The System to Pay Cash For Cars (and NEVER Have a Payment Again!)

The average American spends over $900 a month on car payments for a depreciating asset. Here is how to stop and what to do with that money instead. 👉 Join Andrew’s FREE Investing for Beginner’s Masterclass: https://event.webinarjam.com/q05p7/register/0o8z9io?webinar_id=21 What You'll Learn in This Episode Why paying cash for cars is not about being cheap but about buying your financial freedom back The three specific methods Andrew uses to build up enough cash to never finance a car again The 24/12/10 rule that protects you if you do have to finance and exactly what each number means Why most people who say they will invest the difference never actually do and what happens to that money instead How to build a mini portfolio that lets your assets pay for your vehicles instead of your paycheck When it actually makes sense to keep fixing your current car instead of buying a new one Q&A: Should a 27-year-old with $100K invested pay down student loans or keep investing? Start Here Join the community built to help you master your money, stay accountable, and reach financial freedom. 👉 Try Master Money Academy FREE for 7 days today!https://mastermoney.co/join/ 👉 Join Andrew’s FREE Investing for Beginners Masterclass https://event.webinarjam.com/q05p7/register/0o8z9io?webinar_id=21 👉 Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! https://expert-hustler-605.ck.page/6aa7bb9a79 Partner Deals Indeed → Get a $75 sponsored job credit http://Indeed.com/personalfinance Wayfair → Up to 60% off | MEMORIAL DAY WAREHOUSE CLEAROUT http://wayfair.com Policygenius → Free life insurance quote http://policygenius.com Chime → Get more rewarding fee-free banking at https://www.chime.com/PFP Monarch Money → The all-in-one financial tool + Get 50% Off at http://www.monarch.com/PFP Scribe → Sign up for a 30-day risk-free trial ⁠⁠http://www.scribe.how/pfp ⁠ DeleteMe → 20% off with code PFP https://joindeleteme.com/PFP20/ Resource/s Mentioned Andrew’s Favorite Brokerage Accounts https://secure.money.com/pr/v8d06f8de92c Best IRAs https://secure.money.com/lp/iras/lp/best-iras-master-money?pcuid=oe09b73d1952&jump_from_embed=true&wafid= Index Fund and ETF Cheat Sheet https://mastermoneyresources.com/index-fund-cheatsheet Tool/s Mentioned Car Buying Calculator https://mastermoney.co/how-much-car-can-you-afford/ Compound Interest Calculator https://expert-hustler-605.kit.com/aefaaad27e Book/s Mentioned Rich Dad Poor Dad by Robert Kiyosaki The CashFlow Quadrant by Robert Kiyosaki Watch Next Reset Your Money Mindset, Get Out of Debt, Save for a House & Understand Credit Scores (Money Q&A) https://youtu.be/JGoKB92rddo Are Trump Accounts Worth It? (And What's Actually Better) https://youtu.be/jJKCfTvTm0Q The Retirement Mistake 80% of Investors Make (with Vanguard's Lead Researcher) https://youtu.be/37zVUL0e2TE How Much More Expensive Has Life ACTUALLY Become Since 2020? https://youtu.be/_n8qUA3NsoI Chasing a Higher Savings Rate, Semi-Retiring in Our 40s & Rebuilding After Bankruptcy (Money Q&A) https://youtu.be/OobdeA8qYbA Connect with Andrew Instagram → https://bit.ly/Skool-Instagram TikTok → https://bit.ly/Skool-TikTok Facebook → https://bit.ly/Skool-Facebook Podcast → https://bit.ly/Skool-Podcast Youtube → bit.ly/Skool-Youtube Newsletter → https://bit.ly/Skool-Newsletter Website →⁠ https://mastermoney.co ⁠ X → ⁠https://x.com/mastermoneyco LinkedIn →⁠ ⁠⁠https://www.linkedin.com/in/andrew-giancola-45027b340 ⁠ Question for you: Are you currently paying off a car loan? Drop it in the comments and tell us what method you are using. 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.

• 0:00Andrew Giancola?

  Now, if you watch this podcast on Spotify, Apple Podcasts, or YouTube, you've probably noticed the wood slat walls behind us. We wanted this podcast set to look professional, but also not be a project that was overly complicated. And I found these slat walls on Wayfair and it completely changed this space. And it's now basically the background that you see in every single podcast or piece of content that we record. And that's one of the things that I love about Wayfair. You can shop thousands of products across different styles and budgets, use customer photos and reviews to see how things actually look in real homes, and find something that fits your space. They also have Wayfair verified products that are hand vetted by product specialists using a 10-point quality inspection.

• 0:44Andrew Giancola?

  And with more than 20 million verified five-star reviews, you can feel a lot more confident about what you're ordering. I've used Wayfair for this studio and our home, and I absolutely recommend them for your space. So transform your space with pieces that hold up to real life. Join Wayfair Rewards today and get 5% back on every single purchase. Head to wayfair.com or shop the Wayfair app for all things home. That's W A Y F A I R dot com. Wayfair, every style, every home.

• 1:17Speaker 01

  Wayfair, every style, every home.

• 1:20Andrew Giancola?

  When I started the Personal Finance Podcast, I had no idea how big it could become. I just knew I had something I wanted to share, so I started putting it online. And looking back, I definitely wish I would have started a decade earlier. One of the horror parts about building something online, though, is making it look professional. A website used to mean hiring a developer, figuring out design, and potentially spending thousands of dollars. In fact, on my website, I spent tens of thousands of dollars. That's what impressed me when playing around with Hostinger's AI website builder. I told it what kind of website I wanted, and I built the first version in minutes. No coding, no designer or developer needed. And Hostinger doesn't stop at launch.

• 2:04Andrew Giancola?

  Their AI can help with SEO, website copy, email marketing, and more. Plus, your domain, website, email, and marketing can all live in one account with plans starting at just $3 every single month. Hostinger builds your vision step by step. Create your website today. Go to hostinger.com/pfp and use code PFP for 10% off now. What's up, everybody? And welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of mastermoney.co. And today on the Personal Finance Podcast, we're going to be talking about how to pay cash for cars. If you guys have any questions,

• 2:45Andrew Giancola?

  make sure you join the Master Money Newsletter by going to mastermoney.co/newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now, on today's episode, we're going to be talking through how to pay cash for cars. The reason why this episode came up is twofold. One is the older that I get and the longer that I have gone through this life, the more I realize I do not ever really want to go into debt for anything again. And for me specifically, you know, there are reasons why you may want to go into debt.

• 3:30Andrew Giancola?

  Maybe you were buying a rental property, and so you want to buy this asset. That cash flows over time. Maybe you want to go and buy a business with an SBA loan, and you feel as though you can make that business profitable. Well, those are some reasons to consider going into debt. But for me specifically, when it comes to cars, cars are depreciating assets. And the longer the timeframe that I hold on to these depreciating assets and put debt against these depreciating assets, the less likely someone is to build wealth. And I have seen time and time again so many people sitting with these fancy cars in middle-class neighborhoods because they have their priorities reversed. The fastest way to see if someone is broke is to look into their driveway. If they live in a small or middle-class home,

• 4:14Andrew Giancola?

  but they have the fancy car in the driveway, you know the likelihood of that being leased or really high payments are going to be very, very high. And for most people out there, the reason why this happens is because they want to impress other people. And so we want to make sure that if we are prioritizing freedom, if we are prioritizing wealth building for our family, if we are prioritizing peace of mind, financial peace, having the ability to get this freedom so that we can do what we want, when we want with our time, we want to make sure we are approaching buying cars in a very cautious way. My friends, cars go down in value the moment you drive them off the lot. And the reason why this is so important

• 4:57Andrew Giancola?

  is because you can lose a lot of money if you don't know how to buy cars the right way. And there's a lot of misinformation out there right now. In fact, we recently just did a video on Instagram. It's gotten hundreds and hundreds of thousands of views. It's likely going to go into the millions. And when we did this video talking about how to buy cars and reasons why you may want to consider paying cash for cars, the amount of negative comments for paying cash for a car were astronomical. It was actually unbelievable how many people do not have a financial education. The reason for this is many people think, okay, well, maybe if I decide that I want to put my money into investments. And the reason for this is because many people have been brainwashed into thinking, A, car payments are completely normal. You should always have car payments. And sure, you can have a car payment.

