Pod Insights Money Guy Show What You Need to Know About the New Tax Bill About this episode A potential tax overhaul is on the horizon so we’re breaking down what it could mean for your finances. From deductions to credits and everything in between, we explain what’s likely, what’s noise, and how you can get ahead of it all. Plus, we tackle smart strategies for managing mortgage prepayments, 401(k) match tradeoffs, and more.
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Transcript 14,187 words · 6 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:05 Brian Preston? I don't know if you guys have heard, there is a tax bill that's floating around out there. We needed to tell you what's noise and what do you actually need to know?
1:13 Speaker 03 Brent, I am so excited to talk about this because we know that the financial landscape is ever changing and there are only a few certainties in life. Death and taxes. And this is super interesting because right now it sounds like there may potentially could be some tax changes coming out of the pipe and we want you to know what they could be and how they might affect you.
1:36 Brian Preston? Now I'll throw the dash of money guyism out there is that we typically don't like to cover anything until it comes through both sides of the legislative process, both the House and the Senate. But there's so much out there in the news media. I told the crew, I was like, look, we got to cover something just to let people know. So just the, so we can express the fact that this still is only half baked. We've got to get it through Senate. There's going to be horse trading. The political process is always a mess, but I needed you guys to at least know some of the broad themes that are Going on, so you can go ahead and start preparing yourself because it will move fast.
2:14 Speaker 03 Yep, that's right.
2:15 Brian Preston? Once the Senate and the House start doing their negotiations back and forth, it will start moving faster. And we want to kind of give you the overarching parts that you can start planning for your personal finances.
2:25 Speaker 03 And don't you worry, when we actually have law, we're going to cover that. We're going to do a deep dive to let you guys know what's in there. But as we were thinking about this legislation, we're thinking about what's, okay, what would be an interesting way or an easy way to sort of lay it out for you. And we thought about the personal income tax return. And when you think about your personal income tax return, there are really sort of four sections. If you want to think about how it's broken down, you have the money you make, that's like all the income sources you have. Then you have the part where you get to reduce the money that you make, or at least what the IRS recognizes as the money you make. Then there's a calculation that takes place that determines, okay, how much tax do I owe? And then there's a part of your tax return where you can actually reduce
3:08 Speaker 03 the amount that you owe. That's where credits come in. So we thought about, okay, if these are sort of the four broad sections, very generally speaking of a tax return, how do some of these tax changes, potential tax changes, hit each one of those sections?
3:22 Brian Preston? Now, the first one is the money you make, gross income. We don't really have a slide on this one, other than the headline, because this is where you see that everybody talks about, is tip income going to be taxable?
3:34 Speaker 03 That's the big one, yep.
3:35 Brian Preston? Is social security going to be taxable? Remains to be seen. Like I said, we're only half baked. We've got the House bill. We do not have the Senate bill. I will be curious to see, but we didn't want to put any additional slides on this until we got the full details from the Senate, once they get through the negotiations.
3:52 Speaker 03 So then, when you move down from gross income, you get into, okay, well, how much income does the IRS recognize? Because it's given some things that will allow us to decrease the amount that our taxes are computed against. And so, one of the big things, and a lot of what this bill is, is there was some tax legislation that came out in 2017, the Tax Cuts and Jobs Act. And a lot of what this legislation is, is it's saying, okay, are we going to allow things that changed in 2017 to expire or are we going to allow them to remain and one of the big things that's going to hit a lot of households is the standard deduction and the for those of you that don't know the language when you fill out your tax return you have two choices you can either
4:33 Speaker 03 take the standard deduction or you can itemize your deductions where you get mortgage interest and state income taxes and other types of items where you can create your deduction list or you can just take the stated standard that the government allows each year.
4:48 Brian Preston? Now, look, we've pulled the stats 90% of taxpayers actually use the standard deduction. So this is a big deal. The, the, I would say the big driving factor for why we even need updated tax legislation is because you see, look at what happens to the, the standard deduction is it basically gets cut almost in half if we don't bring back, you know, or make these, these changes permanent because they all sunset, which means they go away at the end of the coming year of, of this, it's actually this year.
5:20 Speaker 03 That's right.
5:20 Brian Preston? So I always been, for years, I've been saying 2025 is when the, well, here we are living in it. So that's why we know that something will happen is because, you know, politicians, they know that, you know, taxes going up is less than ideal for getting elected. So that's why I think that you will see bipartisan, they will want to do something just because they want to keep their, the, the people happy.
5:44 Speaker 03 So if the legislation passes, it does seem that the standard deduction will increase for a single individuals from 15,000 to 16,000 for married filing jointly from 30,000 to 32,000 and there is an additional senior standard deduction that is currently a $2,000 addition that if this passes, it'll go to 4,000. Now, it is important to note that this increased standard deduction, the little cherry on top is only set under the current proposed legislation to, to go from now until 2028. So they're kind of even kicking the can down a little bit further in terms of when they're going to lock in.
6:20 Brian Preston? But long-term, this would make those changes permanent.
6:22 Speaker 03 That's right.
6:23 Brian Preston? So the standard deduction would stay at current levels instead of sunsetting like it's done in the past, but they put a little juicer in there, probably for political purpose.
6:32 Speaker 03 That's right. So now that's the standard deduction. Whether there's a other part of the population that itemizes their deductions, or essentially they calculate some of the allowed expenses that you're able to deduct against your income, and probably the most significant change that has been talked about that will likely be in the bill in some form is the SALT deduction.
6:53 Brian Preston? Yeah, for those that don't know, you know, years and years, if you live in a high tax state, you know, the only consolation prize you got was, hey, at least it's deductible. You know, so a lot of people, then the tax bill came out in 2017 that actually now put a cap, and it said, look, you only get to deduct the first $10,000. And this is not just your state income taxes, also your property taxes on all your local taxes. So you can imagine this made some waves if you lived in one of those high tax states. And it doesn't, by the way, it doesn't even have to be high, you could just be in a high property tax state, and all of a sudden you get captured where you're limited how much you could deduct.
7:35 Brian Preston? Well, they've listened to some of the criticism, and they've actually expanded this under the proposed legislation to $40,000 cap with the caveat that it starts phasing out once your income is over $500,000, back down to that $10,000 cap. So this will allow people to expand that if you live in one of these higher tax areas, or you pay high property taxes. It looks like the SALT deduction is going to get expanded to a degree.
8:01 Speaker 03 And so then the next change, if we think about working through the tax return, you have the income you make, and then you have the income that the IRS allows you to recognize. Well, then you actually have the tax computation. How are they calculating what you owe? And one of the, again, significant things that has been talked about is whether or not tax brackets are going to change. And as a reminder, the brackets did change with the 2017 legislation. And if that legislation is allowed to phase out, they will revert back to the rates that were in place prior. But if the new legislation passes, it's going to lock the current rates in. And what that means is that the highest marginal tax bracket's going to be capped
8:41 Speaker 03 at 37% as opposed to 39.6%. But even inside of how they expand the tax brackets, there's going to be a change each year.
8:50 Brian Preston? Yeah, I mean, this is the one, if you take into account the standard deduction and the tax brackets, this is the one that's going to capture. The majority of taxpayers, plus we'll get into credits in a minute with the child tax credit, but this is the stuff, once again, it's the theme of this legislation is to make this stuff permanent if they, if they actually make this happen.
9:11 Speaker 03 And so now we're going to move to the last section. So it's income that you make, it's deductions, it's then how you calculate it. And the last thing is how you actually reduce your tax bill. And one of the most significant tax credits that a lot of American families are able to take advantage of is the child tax credit. And there is some proposed legislation inside of the bill suggesting that there will be a change to the child tax credit.
9:37 Brian Preston? Yeah, this was, child tax credit, you know, it's pretty much been doubled. I mean, you can see if you, if it phased out, it goes back to a thousand dollars. It's currently been 2,000. Now, once again, under the new bill or the proposed bill, there is a sweetener in there that's going to phase out in 2028. But the overarching theme for long-term is just to make the, the doubling of the child tax credit permanent. You know, and I thought that the other interesting thing, if this legislation passes, it is going to make these child tax credits now indexed for inflation after 2028, once they lose that sweetener on there. But I think a lot of taxpayers, this impacts a lot of your taxes. If you
10:18 Brian Preston? have kids, you know what, what a big deal this is because credits are different than deductions is that these are not, you get a deduction, you know, and say a deduction gives you 30% off or even 50% off, you still pay taxes on the other 50% or the 70%, depending upon what the deduction and your tax rate is. A credit is a dollar for dollar reduction in your taxes. So these things are actually bigger impacts on, on how much in taxes you pay because that's a literal $2,000 reduction in the taxes you pay. So you can imagine if you're a parent, this is something you'll want to pay attention to.
