this is silly, right? This is fun stuff. I was at soccer practice and I started getting, my phone started buzzing and I was getting notifications for the money verse. And this was like 7:00 PM at night. It wasn't like a live, and people were just like asking some questions. Hey, what, and I was like, you know what? I'm gonna dive right in. And it was wild. Even at 7:00 PM on a Wednesday night, this was last week, we still get to hang out with you guys. So if you've not checked, if you've not checked out the money verse, moneyguy.com slash money verse. It is like a 24 seven live stream. We're not only do you get to interact with us and yes, Brian is in there. There's a whole thread.

• 45:17Brian Preston?

  I've been nervous. Well, I've been, I've been, but here's the thing. I'm kind of playing the part of just, I've been nervous to post.

• 45:23Speaker 02

  Why?

• 45:24Brian Preston?

  I don't know. It's new. I'm old.

• 45:26Speaker 02

  Do you know what's wild? A lot of people think, think that you're lurking and they're making guesses of who, like they think you're posting under a pseudonym.

• 45:33Brian Preston?

  Well, they can't see me. I haven't posted anything.

• 45:35Speaker 02

  No, no, no. Listen, listen to me. I'm telling you this. You gotta listen. A lot of people think that you have a, you are someone else in the money verse. So like there's some folks in there like Penguin or Mr. Sky or Panda or all these folks. They think that you are that person pretending not to be you. And I had to tell them, it's not.

• 45:53Brian Preston?

  No, I've been lurking. I haven't been posting.

• 45:56Speaker 02

  So if you.

• 45:57Speaker 03

  Well, there you go. You've heard it here first.

• 45:59Speaker 02

  If you've not checked out the money verse, it's a great place. One, you can interact. You can talk and goof off. There's also unbelievable celebrating milestones.

• 46:05Brian Preston?

  That's, that's the one I was gonna say I've worked the most in, in the celebrations. I think it's really cool.

• 46:09Speaker 02

  It's awesome.

• 46:11Brian Preston?

  I just feel weird about jumping in on some of that stuff.

• 46:14Speaker 03

  Interesting.

• 46:15Brian Preston?

  I need, well, y'all need to, y'all need to educate me.

• 46:17Speaker 03

  You never know.

• 46:18Brian Preston?

  Maybe hold my hand as we do it.

• 46:22Speaker 03

  Noted. Well, you want to answer some more personal finance questions right now? I have a few more queued up.

• 46:27Speaker 02

  Let's do it.

• 46:28Speaker 03

  All right.

• 46:28Brian Preston?

  I will say, can I say one more thing about the money verse?

• 46:31Speaker 03

  Of course.

• 46:31Brian Preston?

  So my, my daughter, she brought her boyfriend to dinner with us like two weeks ago or something like that.

• 46:38Speaker 02

  It's a big deal.

• 46:38Brian Preston?

  And, um, and. He, he heard that we had like this Reddit thread. I guess with the youngsters, this Reddit stuff is legit.

• 46:46Speaker 02

  Uh huh.

• 46:46Brian Preston?

  And I showed him how big the way the money verse was and it was like, whoa.

• 46:50Speaker 03

  Do you mean Discord?

• 46:51Speaker 02

  Are you talking about Reddit or Discord?

• 46:52Brian Preston?

  Discord.

• 46:53Speaker 02

  Discord, yeah.

• 46:54Brian Preston?

  See?

• 46:54Speaker 02

  No, but, no, but our Reddit thread is also incredibly active.

• 46:57Brian Preston?

  Whatever, the money verse is on Discord.

• 46:58Speaker 02

  That's right. Yep.

• 46:59Brian Preston?

  I showed him, cause I'm a lurker. So I have the app. So I showed him the thing and they were, their mind was like.

• 47:06Speaker 02

  It's, it's literally like.

• 47:08Brian Preston?

  So for the youngsters, we're doing something right.

• 47:10Speaker 02

  And what's great is there's, there's always people out there. Like you got a question, you want to get somebody's thoughts, you want to celebrate something, you just want to say, hey, I just paid off my car. I can't tell my family and friends because it seemed like I was bragging. You can come tell the money verse and we love to celebrate with you. We love to be excited for you. It's a cool thing. So if you've not checked it out, go check out the money verse. Uh, it's awesome.

• 47:32Speaker 03

  Moneyguy.com slash money verse. No, I loved it.

• 47:34Speaker 02

  There was some bench press content in there this past week, which was awesome. Some deadlifting stuff in there. It was, it's great.

• 47:40Brian Preston?

  Oh, that's, this stuff just surrounds, but we had a, we had a, we did, recorded a Making a Millionaire and the question after the cameras went off, but what's your, what's your bench press max?

• 47:48Speaker 02

  [laughing]

• 47:49Brian Preston?

  These type of questions.

• 47:50Speaker 02

  I love it.

• 47:51Speaker 03

  Always. All right. Speaking of questions, Brandon S. has one for you. It says, my company matches 6% and offers both 401k and Roth 401k. I'm currently doing 12% in the 401k and 3% in Roth 401k. Is there a guideline on what I should contribute to more? Should it be a 50 50 split?