• 5:42Andrew Giancola?

  Many of you do. I have had many a car payments in my entire life. There's nothing wrong with having car payments if you don't have the cash on hand. But the question then becomes for many people, well, if I invest to the difference and I get a low interest rate, would that make more sense? And so this is where I'm going to talk about that. I'm going to talk about, A, why you should consider paying cash for cars. B, I'm going to talk about how to develop a plan to pay cash for cars because it's not an easy thing. You don't just end up having $40,000 to go spend on a new vehicle or a used vehicle. So how do we actually do this? Three, then I'm going to talk about how to finance cars safely so you don't get in over your head. And then we also have a couple of questions that you guys sent in for a Q and A towards the end of this episode.

• 6:26Andrew Giancola?

  So this is an action-packed episode. I am really excited to dive in. So without further ado, let's get into it.

• 6:35Andrew Giancola?

  So one of the big questions people get when I bring up paying cash for cars is what if you just invested the difference? Let's say, for example, your dealer offers you a 2% interest rate on buying a car, and you invested the difference and you took on that loan and invested the difference. Hey, that's a smart move. There's nothing wrong with that move whatsoever, but it's going to depend on the individual person. Because why would you still pay cash in that instance? Why would you still pay cash in this scenario? Let's get to the reality of it right now. Money psychology is a big component of this. And when we think about what people actually do with the difference, what people actually do with the extra money, most people out there are not going to invest the difference. Now, listen, most people listen to the Personal Finance Podcast. You all are wealth builders.

• 7:18Andrew Giancola?

  You all are people who live a little differently than everybody else. So if you are someone who has been listening for a long period of time, I trust you to have the ability to invest the difference. You're not who I'm worried about. The folks that I'm worried about are the folks who do not actually act in this way. Meaning, you could say all day long until you're blue in the face that you should invest the difference. But most people, that difference is going to turn into a kitchen remodel. That difference is going to turn into vacations. That difference is going to turn into a boat. That difference is going to turn into lifestyle creep with frivolous purchases across the board. Maybe $500 here, $1,000 there, $2,000 there. And they go and blow the difference instead of investing those dollars because most people don't act in this way.

• 8:03Andrew Giancola?

  But number two is that if you pay cash for cars, it just removes the financial obligation. Now, you are not a slave to this lender, meaning you are not having to go to work every single day. You have this financial obligation where you got to make sure that you make this car payment every month in addition to your rent or your mortgage, in addition to paying for groceries and electricity and all these other things. No, instead, when you pay cash for a car, that's one less obligation to worry about. And so you can then have the ability to remove a little bit of stress out of your life, and then you can invest the difference based on paying cash. Now, you're going to see how to pay cash in a second. I'm really excited to show you guys exactly how to do this. So it just lowers your overall fixed expenses. And the lower your fixed expenses are,

• 8:46Andrew Giancola?

  the more room you have with that gap to be able to build wealth. And that's what I really love about this. Three, Is it reduces your risk? Risk aversion, when it comes to your personal finances, should be part of your goal. Risk aversion, especially when it comes to liabilities. I want you to be as risk averse as possible when it comes to liabilities, because liabilities are going to cause your net worth to go down over time. Assets are going to cause your net worth to go up over time. So I want you to have some risk tolerance when it comes to your assets. Meaning if you're trying to decide between stocks and bonds, and you have 25 years before you're going to retire. Well, having an allocation with more stocks than bonds is going to be a great choice for you. But if you are thinking through these liabilities of buying a boat,

• 9:30Andrew Giancola?

  or a car, or any other liability that goes down in value over time, I want you to be risk averse there. And I want you to be very careful and very cautious when it comes to those liabilities. Four is making sure that you pay off this car is a guaranteed return. There is no guaranteed return in this life, but it is guaranteed that you will not be paying anywhere from a 6% to 7% interest rate, which is what the interest rate is on vehicles right now. Some people have seen 8, 9, and 10%, but it's going to guarantee that you at least get that rate of return on that cash. And so when you're thinking about paying off a 6% loan, at least you have that guarantee of 6% no matter what. And so when we think about paying cash for cars, this is one of those considerations just to bring up. And then cash also changes your buying power.

• 10:14Andrew Giancola?

  So it is a lot easier to take on a note for a $60,000 car. You go into the dealership, they say, how much can you afford? When it comes to your monthly payments? And you say to yourself, oh, that's a great question. Maybe I should make my choice based on the monthly payments, instead of thinking about the overall price. And this is where many people get into muddy waters. If you make car buying decisions based on the monthly payment, you are making a broke person choice. Broke people look at the monthly payments. Wealthy people look at the total cost of ownership. Meaning what is the total cost of this vehicle? How much is it going to cost to maintain? What kind of gas do I have to put into this vehicle on a weekly or bi-weekly basis?

• 10:57Andrew Giancola?

  And what is it going to cost me down the road in depreciation? Plus, will my insurance go up because of this vehicle? There is a lot of costs associated with owning a car, and many of you out there do not realize how these costs will rise depending on what you select to buy. And so when you pay cash for cars, you're going to have a much more frugal mindset when it comes to this, because you either have to fork up $60,000 in cash, or actually, you know what? The two or three-year used vehicle for $35,000? That one's going to be A-OK for me, because I gotta go and write a check. And so your buying decisions are going to be much more prudent, and they're going to be much better long-term than they would be if you were financing it.

• 11:42Andrew Giancola?

  Plus, a lot of dealerships don't like you when you pay cash. They don't like when you pay cash, because they make a lot less money. And that was one of the hilarious arguments with the post that we just recently made, is that, well, the dealer is not going to make any money on this deal. What do I care if the dealer is going to make any money on this deal whatsoever? Instead, I want you to win. I want every single person listening to this podcast to win. My goal is to bring you as much value as possible, and my duty is to every single one of you. You are the reason why we do this show, because we want you to win with money. No longer are the days of people just struggling to make those car payments. I don't want you to struggle anymore. I don't want you to have to struggle to make your house payment, because your car payment is eating into your wealth every single month.

• 12:26Andrew Giancola?

  No, I want that to completely flip, so that you and your family can have financial freedom. You can go on those vacations that you want to go on. You can go and spend money on things that you actually enjoy. You can go out and buy things that you want. Maybe you want to go buy a boat one day. That's an appreciating asset, but you're paying cash for cars, and you decided, actually, I'm going to start to pay cash for a boat too. And you realize this is possible. You realize what we're about to talk about is possible, that you can pay cash for big items. You just need a little time, and you just need to sprinkle a little discipline on there as well. This is just like a recipe. And what you're going to see pretty quickly is that you can do some pretty cool stuff paying cash for things. Listen, many people out there are going to tell you this is a dumb choice, and you can go and finance.

• 13:10Andrew Giancola?

  I don't care if you finance, as long as you fall into the parameters that we'll talk about later on here. But if you pay cash, it's going to give you the freedom to really own the things that you buy. But secondarily, you also can never have a payment again. And if you don't have a payment again, those dollars can go towards things that you actually want in life. And I want you to realize, this is not an episode, honestly, about cars. This is an episode about your freedom and where your cash goes, because you can use your cash to buy the things that you want in this life. And that's what I want for each and every single one of you. I will say it to your blue in face. You will become a multimillionaire if you figure out some of these things. If you figure out how to do some of this stuff, and if you consistently do it the right way, all of a sudden, you're going to see a huge, huge difference.

• 13:53Andrew Giancola?

  So let's dive into a couple of the plans that I have in place on how I'm going to be paying cash for cars moving forward.

• 14:02Andrew Giancola?