10:57 Speaker 03 So what should you change? How should you alter your financial plan today? Well, realistically, it might be a little premature because again, we don't know what the final legislation is going to have in it. But we do want you to be aware that these are the areas that are most likely to be impacted. So if you are someone who would be impacted in one of these areas, we just want you to pay attention. We want you to recognize that changes could be coming down the pipe and we want you to be prepared for them so that you can either plan for them or position yourself in such a way that you can take advantage of it.
11:28 Brian Preston? And don't worry, we're going to give you the full details and I mean, get all into the nuts and bolts of this. Once we actually know what the real consolidated bill from both the Senate and the House, we've only got the House to this point. And that's where we'll be able to talk about the tax on tips, the social security. How about these savings accounts? I mean, that we're talking about putting a thousand dollars for all newborns. I mean, it's almost like somebody woke up. I don't, I'm not getting into the policy idea, but it is one of those things where if you go to moneyguy.com/resources, we do have a resource on how powerful is your army of dollars. It's essentially a wealth builder by any, a wealth multiplier by any age.
12:11 Brian Preston? And for a newborn, you only, I mean, if you look at how much you have to put in there, every dollar you put in for a newborn is 647 times.
12:22 Speaker 03 That's incredible.
12:24 Brian Preston? It's pretty powerful stuff. If they did, but I've never realized, I've lived long enough through politics that you remember how it was under, I think President George W. Bush, that they talked about turning a portion of social security into private industry and index funds. So that might be something that will, it remains to be seen on what actually comes out. A lot of it is conjecture until we get the actual consolidated bill.
12:52 Speaker 03 But we love that we get to speak into this stuff. We love that we get to stay abreast of what's going on out there in the financial markets and hopefully communicate it in a way to you that's easily to digest, that's easy to understand. And we love that we even get to do that when it comes to what's going on in your personal life. It's why every single Tuesday at 10 a.m., we are here live answering your questions. So if you have a question you want us to answer, something you want us to weigh in on, make sure you get it in the chat right now because I have the team out in the wings collecting your questions. Because we believe that there's a better way to do money. So with that, Creative Director Rebe, I'm gonna throw it over to you.
13:29 Speaker 04 Yeah, I'm gonna kick us off with Garrett's question. You talked about this in your most recent Making a Millionaire episode. Thanks for watching that, by the way. The rule of thumb for saving for your next home is to not put extra money towards your mortgage. Can you elaborate? P.S. Awesome episode. So can you guys elaborate on what to think about when you're saving for your second home and whether or not you should put extra money on your current mortgage?
13:56 Brian Preston? Well, let me, I'll let you give some additional nuts and bolts, but the most recent Making a Millionaire was a couple that was 25 years of age. And we, they made the mistake that I see debt crusaders do all the time is that, you know, you're so used to getting, you come out of school with whether it's student loan debt, or you immediately run out and get some credit card debt. And so we help people learn how to overcome some of those high interest debts. But then it feels so good when you vanquish that bad debt, that a lot of times, young people will then get, you know, they'll get excited about how good it felt to pay off that credit card, that they'll start paying off a mortgage. And I'm always like, I love paying off a mortgage. I want you to be completely debt
14:40 Brian Preston? free. But there's a time and a place, because when you're 25 years of age, I mean, the wealth multiplier, and I've got it right here in front of me for a 25-year-old, is 44 times over. So you can quickly realize, if you want to know yours, go to moneyguy.com/resources. You can pull up your age as well. And it just bothers me when somebody is not funding their Roth IRA, who is not saving and investing 20% to 25% of their gross income, and is immediately trying to pay down a mortgage debt. You have to, it's more of the make wealth before you get to make, maintain wealth behaviors. And that's the thing, the mistake that we got onto them about.
15:23 Speaker 03 And I think one of the things that Garrett, because I remember, and by the way, if you haven't checked out Making a Millionaire, make sure you go check that out. If you've not subscribed, make sure you subscribe, so you know when we put brand new episodes I think one of the questions or one of the ways that it says, okay, I'm planning for the next home, right? And so should I just begin prepaying that mortgage? Because essentially, I'm going to lower that debt. And then when I sell that house, I'm going to roll it into this next house. And while that sounds good in theory, one of the reasons we don't love prepaying mortgages early is because especially if you're going to make a big life change, like buying another house, moving to a different community, moving to a different part of town, it gives you maximum flexibility when you save that money outside of your mortgage.
16:04 Speaker 03 Once you put money into the house, once you have money on that mortgage, it's kind of locked in. Now, sure, you can do a refinance or do a home equity line. But we don't love that. So once you put it in there, it has served one purpose. It has now vanquished whatever that debt is you had in the mortgage to that extent. If instead you can put that, and if this is a short term thing, not something that's like five, six, seven years out, but this is the next two or three years, and you can just save that money in a high yield account right now, earning three, four percent. Yeah, that might not be quite as high as your interest rate on your mortgage. But what it's going to give you is flexibility. Because what happens if your house doesn't sell as quickly as you thought it was going to? Or what if there are additional moving costs that you weren't prepared for that you need that liquidity
16:49 Speaker 03 for before you actually sell your other home? So that's why we don't love putting all of your eggs in prepaying that mortgage basket. Because sometimes you might need those eggs as the recipe changes.
17:02 Brian Preston? Well, the contrarian wealth opportunity also is when you're a young person, sometimes you have to make, just like this couple, they had to move across to a different state.
17:10 Speaker 03 That's right.
17:10 Brian Preston? For their career opportunities. And I can't tell you how many of us of you who've come and done studio tours where you're achievers, you're so good at being financial mutants, you're used to being rewarded for making it through all of your goals as fast as possible. And one of the first things I try to tell young people is, deep breath, slow it down. You don't have to do everything as fast as possible. Don't feel like you have to go buy a house when you're 25 years old. Don't feel like you have to. You know, do all these different things when you don't have other components of your financial life figured out. I mean, I've shared before, I had an attorney in here, 25 years old also, who, who had gone out there and house hacked into like a duplex, but
17:52 Brian Preston? yet he felt like his career opportunities might be in a different state or a different city in the state. And I was like, look, that's a problem. You've kind of got yourself in this pickle because you pushed a life decision a little too fast. The, the, the contrarian wealth building opportunity when you're young like that is the additional flexibility. That's why Beau is spot on. Sometimes building up, even if it's cash assets, which seem like they're underperforming, that additional flexibility so you can focus on some of the key elements of your financial foundation of your success, which is getting the job, the opportunity. So then you can let all the other puzzle pieces fall into place. Don't force it. Cause that's what I see a lot of really smart people force it
18:37 Brian Preston? and lock themselves into things that they, that's much harder to unwind and get out of.
18:42 Speaker 03 If you are someone who's in the market and you're thinking about buying a home, we have an entire home buying hub out at moneyguy.com. We have a home buying checklist to tell you the questions to answer before you purchase a home. We have the home buying calculator to help you figure out affordability. So we have a plethora of resources out there because for most folks, buying a home is the single most expensive thing that you will ever spend money on. So you want to make sure you make that decision the best that you can.
19:09 Brian Preston? By the way, if y'all haven't gone out there, just go to moneyguy.com/resources. You'll, you'll see a dropdown of ultimate guides. It's kind of mind spinning how many ultimate guides. If you have any big decisions you're trying to make financially, we probably have you covered.
19:26 Speaker 04 Yeah, lots of topics out there. Moneyguy.com. Just click on resources and you'll see all of that good stuff that we made for you. And another thing that we make for you are Money Guy tumblers.
19:37 Brian Preston? Hey!
19:37 Speaker 04 And that is-
19:38 Brian Preston? Today's a Tumblr day!
19:39 Speaker 04 It's a Tumblr day. And so, since we answered Garrett's question on the show, we would love to send you a Tumblr, Garrett. Just email [email protected] and we will work on getting that sent to you.
19:49 Brian Preston? And we've been using them in two different forums. I'm using mine as the koozie.