• 48:14Speaker 00

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs.

• 48:44Speaker 02

  Brandon, we need to know a little bit more information. Can you let us know your household income? Because oftentimes when it's trying, one, I love hearing that you're getting the full match. It says my company matches six. And so I'm assuming that if you're putting in 15% total, you're probably getting that full six. So step number one, Brian, will you hold that thing up for me? You are hitting step number two. You're getting the full employer match. You're getting all that 6%. Well, the next question you have to figure is, okay, if I'm going to put more in my 401k, should I do Roth or should I do pre-tax? And in our opinion, it probably most likely depends on what your tax situation looks like.

• 49:20Brian Preston?

  Yeah, this is, but this is one majority of time. I don't want to say always. It's nothing, this isn't bad, but it's not maximization. Because typically, once we figure out that you've crossed the threshold, that you're a high income, high tax situation, you would do 100% into traditional. If you're one of these people that's young and you're in a low tax situation and you want to maximize the tax-free growth of the Roth accounts, you'd be 100% on the Roth side of things. So that's why if you, if you go deeper into our content, you'll see we're typically, instead of dabbling and having feet in both sides of this, you need to squarely do the exercise of figure out where you are from with the tax system

• 50:02Brian Preston?

  and where you are the savings and compounding growth and make the decision, are you Roth, where you get tax-free growth over the long term? Or are you traditional, you know, where you take the tax deduction now, but you get tax-deferred growth? But then when you pull it out in the future, you pay ordinary income tax rates on it. And you have to figure out, am I going to have a tax arbitrage situation in retirement? Because maybe when I'm no longer have my earned income in my total income, my income goes way down into the basement. And I'm once again back in a low tax rate and I can do an arbitrage in the future to take advantage of the lower tax rate in retirement.

• 50:40Speaker 03

  Well, Brandon S., thank you for the question. Appreciate you being here.

• 50:45Speaker 03

  Next one's from Sheri. It says, "I'm on track for coast-fy. Should I put continued savings in a brokerage account or in a Roth IRA? Because I can always access my contributions if I need the money. What do you think?"

• 50:58Brian Preston?

  This is a good question. I mean, I'm gonna give off the cuff. By the way, my favorite child, when you're looking at the three bucket strategy of Roth accounts, which are tax-free growth, tax-deferred, which, you know, you get deduction now, but they grow tax-deferred and then you pay ordinary income tax or after-tax, Roth is always my favorite child because they have a huge legacy component to them. I love that you get to stick it to the man and potentially grow a seven-figure tax-free account. There's just a lot of benefit. And once again, she is exactly right. You can pull the basis out. Well, you can pull the whole account out after enough time.

• 51:34Speaker 02

  Yeah. If you're on track for coast-fy, so the idea of coast-fy is I'm gonna save, save, save, save. I'm gonna build up a pot of money and I'm gonna just let that pot of money coast until I get to full financial independence and the pot of money will have grown to be enough. Well, I'm gonna argue, if you're already in that position and you're already on track for that, you've probably been saving really, really aggressively anyways. So if what you're asking is, okay, while I'm in the coast phase, I just can't help myself. I still gotta save more. I agree, Brian. I love the idea of putting money in the Roth, not because you can get access to your contributions, tax-free and penalty-free, before 59 and a half, but for the reason that it grows tax-free. And tax-free growth is really, really awesome. Now, if you're

• 52:17Speaker 02

  in a position, Sheri, where you know you're gonna exit the workforce early and it's gonna be pre-55 and you're gonna have to have access to dollars, while, yes, you can access the Roth dollars, I don't know that that's the best choice because now, again, if you're pulling out of your Roth at age 52, 53, 54, you are shortchanging those dollars, 10, 20, maybe 30 years of tax-free growth. What I'd rather see you do is put money in the Roth, let that grow, let that be the money that you pull out much later in life after it's grown. On a ton and also fund that after tax account so that when you're at 52, 53, 55, whatever your number is, you can then begin to pull dollars out of that after tax account.

• 53:00Speaker 02

  So it's a best of both worlds. And this one, I don't think it's, it's not either or. I'd love for you to do both.

• 53:05Brian Preston?

  That's exactly, I was about to say, this is not an or question. This is an and question is because we know for anybody who's in the fire slash fine movement, next endeavor, um, this is just the coast version of fire.

• 53:16Speaker 02

  Yep.

• 53:17Brian Preston?

  Is that most people to be part of successful in the fire movement, you have to have a savings rate beyond 30%. And because people have savings rates, sometimes 30, 40%, you're going to blow through what you can put into Roth accounts. You go blow through what you can put into a 401k account. And that's why it's a perfect setup for people. That's why it's always step seven, when you're really thinking about these things, load up that after tax account because that's going to be your bridge account. For anybody who's retiring between 50 to 55, you're going to love that you have those after tax assets because that's going to be the easy money to pull out of without you kind of losing sleep on the fact of, yeah, I could get access to my Roth basis. But man, oh, man, is that an incredible legacy building thing to let those Roth assets.

• 54:01Brian Preston?

  That's why you love this child so much, this Roth account. You're going to hate using that money. This is typically the account you're going to fund first and then try to die with it. So you can leave it to your heirs.