  All right, so number one, I am calling the car payment forever method. Now, this is one of my favorite methodologies, because it gives you flexibility, and it's going to give you choices. Now, this is exactly one of the ways that I am going to be doing this. This is one of the things that I'm going to be doing going forward when it comes to paying cash for cars. Now, some of the other methodologies that I'm about to talk about here, I'm going to be doing those for different items, and I'll talk about that in a second, okay? So the day that you pay off your car loan, many of you out there are like, okay, well, how the heck am I going to be able to ever pay cash for a car? Well, your first goal is to pay off your current vehicles. And so if you have two vehicles in place, I'm not saying you have to make a bunch of extra payments. That's not what I'm saying whatsoever. But what I am saying is let the loans finish out, let them run the course.

• 14:47Andrew Giancola?

  And then what I want you to do is I want you to then hold on to those cars for longer periods of time. So let's say, for example, you are listening to this episode, and you're like, okay, well, at the beginning of this episode, I do want some financial freedom. So maybe you're starting to convince me to pay cash for cars. But I got three years left on my car loan. Me and my wife, or me and my husband, you know, we got a couple of new cars a few years back. My wife got one two years ago. I got one a year ago. And so we have about three or four years left on our car loan. Well, that's A-OK. So here's what I would do, is go ahead and continue making the payments on those cars with the plan to drive those vehicles for a very long period of time. So I want you to be meticulous about maintenance. I want you to make sure that you are maintaining that vehicle

• 15:31Andrew Giancola?

  in the way that it should be maintained, getting the oil changes on time, making sure you get it checked on a yearly basis, making sure you do all the stuff that you're supposed to be doing, so that thing can last you for a little while. The reason why I want it to last you for some time is because once you finish making those car payments, I want you to continue driving it with no payments at all. And so instead of making car payments, or going in and getting a new car, like what most people do, we are then going to take those car payments, and we are going to start to save them. We're going to set up a bucket in our high-yield savings account, and we're going to start to save for the next car with the same exact payment that you were paying for before. Now, here's the fun part, okay? Let's say, for example, that you bought a vehicle,

• 16:14Andrew Giancola?

  and it was $700 per month, okay? And you were paying $700 per month for years. Maybe you had a four-year loan, maybe you had a five-year loan. Here at Master Money and the Personal Finance Podcast, we don't want you having loans for longer than four years. That is going to be something we'll talk about here in a second. But let's say, for example, you have a loan for five years, and you had this five years, you're paying $700 per month over the course of five years. Now, you have two options. You can have this fully paid off car and continue to drive it, or you could trade it in and just continue the cycle of payments long-term. If you trade it in, then you're just restarting the entire cycle. But if you hold on to the vehicle, you could have X amount of years where you have no payments at all.

• 16:56Andrew Giancola?

  And having no payments allows you flexibility, it allows you freedom, and it allows you to save and invest cash for things that you actually want in life. Maybe what you want in life most is freedom. Maybe what you want in life most is to spend more time on vacation with the family. It doesn't matter what it is. But in this scenario, let's work on taking that payment and putting it towards the car. Let's look at what you would have over the course of the next couple of years. If you just saved this in cash, okay? After five years, you would have $42,000 in cash saved.

• 17:26Andrew Giancola?

  Can you buy a car for $42,000 five years later? That means you would have had this vehicle for 10 years. You would have driven it for 10 years and you had $42,000 in place. After eight years, you would have $67,000. So that's if you drove a car for, let's say, eight to 13 years, you could potentially have $67,000 in this account. This is before growth. This is before any interest. We're going to talk about interest in a second. This is before any of that stuff. What about 10 years? If you drove it an additional 10 years, maybe you had car payments for three years and you got 13 years out of this car. Maybe you had car payments for five years and you got 15 years out of this car. My plan for what I currently drive right now, I drive a 2018 Ford F-150. I bought that thing for $24,000, one year used.

• 18:10Andrew Giancola?

  This was right before COVID in 2019. So the timing, sure, little lucky, but my plan is to drive it for 15 years. Now, will it go for 15 years? Some of you car lovers out there will say, oh, Fords will never go for 15 years. Well, I'm just going to replace stuff until it does. Then maybe I'll give it to my oldest son and he can drive it. But my goal here is to drive it as long as I possibly can. So I would have at least 10 plus years to take that payment and put it towards paying cash for cars. Okay, because after 10 years, you'd have $84,000. Could you buy a car for you? Could you buy a car for your spouse with $84,000? Absolutely. But let's talk about this for a little bit. What if you put it in a high yield savings account?

• 18:53Andrew Giancola?

  Or better yet, what if you invested a portion of it? What would happen there? After five years, you would have $42,000 contributed. And in a high yield savings account, it would have grown an additional $4,400 to $46,400. That's beautiful. This is why we tell you to put your savings in a high yield savings account at a minimum. This is where your emergency fund should be. This is where your savings for a wedding should be. This is where your savings for anything less than five years should be. Okay, if you invested it, it'd be $50,100 at a 7% rate of return. Maybe you put in a little portfolio and you were okay if that portfolio dropped. We'll talk a little more about investing in a second. Okay, now let's look at eight years. You had $67,200 that you contributed.

• 19:34Andrew Giancola?

  $79,000 is what it would grow to at a 4% high yield savings account. And $89,700 invested at a 7% average rate of return. That's just in eight years, guys. Eight years, that's all it was. Over 10 years, $84,000 was contributed. And $103,100 is what it would grow to at a 4% yield. $104,000 in 10 years, just by taking your car payment and putting it into a high yield savings account. Now, for me specifically, if I was doing this over a 10-year timeframe, I would definitely take a chunk of it, maybe even 50%, and I would invest 50% of that into the market.

• 20:17Andrew Giancola?

  In a low-cost index fund, something like a BTI or a VOO or a QQQM, something like that is where I'd put these dollars. And we'll talk more about that in a second. But $121,200 is what you would have at a 7% interest rate over the course of 10 years if you invested $700. Now, that 7% interest rate is pretty conservative. I'm just in for inflation. I am looking at this in a very conservative way. The S and P 500 over the course of the last decade alone has returned almost 15% to investors if you look at the actual real numbers. So when we look at this, paying cash for a car is slowly over time, saving money or investing a small portion of it so that you can get to the point in time where you have enough cash on hand, where potentially, what if you had enough on hand where you could draw down that portfolio? We'll talk about that in a second, too.

• 21:02Andrew Giancola?

  All right, that's option one. Okay, so you take the extra car payment and you start to put it towards whatever your goal is. And you could put it in a high yield savings account or you can put it, a portion of it, into a brokerage account. Again, I would not invest the whole portion unless you are okay with continuing to drive your car for an additional three, four, or five years while the market takes a dip. If you have a 2009 instance, for example, where the market got cut in half and it took two or three years before it recovered, well, then you gotta be okay driving that car for two to three extra years. And there's a risk and reward there. But that doesn't happen in a high yield savings account. So if you want to keep it safe, just put it in a high yield savings account. For most of you, that's what I would do, is keep it in a high yield savings account unless you are a really, really disciplined investor. So that's option one, okay?

• 21:48Andrew Giancola?

  Option two is to build a permanent car fund. And you're going to treat this like a insurance fund, okay? The way I want you to think about this is, let's say, for example, that you decide that you are going to replace your vehicles every 10 years, okay? And so you estimate that you have two vehicles. You have your vehicle and your spouse's vehicle. And you estimate that vehicle one is going to cost $45,000 and that vehicle two is going to cost $45,000. Unfortunately, in 2026, that's right around the mid-range of what a lot of vehicles cost. Now, sure, you can get a lot of cars for cheaper than that, but I'm trying to be realistic with what a lot of you will end up doing when it comes to this.

• 22:29Andrew Giancola?