19:52 Speaker 03 I'm using mine as the Tumblr.
19:54 Speaker 04 What a great example.
19:56 Speaker 03 Look at that.
19:57 Speaker 04 Just, I love that.
19:57 Speaker 03 Do you think that when you announce it's Tumblr Day, do you think the volume of questions increases? Or do you think it's pretty standard throughout?
20:04 Speaker 04 I will say, our people like to talk personal finance, so...
20:07 Speaker 03 So you think we get a bunch of questions either way?
20:09 Speaker 04 I think so.
20:10 Speaker 03 Awesome.
20:10 Speaker 04 But, I mean, prove me wrong. Let's go. Bring on the questions. You might win a Tumblr. All right, Donald writes, "Hi guys, I'm 31 and my employer has a 401k match at 50% up to the legal limit, which is $23,500." I know. That's pretty good. He says, "I'm currently maxing this out, but I do not have a fully funded emergency fund. Would you recommend reallocating?"
20:39 Brian Preston? Yeah. I mean, you gotta have an emergency. I mean, that's, oh, gosh.
20:42 Speaker 04 See, that's because he's technically getting that step two match.
20:45 Brian Preston? Oh, Donald!
20:46 Speaker 03 Hey, he put-
20:47 Brian Preston? Look at Donald!
20:48 Speaker 03 So, look, he put leaves over that trap and he almost just walked right into it.
20:52 Brian Preston? Because here, Donald brings up a solid point, is most people, you know, you're capped once you put in 3%, 4%, 6%. I mean, this is what we see. Donald has this unique thing where his employer is just so generous, where offering essentially a $12,000 benefit if you can put $23,500 into it. It is hard to get away from that. But, and I'm not rewriting Millionaire Mission, but this is one of those things where I think you have to figure out the balance. If you can't fill up that emergency reserve naturally within the next four to six months, you're going to have to figure out, because you're running a risk
21:35 Brian Preston? that if you had a life emergency- I mean, you don't want to take, I mean, do you do a loan at that point? I mean, if they make that option, I mean, it's, it's a pickle of a situation.
21:47 Speaker 03 Yeah, I'll, I'll tell you what, if, if I said to you, Donald, hey, I got a bag of money sitting in my office, you just gotta come get it, you'd come get it. But then if I was like, hey, I'm gonna put like a 30 inch box and you gotta jump over that box to come get this money, would you do it? You'd probably still come get it. I said, okay, well, I want to put a 30 inch box and then I'm gonna like dig a hole and you gotta jump over the, what I'm getting at is there's a lot of things that you would be willing to do to get to that free money. I think that this is no different because here's what I don't want to say. I don't want to tell you not to go get that free money, not to take advantage of that 50% max. But you have to have an emergency fund. Like it's just, it's a non-negotiable.
22:28 Speaker 03 It's something that has to be there because all the savings in the world doesn't benefit you if you have a catastrophe that literally takes your financial life just off the rails. So I would figure out, how creative can I be? Can I eat, and again, I'm not advocating for this because it's a horrible health decision, but Historically Public sells cereal for two boxes for one. Can I eat cereal for every meal for a little while?
22:53 Brian Preston? You can do peanut butter and jelly too, by the way.
22:54 Speaker 03 Can I not eat out? Can I, you know, can I cut out my subscription? What things can I do to get my living expenses absolutely as low as possible so that I can still take advantage of getting that full 50% and get the emergency fund? Because here's what I'm going to tell you. If you can't at least get the emergency fund built up, I think you're just living way too far out, too much risk. Because even though you're putting that money into the retirement plan, even though you're technically following, we hold that thing up because we have a nine step tried and true process. Even though you're following the financial war of operations, you're doing step two, you are now captivating those dollars in such a way that you cannot get to them.
23:38 Speaker 03 You have to have something to at least be able to get you out of that pickle. So I would figure out, how can I get my expenses absolutely as low as possible? So that way I can do both. And then once you have that emergency fund fully funded, then you can breathe a sigh of relief and know you're in a great spot letting those dollars continue to work for you.
23:55 Speaker 04 What if he can't cut expenses anymore? Cause like, that's a lot of money because he could just do a very short amount of time. Where he pulls back from the 401k slightly, but doesn't miss out? Like, when is that a good option?
24:07 Speaker 03 Yeah, so again, you cut off the, again, you have all year most plan. Now, some plans work this way where you have to, in order to get the employer match, you have to contribute each pay cycle. But some have what's called a true up provision where even if I don't contribute each pay cycle, so long as I get X dollars in by 1231, I'll qualify for that match. So maybe you know you're someone who's a December bonus payer, right? Like, I get a year end bonus, it's gonna be whatever. Okay, I might decrease my 401k contribution right now so that I can fill up that emergency fund bucket. But then, when my bonus comes in, or at the end of the year, at some point, if you want to be able to do both, if you want to be able to get both of them done, you're gonna have to make the hard decisions,
24:51 Speaker 03 where you like, cut down to the quick. But man, 50% free money.
24:57 Brian Preston? Well, you bring up a good point. I mean, if you have year end bonuses, a lot of times your employer will let you be creative on that bonus payment versus your normal pay. I've done that for employees, when they tell me that they want to go and allocate more to the 401k. I'll make exceptions for them, because I want to encourage that financial mutant behavior. So, but you've got to, I completely agree with you both. You've got to get the emergency fund. The ideal is to figure out a creative way so you get to do both. And maybe you play, the way you squeeze the balloon on making that happen is play with the timing of the way the cash flow comes in. Maybe you dial down temporarily now, but then you catch it back up with year end bonuses or other things that are coming down the pipe.
25:40 Brian Preston? Because I gotta think, an employer that's doing that type of funding, this is probably a high skilled career, where part of this is golden handcuffs, but part of this is because it's a very profitable industry. And I bet there's some opportunities to get the best of both worlds.
25:58 Speaker 03 I'm just thinking, if expenses are so low, because I'm, like, if I were in this situation, what would Bo Hanson do? Like, how would? Honestly, because once you fill up your emergency fund, you're done. It's not like something has to continue going. Saving in your 401k, hopefully you do this over and over and over and over again. I'm standing here thinking, man, I might go drive Uber. I might go pick up a side gig. I might find something on nights and weekends just to satisfy this one goal.
26:24 Brian Preston? Because it is such a valuable thing.
26:26 Speaker 03 It's so unique.
26:27 Brian Preston? Fifty percent on that money is pretty powerful.
26:29 Speaker 03 It's insane. I mean, that's an unbelievable match. I would figure out what creative thing could I do?
26:36 Brian Preston? I think we gave Donald enough, whether it's a cash flow management and timing issue, or it's side hustling. We've thrown enough breadcrumbs out there that I bet Donald's going to come back.
26:45 Speaker 04 There are ways he can do both.
26:47 Speaker 03 That's right.
26:47 Speaker 04 And both are important.
26:48 Speaker 03 Both are important.
26:49 Speaker 04 No, I loved what you guys were saying. I think there was just a piece of me, since I am a proud member of the messy middle, I'm like, if Donald's single, then yeah. But what if he's like married with three kids? So like, it just changes the conversation to like, what other level levers can you pull? So that was a great answer.
27:05 Speaker 03 Every financial decision we make has an opportunity cost, right? There is a cost associated with any decision we make, no matter what decision that is. And as well, personal finance is very, very personal. And his personal situation, he's going to figure out which one of these things is actually possible and plausible for me to be able to execute.
27:21 Brian Preston? And look, you don't have to get it perfect. I mean, look, I've written the book on all the mistakes you can make and still end up in a pretty good place.
27:27 Speaker 03 That's right.
27:30 Speaker 04 Love it. All right, Donald, since we answered your question, just email [email protected] if you would like a Money Guy Tumblr.
27:37 Brian Preston? I was like, thank you. By the way, kudos to you because I'm sitting here, I'm like, wow, I'm such a financial mutant. I was like, how can we get him that 50% guaranteed rate of return?
27:46 Speaker 04 No, I respect that.
27:47 Brian Preston? But man, oh man, we got to respect having that emergency reserve so you don't make desperate decisions.
27:52 Speaker 04 Yeah, for sure.
27:54 Speaker 03 Fifty percent.
27:57 Speaker 04 Okay.