• 54:12Speaker 02

  That's right. That's exactly right.

• 54:15Speaker 03

  They like that question. Good question and great answer. Thanks so much for asking it, Sheri. All right. Next question is from top notch MUSA, I think it says.

• 54:28Brian Preston?

  We just give a plug?

• 54:30Speaker 03

  No, I don't think so. This is just a bunch of letters I was trying to make sense of as a username. But, um, okay, the question is, we're 30 with a newborn. I have a bit over one times saved. My wife has under 20, has 20 K under one times. On Foo Step 5, should we focus on catching her up or continue equal percent investing? I make about 30K more than her in salary.

• 54:59Brian Preston?

  This is, I already see the problem.

• 55:01Speaker 02

  Well, so it sounds like what you're trying to do is hit some of our milestones. One of the milestones, if you've not, if you're not familiar with this, you haven't heard this before, we think that by the time you get to age 30, we want you to have one time your annual household income saved in investments, not net worth, but in your liquid investments saved up. Well, if you're at one time on your end and she's at almost one time on her end, what that means collectively is that y'all are at almost one time as a household. My opinion is, and I only say opinion because I don't want to like project my bias onto you, but when it comes to being married and it comes to hitting these milestones, I think rather than thinking about, okay, you need to hit one time and then I'm gonna hit one time, and then I'm gonna get to three times by 40, then you're gonna get three times.

• 55:46Speaker 02

  If we can think about it as a household, and think about total household income, then what we're able to do is when we approach the financial order of operations, we can save in the most efficient and effective manner possible. Because let's assume that you have access to a 401K and she doesn't have access to a 401K. Well, does that mean that you should just not put a ton in your 401K and she should just start doing after-tax? Maybe not. That's gonna get the financial order of operations out of whack. So if you can think about it as a household, lay out all the income in front of you, then lay out all the accounts and vehicles you have at your disposal, then pick and choose, okay, which ones make the most sense for both of us collectively in the household to achieve those goals?

• 56:31Brian Preston?

  Look, when I, when I have a couple come to me, and a lot of times like older marriages and other things, they're gonna have complications where they're gonna have children from previous marriages, they're gonna have assets that were built up because, you know, earlier in life, and, or maybe they inherited some assets. There's complications out there that because of the legal protections and then just because of the legacy of what you've built already in the earlier parts of your life, separate assets makes complete sense. And we protect that, we do a good job of helping our clients with that. However, I do think when two become one through marriage. All of your money, set up a joint account and the money coming into the household should be going into that account and then y'all should be making collaborative joint decisions. Because, by the way, you just had the key point in there. What is it? You make thirty

• 57:16Brian Preston?

  to forty thousand dollars more than your spouse? That already is going to create a strange power dynamic. And here you are, running a metric saying, well, I'm doing what I'm supposed to be doing. But yet she's underfunding what she should be doing. And by the way, I make thirty thousand dollars more a year than she does. Do you see the double whammy of the power structure you just created there? Where is that? Is that healthy? And I don't, I don't think so. I mean, I know that, look, in my household, we get in fights, you never talk about divorce. You also, in fights, we never talk about who makes what money. Because the power has to come out of who makes what in a relationship.

• 57:58Brian Preston?

  Otherwise, this is just going to get worse and weird. And I get it. I mean, we've had guests on and I have bias. I don't even try to hide it. Is that, I think two should become one, not just for the marriage bed, but also for your checking account.

• 58:14Speaker 02

  Love that.

• 58:16Speaker 03

  Well, really good questions today, everyone. Thank you for joining in.

• 58:20Brian Preston?

  Wow, I felt like boom.

• 58:25Speaker 03

  Where's that mic drop emoji?

• 58:27Brian Preston?

  And we just threw that bad boy out there and now I'm hiding over here. I'm not even hiding. I'm just gonna let it blow up in my face.

• 58:32Speaker 03

  You said it so confident. I was like, and with that.

• 58:36Brian Preston?

  All right, that's where we'll go with it.

• 58:37Speaker 03

  Let's wrap this thing up.

• 58:39Brian Preston?

  Boom, shakalaka.

• 58:41Speaker 03

  Boom, shakalaka. But truly, let us know what we should include in our next From the Wings segment. Thank you so much for getting all of your questions in the live stream, even though we turn off the cameras here. Moneyguy.com/resources is full of free stuff just for you, all about personal finance. And you can continue to have discussions and ask questions in the Moneyverse at Moneyguy.com/Moneyverse.

• 59:05Brian Preston?

  Guys, thanks for putting up with my Barry White voice today. Hopefully, I don't even know how this is gonna come off. I mean, I might go check out this episode so I can hear how this sounds through the microphone, see how it modulates, see if that bass is as good as I'm hoping. But we'll play it out. Not only can you get entertained from what's going on with our voices, but also with what our knowledge is on personal finance. I'm your host, Brian, joined by Mr. Bo Rebe and the rest of the Money Guy crew. Money Guy, out.

• 59:33Speaker 03

  The Money Guy Show is hosted by Brian Preston and Beau Hanson. Brian and Beau 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.