  My sister just bought a 2021 Explorer for $21,000 and it had minimal miles on it. I think it had like 40,000 miles on it. And this was one of those things where she was trying to find a really low-cost car that she could drive around as a second car for her and her husband, because they have a baby and they want to make sure that they just have a second safe car. They paid off her car and they had one extra car available here that they wanted to put into play. Somebody ran into my brother-in-law. He totaled his car and so they wanted to just find something that was really, really safe and really inexpensive that was in really good shape. Took it to the mechanic, the mechanic said everything checked out and so they were good to go. So you can find stuff for significantly cheaper than this. And all of a sudden, you're paying cash for cars that makes a lot of sense.

• 23:14Andrew Giancola?

  Hey, I went and searched before this episode story for a bunch of Honda Accords, Honda Civics, Toyota Corollas that were 10 years old, that could go for a very long period of time. And you can find those things all day long for $10,000 in cash, $8,000 in cash. If you're like, I want to make a drastic choice and I want to do this right now, you can do it and you can do it pretty quickly if you go look at hard enough. Maybe you're owning your first set of vehicles for five years, but you're just trying to, you know, pay cash for it. You're going to own it for five years. You're going to get rid of it so that you can build up your cash reserve to pay cash for a nicer vehicle five years down the line. Because you know, hey, I'm dating right now. I'm going to get married soon. I want to have kids one day and I want to buy a nice vehicle for when I have kids. You could do something like that and have the ability to do something drastic where you're building wealth towards this.

• 23:58Andrew Giancola?

  And what could happen is when you start to build up these funds, all of a sudden you realize I have too much in here. I'm just going to move it over to something else that I would like to enjoy, which is going to be the cool thing that you could do here. So if, let's say, for example, every 10 years, you're going to spend about $90,000. And so you decide, maybe I want to build up a portfolio large enough that can just pay cash for this, where I draw down on that portfolio, but it continues to grow over time. Now, this is a very cool concept because we're going to use the 4% rule. It's basically a mini-fund that you're developing for yourself to pay for cars. Now, one of the things you'll start to learn about me, if you're new to this podcast, is I think about weird, unique money ideas like this all the time. I spend a lot of time playing with compound interest calculators.

• 24:41Andrew Giancola?

  Sometimes on a Friday night, I get a little crazy and I play on my compound interest calculator for maybe over an hour, just seeing some of the stuff I could do with it. And so in reality, what I'm saying here is that there is some cool, unique, and really, really fun ideas of how to save for these cars, okay? So when you buy a car, what you're going to do is you're going to spend from this fund. So let's say you're going to build up this fund over time. And once you spend from the fund, then you immediately begin to rebuild it again. The fund is never finished. It's just a work in progress over time. And so for most people, let's say you want to spend $90,000 every decade. What that means is that you can start to draw on this fund if you wanted to at a 4% rate of return. And so a 4% withdrawal rate on a yearly basis is about $9,000 per year.

• 25:27Andrew Giancola?

  And so if you had $225,000 invested, you could draw on this at $9,000 per year. Now, for many of you out there, you're going to be saying, $225,000, how the heck am I ever going to get there? Time. It just takes a little bit of time and takes, investing small amounts of money over time can grow to very large amounts of money. If you feel as though you're in the wealth accelerator phase, meaning you're in the phase where you have some extra cash on hand, you're hitting your retirement goals, you're hitting your investment goals, you can do stuff like this. You can do unique things like building up a mini-portfolio that allows you to withdraw for depreciating assets. I love that idea. Why? Because then your assets are paying for your vehicles instead of you just putting cash towards it the entire time. And so you can draw down on an S and P 500 index fund

• 26:11Andrew Giancola?

  or draw down on whatever you want, a total stock market index fund. Or maybe it's a portfolio of a couple of different things. Maybe you want to build up a dividend portfolio like an SCHD and you want to draw on that and see how much you would need in cash flow to get to $9,000 per year. These are all really cool ways that you can have enough cash on hand where your assets are paying for your liabilities. And the point in time where you get where your assets are paying for your liabilities is really, really powerful. Another cool way to do this is with real estate. If you have cash flowing real estate, you can also, you know, develop something where you have a portfolio of real estate that pays for your liabilities. That's what Robert Kiyosaki talks about in Rich Dad, Poor Dad and the Cash Flow Quadrant. Now, Robert Kiyosaki has a lot of other differences of opinion from me, but when it comes to some of this stuff, it is a really cool idea.

• 26:57Andrew Giancola?

  And many people are going to say they can't do it. Many people are going to say this is impossible. Many people are going to say, I'll never be able to do this. I don't make enough money. Listen, I don't ever want to hear those words from you because I know that you can do this. It just takes small amounts of money, invested over time, can grow to very large amounts of money. So if you have a little bit of extra capital on hand, start to mess with a couple of compound interest calculators, figure out how much you can draw down for 4%. Maybe you're single and you only need to draw down $20,000 every decade because that's all you need for a vehicle. Then it's going to be a lot less for you. It's going to be significantly less for you than someone who needs $220,000 for two $45,000 vehicles. If you have a two-vehicle household, it's going to cost you more than someone who has a single-vehicle household.

• 27:41Andrew Giancola?

  So this is what I want you to understand, is that you could build up a mini-portfolio that allows you to draw down, okay? So the steps for that one is to build up the fund, invest in an diversified portfolio and figure out how much you can draw down every year and then use the amount that you can draw down towards your vehicle purchase. The portfolio is going to stay the same and you don't have to worry as much for some of these vehicles.

• 28:02Andrew Giancola?

  My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money. Now, I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions. That's one of the reasons I love Monarch. It's the personal finance app that tracks everything, from your accounts and investments to your savings, goals, and spending. So you can see your entire financial picture in one place. One habit that's made a huge difference for me is my five-minute drill every single morning. I open Monarch, check my spending, investments, cash flow, and net worth, and I'm done in just a few minutes. It gives me confidence that nothing is slipping through the cracks. I also love the AI weekly recap because it'll flag spending changes,

• 28:47Andrew Giancola?

  upcoming expenses, or shifts in my net worth before they become a problem. Instead of reacting after the fact, I can make adjustments early. It really feels like having a financial advisor in your pocket. Write your own money story with Monarch. Use code PFP at monarch.com to get your first year of Monarch Core half off at just $50. That's 50% off your first year at monarch.com with code PFP. It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before. And it reminds me that while we can't predict the future, we can prepare for it.

• 29:30Andrew Giancola?

  That's one of the reasons I like PolicyGenius. See, PolicyGenius isn't an insurance company. They're an online marketplace that lets you compare life insurance quotes from some of America's top insurers, side by side, for free. And their licensed team helps you compare coverage, prices, and terms, answers your questions, and even handles the paperwork so you can get the right policy without the hassle. For me, having life insurance isn't about expecting something to happen. It's about knowing my family is protected so I can actually enjoy these moments together instead of worrying about what comes next. And with PolicyGenius, you can find 20-year life insurance policies, starting at just $276 a year for $1 million of coverage.

• 30:13Andrew Giancola?

  Head to policygenius.com to compare life insurance quotes from top companies and see how much you can save. That's policygenius.com. If you've heard any recent episode of Health Corner, you know that I have spent the last few years trying to optimize my sleep. I've tried sleep trackers, cooling my room, changing my nighttime routine, all the different things. But nothing really matters as much as having the right mattress. And that's one of the reasons I love Leesa. A great mattress is one of those things that you use every single night and you spend a third of your life sleeping. And it can make a huge difference on how you feel the next day. Leesa has mattresses designed for different sleep positions and comfort preferences.

• 30:56Andrew Giancola?

  And their sleep quiz can help you get matched in less than two minutes. Plus, they're designed and they're assembled in the USA, and they come with free shipping, easy returns, and a 120-night free sleep trial. So go to leesa.com for up to 30% off mattress plus and get an extra $50 off with promo code PFP. Exclusive for my listeners. That's L-E-E-S-A.com, promo code PFP, for 30% off mattresses plus an extra $50 off. Let them know we sent you in the survey after checkout. Leesa.com, promo code PFP. One thing I've learned from running multiple businesses is there's usually a gap between how you think work is getting done

• 31:41Andrew Giancola?

  and how it's actually getting done. And we've had times where we thought we knew the bottleneck, only to realize later, the real issue was somewhere completely different. That's exactly what today's sponsor, Scribe, helps solve. Scribe is a workflow AI platform trusted by 94% of the Fortune 500. And Scribe Optimize turns real workflow data into decisions your AI strategy actually needs. Automatically capturing how work happens across approved apps, surfacing inefficiency and opportunities with no interviews and no manual discovery, and no extra work from your team, which is the key. And the live dashboard shows where work is happening, how much time it's taking, and where the biggest opportunities are right now.