27:57 Brian Preston? Hug your employer today. Oh, well, let's don't, don't, I mean, maybe. I mean, I mean, 50. High fives? I like to think we're generous around here with our 8%, but I mean, that's a, that's a pretty incredible. Yeah. Benefit that that employer is offering. It's awesome. Hug your employer. I didn't say kiss. You know what? Side hug. Hey, let's just. Side hug. Let's high five. Side hug, okay?
28:19 Speaker 04 Fist bump.
28:20 Brian Preston? I'm not even a hugger. I know, that's why I'm glad that he's recommending this.
28:24 Speaker 04 What if the employees just came on the server hugging you for your 8% match?
28:27 Brian Preston? I don't like to hug. I think, I think. Who's a hugger if y'all were curious? I am. It's true.
28:32 Speaker 04 Brian is not.
28:32 Brian Preston? You know what? I'm not a hugger. At the office, I high five. That's what I do. Oh, because you're the employer. That's, that's right. That's right. I high five. That's probably, I, I, I agree with that.
28:42 Speaker 04 Smart choice.
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29:43 Speaker 04 All right, ready for the next question?
29:45 Brian Preston? Mm-hmm.
29:45 Speaker 04 Still Mutating has a question for you.
29:48 Brian Preston? Oh, I like that.
29:48 Speaker 04 I like, and then one of his questions, I like it too. It says, "My net worth is 450K and it's all tied up in our SoCal home. We have 15K in credit card debt at 19.75%." I know, I hate that. "Should we use a HELOC at 6.75% to pay the credit card off?"
30:12 Speaker 04 He's still mutating. So what should he do to get himself back on track?
30:17 Brian Preston? I mean, we don't, I look, this is one of those things, we're, we're gonna have to, to paint by the numbers a little bit. We don't have enough variables. I'd love to know what his emergency reserves are. I'd love to know, um, does he have a, a health savings account? I mean, it's just, we don't have enough variables to know what all sources he could go pull this money out of. But I will say, um, I don't like 19.75 on a credit card. That's why it's step three of the financial order of operations is because if that's twice the rate of return you're hoping to get in a good year, we've got an issue.
30:50 Speaker 03 Yeah, but, but I think, and, and this, this is some like general guidance that you should really, really think about. And this is something that you kind of, we learn early on in like becoming a financial advisordom. Uh, when you have, not all debts are created equal, right? So you might be thinking about in terms of like interest rates and that sort of thing. But what I'm talking about is some debts are collateralized and backed by a thing. And some debts are revolving and they're not collateralized. So one of the things you always want to be very, very careful of is taking a non-secured debt, something that at the end of the day, ultimately, if you, if you don't pay it, it's going to make your life tough and difficult, but they can't come like take something away from you. And
31:32 Speaker 03 replacing that debt with something that if you cannot make the payments on that, they can come take it. So if you take a non-secured credit card and you pay it off using a home equity line, and now all of a sudden you cannot pay off that home equity line, you cannot make payments, you go into default, well, now you've actually put your primary residence at risk. You've now put yourself in a situation where literally your very home is now on the table for this debt that you've incurred. So even though the interest rates are, there, there's a huge arbitrage situation there, you have to factor in the total risk. If I take out this HELOC, I am now taking debt and I'm putting my house up on this debt. And that's just an aggressive.
32:16 Brian Preston? Well, there's also, I think it's too much of the easy button on the behavioral issue might. Not have been addressed is that if you have you have this house that's obviously driving your entire net worth success and we know you can't eat a house. I mean, you have to go take down debt exactly what you're considering and that's the easy button because you you've obviously there's some behavior going on in the background that's run up a credit card debt at this level. If you immediately hit the easy button and go do this home equity line, I'm worried and look, I've fallen into this trap, you know, if you and I know I've talked about it earlier, but in millionaire mission, I talked about my access to cash trap where I had a home equity line because I had a house with multiple well, it's over six figures of equity.
32:59 Brian Preston? And I did this, I went and did the home equity line. And what's funny is that we did it, we were doing some show research and I went and pulled all those old statements and I found out that, you know, it started off as such a just benign, simple thing is like kind of like your situation, whereas, you know, it just seemed like a no brainer. The banks were giving away free home equity lines. They were doing prime minus a half at the time. So the interest rates were super low. By the way, home equity line interest rates right now are not seven percent. It's still not great, but it's better than 19. But what I found in my own behavior is is that it was too easy. They gave me a credit card. They gave me a checkbook and what it all of a sudden became the easy way instead of making the hard discipline decisions of life to maybe
33:44 Brian Preston? this month I need to budget better and actually restrict where I was spending money. It just seems so easy to just go transfer from the home equity line. So I worry it's still mutating. If we gave you the easy button before you address the behavioral and the discipline issues, we might actually be giving you a path that actually digs you this hole deeper instead of getting you out. So I would first before you go do something like a home equity line that first of all, it's friction costs, but also all those security and risk factors that Bo talked about with you. This is the house that you live in and do you want to put that in jeopardy is have you gone through
34:25 Brian Preston? the exercise of looking at your budget and figure out, hey, can I cut subscriptions? Can I go do the 200 bucks with a few phone calls type in doubt, you know, exercise that I have in millionaire mission? There are other things I could do that could help me accomplish this before I just go and let this home equity line be the solution and the solve all for this moment
34:48 Speaker 03 The other thing I think, and when you hear these stories of people that paid off a tremendous amount of debt and you ask them, how'd you do it? A lot of it is like, hey, I budgeted it. I cut down my expenses. We lived on this. Another thing that people do, and this is like a painful thing to do, but it's a really healthy thing to put you in the situation of never do this again, is start selling stuff. Hey, are there things, are there assets that I own in my house? Are there things that I've spent money on previously that I might be able to go round them up and hey, I don't use this thing anymore. I'm gonna, I'm gonna sell my PS4. I'm gonna sell my, whatever this thing is. I'm gonna get rid of, I'm
35:30 Speaker 03 gonna sell the car and I'm gonna get rid of the car payment and I'm gonna buy a less expensive car and I'm gonna take that difference and I'm gonna go extinguish this debt. You might need to make some really extreme decisions like that before you start taking, again, like hitting the easy button and just say, oh, well, I'm just gonna replace this one debt with another debt. You haven't really addressed the problem. No pain, no gain. Look at that. That's not mine. No pain, no gain. Brian Preston.
35:58 Speaker 04 On that note, still mutating. Great question. Keep up the mutating.
36:02 Speaker 03 I'm sure it's Benjamin Franklin, like everything else. I think, Nick, that was Benjamin Franklin that said that, right?
36:06 Speaker 04 Sure. Sure, sure. Well, hey, still mutating. If you would like a Money Guy Tumblr, we appreciate you being here and asking your question. Just email [email protected] and we'll send one out to you as a thank you. All right, Ruben F. has a question next. How should teachers think of the recent 401k by age episode? 10% of my salary goes to the pension. It's vested. I have 36K in my 403B, maxing out my Roth IRA with a 21.5% savings rate without the pension. And I'm on step seven. So it sounds like he's got a lot of good things going on, but I think this is a good.
36:48 Speaker 04 Kind of nuanced to, we talk a lot about the power of the 401k, but he's a teacher.
36:52 Speaker 03 Ruben's asking for somebody else because Ruben's crushing it, right?
36:55 Speaker 04 I kind of thought that too. This is a good question, but he's doing great.
36:59 Speaker 03 You don't think about it at all because you are literally knocking it right out of the park.
37:02 Brian Preston? But I see what Ruben's asking is because we, you know, we talk about you don't count employer contributions if your income for a single individual is over a hundred thousand and for a married couple, over 200,000 because you get over that social safety net and more of the discipline when you actually start go to use this assets falls on your shoulders. So that's why we even have this caveat out there. Well, and teachers typically don't make a ton of money. So, but Ruben, you're proving the point that there's, there's categories of people by occupation that typically do really well at becoming millionaire status. As a matter of fact, I'm, I'm recording a mini show today and I threw a little caveat
37:43 Brian Preston? in there and winked at the teachers because y'all, y'alls, a lot of you do show this high discipline function to it with savings and becoming millionaire status with low income, lower incomes. So, so kudos to that. But to answer your question, I don't mind people counting that 10% because there might be another teacher out there who is unfortunately not able to save 21% in addition to the 10% that they're forced to take out of their pay. Because realize, here's, here's the other part of Ruben's thing is when your employer makes you take 10% out for your, your pension, what the other part is they're probably putting
38:24 Brian Preston? in at least 10, if not even 15% on top of that as well. You get to count a lot of that and because teachers, we, we often say this is that pensions don't show up on your net worth statement unless they have an option to where you actually can roll the money out into an IRA later. So you're going to have both those options typically. And usually the pensions coming from, from government institutions like education are some of the most lucrative out there. So without a doubt.
38:58 Brian Preston? You know, you can count that in your savings rate, but I, I, Ruben, I like your ability because teachers, the other cool thing about teachers is they typically hit 30 years so fast that a lot of them retire in their mid 50, early to mid 50s. The more you save when you're younger, as long as you're not sacrificing memories is going to give you additional flexibility to live that great, big, beautiful tomorrow moment that, that I know you're building for.
39:23 Speaker 03 That's, that was what I was saying. I love that the 21, 21 and a half percent in addition to the pension is really just giving you more options down the road. I don't know how old Ruben you are, but likely if you're doing this for a majority of your career, you're going to be at a place where you get to write your ticket much earlier in life than a lot of other folks because you have that wind at your back with the pension. So I love it. I think flexibility is on your side and I think you're thinking about it great.
39:50 Brian Preston? Look, I, I don't, young people, I know you're typically without resources. You don't have money, but your time is so valuable. But do you know what, how dynamic it is for a young person that is disciplined is because you're, you're, you, you take this element, that's, that's why we spend so much time talking about the wealth multiplier is because I get, you know, you don't have much money, but a little goes a long way. So every little bit, as long as you're not sacrificing memories. I don't want your 50 year old self to be wealthy, but go, man, why did you waste your twenties? Why'd you squander your thirties? But if you feel like you're living your best life, but you still have this discipline function where you're able to save, knock it out because I will tell you some of my best, I feel like
40:34 Brian Preston? some of the best success moments I've had in my life, now that I'm, am post 50 is that I can't tell you which dollars I saved have turned into this, but I'm so glad because I was at that element when I was in my twenties that I was going to save so dynamically so that I could retire at 50 and then I get to 50 and I'm like, there's no way I'm retiring. I love doing what I do. I feel purposeful when I wake up, but I realized that all those decisions were the culmination of why we get to do crazy stuff like buy more equipment and all this other stuff is because it doesn't have to be tied to, does it generate money? Is because we, you know,
41:10 Speaker 03 You did the hard decisions early, yeah.
41:12 Brian Preston? The why, the why became, the flexibility gives us options to do things in an unorthodox way.
41:21 Speaker 04 I love it too. Well, Ruben, thank you for the question. We're really glad that you are here.
41:27 Brian Preston? Do you know how hard it was for me not to pop that thing?
41:30 Speaker 03 I'll put it over here.
41:30 Brian Preston? No, no, it was sitting here. I came really close, but I was like, we don't pull the same trick twice. I do it all the time, by the way.
41:35 Speaker 04 Does everyone actually hear it when Bo opens his can of sparkling water?
41:40 Brian Preston? I bet they heard it still.
41:41 Speaker 03 I made sure that he wasn't talking.
41:42 Speaker 04 Cause you held it pretty far away from your mic.
41:44 Speaker 03 I'm ba- yeah, I'm, yeah.
41:46 Speaker 04 I don't know. Let us know. I'm curious now. We always notice it.
41:49 Brian Preston? Thank you for not doing it while I'm in mid-sentence. That is not always the case.
41:54 Speaker 03 You taught me my lesson last, last week.
41:57 Brian Preston? It was sitting right here too, though.
41:59 Speaker 04 That was good.
42:01 Speaker 03 I mean, I did it way over here. I mean, whatever.
42:03 Speaker 04 Um, oh, I was gonna give Ruben a Tumblr. That's what I was gonna do. Ruben, email [email protected] . We'd love to send you a Tumblr since we answered your question on the show.
42:13 Speaker 04 All right. Ready for the next one?
42:16 Brian Preston? Indeed.
42:17 Speaker 04 Leo writes, "My husband and I, who are 31, are over the income limit for Roths. Our account structure isn't ideal for backdoor. Aside from HSA, is there another way to fill that bucket? It feels like we're missing out."
42:33 Speaker 03 So is there another way to get money in Roth? Yeah, sure. I mean, one of the, one of the ways that a lot of people, uh, get money into Roth is they can do Roth 401K or Roth 403B contributions. A lot of people don't realize that for most retirement plans, you have two different ways, well, actually three, but two that most people know. You can do a pre-tax contribution where you get a tax deduction this year when you pull the money out in retirement, you pay tax on it, or you do a Roth contribution. You put the money in, you don't get a tax deduction this year, but it grows tax-free, assuming when you distribute it, that's a qualified distribution.
43:08 Speaker 03 So yeah, you could do Roth 401K or Roth 403B contributions, but if you're someone who is in a high enough tax bracket that you're now above the ability to even do direct Roth contributions,
43:21 Speaker 03 I'm going to bet that that pre-tax benefit of putting pre-tax contributions in your 401k or 403B or 457 is pretty valuable. And so it's probably still going to make sense to do pre-tax. Well, a lot of people find themselves in this situation, and I'd be curious to know why your account structure doesn't lend itself to that because maybe you have four, you have retirement plans, but maybe they're not good. Maybe they're really, really expensive and very limited investment options and they're just not awesome. So it doesn't justify moving IRA assets into those plans? Well, if that's the case, then right now do the best you can, the best that you can and continue to build money on a pre-tax way and then continue to think
44:06 Speaker 03 about building money in an after-tax way. If you don't have any other tax-free options and likely, if you're only 31 right now, later on, at some point in your life, you're going to have an opportunity to start building Roth assets, whether that be through job changes where you get access to a better 401k and then you can start doing backdoors, or maybe you retire before traditional retirement age and you're able to start doing Roth conversions, just like we did a Making a Millionaire episode, walking through what that could look like and how even Roth conversions in your 50s and 60s can lead to like millions of extra dollars in retirement, if you think about it well. So just because you can't do it today, doesn't mean that you'll never going to be able to do it. Agree, disagree?
44:46 Brian Preston? I think you nailed, and that's why I'll just, I'll close it out with the, the quick checklist for, for leave, for homework is just go, once again, look at the structures of the, your employer plans because obviously the way you, since you said it's not, you can't do backdoor, that means you'll have an IRA rollover or some assets and you've decided you shouldn't roll that into your 401k. Make sure you go through that exercise again, because maybe you'd misunderstood, you didn't realize, because if you work for a Fortune 500 company or a big company that has just like, we're a small company, we have a great 401k. Just, once again, go look and figure out why you're not rolling those assets into 401k so that they're gone. And then if you look at it and it just doesn't work out, then I would ask yourself, y'all need to make, look at life.
45:31 Brian Preston? Time planning things like, hey, we live in a state where there's a very high state income tax. Plus, our federal tax bracket or marginal rate is at this level. We're crazy not to take this tax deduction right now. But then ask yourself, hey, are we going to retire in this state? Because if we're not going to retire in this state and then, and you know, we're, we're saving so diligently now. Maybe we're going to go from this high tax state to a low tax state in retirement. There's probably going to be some unique, you know, arbitrage situations where you're going to have Roth conversions as well as be tax smart. But I would, I always like having the plan so you can think about those things now. Daydream, figure out a path forward.
46:14 Brian Preston? And then I think you'll be in a great place because you know, and that also gives you the dynamic. If you look at it, you can figure out, use that decision matrix that you just did to figure out, should all this go to traditional because of our tax rate? Or maybe this means that because we, maybe you're in a low income tax state. And you're, you're barely over 30% or maybe you're 28% on your marginal rates. And you say, well, maybe we should do, you know, money to Roth because we're so young too. So it at least gives you the decision guidelines and variables. So you can start making the better path forward choices for yourself.
46:54 Speaker 03 Love it.
46:55 Speaker 04 That's great. Leah, thank you for the question. Just email [email protected] if you would like a Money Guy Tumblr.
47:01 Brian Preston? Is it Leah or Leah?
47:03 Speaker 04 It said Leah.
47:04 Speaker 03 There was an H at the end.
47:05 Brian Preston? Was there? Does that make it? Okay.
47:07 Speaker 03 I think if there's an H at the end, doesn't that make it Leah?
47:10 Speaker 04 Yes.
47:11 Speaker 03 Leah.