• 32:23Andrew Giancola?

  It automatically discovers workflows across multiple tools, then highlights your biggest inefficiencies, and gives AI-powered recommendations with estimated time-saving. You know I love saving time. It's also built with privacy in mind. It only runs across approved business applications. User-level data is anonymous by default, and sensitive information is automatically redacted and never leaves your firewall. To see optimization action, head describe.how/pfp and mention PFP for a 30-day risk-free trial. That's S-C-R-I-B-E dot H-O-W slash P-F-P. Now, the third one is instead of just using it as a fund that you're going to draw down on all the time,

• 33:07Andrew Giancola?

  the third option is to have a car investing account. So you feel comfortable with volatility. You're comfortable with the market moving up and down, and you're okay with the way that this could go. Okay, so what you would do is open something like a taxable brokerage account, wherever you like to open your taxable brokerage account. You invest in something like low-cost index funds. And then you consider only moving money to cash when you're about two years from replacing your vehicle. So it's going to be similar to option two, but it's going to be different in the way that you do this because you don't have to invest as much upfront. You don't have to get it as large as maybe number two. And this has the highest expected return, but you accept that if the market is down by like 30%, for example, you wait a year or two, or you just pay cash for a less expensive vehicle. And so that's the way that you could look at this. And it's a trade-off there.

• 33:50Andrew Giancola?

  You could get a really nice vehicle if the market's doing well. And if the market's not doing well, then you would get a less expensive vehicle. But there's a couple of rules that I would personally adopt if I went with this strategy. I would not buy a new car until the current one is truly becoming expensive or unreliable. Meaning that, when you do a strategy like this, try to stretch it as long as you possibly can. If your car has been truly becoming unreliable, that's when you make the next move. That's when you decide, okay, I know within the next year or so, I need to move some of this into cash because I know within the next year or so, I am going to have to buy a new vehicle. Number two is never buy more car just because your income increased. So just because you got a raise and you feel as though I deserve a brand-new car, doesn't mean you need a new car. If your car is working perfectly fine, and you want to follow some of the stuff we're talking about here, hey, if you're a car person and you like to spend money on cars,

• 34:35Andrew Giancola?

  that's a different story. But if you're not a car person and you feel as though, you know, you just want to upgrade a car so you have nicer leather seats, or you know, you got a nicer dashboard or whatever else, you should see the dash on my truck. My screen is like this big. It is the smallest screen you will ever see. Everybody makes fun of me. It still has a backup camera, which is cool, but you cannot hardly see anything on that screen. Number three is if you do finance, it needs to be a really low interest rate, and then your portfolio needs to be paying those payments. Meaning that, if you decide to finance and you feel as though there's a delta or a gap, your portfolio starts to pay those payments, which is something that you can start to average out or figure out, hey, exactly where that's going to land. But if you got a 0% interest rate and you feel as though you want to keep those dollars invested,

• 35:19Andrew Giancola?

  and you want the portfolio to make those payments, just set it up on autopay from your portfolio, where your portfolio is going to sell X amount of dollars every single month. And then that portfolio pays, and then the rest of it stays invested. Could be a cool idea, too. And so there's cool things that you can do with this. I love thinking about this stuff and running the numbers on this stuff. Okay, now what I would not do is save the exact purchase price and then stop. Continue on, get a little further along so that your portfolio can grow, and realize that cars are a recurring expense. Because if you get these portfolios large enough, if you do decide to invest a portion of it, again, I wouldn't invest all of it because the market dips. Then you have to make a choice, especially when you need a vehicle, to buy a cheaper vehicle. But if the market is doing well, then maybe you can buy a nicer vehicle. So you got to really be careful on this.

• 36:03Andrew Giancola?

  Keep a portion in cash if you need a vehicle, and then a portion invested. That could be the way that you think about this and building a portfolio in the way that makes a lot of sense for someone who's going to use the funds within the next couple of years. Every time you're two years out, though, I would move a portion of it to cash, especially the portion that you need, so that you have it available just in case the market dips. Now, cars, because they're a recurring expense, because there's other expenses associated with them, that's where you want to make sure that you also have enough in this portfolio to help you pay for some of those expenses. Because then, all of a sudden, this thing's growing, and it's paying for your expenses, making sure that you never have a car payment again. And all of a sudden, you have this portfolio in place that can truly help you long-term. And I think it's a really cool way to pay for depreciating assets like cars.

• 36:47Andrew Giancola?

  And what you're going to realize is as time goes on, you're probably going to be able to upgrade to nicer cars, and nicer cars, and nicer cars while paying cash for them, which is so incredibly powerful. And so this is what I love. So a couple of things that I would note, and a couple of steps that I would take if you do want to pay cash for cars is, the first step is never let your car payment disappear. Instead, put it towards what you or your goal are. Maybe your goal is to have, you know, three years of cash on hand to buy a car. In addition, then the back half is going to be, the rest of it's going to go towards investment so it can grow over time and have it in play. But put it in a high-yield savings account if you're going to have it in cash, so you can get at least a 3% to 4% rate of return, and you can beat out inflation. Again, cars go up with inflation as well. So you want to make sure you're at least trying to outpace inflation with this cash.

• 37:30Andrew Giancola?

  Okay, number two, only replace cars when the cost per year becomes unreasonable. Meaning that, a lot of people replace their cars too early. They feel like it's unreliable because they had to replace some brake pads, or they had to replace, you know, a timing belt, or they had to replace maybe even, you know, part of the engine, or their oil was leaking. So they're like, ah, this is becoming reliable. But a lot of times, it is cheaper just to fix it and not have the payment. Because if you fix it, then all of the sudden, it's going to last another three, four, or five years. Well, that is money well spent. I don't care if you have to replace the engine for six grand, but you don't have a car payment for the next four years. That's a really good trade-off because a $700 car payment is going to add up to six grand really, really quickly.

• 38:12Andrew Giancola?

  And so this is one of those things that many people don't realize that it's pretty cost-effective to fix vehicles unless it becomes really unreliable. If you're worried about safety for you or your children, please do not ever jeopardize that for a vehicle. But what I do want you to do is just be prudent and be mindful that you can fix things. Find a good local mechanic who can help you through these problems, who you know is honest, who you feel as though is honest. For example, my local mechanic where I live, I have developed a relationship with them. They are honest, they are awesome, and they have been someone who has, sometimes I'll take it in there and say, hey, something feels wrong with this. They're like, there's nothing wrong, you just got to, and they just fix something really quick for me, and then they give it back to me. That's what you want to do. You want to build this relationship with this mechanic long-term so that you feel as though you both are working together.

• 38:57Andrew Giancola?

  That is what I love to do at least. And if you can't find one in your local area, maybe ask some friends or some family. See if they have any recommendations for you. Okay. Three, if you want to pay cash for cars, make your next vehicle, the one you pay cash for. If you haven't done so already, work on paying off your current payment. And I'm not saying make extra payments toward it. What I am saying though, is making sure you're hitting your investment goals first. But as you start to progress, and if it is a high interest debt, then make sure that you get rid of it. Also, don't let lifestyle inflation creep into your car budget. Okay. Let's say you're making 75 grand per year. When you start this process, then you start making a hundred grand, then 150. And you feel as though, oh, maybe I should just upgrade my vehicle to the brand new BMW or the brand new Mercedes. I'm making more money now. No, I mean, if you want to, and you're a car person, fine.

• 39:42Andrew Giancola?