47:12 Brian Preston? This is where I'm good at math.
47:15 Speaker 04 Hey, it's fun to clarify.
47:16 Brian Preston? What God doesn't give you, you know, he gives you something else. If you saw math A Ts, you'd know why I say that.
47:23 Speaker 04 Oh, you guys are funny. We got lots of comments saying they hear the can opening loud and clear, just in case anybody was wondering. There is no question about it. Somebody even said it was part of the show now.
47:35 Speaker 03 Oh, see, oh.
47:36 Brian Preston? Don't, don't encourage that.
47:38 Speaker 03 Quick poll there. Quick poll there, Nick. Do you like the can opening or do not like?
47:43 Brian Preston? What you ought to ask is it, do y'all consider it rude that Bo answers it in mid-conversation?
47:49 Speaker 04 He opens it while you're talking. That's true.
47:51 Speaker 03 You're going to start doing, I'm going to start doing it like right, like while he's talking.
47:54 Brian Preston? Do that. We might literally have a fistfight. And remember, you only get to hit me once.
47:58 Speaker 03 Oh buddy.
47:59 Speaker 04 Fight, fight.
48:00 Speaker 03 Whatever. All these comments I've been getting lately, I don't think I want the smoke.
48:03 Brian Preston? No.
48:04 Speaker 03 I don't think I want the smoke anymore.
48:05 Speaker 04 I know.
48:06 Brian Preston? This is like me on a golf course. I don't look like I can golf, but I don't know how to golf.
48:10 Speaker 03 Benjamin Button, aging, aging backwards. I don't want that smoke.
48:13 Brian Preston? I'm chill, I'm putting my money on Bo if we got in a fight. Nah, not a chance.
48:17 Speaker 04 I don't know, it's not, it's not as clear anymore.
48:19 Speaker 03 It used to be, but not anymore.
48:21 Brian Preston? I do, you know, what's funny is I have, my next door neighbor is Bo's age. And he's super successful too. And I try to humble Bo by, by bringing him, when I, I came to work and I said, you know, my next door neighbor is doing jujitsu now. And I was like, when are you gonna start? And he hasn't, he hasn't taken it up. I, I, you know, I'm waiting for you to get on that trend too.
48:40 Speaker 04 I could see you doing it, actually.
48:41 Speaker 03 I don't like, like I never, I never, um, like wrestling and all that kind of stuff was just never my, I was always like, the sports that I did were always like ball sports, right? So like baseball, like that kind of stuff. And swimming, avid swimmer, very much so.
48:55 Speaker 04 Sure.
48:56 Speaker 03 And, uh, but like the thought of someone like, ah, elbow me in the face, I just, I don't like that.
49:02 Brian Preston? Oh, he doesn't, I mean, I've seen black eyes. The last time I saw him, he had his toes looked horrible.
49:07 Speaker 03 Yeah, like.
49:08 Brian Preston? It is, but he loves it.
49:10 Speaker 03 I think it's awesome. And people that do jujitsu, I think it's a super, super cool thing and they love it. I just recognize, ah, probably not for me.
49:17 Brian Preston? But all those things that I mentioned, when you do get injuries, it's not like the people are super aggressive. It's just that when you're in close quarters, you catch elbows, you catch other things. I have no desire. I just like hanging out with people who can defend themselves.
49:29 Speaker 03 I just, I, I like to, I like to.
49:30 Speaker 04 That's my strategy too.
49:31 Brian Preston? That's my strategy on most things in life is I just put myself in proximity to others who can do the things that I'm not, remember I've done the one, well, I shouldn't say it was one of the more popular shows. It was one of the shows I'm more proud of was I used to do a historic show on financial mistakes you hope your friends make.
49:46 Speaker 03 Uh huh, yeah.
49:47 Brian Preston? And it, it did okay. But I always like, if you could find a friend that. Buys not just a boat, but a lake house.
49:55 Speaker 03 Uh huh.
49:55 Brian Preston? I mean, those are great friends to have because you just, yeah, if you, you know, go get, go get a friend RVs.
50:02 Speaker 03 Uh huh.
50:03 Brian Preston? I mean, these are great things you hope your friends do so that you can go get the benefit.
50:07 Speaker 03 So you're saying jujitsu is one of, one of the things?
50:10 Speaker 04 You hope your friends do.
50:11 Brian Preston? Yeah. I mean, I would say, I would put jujitsu in that category because then you feel very confident that your friend could defend you. But you don't have to go do all the exercise and work that goes with that.
50:20 Speaker 03 I mean, do you have any, do you have any desire to do jujitsu?
50:22 Brian Preston? I'm too old. I'd be, I'm always worried at this age, I'm in decent enough shape. I worry about injuries.
50:28 Speaker 03 Yeah.
50:28 Brian Preston? So that's why I pick on you all the time. When you're doing all that heavy Olympic lifts, I'm like, Beau, you're getting to the age.
50:34 Speaker 03 Nah.
50:35 Speaker 04 Watch out.
50:36 Brian Preston? Careful. Cause it's the injury that gets you. It's not, you're in great shape, but it's the injury that, that you have to worry about.
50:43 Speaker 03 I get it.
50:43 Brian Preston? There's some life advice for all my 40, 50 somethings. You know what I'm talking about.
50:49 Speaker 04 You know what he's talking about.
50:51 Brian Preston? No, you mess up your knees, you mess up your ankles.
50:54 Speaker 04 No, it is true.
50:55 Brian Preston? How many, how many people do we know that are successful, have back problems?
50:59 Speaker 03 I try to.
50:59 Brian Preston? And it, the pain is a, is a legit issue as they get older.
51:03 Speaker 03 To put your mind at ease, I try to put myself in a position where I don't do the crazy stuff anymore. Like I think, I keep it very much inside the realm.
51:10 Brian Preston? Did y'all not hear him talking about throwing around 100 pound dumbbells this morning in the team meeting, in the content meeting? That sounded, when I heard 100 pound dumbbells, I was like, he's not, he's not smart yet.
51:21 Speaker 04 He's not smart yet. Someday.
51:23 Speaker 03 Still working, still mutating over here.
51:25 Speaker 04 Still mutating. All right. Ready for another personal finance question?
51:29 Brian Preston? Yeah. Before we have zero people watching the show.
51:32 Speaker 04 Well, this one is from Michael C. It says, how do I determine the right down payment? Do I buy once I hit 5% versus continuing to save? I plan to stay in this area for the long run. Thank you. And something I appreciate about the money guy is that you guys give some flexibility, right? On that first home purchase, you could put 5% down and still do it in a smart way, but is that always the smart way?
52:01 Brian Preston? I mean, look, the. Percent is meant to, I mean, the ideal is still 20%. Let's never forget that. That is the ideal. But I just know that if, if you go like some of the other financial gurus, which by the way, I kind of, I smile as a lot of them have changed that, that update is because I was like, we never had to change our rules. We've always been super flexible in this. But it is, the ideal is 20% just because of you avoid PMA. It allows the likelihood that you're keeping that, you're getting a nicer house and still respecting the 25% of your, you know, of what your expenses are. So I consider it a balancing act. If you've had to forego saving and investing 20 to 25%
52:43 Brian Preston? for the future because you were saving up to get to this 5%, the 5% now allows you to still make sure you're getting the Roth, you're getting to do your 401k. But if you find out that you're already doing 25% and you'd like to now go to a nicer house, but you're going to be putting in jeopardy that 25% towards housing, then yeah, let's put a bigger down payment down.
53:05 Speaker 03 Yeah, I think that's the answer is how do I know when the down payment's right? When I've done the mathematics to recognize that whatever the mortgage is based on my down payment, I'm going to stay below that 25% threshold. That's the thing. Most people, when they make this decision, it's less about like, well, how much do I want to put down? It's how much is necessary? So I make sure the house is inside the realm of affordability. Okay, if I do 20, my mortgage is going to be less. I'm not going to have PNI. There's the other costs I'm not going to incur. Or man, if I try to wait for 20, the house price is my area. They just keep going up and up and up and up. And I'm at five right now. But if I wait till 20, the house is literally running away from me more quickly than I can catch up to it. This is where personal finance is so
53:48 Speaker 03 personal. You have to determine for you and your situation, what's the best answer? What's the best scenario? And a lot of times it's not just you, it can also be your area. We happen to live in an area where home prices just continue to move further and further and further and further and further away. So a lot of people, even though they would desire, they want to put down 10, 15, They're having to make the decision so long as it still is in the 25% to put down less just so they can get on that side of homeownership because they know that they want to be here. They know that they have, they're going to be here for at least five to seven years. They know that their vocation is secure. They're doing it just so they can stop that
54:29 Speaker 03 train from moving away from them. You have to assess in your circumstances, what's the best decision based on the goals that I'm trying to achieve?