  But if it doesn't bring you a lot of value and you feel as though that new car smell is going to wear off within a year. It's not worth it. Okay. Next thing is keep the fund invested if it's years away. If you're 10 years away from buying your next car, well, at least for the next five years, consider investing those dollars. Because you have a long time horizon there. And so that's going to allow you to really make sure that you're getting the maximum growth on some of this money. And the last thing is make financing kind of like your last resort. It's the last thing you want to do. Now, many dealers are going to try to talk you out of financing. Many dealers are going to try to talk you out of ever doing that because they make less money when it comes to this. But try to make financing your last resort, or maybe a very small portion of the vehicle purchase. Hey, you can get pretty close to paying for cash and maybe financing a very small portion. And this will still work.

• 40:27Andrew Giancola?

  Why? Because maybe you only put a one year loan on it. And then all of a sudden, after a year, you're working towards this goal again. And so this is the cool thing about having the ability to be able to pay cash for cars or a big chunk of it. Is that you don't have to worry about these debt payments anymore long term. And if interest rates are like they are right now, and you're coming back with seven and a half, eight percent interest rates on a lot of car loans. Probably better off paying cash than paying, taking on the eight percent loan. That's a pretty high loan. You're going to be paying a lot more for that vehicle than someone else. You're not paying interest when you pay cash. And so you are saving more money long term. So if you do have to finance this, how would you finance this? And how would you think about this? Well, our car buying rule is the 24 12 10 rule. Okay. Here's how it works. 20% down.

• 41:12Andrew Giancola?

  Now, why would you put 20% down on a vehicle? The reason for this is that if you buy a brand new vehicle, or even a slightly used vehicle, and you drive it off the lot. It is going to have a depreciation hit right off the bat. Well, if you total that vehicle within the first couple of years, you're going to be underwater. Meaning if you bought a $50,000 vehicle and it depreciated 20% when you drove it off the lot. Now it's only worth $40,000, but you get into an accident and you owe $48,000 on that vehicle. That means you are still going to owe $8,000 if you total that car. So you have two options. You either put 20% down or you get gap insurance. But gap insurance is pretty expensive and not something I would want to do long term if I didn't have to. Instead, I'd rather put the money and roll that money right into the vehicle.

• 41:55Andrew Giancola?

  Instead of just paying some frivolous insurance where I'll never get that money back. Okay. So 20% down, that's the reason why. I've talked to people who have done this. They have bought new cars. Three weeks later, when they bought the new car, they get into an accident. It's their fault. They total their car. And that's where that 20% came from. Okay. Four years or less is the second number. So four is four years or less on your car note. Meaning that if you are going to buy a car, you want to never, ever have a loan longer than four years. And four years is being generous. I would like it even shorter than that. But four years is where most people probably need to land in today's day and age. If you go for six years, because you want to stretch it out and you want to make extra payments, you better have some discipline to pay that off. I don't really want you doing that. I'd rather you just committing to the four years so that you have the discipline already in place.

• 42:41Andrew Giancola?

  And you are paying off that vehicle in four years or less. Okay. That leaves you room for six, seven and eight years to be able to have years with no car payments. Where you can either build up cash reserves or invest the difference. And so that gives you the opportunity to build wealth with these depreciating assets. That's why we have it for years or less. The next number is 12. Now 12 means that you want to spend 12% or less on car payments and car maintenance combined. So for most people, targeting about seven percent or less on your car payments. Seven percent or less of your income on car payments and five percent or less on maintenance is the key. Now, why did I put these together and lump them together? Well, the reason for this is because many people go out and they buy a luxury car and try to stretch that luxury car out.

• 43:24Andrew Giancola?

  Not realizing the maintenance every single year is thousands and thousands of dollars. I did this with a car company that rhymes with Mercedes. Mercedes, I got myself a Mercedes. And when I did that, all of a sudden I realized and got to the first oil change and it was $3,000 a year. And I said, whoa. And then I had to get some new tires and it was $500 a tire. And now it's probably a lot more than that. It's probably $800 a tire now. I had to get new brake pads and it cost me $3,000 instead of $800 like on my F-150. And so all the maintenance costs are going to rise. And many people don't realize that when you buy a car that has high maintenance like this, it can really, really catch you by surprise. If you're not prepped for it. So this is why we talk about five percent or less on maintenance costs.

• 44:06Andrew Giancola?

  Now, if you're like, I don't know what the maintenance is annually on this specific vehicle. Go to somewhere like Claude or ChatGPT, or whatever your AI tool of choice is and type in, hey, I'm thinking about buying this vehicle. I want to know what the maintenance costs are all the way down to the penny. Please give me a deep dive of what the maintenance would be over the course of the next 12 years. And it can do a full breakdown of what it believes the average maintenance would be. Then you want to add 10% or 20% to that. Because that is how you make sure that you are protected when it comes to this maintenance. Okay. But car payments need to be seven percent or less. That's going to make sure that you don't try to stretch these payments. Because between four years and seven percent or less of your income means that you're not stretching the payments out to make it fit.

• 44:48Andrew Giancola?

  And it means that when you do have seven percent or less, you're actually buying a car that you can afford. I'd rather you spend those dollars other places that are going to help you tremendously. If you want to get to a 20% savings rate and make sure that you are buying your financial freedom. This is the kind of stuff you gotta do. Okay. And the last number is 10. 10 stands for driving the car for 10 years or longer. Okay. Every time I say this, people come back and say, you can't drive cars for 10 years or longer. My friend, if you believe that in your head, and you believe that you can't drive a car for 10 years or longer. You have a broke mindset. Just because your experience tells you for some reason, whatever happened, that you can't drive a car for 10 years or longer.

• 45:32Andrew Giancola?

  You gotta make sure that you flip the script on that. Because I have driven many a cars for 10 years or longer. And guess what I do? I just fix the problems. So if a problem arises and I got a leaky oil pan, I fix the leaky oil pan. What happens then? I pay $2,500 for a leaky oil pan, but then all of a sudden I have no car payments for the rest of the year. That's a really good trade off. And then the next year I have to replace all the brake pads and maybe get some brand new tires. But it's cost me $2,000 and I don't have car payments for the rest of the year. The next year I have to replace something big like the engine. It cost me $6,000, but I don't have car payments for the rest of the year. The next year, because I replaced all these bigger things, then I'm A-OK. And all I got to do is standard oil changes, maybe replace some windshield wipers, maybe replace a couple of things inside the car.

• 46:17Andrew Giancola?

  But it's not as big of a deal. So I spent a thousand dollars on car repairs the next year. The next year after that, I spent another two. You see how this works where it's a lot less than making car payments? So long term, if you replace stuff, if you get stuff fixed, that would cause this to be unreliable, to make it more reliable. Well, then all of the sudden, you are really not spending as much as you think you are in comparison to an $800 per month car payment. The average person right now is spending over $900 per month on car payments. Let that sink in for a second. Because that is a lot of money every single month. And I don't think there are many repairs out there on vehicles that are going to cost you more than $11,000 per year. And so you gotta be really cautious about what you say with your words and what you believe and who you listen to.

• 47:01Andrew Giancola?

  Because many times, and even when it comes to me, you do the math. Don't just listen to what I say. You go do the math. Because in reality, most people don't want to believe it because they want the new car. Most people don't want to believe it because they want the brand new vehicle with the new car smell. So they could show it off to their friends and show them how well they're doing. Isn't that the reality of what we're doing here? We're trying to show our friends how well we're doing. Because we got this nice new whip. Let's ghost ride the whip down the parking lot. I might be aging myself as a millennial with that one. Shout out E40. But in reality, we want to make sure that we are doing the right things and we are listening to the right people. There's going to be a lot of people that come out and say, no, you should lease a vehicle. Why? Oh, your business should lease a vehicle.

• 47:45Andrew Giancola?

  You should do all these different loopholes to make sure you got the perfect loophole. Blah, blah, blah, blah, blah, blah, blah. Listen. What are we doing here? You gotta be cautious when it comes to these depreciating assets because they can pull you down and make, pull you deeper into a hole that you are already in. And they can cause you to stay there. They can cause you to have to be chained to your desk for another five years throughout your life because you made the wrong choices with cars. I want you to have freedom when it comes to buying vehicles, which is why we are talking about this, which is why I'm trying to motivate you to look, look at this and think through this. And so for me specifically, I've come to the point in time where I'm trying to avoid car payments at all costs. I'm trying to avoid any payments for depreciating assets. If I want to go out and buy a boat, for example, which is something I may want to do one day.

• 48:30Andrew Giancola?

  I've decided, I live in Florida, I've decided I probably want to buy a boat one day and I'm trying to decide, should I rent one? Should I buy one? That, that, that, should I join a boat club? And I've gone back and forth. It's going to be cheaper to join a boat club or just rent boats. But there is something about, you know, just getting on your boat whenever you're ready to go and shoot out. And so because of that, I'm trying to make that choice, but I'm actively saving as if I'm going to buy it. But I'm investing those dollars because I don't care if the market dips. If I have to wait three more years to buy this depreciating asset, I'll continue renting until that portfolio regains its value. So for things like that, that's where I'm investing my dollars. But for something where you're going to need a vehicle to get it from point A to point B, you want to be a little more cautious about that. Maybe it's a couple of years of cash where you know, you have enough cash on hand to buy, you know, the lowest version of what you would ever want to drive.

• 49:14Andrew Giancola?

  And then the rest of it gets invested so you can buy the fancy car if you want to buy it. I want you to buy the fancy car if you want to buy it. I want you to enjoy your money. I want you to enjoy your life, but you just gotta be cautious when you think about this. So that's my plan. That's what I'm going to be doing when it comes to paying cash for cars going forward is I'm going to take a portion of every single dollar that comes in and I'm going to be saving it for cars. What I'm doing is I have like a depreciating asset portfolio that I opened. And when I do it, I am going to be putting it personally into probably S and P 500 index funds or QQQM and/or something else that, you know, in the future. So for example, my boat fund, I'm putting in QQQM. Right now it's in QQQM. And the way I'm compartmentalizing this is I say, okay, I know the boat fund is in QQQM

• 49:57Andrew Giancola?

  in this depreciating asset portfolio, but for something like my car, I'm going to put it into VOO. And that way it's in VOO and while it's in VOO, I know that's compartmentalized for the vehicle. And so that, you know, buying different funds is how I'm just kind of using this as a sinking fund without having to open a bunch of different accounts. And so that's the way I'm thinking about it. SPYM is another one that I'm using for other things. So like, there's just a bunch of different things that you could put in your portfolio. You could do an IVV, SPYG, you could do SPYV. There's a bunch of different options out there. By the way, we have a index fund and ETF cheat sheet, by the way. If you go to mastermoney.co/resources, you can get it there. We also have a car buying calculator. If you want to run the 24 12 10 rule, we have a car buying calculator at mastermoney.co/resources.

• 50:41Andrew Giancola?

  I always forget to plug those, but we have those available as well. Now let's get into a couple of your questions.

• 50:49Andrew Giancola?

  All right. So we have two great questions here. The first one comes from Nick. So Nick says, long time listener here. Thanks for all the financial insight you give everyone. I'm 27 with a hundred thousand dollars invested. Well, first of all, Nick, absolutely fantastic. 27 with your first hundred K, that is absolutely amazing. I mean, you are going to see this accelerate pretty quickly, which I absolutely love. I have $40,000 in my Roth IRA and $60,000 in a brokerage. Fantastic. All in SWPPX and QQQM. Ah, QQQM, we just talked about that. Perfect. I have $75,000 in student loans at just under 6%, a six month emergency fund. Wow, Nick's killing it. And earn $125,000 per year. I'm starting my Roth 401k next month with a 6% match. Boy, oh, boy, that's awesome.

• 51:34Andrew Giancola?

  Should I keep investing or start paying down the student loans? I also need to save for an engagement ring in one to two years. Thanks again for all your tips. All right. So Nick, you are crushing it. First of all, you've got a great income coming in. You are really ahead of most people when it comes to how much you have invested. You have a hundred thousand dollars invested. Having your first hundred K is no easy feat, so I commend you for that. Absolutely amazing. You have a six month emergency fund, which you are absolutely nailing this. So you are in a really strong financial position and the fact that you're going to get married in two years and be in this strong of financial position is wonderful. It is incredible, in fact. And so what I would say here is you have $75,000 in student loans at a 6% interest rate. Luckily they're at a 6% interest rate.

• 52:18Andrew Giancola?

  It's not going to absolutely kill you when they are right on the line of high interest and low interest. And so here is the exact order, if I was in your shoes of what I would do. Now, whenever we're answering these, we're always looking at these as if I was in your shoes, this is what I would do. Number one is I would make sure I'm hitting my investment goals first. You've already got this great head start. So what I would try to do is target COSSFI and then after COSSFI, then try to target some of the other things that you were looking at. So when you think about this, I would make sure I'm trying to hit my retirement number first. Okay? And so hitting those investment goals, making the minimum payments on the rest of the debt. So on the student loan, I'd be making that minimum payment. Okay? And so when you do this and you're investing, I'd grab obviously that 401k match at 6% first, and then I would try to max out either that Roth 401k, if that's the order that you're going in.

• 53:03Andrew Giancola?

  If you're looking at the Roth, the Roth 401k is absolutely fantastic. It depends on your situation and as your income starts to rise, just continue to think about this and consider, is the Roth the best option in the given year? Usually that's the option I'd go with, no matter how much I'm making, because I like that tax free growth. I think in my personal opinion, and this is just an opinion, I don't have a crystal ball. I don't know what's going to happen in the future, but in my opinion, I think taxes will be higher in the future because of the types of things that are happening with social security and Medicare and all of the baby boomer generation. I just think taxes are going to be higher. I just think they are. And so because of this, I just want you to be cautious when you think about that. And so that's why the Roth is great because if taxes are higher in the future, you already pay taxes on all your money and you don't have to worry about it anymore.

• 53:46Andrew Giancola?

  The next thing I would do is once you start to really hit your investment goals, then I'd be saving for the ring. Cause you want to have some time and place for this. You want to pay cash for the ring. And so this is going to be something that you can either put in a sinking fund into like a high yield savings account because it's two years out, but that will be the best way to go when it comes to that. Now here's a pro tip. She's got to be okay with this if you're going to go this route, but here's a pro tip is not everybody wants to hear this, but I'm just going to give you my two cents on this and see if you can have a conversation about it. Lab grown diamonds are the way to go.

• 54:22Andrew Giancola?

  Now, when we think about lab grown diamonds, they're significantly cheaper, but they are 100% the makeup of a real diamond. It's just people feel as though a real diamond is more valuable because it wasn't grown in a lab, but they are the 100% the exact chemical makeup of a real diamond. And they are significantly cheaper. So if you can get her to go lab grown diamonds, you gotta have this conversation first because if she doesn't want that, obviously that's, that's another thing. But if I were you, that's the route I'd go because it's significantly cheaper. A, B, it is better overall for the entire environment. We're not going to go into politics here, but we're not going to go into, B, it's better overall for humanity because obviously blood diamonds, that whole ordeal.

• 55:05Andrew Giancola?

  And then C, the value of real diamonds keep dropping. And over the last couple of years, I have noticed the value of diamonds really dropping. I even told my wife, we upgraded her engagement ring. And when we upgraded it, we upgraded her engagement ring when we, at our 10 year anniversary. And when we upgraded it, she has a real diamond that I gave her, which is like a little over a carat, I think. And then she got the, the lab grown diamond as the upgraded ring. And she might not want me saying that, but I don't know. Well, too late. And we upgraded with the lab grown diamond and the value of the diamond, and I got a really nice diamond for her engagement ring. The value of the diamond that I proposed with continues to go down. And I'm like, well, you don't wear this anymore.

• 55:48Andrew Giancola?