54:39 Brian Preston? I like that.
54:40 Speaker 04 I love it. Michael C. Great question. Thank you for asking it. Just email [email protected] if you would like a money guy Tumblr. 83% say yes, they like it when Beau pops open the can of sparkling water.
54:55 Speaker 03 You know what I mean? I don't even do it on purpose. It literally, I just.
55:01 Brian Preston? This is, this is, this is what I like to say in polling. You have to be careful with how the question was answered. If we'd have asked, do y'all consider it rude that Beau opens this in the middle of Brian speaking? I'd like to know how that, that.
55:16 Speaker 04 I would also, because this was from our YouTube live stream. I'm also curious what the audio podcast listeners would say because we also release this on audio.
55:24 Speaker 03 Interesting.
55:24 Speaker 04 And if you can't see it, well, how do they think it's funny too? I don't know.
55:28 Speaker 03 To be clear, I did it.
55:29 Speaker 04 I would love to know. You can comment actually down below.
55:32 Speaker 03 She has not said that it was rude at all. Not even almost, like she didn't even bring it up.
55:35 Speaker 04 I mean, I'm just amused. I'm the wrong person to ask.
55:38 Brian Preston? It is a personality issue. I'm the same person. If you eat macaroni and cheese around me, it bothers me.
55:42 Speaker 04 Wait, what?
55:43 Brian Preston? Don't smacking sounds? Those, y'all don't hear people chewing?
55:46 Speaker 03 So it's not, it's not.
55:48 Speaker 04 That was so specific.
55:49 Speaker 03 I thought he had a problem with macaroni and cheese.
55:52 Brian Preston? I'm not going to give too many clues.
55:53 Speaker 04 There are a lot of other foods that can make that sound.
55:55 Brian Preston? Because these are people we socialize with all the time, but there are certain people that it's hard to be around them when they're eating because they just, they chew with their mouth open and it bothers me.
56:03 Speaker 03 I do, I do not disagree with that. That bothers me. But the, you're saying, so the can popping for me is the equivalent of eating with my mouth open.
56:11 Brian Preston? I'm an open book to you guys. I tell you how it is and I just, some people, unfortunately, I will tell you, everybody in this room, I eat around you all the time. Nobody here is a weird eater.
56:20 Speaker 04 I literally was like, okay, I must not do this. Brian eating lunch with me. So I think I'm good.
56:25 Brian Preston? It's more of somebody in my, in my orbit in life that when my wife says we're going out with so and so, I'm like, oh, please don't put me across the table from them. We really have those conversations.
56:35 Speaker 04 Right, wow.
56:36 Speaker 03 You don't eat mac and cheese in front of them.
56:38 Speaker 04 Don't do it.
56:38 Brian Preston? No, I say that because in college I had a roommate and every time he was, you eat cereal too. He would eat macaroni and cheese. And I could be in the room trying to study or something and I hear him over there just smacking, going to town. And I was like, there's, there's something not right about this.
56:55 Speaker 03 I, for the record, I don't eat cereal anymore, but when I did, I ate it very quietly with my mouth closed. Uh, so I was a very polite.
57:02 Brian Preston? You're, you're a clean eater.
57:03 Speaker 03 Yeah.
57:04 Brian Preston? I've never, I've never noticed you eating.
57:07 Speaker 04 What a compliment.
57:08 Speaker 03 When I, uh.
57:09 Brian Preston? And I, I don't think I'm that odd in that. I mean, I just think that some people, they just, I don't know.
57:14 Speaker 04 Some people have a thing about it.
57:16 Brian Preston? I mean, does that make me weird?
57:16 Speaker 04 I think it just depends on the person.
57:19 Speaker 03 I, uh, I don't like my fingers being messy. It's like just a thing, right?
57:22 Brian Preston? This is my wife is the same way.
57:24 Speaker 03 So like if I'm ever out, like if I'm out on like a double date or like I will not get hot wings. I will not get ribs.
57:30 Brian Preston? No, I've seen you eat wings.
57:32 Speaker 03 Because we're practically family, right? Like it's different, but if I'm out with people that like, I would not eat that around folks that are not like inner circle. Cause I don't.
57:39 Brian Preston? Okay. I'm willing to put an asterisk next to everything I just said about wings. I think me and my family go eat wings. I'm counting on us all to be a little gross while we eat wings.
57:48 Speaker 03 It doesn't matter. If you eat mac and cheese one way, you're out, but it doesn't matter.
57:52 Brian Preston? That type of food, it's okay that you're getting in it because the food is that good.
57:56 Speaker 04 What about spaghetti?
57:57 Brian Preston? It's other things though, like you should be able to eat. Oh, you're saying like Italian food? I guess possibly.
58:03 Speaker 04 No, spaghetti specifically.
58:04 Brian Preston? What's funny is we ate, we ate Asian, we went to, um, this awesome restaurant that had a James Beard award. We didn't even know we stumbled into this place.
58:13 Speaker 03 This was, this was this past weekend?
58:14 Brian Preston? Yeah, down in, um, Winter Park. And so, you know, it was a noodle bowl. So I think you could, you're supposed to make some noise when, when you eat a noodle bowl with broth and all the other stuff.
58:24 Speaker 03 Supposed to seems aggressive. I don't know that you're supposed to make a noise.
58:28 Brian Preston? Huh?
58:28 Speaker 04 It's polite?
58:29 Brian Preston? Yeah, see?
58:30 Speaker 04 Is this like?
58:31 Brian Preston? Look, I know where you're from. You don't know the answers to these things.
58:35 Speaker 03 It's polite to make a noise when you eat noodles?
58:38 Speaker 04 Yeah, in a culture. That's what we're saying for like Asian cultures.
58:41 Brian Preston? You know nothing.
58:42 Speaker 04 Hey, you learned something new today.
58:45 Speaker 03 All right. Well, I know what I'm having for lunch today. We're going to get a noodle bowl and I'm just going to be, it's going to be great.
58:53 Speaker 04 Have we exhausted that topic?
58:54 Speaker 03 I think, I think.
58:55 Brian Preston? I'm ready to move on.
58:56 Speaker 04 Let's go back to personal finance for a bit.
58:58 Speaker 03 The four people here really loved that conversation.
59:00 Speaker 04 All right. John has a question for you. I'm 37 years old and my company was bought out and they paid out the ESOP shares. You say that ESOP, right?
59:11 Speaker 03 That's right.
59:12 Speaker 04 Okay, I always second guess myself. The money was dispersed to a 401k. Should I move that to a Roth IRA over 10 years slowly? The amount is over 250k.
59:24 Brian Preston? Now, this is totally, it depends. Cause it, look, this is the same, you could ask this question, should you do Roth conversions? We'd have to know what his income is, what the goal long-term? Because the whole reason you do Roth conversions, or you convert anything that's pre-tax into Roth, is really because you're thinking about how you go use this money in retirement? And then you're seeing if there's a tax arbitrage opportunity? Because you have to make the choice, do I pay the taxes now or do I pay the taxes in the future? And if you think taxes are going to be higher in the future, then sometimes it makes sense to forego some opportunity costs of what this money could become, because you're paying the taxes now.
1:00:08 Brian Preston? But, but, but I would, I mean, 37 is still so young that the wealth multiplier for a 37-year-old is...
1:00:15 Speaker 03 Pretty strong.
1:00:16 Brian Preston? I mean, it's still 10, 10.1. So, I mean, every dollar you have is going to have a tenfold multiple. Now, that, if you don't, if you have low taxes, that's a, that's a for the Roth conversion, because you could, every dollar you put in there could have a tenfold multiple with no taxes. But if you're in a high tax situation, I would hate for you to lose 40% of that money to taxes. That, that's really, I just gave you the answer with the way I just went through that analysis.