  Should we, you know, trade this in and/or try to get the value out of it before diamonds really start to drop? And she wants to keep it for sentimental value, which I get, but at the same time, I'm thinking financially and I kind of want to trade it in. But anyways, that's a whole side note. Anyways, as we go through this, uh, this is one of those things that you want to make sure that she's okay with that first. But yes, I would start saving for that ring. I would start to save for it now because lifestyle, especially something big like that, you want to make sure that she have that in play. Then when you have extra cash on hand after that, maybe you get a bonus, maybe you get a tax return, maybe you have extra cash that comes up at the end of every single month. Then you can start to put it towards these student loans. Because if you can start to get chunks of these student loans paid down, maybe in bigger chunks, then you can get rid of it and get it out of your life.

• 56:30Andrew Giancola?

  And what I would do is I would develop a plan that maybe by the time you turn age 35, you haven't paid off. That'll give you enough runway where you're still comfortable, you know, living your life, enjoying life, you know, saving up for this diamond, doing the things you actually want to do, saving up for your wedding that comes up after that, but also having the ability to be able to, to get these paid down with a plan over time. See, that gives you enough runway where you got, you know, eight years to pay off that $72,000 and that's a lot more manageable than it would be if you just tried to accelerate it really, really quickly. Now, if you're the type of person that is happy to just rip the Band-Aid off and pay them off quickly and they bother you, they keep you up at night, then more power to you if you want to pay them off early. There's nothing wrong with that. You'll get a guaranteed 6% rate of return, but I think you have higher priorities right now. And because you're doing so well with your investments and you are disciplined, I can see that you're disciplined.

• 57:15Andrew Giancola?

  This is the reason why I'm telling you to go this route. So again, hit your investment goals and making sure you're hitting your retirement number goals. Then go out and, you know, get that employer match, max out the Roth, those types of things. Then start saving up for your engagement ring and then take that extra cash and throw it at student loans as the, the last thing that I would do. So really, really good stuff. And again, you are crushing it, Nick. Thank you so much for sending in this question and feel free to send me any other questions that you guys may have. And again, as a reminder for everybody out there, join the master money newsletter and you can get your question answered on the show just like this. The next question we have is from Dan. So Dan says, love your videos. And when you leave a job, when does it make sense to roll your 401k into an IRA versus rolling it into your new employer's 401k plan?

• 58:00Andrew Giancola?

  My financial advisor wants me to roll it into his IRA, but I've always done 401k rollovers at past jobs. My balance is a lot higher now, so the decision feels bigger. And you're right, Dan, this is a great question and the decision is going to be bigger with the larger amount. Now let's talk about the options that you have available to you and I'm going to give you the pros and cons of each option. Okay? Option one is to roll it into your new employer's 401k. That is typically not what I love to do unless your new employer is at like a Vanguard or a fidelity or a Schwab and you feel as though, hey, I love the investments that are in here. These, this is a low cost 401k. There's great stuff in here. I, it's the same stuff I'd be investing in somewhere else. Then more power to you. If you want to keep it all in one spot, because you don't want to have to worry about it and you just want to have one login, I think that's completely fine. Two.

• 58:44Andrew Giancola?

  Is to roll it into a rollover IRA. Now, this is personally what I did. I rolled it into a rollover IRA at Vanguard. And when I left my job, I left it there. And what this does is it gives you options. It gives you flexibility and it gives you freedom. So I roll it into Vanguard because that was the choice brokerage at the time that had the best possible funds that I went to invest in. Because when you do this, you get to choose the funds that you get to invest in. You get to choose the brokerage that you're going to roll it over into. And sometimes, Dan, sometimes some of these brokerages will give you a match if you roll it over. So look and see if there's some matches out there. There may be some that'll give you a 1% match. That could be worth it if it's a large enough amount. So look into rollover IRAs.

• 59:28Andrew Giancola?

  Mine's at Vanguard personally. Charles Schwab has them. Fidelity has them. There's other places like SoFi that has them. I think SoFi is one to look into if you want to look at the 1% match. There's others out there that probably have a 1% match too. But it could be a good option for you if you want to just get that boost. I mean, if you have, you know, $500,000 invested into a 401k and you roll it over into a 1% match location, that's an extra five grand that you could be getting. So really, really powerful stuff there. And then number three is to roll it into your advisor's IRA. Your advisor is saying that they want you to roll it over there because A, they make more money if you roll it over there. So I get why they're asking you to roll it over to them. But you have to make the decision. If, you know, I roll this over and then they're managing another 1% or 2% of my money,

• 1:00:14Andrew Giancola?

  what is that going to look like? If it's a $500,000 balance, that's $5,000 per year that you're going to be giving up to an advisor. Or 1.5%, it's going to be $7,500 per year. Now, doesn't mean it's the wrong decision, but it's a big balance. It's a big difference. And if you look at the compound interest of that, then you could be looking at something where you're going to be investing it anyways. Then maybe you make the choice of looking at the cost there. Is it worth $7,500 per year? Or if it's at 2%, it's $10,000 per year. At 500,000 bucks, at a million bucks, it's $10,000 per year at 1%. It's $15,000 per year at 1.5%. And it's $20,000 per year at 2%. So the higher the number, the more expensive that it gets. And so when you look at this, it's a multimillion dollar decision if your advisor is charging AUM.

• 1:00:57Andrew Giancola?

  Now, if they're not charging AUM and they're just, you know, helping you open an IRA up, or if their AUM is low, like for example, you know, there's advisors out there that have a lower AUM than 1%, then it may be worth it if it's peace of mind for you and you just don't want to deal with it. But if it's something that you feel as though you could do it yourself or you kind of know what you're doing, at least with your 401k or your retirement accounts, then consider some of the other first two options. Again, mine was I rolled it over to Vanguard. That's the way I did it. If you like the options at your current employer, they can go that route. But if you are like, I don't know which one to do, just do a rollover IRA. And if you're like, I don't know which one to do, consider the rollover and do some research on that, that I think is the easiest path for most people. So really good question, Dan. I truly appreciate you sending this in.

• 1:01:40Andrew Giancola?

  If you have any other questions on that, please let me know. And thank you so much. Listen, I truly appreciate each and every single one of you listening to this episode. And if you are getting value out of these episodes and you feel as though you want to go deeper with me and you want to go deeper with my team, we are going to be offering a couple of different things. One is we potentially will be doing some one-on-one coaching. And if you want to do some one-on-one coaching with me directly, just email me, [email protected]. Or if you feel as though you would do well with group support in a group setting, consider Master Money Academy. Master Money Academy is our community where I do weekly live coaching calls with you specifically, you in a group, you and the entire community. And you ask me questions and I answer your questions.

• 1:02:26Andrew Giancola?

  And we have all of our courses in there. We do monthly meetings on a specific topic. And you can ask your questions to the rest of the community as well. And Master Money Academy is something I am really, really proud of. And I'm really, really excited for you to experience if you haven't done so already. We're going to give you a seven day free trial linked up down below that you can check out if you want to join Master Money Academy. There are tons of amazing wealth builders inside of Master Money Academy that are all working towards building up wealth. I'm really excited. If you want to join for seven days, check it out, see what's going on in there. Take a couple of courses, join a couple of the coaching calls and see if it's right for you. Great. If it's not right for you, no hard feelings whatsoever. I just appreciate you checking it out and being here and being part of this community. Because one of the things that I want every single one of you to know again

• 1:03:11Andrew Giancola?

  is that my goal is to bring you as much value as possible. I want us to create a million millionaires. I want you to be able to, to learn how to build wealth and change your financial tree for your family. And so because of that, we just want to make sure that we're helping as many people as we possibly can. So if you're interested in any of that whatsoever, reach out. Truly appreciate you. If you're getting value out of the show though, please leave a five star rating and review. Those mean the world to me. I cannot thank you guys enough for leaving those five star ratings and reviews. And if you want us to do episode on a specific topic or you've got questions, feel free to email me and we will consider those options. Again, thank you guys so much for listening to this episode and I will see you on the next episode.

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