1:00:46 Speaker 03 What's interesting to me is, uh, this is like one of those test questions where they throw stuff in there that doesn't matter. The actual ESOP part of the question doesn't matter. I, I recognize the reason you're saying that is because the ESOP funds rolling into your 401k is something you can roll out even while you're in service. It sounds like that's the way that you're playing it. Was structured, so you probably couldn't do that with your other 401k assets. But for a 37 year old, whether or not you should do Roth conversions is the real question you're asking. And it's exactly what Brian said, it kind of depends on your circumstance. And I would contend, there's probably a really good chance at 37 years old, between now and the time that you hit 75, when your RMDs are going to start, you're probably going to have a chance to do Roth conversions at some point. So I figure out, based on my income now at 37,
1:01:29 Speaker 03 versus based on the income I think I'm going to have at 74, are there going to be some chances there that I'm going to be able to convert dollars to Roth at a lower tax bracket than I would be able to do them today? And if the answer is yes, then I'd probably wait to do that. I don't think that it makes sense to accelerate that simply because you can right now.
1:01:50 Speaker 04 Great answer. John, thank you for being here. Thank you for asking your question. Just email [email protected] if you would like to cash in on your very own Money Guy Tumblr slash koozie.
1:02:01 Brian Preston? I had one other thing I was gonna share. I waited until the end of the show because I realized nobody came up to me at Epic Universe.
1:02:08 Speaker 03 I kept, honestly, I thought it was gonna be after the first question.
1:02:10 Brian Preston? Usually, usually at Disney, or I usually have a few financial mutants that come up. Nobody at Epic Universe.
1:02:16 Speaker 03 People were asking about, how was it? Give us the rundown.
1:02:18 Brian Preston? So, so I'm just assuming none of our audience goes to Epic, you know, Universe. They're all Disney people. There's no Universal people in there.
1:02:25 Speaker 04 There's a theory.
1:02:26 Brian Preston? But I will, I will tell you guys, hat tip to Universal for being able to come up with, because I think sometimes if the, the whole, realize there hasn't been a new theme park, like opened this century, like, I mean, well, you, I mean, it's a lot of money. It's billions of dollars. And I feel like even if you think about other parks that have opened, I mean, still even now, decades later, they're like a half a day park.
1:02:57 Brian Preston? Universal actually opened a brand new park that is a full day experience. I mean, with multiple shows, because they have a How to Train a Dragon show. They have a Harry Potter show. And then they had multiple thrill rides. It was impressive. I mean, I think my, we, at the end of the night, we were trying to, we, by the way, we got there. Because we stayed, my, my family stayed in the Helios Hotel that night. And so we got early park entry at 9:00 AM. So we got in the park about 8:45, 8:50 is when they released us to go in. And we were there until after the park closed at 9:00 PM. And it was a full experience. That monsters-
1:03:37 Speaker 03 So you could do everything? Cause you're there all day? Like is it something you do everything in one day?
1:03:40 Brian Preston? We could have done, now, and I'll go ahead and tell you, and I think it's money well spent. Universal, another thing that they do different than Disney is that they, you can do what's called a VIP tour. That's just an add-on to your normal ticket. And it's, it's, it's a few hundred dollars. But if you know the pricing of doing a private VIP tour versus a group VIP tour, it is, if you, if your time's worth a lot, it's, it's well worth it. Because that was the only way that you were, because the Harry Potter ride, Ministry of Magic, three hours, four hours, sometimes the Q rod. So, but if you did the VIP add-on, it was not a private tour. So they don't feed you and it's only for a few hours.
1:04:22 Brian Preston? It, you got on that ride immediately. They did that with, so I thought it was well worth it. If I, here's, here's some tips. Cause that's just the way my brain works.
1:04:33 Speaker 04 Here we go. Write this down.
1:04:35 Brian Preston? If you stay at the Helios, or I think any of, probably, I, I don't know if it's all the parks around there, all the hotels around there. You get in an hour early. You take advantage of that. Because that, by the way, it scares you at first because they let everybody in the parks at nine o'clock. But they are doing a good job of making you show the hotel room key to actually get on the rides early. Cause I remember I was like, what the heck are they doing? Because you see all these other people running around the park and you see them literally sprinting. They're just trying to get in to get in line. Is all they're trying to do. You actually get to go ride the rides. Set your VIP tour, if you buy those tickets, for a few hundred dollars more, your financial mutants, your time's worth a lot for 10:00 AM. And then you can, you get to take advantage of the hour.
1:05:20 Brian Preston? Go ride some rides first, then do the, the six, the few hour excursion that they do. You'll load it up. It's pretty cool. That's the hack.
1:05:29 Speaker 03 So it was awesome. Recommend.
1:05:31 Brian Preston? Was definitely. Now, I don't know if we're headed back because it's still, it's not, they don't offer a season pass on Epic Universe yet.
1:05:39 Speaker 03 Got it.
1:05:40 Brian Preston? We even, because we have universal season tickets too. And I couldn't, I was like, when are you going in there? Like, probably not in 2025. That's, that, nobody knows though. But it was, it was epic. It's well named.
1:05:52 Speaker 04 That's so true. Did you mean to do that? You didn't even mean to do that, did you?
1:05:56 Brian Preston? It was incredible. And now, look, there's no shade. I picked on my wife. She doesn't watch this, so it's okay. She bought an umbrella to walk around with, you know, it's specifically designed to keep the, and it was brilliant, you know? So I will tell you, there is no shade hardly in Epic, because all the trees are so young.
1:06:13 Speaker 04 Oh, like an umbrella for shade?
1:06:15 Brian Preston? Yeah, so I would say do that, do the personal events, because by the way, Florida right now is scalding hot. It is the face of the sun. It's humid, it's hot. So you need, it actually was, I mean, I, I, I thought it was a crazy thing for her to show up with it, but it was actually, and I had one of those fans around my neck that you charge, somehow those things, I don't know how they work all day, but they do. And it just blows air on you all night, all day. I look like a straight up tourist.
1:06:42 Speaker 03 Fanny pack?
1:06:43 Brian Preston? No fanny pack.
1:06:44 Speaker 03 Cargo shorts?
1:06:45 Brian Preston? I don't do cargo, you know, I have these, everybody makes fun of me because I, look, I don't get paid for this, but why, they should, they should pay us for this. During the summer, the license to train shorts from Lululemon are actually spectacular because they have zippers on the sides and on the back. So everything is zipped up, so you can ride it on rods. And they, they stretch out. Now, you look like a complete bozo walking around with pockets that are, you know, protruding eight inches all the way around you. But I do that. I can put sunglasses, I can put cameras, I can put anything in the, in those pockets. During the winter, Viori has some, I can't remember what those pants are, but they have zippers.
1:07:27 Brian Preston? Just look for the Viori jogger pants that have zippers on the sides and the back. Because that's the problem with most athletic stuff is they don't have enough zipper pockets. That's the hack for, for theme park wear.
1:07:39 Speaker 03 Uh, Viori Lululemon, if you're looking for sponsorship opportunities, you can write info at my, I'm just kidding.
1:07:45 Speaker 04 Let's go. Actually, you support at moneyguy.com. Thank you. Okay.
1:07:51 Speaker 03 There's actually.
1:07:54 Speaker 04 Well, that was fantastic. We got some theme park advice. We really dug into how people feel about the can popping.
1:08:01 Speaker 03 I can't believe you held that to the end.
1:08:03 Brian Preston? Well, I didn't want to run off. I mean, I knew, I didn't want to run off the audience for people who don't care. You have to really be a part of the Money Guy mutant family to want to know about theme park stuff with us.
1:08:13 Speaker 03 Love it.
1:08:13 Speaker 04 Fair enough. Well, I enjoyed it. I'm glad you had a great time. And we also did have a great time. Maybe not quite as epic, but also an epic time here today on The Money Guy Show. We'll be back Tuesday, 10 a.m. Central every week, talking personal finance with you and trying to just help you feel a little more confident in your finances. So you can focus on what really matters. MoneyGuy.com is full of all of our episodes, all of our free resources that we made just for you. So be sure to check that out to just dive a little bit deeper as you continue on your financial journey. Thank you for being here, for real.
1:08:44 Brian Preston? So you just said, so you can focus on what truly matters. And I love, that's why I got to do the theme park. Cause it was great family memories. And that's why it's just worth remembering that money is just a tool. It's not the goal. So make sure you're doing the why. So you enjoy your twenties, your thirties, your forties, your fifties, and live your best financial life. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy team, out.
1:09:08 Speaker 03 The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.
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